-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GEiaFGKB0TIBRLxlx9s0Rj3w7L3JzUNVlLTMpXXfJYKUrX1UstY1+8gHOUVwlNLq wxCD69V36469lsJiGlNJow== 0000902561-04-000329.txt : 20040730 0000902561-04-000329.hdr.sgml : 20040730 20040730152632 ACCESSION NUMBER: 0000902561-04-000329 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 37 FILED AS OF DATE: 20040730 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENINSULA GAMING CO LLC CENTRAL INDEX KEY: 0001095997 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 421483875 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-117800-03 FILM NUMBER: 04942224 BUSINESS ADDRESS: STREET 1: 3RD STREET ICE HARBOR STREET 2: P O BOX 1750 CITY: DUBUQUE STATE: IA ZIP: 52004 BUSINESS PHONE: 3195837005 MAIL ADDRESS: STREET 1: 3RD STREE ICE HARBOR STREET 2: P O BOX 1750 CITY: DUBUQUE STATE: IA ZIP: 52004 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLD EVANGELINE DOWNS LLC CENTRAL INDEX KEY: 0001235660 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948] IRS NUMBER: 721280511 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-117800-01 FILM NUMBER: 04942222 BUSINESS ADDRESS: STREET 1: P O BOX 90270 CITY: LAFAYETTE STATE: LA ZIP: 705090270 BUSINESS PHONE: 3378967223 MAIL ADDRESS: STREET 1: P O BOX 90270 CITY: LAFAYETTE STATE: LA ZIP: 705090270 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Peninsula Gaming, LLC CENTRAL INDEX KEY: 0001299109 IRS NUMBER: 200800583 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-117800 FILM NUMBER: 04942221 BUSINESS ADDRESS: STREET 1: 400 EAST 3RD STREET CITY: DUBUQUE STATE: IA ZIP: 52001 BUSINESS PHONE: 563-583-7005 MAIL ADDRESS: STREET 1: 400 EAST 3RD STREET CITY: DUBUQUE STATE: IA ZIP: 52001 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLD EVANGELINE DOWNS CAPITAL CORP CENTRAL INDEX KEY: 0001235662 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948] IRS NUMBER: 251902805 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-117800-02 FILM NUMBER: 04942223 BUSINESS ADDRESS: STREET 1: P O BOX 90270 CITY: LAFAYETTE STATE: LA ZIP: 705090270 BUSINESS PHONE: 3378967223 MAIL ADDRESS: STREET 1: P O BOX 90270 CITY: LAFAYETTE STATE: LA ZIP: 705090270 S-4 1 forms4_bergin071404.txt REGISTRATION STATEMENT DD JULY 2004 As filed with the Securities and Exchange Commission on July 30, 2004 Registration No. 333- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -----------
- --------------------------------------------------------------------------------------------------------------------- Diamond Jo, LLC Peninsula Gaming, LLC Peninsula Gaming Corp. The Old Evangeline (Exact name of registrants (Exact name of registrants as (formerly known as Downs, L.L.C. as specified in their specified in their charter) The Old Evangeline Downs (Exact name of charter) Capital Corp.) registrants as specified (Exact name of in their charter) registrants as specified in their charter) - --------------------------------------------------------------------------------------------------------------------- Delaware Delaware Delaware Louisiana (State or other (State or other jurisdiction of (State or other (State or other jurisdiction of incorporation or organization) jurisdiction of jurisdiction of incorporation or incorporation or incorporation or organization) organization) organization) - --------------------------------------------------------------------------------------------------------------------- 42-1483875 20-0800583 25-1902805 72-1280511 (I.R.S. Employer (I.R.S. Employer (I.R.S. Employer (I.R.S. Employer Identification No.) Identification No.) Identification No.) Identification No.) - --------------------------------------------------------------------------------------------------------------------- 7948 (Primary standard industrial classification code number) - ---------------------------------------------------------------------------------------------------------------------
P.O. Box 90270 Lafayette, Louisiana 70509-0270 (337) 896-7223 (Address, including zip code, and telephone number, including area code, of registrants' principal executive offices) ----------- M. Brent Stevens Chief Executive Officer P.O. Box 90270 Lafayette, Louisiana 70509-0270 (337) 896-7223 (Name, address, including zip code, and telephone number, including area code, of agent for service) ----------- Copy to: Nazim Zilkha, Esq. Mayer, Brown, Rowe & Maw LLP 1675 Broadway New York, New York (212) 506-2620 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------------- TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TO BE REGISTERED REGISTERED OFFERING AGGREGATE REGISTRATION PRICE PER UNIT (1) OFFERING PRICE (1) FEE --------------------------------------------------------------------------------------------------------------------- 8 3/4% Senior Secured Notes due 2012...... $233,000,000 100%(1) $233,000,000 $29,521.10 Guarantees(3)........................... (2) (2) (2) (2) --------------------------------------------------------------------------------------------------------------------- -------------------- (1) Calculated based on the book value of the securities to be received by the registrant in the exchange in accordance with Rule 457(f) under the Securities Act of 1933. (2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is payable for the guarantees. (3) The Old Evangeline Downs, L.L.C. will guarantee the notes being registered hereby.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. The information in this prospectus is not complete and may be changed. We may not sell securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting any offer to buy these securities in any state where the offer or sale is not permitted. Subject to Completion, Dated July 30, 2004 PROSPECTUS DIAMOND JO, LLC PENINSULA GAMING CORP. PENINSULA GAMING, LLC Offer to Exchange $233,000,000 8 3/4% Senior Secured Notes due 2012 ----------- o We are offering to exchange new registered 83/4% Senior Secured Notes due 2012 for all of our outstanding unregistered 83/4% Senior Secured Notes due 2012. o The exchange offer expires at 5:00 p.m., New York City time, on , 2004, unless extended. o The exchange offer is subject only to the conditions that the exchange offer will not violate any applicable law or any interpretation of applicable law by the staff of the Securities and Exchange Commission. o All outstanding notes that are validly tendered and not validly withdrawn prior to the expiration of the exchange offer will be exchanged. o Tenders of outstanding notes may be withdrawn at any time before 5:00 p.m., New York City time, on the expiration date of the exchange offer. o We will not receive any proceeds from the exchange offer. o The terms of the new notes to be issued are substantially identical to your notes, except that the new notes will not have securities laws transfer restrictions, and you will not have registration rights. o Any restricted subsidiary we form or acquire will be required to fully and unconditionally guarantee the notes on a senior secured basis, subject to the prior lien with respect to the collateral securing our secured credit facility. o There is no established trading market for the new notes, and we do not intend to apply for listing of the new notes on any securities exchange. ----------- For a discussion of factors that you should consider before you participate in the exchange offer, see "Risk Factors" beginning on page 17 of this prospectus. ----------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ----------- The date of this prospectus is , 2004 Forward-Looking Statements.......................................................................................1 Prospectus Summary...............................................................................................3 Terms of the Exchange Offer......................................................................................8 Risk Factors....................................................................................................17 The Transactions................................................................................................32 Use Of Proceeds.................................................................................................35 Capitalization..................................................................................................36 Selected Consolidated Financial Data............................................................................38 Management's Discussion and Analysis of Financial Condition and Results of Operations...........................41 Business .......................................................................................................56 Regulatory Matters..............................................................................................62 Management......................................................................................................70 Executive Compensation..........................................................................................72 Security Ownership of Certain Beneficial Owners and Management..................................................75 Certain Relationships and Related Party Transactions............................................................77 Description of Senior Secured Credit Facility...................................................................79 The Exchange Offer..............................................................................................80 Description of Notes............................................................................................90 Book-Entry; Delivery and Form..................................................................................134 Specific United States Federal Income Tax Consequences.........................................................137 Plan of Distribution...........................................................................................140 Legal Matters..................................................................................................140 Experts ......................................................................................................140 Where You Can Find More Information............................................................................140 Index to Financial Statements..................................................................................F-1
Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the new notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended, which we refer to as the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where the old notes were acquired by the broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of up to 180 days after the expiration of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution". i FORWARD-LOOKING STATEMENTS This prospectus includes "forward-looking statements" within the meaning of the federal securities laws. These statements relate to analyses and other information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "could," "would," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will," "likely," "continue" and similar terms and phrases, including references to assumptions. The forward-looking information contained in this prospectus is generally located under the headings "Prospectus Summary," "Risk Factors," "Use of Proceeds," "The Transactions," "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," but may be found in other locations as well. These forward-looking statements generally relate to our strategies, plans and objectives for future operations and are based upon management's current beliefs or estimates of future results or trends. These statements also include all statements with respect to the Transactions (as defined herein). Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, they are inherently subject to risks, uncertainties and assumptions. Accordingly, there can be no assurance that such plans, intentions or expectations will be achieved or that any trends noted in this prospectus will continue. We caution you that any forward-looking statement reflects only our belief at the time the statement is made. You should read this prospectus completely and with the understanding that actual future results may be materially different from what we expect. We do not plan to update forward-looking statements even though our situation may change in the future. Specific factors that might cause actual results to differ from our expectations, might cause us to modify our plans or objectives, may affect our ability to pay timely amounts due under the notes and/or may affect the value of the notes, include, but are not limited to: o the loss of any licenses, permits or approvals in the jurisdictions in which we operate (including gaming, racing, alcoholic beverage and tobacco licenses), or the limitation, conditioning, suspension or revocation of any such licenses, permits or approvals; o our ability to complete construction of the racetrack on schedule and within budget, the failure of which could result in, among other things, the cancellation of our gaming license for the racino and our inability to make payments on the notes; o uncertainties in starting up new operations at the racino, including our ability to retain qualified employees and to conduct our gaming operations; o the lack of positive earnings from our racino operations and the uncertainties about its cash flow and overall financial performance during the completion of its racetrack; o the loss of any of our gaming facilities or any portion of their operations due to casualty, weather, mechanical failure or any extended or extraordinary maintenance or inspection that may be required; o our substantial indebtedness and the effect of restrictive covenants in our debt instruments on our operating and financial flexibility; o our control by Peninsula Gaming Partners, LLC and potential conflicts of interest with Peninsula Gaming Partners, LLC and its affiliates; o competition in our markets and in the gaming industry, including, without limitation, new or expansion of existing Native American gaming establishments in the jurisdictions in which we operate and the availability and success of alternative gaming venues and other entertainment attractions; o other risks related to the notes (including the value of the collateral) and to high-yield securities and gaming securities generally; 1 o risks related to pending legislation and other adverse changes or developments in laws, regulations, including liquor regulation, or taxes in the gaming or racing industry or a decline in the public acceptance of gaming; o other adverse conditions, such as adverse economic conditions, changes in general customer confidence or spending, weather-related factors, factors relating to the current state of world affairs and any further acts of terrorism or any other destabilizing events, that may adversely affect the economy in general and/or the casino industry in particular; o the availability and adequacy of our cash flow to satisfy our obligations, including payment of the notes and additional funds required to support capital improvements and development; o other economic, competitive, demographic, business and other conditions in our local and regional markets, including the Dubuque market and the Lafayette market; o actions taken or omitted to be taken by third parties, including customers, suppliers, competitors, members and shareholders, as well as legislative, regulatory, judicial and other governmental authorities; o changes in business strategy, capital improvements, development plans, including those due to environmental remediation concerns, or changes in personnel or their compensation, including federal, state and local minimum wage requirements; o the termination of our operating agreement with the Dubuque Racing Association, Ltd. or the failure of the Dubuque Racing Association, Ltd. to continue as our "qualified sponsoring organization" with respect to our operation of the Diamond Jo; and o other factors discussed under the section entitled "Risk Factors" or elsewhere in this prospectus and factors that may be disclosed from time to time in our SEC filings or otherwise. All future written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. In light of these and other risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus might not occur. You should read this prospectus completely and with the understanding that actual future results may be materially different from what we expect. We will not update forward-looking statements even though our situation may change in the future. 2 You should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. PROSPECTUS SUMMARY This summary highlights selected information from this prospectus and may not contain all of the information that is important to you. You should carefully read this entire prospectus, including any information or documents to which we refer you, before deciding to participate in the offer. This summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial data, including the consolidated financial statements and notes thereto, appearing elsewhere in this prospectus. Unless the context requires otherwise, references to the "Company" mean Peninsula Gaming, LLC ("PGL"), and references to "our," "us," and "we" mean Diamond Jo, LLC ("DJL", formerly known as Peninsula Gaming Company, LLC), The Old Evangeline Downs, L.L.C. ("OED"), Peninsula Gaming Corp. ("PGC", formerly known as The Old Evangeline Downs Capital Corp.("OED Corp.")), and PGL. PGC has no assets or operations and exists to facilitate the offering of the notes in certain jurisdictions. PGL is a newly formed holding company of DJL, OED and PGC. Unless otherwise specified herein, references to the "Transactions" shall mean the transactions described below under "The Transactions." The Company We own and operate both the Evangeline Downs pari-mutuel horse racetrack and casino, or "racino," in Opelousas, Louisiana and the Diamond Jo riverboat casino in Dubuque, Iowa. Evangeline Downs, located approximately 20 miles north of Lafayette, Louisiana at the intersection of Interstate 49 and U.S. Highway 190, began casino operations in December 2003. Evangeline Downs' new horse racetrack is scheduled to establish its schedule of live racing meets commencing with the 2005 racing season, at which time its existing horse racetrack near Lafayette will cease operations. We believe, because of its close proximity to Lafayette and ease of access from major interstates and highways, Evangeline Downs will become the primary source of gaming entertainment for the Lafayette area, its primary market. As one of only two licensed gaming operations in Dubuque, the Diamond Jo has consistently captured more than 50% of Dubuque's casino gaming revenues since 1995, its first full year of operations. We believe Evangeline Downs and the Diamond Jo operate in favorable environments, benefiting from strong market demographics and limited competition. Both of these operations focus primarily on local markets, repeat customers and higher margin, less volatile slot machine play while offering unique and diverse gaming experiences. The table below provides a summary of our properties.
EVANGELINE DOWNS DIAMOND JO ---------------- ---------- PROPERTY DATA: Size Approx. 120,000 square feet Approx. 48,000 square feet Location Opelousas, LA Dubuque, IA Gaming o Approx. 40,000 square feet o Approx. 19,000 square feet (15,000 of designated gaming o 749 slots space), excluding OTBs o 17 tables o 1,627 slots o Live and simulcast horse racing with grandstands o 2 OTBs (one with 100 video poker machines) 3 Amenities o Fine dining restaurant o Fine dining restaurant o Food court o Buffet o Buffet o Banquet facility o Sports bar with screened patio o VIP lounge o VIP Lounge o Deli o Gift shop Parking o Approx. 2,229 spaces o Approx. 1,200 spaces (including valet) (including valet) 60 semis 5 buses
COMPETITIVE ADVANTAGES In each of our markets, we offer, or will offer, our customers unique and diverse gaming entertainment. At the Diamond Jo we offer the only table games, video poker and video keno within 60 miles of Dubuque. At Evangeline Downs we will offer live horse racing a minimum of 80 days per year and year-round simulcast horse racing with pari-mutuel wagering. Since only three other racinos are legislatively authorized in Louisiana, with the nearest located over 100 miles to the west, we believe that Evangeline Downs' entertainment offerings will be unrivaled in both its primary market area of Lafayette and its secondary markets, including Baton Rouge, which is approximately 50 miles to the east. In addition, a significant portion of the fees imposed on Evangeline Downs' slot machine revenues is required to be allocated to purses for live horse racing at the racino. We believe that a substantial increase in purses at Evangeline Downs will attract higher quality horses to our new horse racetrack, which should in turn increase the wagering for both on-site and off-track betting. Evangeline Downs - ---------------- Overview. Our new Evangeline Downs Racetrack and Casino ("racino") in Opelousas has a Southern Louisiana Cajun roadhouse theme on the exterior, with a complementary regional Acadian atmosphere on the interior. The racino currently includes a casino with 1,627 slot machines, parking spaces for approximately 2,229 cars, 60 semis and 5 buses, and several dining options. Our dining options include a 312-seat Cajun Buffet, an 82-seat fine dining Evangeline restaurant, a 192-seat Lagniappe food court and a 202-seat Mojos sports bar with an additional 98-seat screened patio, in addition to a raised bar and lounge area with 120 seats, known as Zydeco's, occupying the center of our casino floor. In accordance with our regulatory requirements for the racino, we expect to complete construction of a one-mile dirt track, stables for 980 horses, a grandstand and clubhouse with seating for 1,295 patrons, and apron and patio space for an additional 3,000 patrons by the end of fiscal 2004 with related additional capital expenditures of approximately $15.1 million. Consistent with our regulatory requirements, we also expect to continue construction on our turf track during fiscal 2005. Pending completion of our new horse racetrack, horse racing operations are conducted at our nearby pari-mutuel wagering complex in Lafayette, Louisiana, whose operations will be transferred to our new horse racetrack upon completion. Our Evangeline Downs operations also include two OTBs, one in New Iberia, and one in Port Allen, Louisiana. Our OTB in Port Allen, located on Interstate 10 across the Mississippi River from Baton Rouge, Louisiana, also operates 100 video poker machines. Large Market With Strong Local Demographics. Louisiana generated approximately $2.0 billion of casino gaming revenue in 2003, excluding Native American casinos. Such amount has grown at a compounded annual rate of 8.7% since 1996 and 6.0% since 2001. We believe that our centralized location in Louisiana will afford us the opportunity to participate in this large and growing market. There are approximately 300,000 adults living within 35 miles of the racino site, mostly within the Lafayette metropolitan area, our primary market. In addition, there are approximately 1.5 million adults living within 100 miles of the racino site. This area includes secondary markets from which we believe we will attract patrons due to our ease of access from major interstates and highways compared to our competitors in those areas, as well as our offering of pari-mutuel live horse racing. Approximately 39,000 vehicles per day pass through the intersection of Interstate 49 and U.S. Highway 190 where the racino site is located. In addition, the racino site is located adjacent to a recently opened shopping center, which currently 4 includes a Wal-Mart Supercenter. A Lowe's and a Home Depot are currently also under construction nearby, affording us an opportunity to attract additional patrons. Limited Competition. The nearest competitor to Evangeline Downs is a Native American casino located approximately 50 miles to the south of Lafayette, including several miles off the highway. Besides that, patrons in Lafayette need to drive approximately 50 miles to reach riverboat casinos in Baton Rouge and approximately 70 miles to reach riverboat casinos in Lake Charles and Native American casinos in Marksville and Kinder. Because our competition in Marksville is situated more than 20 miles off the primary highway, we believe that patrons of the Marksville casino may find the ease of highway access to our racino more convenient. The Diamond Jo - -------------- Overview. The Diamond Jo is a three-story, approximately 48,000 square foot riverboat casino, replicating a classic 19th century paddlewheel riverboat. The Diamond Jo has an approved capacity for 1,394 patrons, features a spacious two-story atrium and a 48-seat capacity deli and offers 749 slot machines and 17 table games on approximately 19,000 square feet of gaming space. Adjacent to the Diamond Jo is a two-story, approximately 36,000 square foot dockside pavilion, featuring our 142-seat capacity Lighthouse Grill restaurant, our 140-seat capacity High Steaks restaurant, our 25-seat capacity Club Wild players lounge and our 205-seat capacity Harbor View Room, a full service banquet facility. Approximately 1,200 convenient parking spaces are available to our patrons, including valet parking. The Diamond Jo operates from, and the dockside pavilion is located in, the Port of Dubuque, a waterfront development on the Mississippi River in downtown Dubuque and is accessible from each of the major highways in the area. On average, more than 30,000 vehicles pass the Diamond Jo per day. The Port of Dubuque is the site of the City of Dubuque's $188 million redevelopment project, known as the America's River Project. The America's River Project is on a 90-acre site on the Dubuque riverfront that features the National Mississippi River Museum & Aquarium, the Grand River Center for conferences and events, the Grand Harbor Resort and Waterpark, the Alliant Energy Amphitheater, and the Mississippi Riverwalk. This project, which was substantially completed in 2003, was designed to enhance the attractiveness of the Port of Dubuque as a community center and tourist destination, and has led to, and should continue to generate, increased foot traffic around the site of, and increased admissions to, the Diamond Jo. Strong Dubuque Market. The Diamond Jo currently draws approximately 85% of its patrons from within a 100-mile radius of Dubuque, an area of approximately 2.4 million residents. Dubuque is situated at the intersection of Illinois, Iowa and Wisconsin, acts as the region's trade hub and has a diverse employer base. Casino gaming revenues in Dubuque have grown at a compound annual rate of 7.0% since 1996, and there are no betting or loss limits in Iowa. In addition to the America's River Project, Dubuque contains several tourist attractions, drawing more than one million visitors annually, and Galena, Illinois, a historic community located 15 miles east of Dubuque, also draws more than one million visitors annually. Limited Competition. The Diamond Jo's principal competition is the only other licensed gaming facility in Dubuque, the Dubuque Greyhound Park (the "DGP"). The DGP is located approximately three miles north of the Port of Dubuque and currently offers 600 slot machines, live and simulcast greyhound racing and, on a limited basis, simulcast horse racing. For a discussion of DGP's proposed expansion and recent changes in Iowa law, see "Risk Factor--Risks Relating to Our Business--Competition." THE TRANSACTIONS The offering of the notes was conducted as part of a plan to refinance our existing debt to improve our financial and operating flexibility. In addition, in connection with this refinancing plan, following our receipt of requisite approvals from applicable Iowa and Louisiana regulatory authorities, we effected a series of corporate transactions to, among other things, simplify our organizational structure. Refinancing Plan. In addition to the offering of the notes, the elements of the refinancing plan included the following: o OED used a portion of the offering proceeds to repurchase a portion of its outstanding 13% Senior Secured Notes due 2010 with Contingent Interest (the "OED Notes") that were tendered 5 in the tender offer by OED and to pay related consent payments, pursuant to the terms and conditions of the Offer to Purchase and Consent Solicitation Statement, dated March 9, 2004 (the "Statement"); o DJL used a portion of the offering proceeds to redeem all of its outstanding 12 1/4% Senior Secured Notes due 2006 (the "DJL Notes"), and to pay accrued distributions on its preferred membership interests; and o We refinanced both DJL's and OED's senior secured credit facilities and OED's FF&E credit facility with Wells Fargo Foothill, Inc. ("Wells Fargo Foothill") with a new senior secured credit facility. Corporate Transactions. The corporate transactions consisted of the following: o Peninsula Gaming, LLC ("PGL") was formed as a holding company that owns and operates, through two direct wholly owned subsidiaries, DJL and OED, the Diamond Jo riverboat casino and the Evangeline Downs racino, respectively; and o OED Corp., which was a subsidiary of OED, was renamed Peninsula Gaming Corp. ("PGC") and is now a direct wholly owned subsidiary of PGL. OED Acquisition, LLC ("OEDA"), formerly the parent of OED, has become a direct wholly owned subsidiary of Peninsula Gaming Partners, LLC ("PGP") and a sister company to PGL. Our corporate structure after giving effect to the corporate transactions is shown in the chart below. PGL Co-Issuer _________________|___________________ | | | PGC OED DJL Co-Issuer Rancino & OTBs Diamond Jo Guarantor Co-Issuer The indenture governing the notes permitted DJL and PGC to consummate the corporate transactions without requiring the consent of any of the holders of the notes following receipt by DJL and OED of such final regulatory approvals. For more information about these transactions, see "The Transactions" and "Description of Senior Credit Facility" in this prospectus. MANAGER PGP is the sole managing member of, and the owner of 100% of the common membership interests in, the Company. Certain affiliates, officers and employees of Jefferies & Company, Inc. (the "Initial Purchaser") serve as managers and executive officers of the Company and PGP, and, through their direct and indirect beneficial ownership or control of voting equity interests of PGP, beneficially own or control in the aggregate approximately 66.2% of the Company's equity interests. See "Risk Factors--Risks Relating to Our Business--Interested Party Matters" and "Certain Relationships and Related Party Transactions". ----------- Our principal executive offices are located at 400 East Third Street, P.O. Box 1750, Dubuque, Iowa, 52001-1750, and our telephone number is (563) 583-7005. PGL is a Delaware limited liability company, DJL is a Delaware limited liability company, and PGC is a Delaware corporation. Our websites are www.evangelinedowns.com and www.diamondjo.com. Information on our websites does not constitute part of this prospectus. 6 THE EXCHANGE OFFER We sold $233.0 million of our 8 3/4% Senior Secured Notes due 2012 to the Initial Purchaser in a private placement of our notes on April 16, 2004. The Initial Purchaser resold those notes in reliance on Rule 144A and other exemptions under the Securities Act. On April 16, 2004, we also entered into a registration rights agreement with the Initial Purchaser in which we agreed, among other things, to: o file a registration statement with the Securities and Exchange Commission relating to the exchange offer on or before July 15, 2004; o deliver to you this prospectus; o cause the registration statement, which includes this prospectus, to become effective on or before October 13, 2004; o consummate the exchange offer within 45 days after the registration statement is declared effective; o keep the exchange offer open for at least 20 business days after the date on which we mail notice of the exchange offer to you. You are entitled to exchange your old notes for new registered 8 3/4% Senior Secured Notes due 2012 with substantially identical terms as your notes, except for transfer restrictions and registration rights. If we do not offer you the opportunity to exchange your old notes, or if we commit other "registration defaults", we may be required to pay you liquidated damages at an amount per week per $1,000 principal amount equal to $0.05 following the registration default, increasing by an additional $0.05 per week per $1,000 principal amount with respect to each subsequent 90-day period, up to a maximum of $0.25 per week per $1,000 principal amount. As a consquence of our filing this registration statement with the Securities and Exchange Commission after July 15, 2004, the date we were required to file this registration statement pursuant to the terms of the Registration Rights Agreement, you are entitled to receive liquidated damages in the form of additional interest on the notes. See "The Exchange Offer - - Purpose and Effect; Registration Rights" and "Specific United States Federal Income Tax Consequences". As soon as we cure a registration default, the interest rates on the notes will revert to their original levels. You should read the discussion under the heading "The Exchange Offer - Purpose and Effect; Registration Rights" and "Description of Notes" for further information regarding registration defaults, additional interest and the new notes that we are offering in exchange for your notes. We believe that you may resell the new notes issued in the exchange offer without compliance with the registration and prospectus delivery provisions of the Securities Act, subject to the conditions described under "The Exchange Offer". You should read that section for further information regarding the exchange offer. 7 TERMS OF THE EXCHANGE OFFER We refer to the originally issued 8 3/4% Senior Secured Notes due 2012 as the "old notes", the registered notes being offered in the exchange offer as the "new notes", and the old notes and the new notes together as the "notes." The following summary of the exchange offer is not intended to be complete. For a more complete description of the terms of the exchange offer, see "The Exchange Offer" in this prospectus.
Old Notes ..................................... 83/4% Senior Secured Notes due 2012, which we issued on April 16, 2004. New Notes...................................... 83/4% Senior Secured Notes due 2012, the issuance of which has been registered under the Securities Act of 1933. The terms of the registered new notes and your old notes are substantially identical, except: o the new notes will be registered under the Securities Act of 1933; o the new notes will not bear any legends restricting transfer; and o except under limited circumstances, your rights under the registration rights agreement,including your right to receive additional interest, will terminate. The Exchange Offer............................. We are offering to exchange $1,000 in principal amount of the new notes for each $1,000 in principal amount of your old notes. As of the date of this prospectus, $233.0 million aggregate principal amount of the old notes is outstanding. Expiration Date................................ You have until 5:00 p.m., New York City time, on , 2004 to validly tender your old notes if you want to exchange your old notes for new notes. We may extend that date under some conditions. Conditions of the Exchange Offer; Extensions; Amendments................ You are not required to tender any minimum principal amount of your old notes in order to participate in the exchange offer. If you validly tender and do not validly withdraw your old notes, your old notes will be exchanged for new notes as long as the exchange offer does not violate any applicable law or any interpretation of applicable law by the staff of the Securities and Exchange Commission. We may delay or extend the exchange offer and, if either of the above conditions is not met, we may terminate the exchange offer. We will notify you of any delay, extension or termination of the exchange offer. We may also waive any condition or amend the terms of the exchange offer. If we materially amend the exchange offer, we will notify you. 8 All conditions to the exchange offer must be satisfied or waived prior to the expiration of the exchange offer. Interest....................................... The first interest payment date on your old notes is October 15, 2004. Interest has accrued on your old notes since April 16, 2004, but has not yet been paid. If your old notes are exchanged for new notes, you will not receive any accrued interest on your old notes. You will receive interest on your new notes from April 16, 2004. Consequences of Failure to Exchange............ Outstanding notes that are not tendered or that are tendered but not accepted will continue to be subject to the restrictions on transfer that are described in the legend on those notes. In general, you may offer or sell your outstanding notes only if they are registered under, or offered or sold under an exemption from, the Securities Act of 1933 and applicable state securities laws. We, however, will have no further obligation to register the outstanding notes. If you do not participate in the exchange offer, the liquidity of your notes could be adversely affected. Procedures for Tendering Old Notes; Special Procedures for Beneficial Owners.......... If you want to participate in the exchange offer, you must transmit a properly completed and signed letter of transmittal, and all other documents required by the letter of transmittal, to the exchange agent. Please send these materials to the exchange agent at the address set orth in the accompanying letter of transmittal prior to 5:00 p.m., New York City time, on the expiration date. You must also send one of the following: o certificates of your old notes; o a timely confirmation of book-entry transfer of your old notes into the exchange agent's account at The Depository Trust Company; or o the items required by the guaranteed delivery procedures described below. If you are a beneficial owner of your old notes and your old notes are registered in the name of a nominee, such as a broker, dealer, commercial bank or trust company, and you wish to tender your old notes in the exchange offer, you should instruct your nominee to promptly tender the old notes on your behalf. If you are a beneficial owner and you want to tender your old notes on your own behalf, you must, before completing and executing the letter of transmittal and delivering your old notes, make appropriate arrangements to either register ownership of your old notes in your name or obtain a properly completed bond power from the registered holder of your old notes. By executing the letter of transmittal, you will represent to us that: 9 o you are not our "affiliate," as defined in Rule 405 under the Securities Act of 1933; o you will acquire the new notes in the ordinary course of your business; o you are not a broker-dealer that acquired your notes directly from us in order to resell them in reliance on Rule 144A of the Securities Act of 1933 or any other available exemption under the Securities Act of 1933; o if you are a broker-dealer that acquired your notes as a result of market making or other trading activities, you will deliver a prospectus in connection with any resale of new notes; and o you are not participating, do not intend to participate and have no arrangement or understanding with any person to participate in the distribution of the new notes. Guaranteed Delivery Procedures................. If you wish to tender your old notes and: o your old notes are not immediately available; or o you are unable to deliver on time your old notes or any other document that you are required to deliver to the exchange agent; o then you may tender your old notes according to the guaranteed delivery procedures that are discussed in the letter of transmittal and in "The Exchange Offer--Guaranteed Delivery Procedures." Acceptance of Old Notes and Delivery of New Notes............................. We will accept all old notes that you have properly tendered on time when all conditions of the exchange offer are satisfied or waived. The new notes will be delivered promptly after the expiration date. Withdrawal Rights ............................. Tenders of old notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date. Use of Proceeds............................... We will not receive any cash proceeds from the exchange offer. The Exchange Agent............................ U.S. Bank National Association is the exchange agent. Its address and telephone number are set forth in "The Exchange Offer--The Exchange Agent; Assistance." Fees and Expenses ............................. We will pay all expenses relating to the exchange offer and compliance with the registration rights agreement. We will also pay some kinds of transfer taxes, if applicable, relating to the exchange offer. 10 Resales of New Notes........................... We believe that the new notes may be offered for resale, resold and otherwise transferred by you without further compliance with the registration and prospectus delivery requirements of the Securities Act of 1933 if: o you are not our "affiliate," as defined in Rule 405 under the Securities Act of 1933; o you acquire the new notes in the ordinary course of your business; o you are not a broker-dealer that purchased old notes from us to resell them in reliance on Rule 144A of the Securities Act of 1933 or any other available exemption under the Securities Act of 1933; o you are not participating, and have no arrangement or understanding with any person to participate in a distribution, within the meaning of the Securities Act of 1933, of the new notes. You should read the information under the heading "The Exchange Offer--Resales of the New Notes" for a more complete description of why we believe that you can freely transfer new notes received in the exchange offer without registration or delivery of a prospectus. All broker-dealers that are issued new notes for their own accounts in exchange for old notes that were acquired as a result of market-making or other trading activities must acknowledge that they will deliver a prospectus meeting the requirements of the Securities Act of 1933 in connection with any resale of the new notes. If you are a broker-dealer and are required to deliver a prospectus, you may use this prospectus for an offer to resell, a resale or other transfer of the new notes. Federal Income Tax Consequences................ The exchange of old notes for new notes pursuant to the exchange offer will not constitute a taxable exchange for federal income tax purposes. You should read the information under the heading "Specific United States Federal Income Tax Consequences" for a more complete discussion of the United States federal income tax consequences of an exchange of old notes for new notes and of holding the notes. 11 Registration Rights Agreement................. In connection with the sale of the old notes, we entered into a registration rights agreement with the initial purchaser of the old notes that grants the holders of the old notes registration rights. As a result of making and consummating this exchange offer, we will have fulfilled most of our obligations under the registration rights agreement. If you do not tender your old notes in the exchange offer, you will not have any further registration rights under the registration rights agreement or otherwise unless you were not eligible to participate in the exchange offer or do not receive freely transferable new notes in the exchange offer. You should read the information under the heading "The Exchange Offer--Purpose and Effect; Registration Rights" for a more complete discussion of the effects the exchange offer will have on your registration rights.
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SUMMARY TERMS OF THE NEW NOTES Issuers............................. Diamond Jo, LLC, Peninsula Gaming Corp. and Peninsula Gaming, LLC are co-issuers. Securities Offered.................. $233,000,000 aggregate principal amount of 83/4% Senior Secured Notes due 2012. Maturity Date....................... April 15, 2012. Interest Rate....................... We will pay a fixed annual rate of interest equal to 83/4%. Interest Payment Dates.............. We will pay interest on the notes semiannually, on each April 15 and October 15, beginning on October 15, 2004. Ranking............................. The notes will be our senior secured obligations, will rank equally in right of payment with all of our existing and future senior indebtedness and will rank senior in right of payment to all of our existing and future subordinated indebtedness. Guarantees.......................... The notes will be guaranteed on a senior secured basis by all of our existing and future domestic restricted subsidiaries other than DJL and PGC, which are co-Issuers of the notes. Security Interest................... The notes and the guarantees will be secured by a security interest in our current and future assets and in the current and future assets of our domestic restricted subsidiaries, including a pledge of our equity interests in our restricted subsidiaries (other than certain excluded assets). The lien on the collateral that secures the notes and the guarantees will be contractually subordinated to the liens securing any of our existing or future senior credit facilities pursuant to an intercreditor agreement. Optional Redemption................. On or after April 15, 2008, we will have the right to redeem all or some of the notes at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, to the applicable date of redemption, if redeemed during the 12-month period beginning on April 15 of the years indicated below:
For the period Percentage -------------- ---------- 2008 104.375% 2009 102.917% 2010 101.458% 2011 and thereafter 100.000%
Prior to April 15, 2007, we may redeem from time to time up to 35% of the aggregate principal amount of the notes at a redemption price equal to 108.75% plus accrued and unpaid interest with the proceeds of any equity offering. Required Regulatory Redemption...... The notes will be subject to mandatory disposition or redemption following certain determinations by applicable racing and gaming regulatory authorities. 13 Change of Control Offer............. If a change of control occurs, the holders of the notes will have the right to require us to purchase their notes at 101% of the principal amount, plus accrued and unpaid interest. Asset Sale Offers................... If we sell assets or an event of loss occurs and the proceeds are not applied as designated, we may have to use the proceeds to offer to purchase some of the notes at 100% of the principal amount, plus accrued and unpaid interest. Certain Indenture Provisions........ The indenture governing the notes will limit our ability and the ability of our restricted subsidiaries to, among other things: o incur more debt; o pay dividends, redeem stock, or make other distributions; o issue stock of restricted subsidiaries; o make investments; o create liens; o enter into transactions with affiliates; o merge or consolidate; and o transfer or sell assets. In addition, the indenture governing the notes will prohibit PGC from holding any assets, becoming liable for any obligations (other than the notes, remaining OED Notes and borrowings under OED's existing credit facilities) or engaging in any business activities. These covenants are subject to a number of important exceptions. See "Description of Notes--Certain Covenants." Absence of a Public Market.......... The notes are a new issue of securities, and there is currently no established market for them. The notes will not be listed on any securities exchange or included in any automated quotation system. Accordingly, there can be no assurance as to the development or liquidity of any market for the notes. The notes are eligible for trading in PORTAL. See "Risk Factors--Risks Relating to this Offering--No Prior Market for the Notes."
RISK FACTORS Investing in the notes involves substantial risk. Before making an investment in the notes, you should consider carefully the information included in the "Risk Factors" section, as well as all other information set forth in this prospectus. 14 SUMMARY ADJUSTED AND HISTORICAL CONSOLIDATED FINANCIAL DATA Our summary adjusted and historical consolidated financial data set forth below for each of the three years in the period ended December 31, 2003, have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary adjusted and historical consolidated financial data set forth below as of March 31, 2004 and for each of the three month periods ended March 31, 2003 and 2004, have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. The data presented below is a summary only and should be read in conjunction with, and is qualified in its entirety by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the notes thereto appearing elsewhere in this prospectus. FISCAL YEARS ENDED THREE MONTHS ENDED DECEMBER 31, MARCH 31, ------------------------------ ------------------ 2001 2002 2003 2003 2004 ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net revenues........... $48,117 $65,188 $76,502 $15,670 $35,565 Operating expenses..... 36,304 53,466 64,252 12,504 30,461 Depreciation and amortization......... 3,963 2,950 3,324 819 2,896 Income from operations. 11,813 11,723 12,250 3,165 5,105 Net income (loss) to common members' interests............ 1,819 (732) (12,742) (1,965) (2,621) OTHER FINANCIAL DATA: Capital expenditures(1) 1,603 1,695 2,206 511 782 AT MARCH 31, 2004 ----------------- AS ACTUAL ADJUSTED(2) ------ ----------- (DOLLARS IN THOUSANDS) BALANCE SHEET DATA: Cash and cash equivalents(3)......................... $40,079 $41,753 Total assets......................................... 258,544 249,640 Total senior debt.................................... 226,945 272,953 Total debt(4)........................................ 230,945 276,953 Total members' deficit(5)............................(14,404) (51,023) - ---------- (1) Excludes capital expenditures associated with the Racino project. (2) As Adjusted Balance Sheet Data gives effect to the sale of the notes and the application of the net proceeds therefrom as described in "Use of Proceeds" and the consummation of the other Transactions, as if such transactions had been consummated on March 31, 2004. (3) Includes cash and cash equivalents, restricted cash--purse settlements, restricted investments and restricted cash--Racino project. (4) In May 2003, the Financial Accounting Standards Board ("FASB") issued Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS 150)." This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires the issuer to classify a financial instrument that is within the scope of the standard as a liability if such financial instrument embodies an obligation of the issuer. As a result of the adoption of SFAS 150 on July 1, 2003, we reclassified our $4 million mandatory redeemable preferred members' interest from the mezzanine section of the consolidated balance sheet to long-term debt. Further, preferred member distributions paid or accrued subsequent to adoption of SFAS 150 are 15 required to be presented as interest expense separately from interest due to other creditors. We are precluded from reclaifying prior period maount prusuant to this standard. (5) In connection with the offering of the old notes and the consummation of our refinancing plan and related corporate transactions as described in "The Transactions," the Company expensed, among other things, approximately $11.4 million of deferred financing fees associated with the repayment of the DJL Notes and the OED Notes, approximately $22.0 million in redemption premiums and consent payments associated with the DJL Notes and the OED Notes, approximately $0.4 million in unamortized bond discounts related to the DJL Notes, approximately $2.1 million in unamortized bond discounts related to the OED Notes and approximately $0.7 million of interest in respect of the 30 day call period relating to the redemption of the DJL Notes. 16 RISK FACTORS An investment in the notes involves a high degree of risk. You should carefully consider the following risks, as well as other information set forth in this prospectus, before tendering your old notes in the exchange offer. RISKS RELATING TO THE EXCHANGE OFFER AND HOLDING THE NEW NOTES Failure to Exchange Notes --Holders who fail to exchange their old notes will continue to be subject to restrictions on transfer. Holders who fail to exchange their old notes will continue to be subject to restrictions on transfer. If you do not exchange your old notes for new notes in the exchange offer, you will continue to be subject to the restrictions on transfer of your old notes described in the legend on the certificates for your old notes. The restrictions on transfer of your old notes arise because we issued the old notes under exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, you may only offer or sell the old notes if they are registered under the Securities Act and applicable state securities laws, or are offered and sold under an exemption from these requirements. We do not plan to register the old notes under the Securities Act. For further information regarding the consequences of tendering your old notes in the exchange offer, see the discussions below under the captions "The Exchange Offer--Consequences of Not Exchanging Old Notes" and "Specific United States Federal Income Tax Consequences." Exchange Offer Procedures --You must comply with the exchange offer procedures in order to receive new, freely tradable notes. Delivery of new notes in exchange for old notes tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of the following: o certificates for old notes or a book-entry confirmation of a book-entry transfer of old notes into the exchange agent's account at DTC, New York, New York as a depository, including an agent's message, as defined in this prospectus, if the tendering holder does not deliver a letter of transmittal; o a completed and signed letter of transmittal, or facsimile copy, with any required signature guarantees, or, in the case of a book-entry transfer, an agent's message in place of the letter of transmittal; and o any other documents required by the letter of transmittal. Therefore, holders of old notes who would like to tender old notes in exchange for new notes should be sure to allow enough time for the old notes to be delivered on time. We are not required to notify you of defects or irregularities in tenders of old notes for exchange. Old notes that are not tendered or that are tendered but we do not accept for exchange will, following consummation of the exchange offer, continue to be subject to the existing transfer restrictions under the Securities Act and will no longer have the registration and other rights under the exchange agreement. See "The Exchange Offer--Procedures for Tendering Old Notes" and "The Exchange Offer--Consequences of Not Exchanging Old Notes." Potential Restricted Securities -- Some holders who exchange their old notes may be deemed to be underwriters and these holders will be required to comply with the registration and prospectus delivery requirements in connection with any resale transaction. If you exchange your old notes in the exchange offer for the purpose of participating in a distribution of the new notes, you may be deemed to have received restricted securities. If you are deemed to have received restricted securities, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. 17 No Public Market --There is currently no public market for the new notes and you may find it difficult to sell your new notes. There is no existing market for the new notes. We do not intend to apply for listing of the new notes on any securities exchange or for quotation through the National Association of Securities Dealers Automated Quotation System. The liquidity of the trading market in the new notes, and the market price quoted for the new notes, will depend on many factors, including, among other things, prevailing interest rates, our operating results and the market for similar securities. We do not know the extent to which investor interest will lead to the development of a trading market for the new notes or how liquid that market might be. Historically, the market for non-investment grade debt, such as the new notes, has been subject to disruptions that have caused substantial volatility in the prices of securities. Any disruptions may make it more difficult for holders to sell their new notes and may have an adverse effect on the price at which the new notes might be sold. Substantial Indebtedness--Our substantial level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under the notes and our other indebtedness. We have, and will continue to have after this offering, substantial indebtedness. In addition to the notes, we and our subsidiaries are permitted under the indenture governing the notes to incur additional indebtedness including $35.0 million of indebtedness under a senior secured credit facility, incur certain indebtedness to purchase furniture, fixtures and equipment, and certain other additional indebtedness pursuant to the terms of the Indenture and our new senior secured credit facility. At June 30, 2004, we had $29.6 outstanding under our new senior secured credit facility. Additionally, as a result of not all the OED Notes being tendered in the tender offer, approximately $6.9 million of the OED Notes remain outstanding. See "The Transactions--Repurchase of OED Notes." Additionally, if we satisfy debt coverage tests, we could issue additional notes and incur further indebtedness. If new debt were to be incurred in the future, the related risks could intensify. Our substantial indebtedness could have important consequences to you and significant effects on our business. For example, it could: o make it more difficult for us to satisfy our obligations under the notes and our other indebtedness; o result in an event of default if we fail to satisfy our obligations under the notes or our other indebtedness or fail to comply with the financial and other restrictive covenants contained in the indenture or our senior secured credit facility, which event of default could result in all of our indebtedness becoming immediately due and payable and could permit our lenders to foreclose on our assets securing such indebtedness; o require us to dedicate a substantial portion of our cash flow from our business operations to pay our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, development projects, general operational requirements and other purposes; o limit our ability to obtain additional financing for working capital, capital expenditures and other activities; o limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; o increase our vulnerability to general adverse economic and industry conditions or a downturn in our business; and o place us at a competitive disadvantage compared to competitors that are not as highly leveraged. We expect to obtain the funds to pay our expenses and to pay the amounts due under the notes, our senior secured credit facility and our other debt primarily from our operations. Our ability to meet our expenses and make these payments thus depends on our future performance, which will be affected by financial, business, economic and 18 other factors, many of which we cannot control. Our business may not generate sufficient cash flow from operations in the future and our currently anticipated growth in revenue and cash flow may not be realized, either or both of which could result in our being unable to pay amounts due under our indebtedness, including the notes, or to fund other liquidity needs. If we do not have sufficient cash flow from operations, we may be required to refinance all or part of our then existing debt (including the notes), sell assets, reduce or delay capital expenditures or borrow more money. We cannot assure you that we will be able to accomplish any of these alternatives on terms acceptable to us, or at all. In addition, the terms of existing or future debt agreements, including our senior secured credit facility and the indenture governing the notes, may restrict us from adopting any of these alternatives. The failure to generate sufficient cash flow or to achieve any of these alternatives could materially adversely affect the value of the notes and our ability to pay the amounts due under the notes. Value of Collateral--The fair market value of the collateral securing the notes may not be sufficient to pay the amounts owed under the notes. As a result, you may not receive full payment on your notes if there is an event of default. The proceeds of any sale of collateral following an event of default with respect to the notes may not be sufficient to satisfy, and may be substantially less than, amounts due on the notes. No appraisal has been made of the collateral. We believe, however, that the total value of the collateral is less than the amount due on the notes. The value of the collateral in the event of liquidation will depend upon market and economic conditions, the availability of buyers and similar factors. The collateral does not include contracts, agreements, licenses (including gaming, and liquor licenses) and other rights that by their express terms prohibit the assignment thereof or the grant of a security interest therein. Some of these may be material to us and such exclusion could have a material adverse effect on the value of the collateral. By its nature, some or all of the collateral may not have a readily ascertainable market value or may not be saleable or, if saleable, there may be substantial delays in its liquidation. To the extent that liens, security interests and other rights granted to other parties (including the lenders under our senior secured credit facilities) encumber assets owned by us, those parties have or may exercise rights and remedies with respect to the property subject to their liens that could adversely affect the value of that collateral and the ability of the trustee under the indenture or the holders of the notes to realize or foreclose on that collateral. Consequently, we cannot assure you that liquidating the collateral securing the notes would produce proceeds in an amount sufficient to pay any amounts due under the notes after also satisfying the obligations to pay any creditors with prior claims on the collateral. In addition, under the intercreditor agreement between the trustee and the lenders under our senior secured credit facility, described below, the right of the lenders to exercise remedies with respect to the collateral could delay liquidation of the collateral. The gaming licensing process, along with bankruptcy laws and other laws relating to foreclosure and sale, as discussed below, also could substantially delay or prevent the ability of the trustee or any holder of the notes to obtain the benefit of any collateral securing the notes. Such delays could have a material adverse effect on the value of the collateral. We have not yet received, and may not receive prior to the closing of this exchange offer, an updated survey for the real property collateral located in Dubuque, Iowa (the "Dubuque Property"). There can be no assurances that such survey would not disclose any encumbrances, title defects or liens affecting the applicable collateral, which could have a material adverse effect on the value of the applicable collateral or the operation of our business. While the terms of our Purchase Agreement with the Initial Purchaser for the notes include a post-closing obligation to provide an indemnity with respect to such defects, if any, as may be disclosed on such survey as reasonably required by the trustee, and that failure to do so would be an event of default under the indenture governing the notes, there can be no assurance that such parties can or will do so. The indenture governing the notes and the agreements governing our other secured indebtedness also permit us, subject to satisfaction of certain conditions, to designate one or more of our restricted subsidiaries as an unrestricted subsidiary. If we designate a restricted subsidiary as an unrestricted subsidiary, all of the liens on any collateral owned by the unrestricted subsidiary or any of its subsidiaries and any guarantees of the notes by the unrestricted subsidiary or any of its subsidiaries will be released under the indenture but not necessarily under our senior secured credit facility. Designation of an unrestricted subsidiary will reduce the aggregate value of the collateral securing the notes to the extent that liens on the assets of the unrestricted subsidiary and its subsidiaries are 19 released. In addition, the creditors of the unrestricted subsidiary and its subsidiaries will have a prior claim (ahead of the notes) on the assets of such unrestricted subsidiary and its subsidiaries. If the proceeds of any sale of collateral are not sufficient to repay all amounts due on the notes, the holders of the notes (to the extent not repaid from the proceeds of the sale of the collateral), would have only an unsecured claim against our remaining assets. Lien Subordination--Your right to receive payments on the notes or proceeds from the sale of collateral securing the notes will be contractually subordinated to payments under our senior secured credit facility to the extent of the collateral securing such credit facility and subject to the prior claim of purchase money lenders and holders of mechanics' liens. The security interests securing the notes and the guarantees are contractually subordinated to $35.0 million (which may be increased by $15.0 million per gaming property that we acquire or construct or in which we invest) principal amount of indebtedness that may be incurred under our senior secured credit facility, pursuant to an intercreditor agreement between the trustee under the indenture and the lender or lenders under our senior secured credit facility. In addition, lenders of furniture, fixtures and equipment financing and other purchase money indebtedness will have a security interest in the assets securing that indebtedness, although those assets, so long as they secure only such indebtedness, will not secure the notes. As a result, upon any distribution to our creditors, whether or not in bankruptcy, liquidation, reorganization or similar proceedings, or following acceleration of our indebtedness or an event of default under such indebtedness, the lenders under our senior secured credit facility and the lenders of furniture, fixtures and equipment financing and other purchase money indebtedness will be entitled to be repaid in full from the proceeds of the assets securing such indebtedness before any payment is made to you from such proceeds. Consequently, it is unlikely that the liquidation of the collateral securing the notes would produce proceeds in an amount sufficient to pay the amounts due on the notes after also satisfying the obligations to pay our senior secured credit facility lenders and purchase money lenders, even if the fair market value of the collateral securing the notes would be sufficient, absent our senior secured credit facility and purchase money indebtedness, to pay all amounts due on the notes. If the proceeds of any sale of collateral are not sufficient to repay all amounts due on the notes, the holders of the notes (to the extent not repaid from the proceeds of the sale of the collateral), would have only an unsecured claim against our remaining assets. In addition, Louisiana law provides contractors, subcontractors and material suppliers with a lien on the property improved by their services or supplies in order to secure their right to be paid. If these parties are not paid in full, they may seek foreclosure on their liens. In Louisiana, the priority of all mechanics' liens related to a particular construction project relate back to the date on which construction of the project first commenced by any contractor. Accordingly, contractors, subcontractors and suppliers providing goods and services in connection with the construction of the racino who after recordation of the security interests securing the notes otherwise comply with the applicable requirements of Louisiana law may have a lien on the racino that is senior in priority to the security interests securing the notes until they are paid in full. In the event of a liquidation, proceeds from the sale of collateral will be used to pay the holders of any mechanics' liens then in existence before holders of the notes. None of our unrestricted domestic subsidiaries or any foreign subsidiaries that we may designate, form or acquire will guarantee the notes. If any of our unrestricted domestic subsidiaries or foreign subsidiaries becomes insolvent, liquidates, reorganizes, dissolves or otherwise winds up, holders of its indebtedness and its trade creditors generally will be entitled to payment on their claims from the assets of such subsidiary before any of those assets would be made available to us. Limited Remedies--Your right to exercise remedies with respect to the collateral will be limited by an intercreditor agreement between the trustee and the lenders under our senior secured credit facility. A number of the trustee's rights and remedies with respect to the collateral to be shared with the lenders under our senior secured credit facility also will be significantly limited under the intercreditor agreement. For instance, if the notes become due and payable prior to the stated maturity or are not paid in full at the stated maturity at a time during which we have indebtedness outstanding under our senior secured credit facility, the trustee will not have the right to foreclose upon the collateral unless and until the lenders under our senior secured credit facility fail to take steps to exercise remedies with respect to or in connection with the collateral within 180 days following notice to such lenders of the occurrence of an event of default under the indenture. In addition, the intercreditor 20 agreement will prevent the trustee and the holders of the notes from pursuing remedies with respect to the collateral in an insolvency proceeding. Distributions from Subsidiaries--Our ability to make payments under the notes and service our other debt depends on cash flow from our subsidiaries. We will depend on distributions or other intercompany transfers of funds from our subsidiaries to make payments under the notes and service our other debt. Distributions and intercompany transfers of funds to us from our subsidiaries will depend on: o their earnings; o covenants contained in our and their debt agreements, including our senior secured credit facilities and the indenture governing the notes; o covenants contained in other agreements to which we or our subsidiaries are or may become subject; o business and tax considerations; and o applicable law, including laws regarding the payment of dividends and distributions. We cannot assure you that the operating results of our subsidiaries at any given time will be sufficient to make distributions or other payments to us or that any distributions and/or payments will be adequate to pay any amounts due under the notes or our other indebtedness. Ability to Realize on Collateral--Gaming laws, bankruptcy laws and other factors may delay or otherwise impede the trustee's ability to foreclose on the collateral. In addition to our intercreditor arrangements with lenders under our senior secured credit facility, described above, the gaming and racing laws of the States of Iowa and Louisiana and the licensing processes, along with other laws relating to foreclosure and sale, could substantially delay or prevent the ability of the trustee or any holder of the notes to obtain the benefit of any collateral securing the notes. For example, if the trustee sought to operate, or retain an operator for, the racino, the trustee would be required to obtain Louisiana gaming and racing licenses. Potential purchasers of the racino or the gaming equipment would also be required to obtain a Louisiana gaming license as well as appropriate racing licenses relating to horse racetrack operations. This could limit the number of potential purchasers in a sale of the racino or gaming equipment, which may delay the sale of and reduce the price paid for the collateral. In addition, the trustee's ability to repossess and dispose of collateral is subject to the procedural and other restrictions of state real estate, commercial and gaming law, as well as the prior approval of the lenders under our senior secured credit facility. Among other things, if the trustee did conduct a foreclosure sale, and if the proceeds of the sale were insufficient, after expenses, to pay all amounts due on the notes, the trustee might, under certain circumstances, be permitted to assert a deficiency claim against us. There can be no assurance that the trustee would be able to obtain a judgment for the deficiency or that we would have sufficient other assets to pay a deficiency judgment. Federal bankruptcy law also could impair the trustee's ability to foreclose upon the collateral. If we or a guarantor become a debtor in a case under the United States Bankruptcy Code, as amended (the "Bankruptcy Code"), the automatic stay, imposed by the Bankruptcy Code upon the commencement of a case, would prevent the trustee from foreclosing upon the collateral or (if the trustee has already taken control of the collateral) from disposing of it, without prior bankruptcy court approval. The bankruptcy court might permit us to continue to use the collateral while the bankruptcy case was pending, even if the notes were then in default. Under the Bankruptcy Code, you and the trustee would be entitled to "adequate protection" of your interest in the collateral, if necessary to protect against any diminution in value during 21 the case. Because the Bankruptcy Code does not define "adequate protection," and because the bankruptcy court has broad discretion, however, there can be no assurance that the court would require us to provide you with any form of "adequate protection," or that any protection so ordered would, in fact, be adequate. In a bankruptcy case, the court would allow a claim for all amounts due under the notes, including all accrued and unpaid interest through the date of bankruptcy. Under the Bankruptcy Code, interest stops accruing on the date of bankruptcy except under certain specified circumstances, and there can be no assurance that the court would allow a claim for post-bankruptcy interest. If the court held that the value of the collateral securing the notes was less than the amount due, the trustee would be permitted to assert a secured claim in an amount equal to the collateral's value and an unsecured claim for the deficiency. For these and other reasons, if we or our subsidiaries become debtors in cases under the Bankruptcy Code, there can be no assurance: o whether any payments under the notes would be made; o whether or when the trustee could foreclose upon or sell the collateral; o whether the term or other conditions of the notes or any rights of the holders could be altered in a bankruptcy case without the trustee's or your consent; o whether the trustee or you would be able to enforce your rights against the guarantors under their guarantees; or o whether or to what extent holders of the notes would be compensated for any delay in payment or decline in the collateral's value. Finally, the trustee's ability to foreclose on the collateral on your behalf may be subject to the consent of third parties, prior liens (as discussed above) and practical problems associated with the realization of the trustee's security interest in the collateral. Fraudulent Transfer--Under certain circumstances, a court could cancel the guarantees of our subsidiaries. Unless designated as an unrestricted subsidiary, each domestic subsidiary we form or acquire will be required to guarantee the notes and grant a security interest in certain of its assets (junior to the security interest granted to the lenders under our senior secured credit facility) to secure its guarantee. Although these guarantees will provide you with a direct claim against the assets of the subsidiary guarantors, under federal bankruptcy law and comparable provisions of state fraudulent transfer laws, under certain circumstances a court could void (i.e., cancel) a guarantee and the security interest in the guarantor's assets and order the return of any payments made thereunder to the guarantor or to a fund for the benefit of its other creditors. A court might take these actions if it found that when the guarantor entered into its guarantee (or, in some jurisdictions, when payments became due on its guarantee), (i) it received less than reasonably equivalent value or fair consideration for its guarantee, and (ii) any of the following conditions was then satisfied: o the guarantor was insolvent or rendered insolvent by reason of incurring its obligations under its guarantee; o the guarantor was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital; or o the guarantor intended to incur, or believed (or reasonably should have believed) that it would incur, debts beyond its ability to pay as those debts matured. 22 In applying these factors, a court would likely find that a subsidiary guarantor did not receive fair consideration or reasonably equivalent value for its guarantee, except to the extent that it benefited directly or indirectly from the notes' issuance. The determination of whether a subsidiary was or was rendered "insolvent" would vary depending on the law of the jurisdiction being applied. Generally, an entity would be considered insolvent if the sum of its debts (including contingent or unliquidated debts) is greater than all of its property at a fair valuation or if the present fair salable value of its assets is less than the amount that will be required to pay its probable liability on its existing debts (including contingent or unliquidated debts) as they become absolute and matured. A court might also void a guarantor's guarantee and the security interest in its assets if the court concluded that the guarantor entered into the guarantee with actual intent to hinder, delay, or defraud creditors. If a court avoided a guarantor's guarantee, you would no longer have a claim against that subsidiary, and the claims of creditors of such subsidiary would be entitled to be paid in full prior to payments, if any, being made to us to satisfy any claims under the notes, including, in the case of OED, claims of holders of OED Notes who elected not to tender their OED Notes. There can be no assurance that the assets of any guarantor whose guarantee was not voided would be sufficient to pay amounts then due under the notes. Bankruptcy Considerations Regarding the Corporate Form of our Member--We are uncertain how the bankruptcy of our member would affect our ability to continue to operate. PGP is our sole managing member. Generally, limited liability companies ("LLCs") are intended to provide both the limited liability of the corporate form for their members and certain advantages of partnerships, including "pass-through" income tax treatment for members, and thus have attributes of both corporations and partnerships. LLCs and their members have been involved in relatively few bankruptcy cases as debtors, and there has been little reported judicial authority addressing bankruptcy issues as they pertain to LLCs. There is some authority that the bankruptcy of a partnership's general partner may lead to the winding up or dissolution of the partnership. It is possible that a bankruptcy court might hold, by analogy, that an LLC member's bankruptcy would have a similar effect on a LLC. In the absence of judicial precedent, there can be no assurance as to the effect that the bankruptcy of PGP might have on our ability or the ability of our operating subsidiaries to continue in business. Restrictive Covenants--The indenture governing the notes and our senior secured credit facility contains covenants that significantly restrict our operations. The indenture governing the notes and the agreement governing our senior secured credit facility contain, and any other future debt agreements may contain, numerous covenants imposing financial and operating restrictions on our business. These restrictions may affect our ability to operate our business, may limit our ability to take advantage of potential business opportunities as they arise and may adversely affect the conduct of our current business. These covenants place restrictions on our ability and the ability of our restricted subsidiaries to, among other things: o pay dividends, redeem stock or make other distributions or restricted payments; o incur indebtedness or issue preferred membership interests; o make certain investments; o create liens; o agree to payment restrictions affecting the subsidiary guarantors; o consolidate or merge; o sell or otherwise transfer or dispose of assets, including equity interests of our restricted subsidiaries; o enter into transactions with our affiliates; 23 o designate our subsidiaries as unrestricted subsidiaries; and o use the proceeds of permitted sales of our assets. Our senior secured credit facility also requires us to meet a number of financial ratios and tests. Compliance with these financial ratios and tests may adversely affect our ability to adequately finance our operations or capital needs in the future or to pursue attractive business opportunities that may arise in the future. Our ability to meet these ratios and tests and to comply with other provisions governing our indebtedness may be adversely affected by our operations and by changes in economic or business conditions or other events beyond our control. Our failure to comply with our debt-related obligations could result in an event of default under the notes and our other indebtedness Change of Control--Our ability to repurchase the notes upon a change of control may be limited. Upon the occurrence of specific change of control events, we will be required to offer to repurchase all outstanding notes at 101% of the principal amount, plus accrued and unpaid interest to the date of repurchase. The lenders under our senior secured credit facility have a similar right to be repaid upon a change of control. Any of our future debt agreements may contain a similar provision. However, we may not have sufficient funds at the time of the change of control to make the required repurchase of notes or repayment of our other indebtedness. The terms of our senior secured credit facility also limit our ability to purchase your notes until all debt under our senior secured credit facility is paid in full. Any of our future debt agreements may contain similar restrictions. If we fail to repurchase any notes submitted in a change of control offer, it would constitute an event of default under the indenture which would, in turn, constitute an event of default under our senior secured credit facility and could constitute an event of default under our other indebtedness, even if the change of control itself would not cause a default. Important corporate events, such as takeovers, recapitalizations or similar transactions, may not constitute a change of control under the indenture governing the notes and thus not permit the holders of the notes to require us to repurchase or redeem the notes. See "Description of Notes--Redemption," "--Repurchase Upon Change of Control" and " --Certain Covenants--Limitation on Asset Sales." Required Regulatory Redemption--Noteholders may be required to be licensed by a gaming authority and, if not so licensed, their notes will be subject to redemption. We are required to notify the Iowa Racing and Gaming Commission (the "Iowa Gaming Commission") and the Louisiana Gaming Control Board and the Louisiana State Racing Commission as to the identity of, and may be required to submit background information regarding, each owner, partner or any other person who has a beneficial interest of five percent or more, direct or indirect, in the Company. The Iowa Gaming Commission, the Louisiana Gaming Control Board and the Louisiana State Racing Commission may also request that we provide them with a list of persons holding beneficial ownership interests in the Company of less than five percent. For purposes of these rules, "beneficial interest" includes all direct and indirect forms of ownership or control, voting power or investment power held through any contract, lien, lease, partnership, stockholding, syndication, joint venture, understanding, relationship, present or reversionary right, title or interest, or otherwise. The Iowa Gaming Commission, the Louisiana Gaming Control Board and the Louisiana State Racing Commission may determine that holders of the notes have a "beneficial interest" in the Company. If any gaming, racing or liquor agencies, including the Iowa Gaming Commission, the Louisiana Gaming Control Board or the Louisiana State Racing Commission, requires any person, including a record or beneficial owner of the notes, to be licensed, qualified or found suitable, that person must apply for a license, qualification or finding of suitability within the time period specified by the gaming authority. The person would be required to pay all costs of obtaining a license, qualification or finding of suitability. If you are unable or unwilling to obtain such license, qualification or finding of suitability, such agencies and authorities may not grant us or, if already granted, may suspend or revoke our licenses unless we terminate our relationship with you. Under these circumstances, we would be required to repurchase your notes. There can be no assurance that we will have sufficient funds or otherwise will be able to repurchase any or all of your notes. See "Regulatory Matters" and "Description of Notes--Redemption" for more information about regulatory redemptions affecting the notes. 24 RISKS RELATING TO OUR BUSINESS Risk of a New Venture--Our racino does not have any operating history or history of earnings. We are still completing construction on our racino and have no operating history or history of earnings with regard to racino operations. In addition, neither we nor the Operator (as defined herein) of the racino have any experience in operating or marketing a casino in Opelousas, Louisiana. As a result, you must evaluate our business prospects in light of the difficulties frequently encountered by companies in the early stages of substantial real estate development and gaming projects and the risks inherent in the establishment of a new business enterprise. There can be no assurance that we or the Operator will be able to successfully operate the racino, that the racino will be profitable or that we will generate sufficient cash flow to meet our payment obligations under the notes and our other indebtedness. Unexpected changes or concessions required by local, state or federal regulatory authorities could involve significant additional costs and delay the scheduled opening of our new horse racetrack. Failure to Complete New Racetrack on Time and Within Budget--If we fail to complete construction of the horse racetrack on time and within budget, it could have a material adverse effect on our business. There can be no assurance that we will complete the new horse racetrack on time or within budget. Construction projects are subject to development and construction risks, any of which could cause unanticipated costs increases and delays. Unexpected changes or concession required by local, state or federal regulatory authorities could involve significant additional costs and delay the scheduled opening of our new horse racetrack. We expect to meet our regulatory requirements for the racino project for fiscal 2004 with related additional capital expenditures of approximately $15.1 million. Consistent with our regulatory requirements, we also expect to continue construction on our turf track during fiscal 2005. We expect to fund these capital expenditures from borrowings under our senior secured credit facility and cash flow from operations. If these amounts are not sufficient, or if actual construction costs exceed expected amounts, we would be required to seek additional financing, modify our construction plans or use cash from operations that would otherwise be used for other purposes (including servicing our indebtedness). There can be no assurances that these alternatives would be available or that they would not have a material adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under the notes and our other indebtedness. Licensing--If a schedule of live racing meets for the 2005 racing season at the new horse racetrack is not established by January 21, 2005 or if we fail to meet the minimum live racing day requirements, our gaming license with respect to the racino will be canceled and all slot machine gaming at the racino must cease. Our failure to complete construction of the horse racetrack at the racino and to establish a schedule of live racing meets at the new horse racetrack by January 21, 2005, will result in the cancellation of our gaming license with respect to the racino. While Louisiana allows us to operate slot machines at the racino prior to completion of the new horse racing facility and the commencement of live racing at the new horse racetrack, Louisiana gaming regulations and our gaming license require that the racino must be constructed and a schedule of live racing meets at the new horse racetrack must be established by January 21, 2005, which is within two years from the date of the grant of our gaming license with respect to the racino. In addition, to maintain our gaming license, we must remain an "eligible facility" under the Louisiana Pari-Mutuel Live Racing Facility Economic Redevelopment and Gaming Control Act (the "Pari-Mutuel Act"). This means that we must, among other things, have a minimum of 80 live racing days in a consecutive 20-week period each year of live horse race meetings at the new horse racetrack. Live racing days typically vary in number from year to year and are based on a number of factors, many of which are beyond our control, including the number of suitable race horses and the occurrence of severe weather. If either a schedule of live racing meets at the new horse racetrack has not been established by January 21, 2005 or if we fail to have the minimum number of live racing days, our gaming license with respect to the racino may be canceled, and the casino will be required to cease operations. Any cessation of our operation would have a material adverse affect on our business and financial condition and ability to meet our payment obligations under the notes and our other indebtedness. 25 Future Operating Performance--Our future operating performance could be adversely affected by disruptions and reduced patronage of our properties as a result of economic and other business factors. Our future operating performance could be adversely affected by disruptions and reduced patronage of our properties as a result of economic and other business factors. The impact of these factors will be more significant to us than it would be to a diversified gaming company or to a gaming company that does not depend on seasonal earnings from racing. Either the Diamond Jo or the racino could be completely or partially closed due to, among other things, severe weather, casualty, mechanical failure, including the failure of our slot machines, physical damage or extended or extraordinary maintenance or inspection. Severe weather may also cause the closure of highways which provide access to the Diamond Jo or the racino and could reduce the number of people visiting these facilities. In addition, to maintain our gaming license for our racino, we must have a minimum of 80 live racing days in a consecutive 20-week period each year of live horse race meetings at the new racetrack, and poor weather conditions may make it difficult for us to comply with this requirement. We are also vulnerable to any adverse changes in general political, financial and economic conditions (including as a result of international conflict) and any negative economic, competitive, demographic or other conditions affecting the States of Iowa and Louisiana, the cities of Dubuque, Iowa and Lafayette and Opelousas, Louisiana and the surrounding areas from which we expect to attract patrons. If the economy of any of these areas suffers a downturn or if any of that area's larger employers lays off workers, we may be adversely affected by the decline in disposable income of consumers in that area. Any of the foregoing factors could limit or result in a decrease in the number of patrons at either the Diamond Jo or the racino or a decrease in the amount that patrons are willing to wager. Although we maintain insurance policies, insurance proceeds may not adequately compensate us for all economic consequences of any such event. If either the Diamond Jo or the racino is not able to generate sufficient cash flow, we may not be able to meet our payment obligations under the notes and our other indebtedness. Requirement of a Certificate of Inspection--DJL must hold a Certificate of Inspection and a Certificate of Documentation from the United States Coast Guard for the Diamond Jo. Loss of the Certificate of Inspection would result in discontinuance of operations at the Diamond Jo riverboat casino. DJL must hold, and currently possesses, a Certificate of Inspection ("COI") and a Certificate of Documentation from the United States Coast Guard for the Diamond Jo riverboat. Loss of the COI would preclude its use of the Diamond Jo as an operating riverboat. The United States Coast Guard requires periodic hull inspections. A traditional dry dock hull inspection would result in the temporary loss of service of its riverboat for approximately two weeks. The United States Coast Guard, upon request and approval of the request, allows for an underwater hull inspection instead of the traditional out of water dry dock inspection. An underwater hull inspection does not result in any loss of services of the riverboat. DJL completed an underwater hull inspection in March 2003 and DJL will be required to perform another hull inspection within sixty (60) months from the date of the underwater hull inspection. At that time, DJL may again seek approval from the Coast Guard for an underwater hull inspection in order to avoid any loss of services of the riverboat. No assurances can be given that the Coast Guard would again approve DJL's request for an underwater hull inspection. Due to changes in Iowa law, we may operate a gaming vessel that is not required to cruise, without a COI. We have applied to the US Army Corp of Engineers and the Coast Guard to give up our COI and become a Permanently Moored Vessel (PMV). The process of becoming a PMV is expected to take at least several months and, if granted, will allow us to reduce our marine personnel to a level fitting of a non-cruising vessel. Reauthorization of Gaming in Dubuque County, Iowa--The Dubuque County electorate must vote in 2010 and every eight years thereafter whether to continue to allow riverboat gaming in Dubuque County, Iowa. If riverboat gaming is discontinued, it is unlikely that DJL will be able to conduct its gaming operations, and, in that case, DJL may not be able to continue to service our indebtedness, including the notes. Under Iowa law, a license to conduct gaming may be issued in a county only if the county electorate has approved the gaming, and a reauthorization referendum requiring majority approval must be held every eight years. On November 5, 2002, the electorate of Dubuque County, Iowa, which includes the City of Dubuque, approved gaming by approximately 79% of the votes cast. If any reauthorization referendum is defeated it is unlikely that DJL 26 would be able to conduct gaming operations on the Diamond Jo, and, in that case, DJL may not be able to continue to service our indebtedness, including the notes. Liquor Regulation--Revocation of any of our liquor licenses, which are subject to extensive regulation, could have a material adverse effect on our gaming operations and our ability to generate cash to service our indebtedness. The sale of alcoholic beverages by DJL and OED is subject to licensing, control and regulation by state and local agencies in Iowa and Louisiana, respectively. Subject to limited exceptions, all persons who have a financial interest in DJL, OED, or PGL, by ownership, loan or otherwise, must be disclosed in an application filed with, and are subject to investigation by, Iowa and Louisiana liquor agencies. All liquor licenses are subject to annual renewal, are revocable and are not transferable. Persons who have a direct or indirect interest in any Iowa liquor licensee, other than hotel and restaurant liquor licensees, may be prohibited from purchasing or holding the notes. The liquor agencies have broad powers to limit, condition, suspend or revoke any liquor license. Any disciplinary action with respect to any of our liquor licenses could, and any failure to renew or revocation of our liquor licenses would, have a material adverse effect on our business. Competition--We face intense competition in our gaming markets and increased competition may have a material adverse effect on our business, financial condition and resulting operations. The gaming industry is intensely competitive. If our existing competitors expand and/or upgrade their facilities or operate more efficiently than us, or new gaming firms enter the markets in which we operate, we could lose market share, our gaming markets could become saturated and new opportunities for expanding our business could become limited. As a result, increased competition could have a material adverse effect on our business, financial condition and resulting operations. In Iowa, we face competition primarily from the Dubuque Greyhound Park and Casino ("DGP"), which possesses several competitive strengths. The DGP offers some amenities that Diamond Jo does not have, including live and simulcast greyhound racing, and, on a limited basis, simulcast horse racing. As a not-for-profit organization, the DGP has developed strong relationships with the local community and city officials by distributing a percentage of its cash-flow, through contributions, to the City of Dubuque and local charities. In addition, legislation recently passed allows the DGP to offer table games and video games that simulate table games, subject to DJL and the DGP filing with the Iowa Gaming Commission an agreement with respect thereto that also allows DJL to operate as a barge. Furthermore, the DGP, which currently operates 600 slot machines and is permitted to operate up to 1,000 slot machines, is in the process of expanding its facilities to accommodate additional slot machines, which expansion is anticipated to be completed by June 2005. In addition, a group of private investors is planning to construct a hotel adjacent to the DGP, which is expected to be completed in June 2005. Besides the DGP, we also currently face limited competition from other gaming facilities located approximately 60 to 120 miles from our operations. In Louisiana, we face competition from several other casinos and pari-mutuel gaming facilities located 50 to 100 miles from our racino, including Native American casinos in Marksville and in Kinder, Louisiana, and riverboat casinos in Baton Rouge and Lake Charles, Louisiana. The nearest horse racetrack to our racino that is allowed to have gaming operations is located in Vinton, Louisiana. We also face competition from truck stop video poker parlors and OTBs in the areas surrounding Lafayette and Opelousas. We also compete to some extent with other forms of gaming on both a local and national level, including state-sponsored lotteries, charitable gaming, on- and off-track wagering, and other forms of entertainment, including motion pictures, sporting events and other recreational activities. It is possible that these secondary competitors could reduce the number of visitors to our facilities or the amount they are willing to wager, which could have a material adverse effect on our ability to generate revenue or maintain our profitability. See "Business--Competition." We could also face additional competition if Louisiana or any of the states bordering Iowa or Louisiana adopts laws authorizing new or additional gaming. Iowa recently took steps to begin authorizing an increase in the number of gaming licenses, and it is likely that new gaming facilities will begin to compete with us. In Louisiana, in 27 the past legislative session, a bill was introduced in the House of Representatives to allow live harness or standard bred horse racetracks. If future legislation authorizes live harness or standard bred horse tracks, our operations at our racino would likely be adversely effected by the increased competition. See "--Governmental Regulation." Increased competition may require us to make substantial capital expenditures to maintain and enhance the competitive positions of our properties, including updating slot machines to reflect changing technology, refurbishing rooms and public service areas periodically, replacing obsolete equipment on an ongoing basis and making other expenditures to increase the attractiveness and add to the appeal of our facilities. Because we are highly leveraged, after satisfying our obligations under our outstanding indebtedness, there can be no assurance that we will have sufficient funds to undertake these expenditures or that we will be able to obtain sufficient financing to fund such expenditures. If we are unable to make such expenditures, our competitive position could be materially adversely affected. Governmental Regulation--Extensive gaming and racing-related regulation continuously impacts our operations and changes in such laws may have a material adverse effect on our operations by, among other things, prohibiting or limiting gaming in the jurisdictions in which we operate. The ownership, management and operation of our gaming facilities are subject to extensive laws, regulations and ordinances which are administered by the Iowa Gaming Commission, the Louisiana State Gaming Control Board, the Louisiana State Racing Commission and various other federal, state and local government entities and agencies. We are subject to regulations that apply specifically to the gaming industry and horse racetracks and casinos, in addition to regulations applicable to businesses generally. If current laws, regulations or interpretations thereof are modified, or if additional laws or regulations are adopted, it could have a material adverse effect on our business. See "--Competition" and "--Liquor Regulation" and "Regulatory Matters." Legislative or administrative changes in applicable legal requirements, including legislation to prohibit casino gaming, have been proposed in the past. For example, in 1996, the State of Louisiana adopted a statute in connection with which votes were held locally where gaming operations were conducted and which, had the continuation of gaming been rejected by the voters, might have resulted in the termination of operations at the end of their current license terms. During the 1996 local gaming referendums, Lafayette Parish voted to disallow gaming in the Parish, whereas St. Landry Parish, the site of our relocation, voted in favor of gaming. All parishes where riverboat gaming operations are currently conducted voted to continue riverboat gaming, but there can be no guarantee that similar referenda might not produce unfavorable results in the future. Proposals to amend or supplement the Louisiana Riverboat Economic Development and Gaming Control Act and the Pari-Mutuel Act also are frequently introduced in the Louisiana State legislature. In the 2001 session, a representative from Orleans Parish introduced a proposal to repeal the authority of horse racetracks in Calcasieu Parish (i.e., site of Delta Downs) and St. Landry Parish (i.e., site of our racino) to conduct slot machine gaming at such horse racetracks and to repeal the special taxing districts created for such purposes. If adopted, this proposal would have effectively prohibited us from operating the casino portion of our racino. In addition, the Louisiana legislature, from time to time, considers proposals to repeal the Pari-Mutuel Act. Similarly, in Iowa, the county electorate must reauthorize gaming every eight years. See "--Reauthorization of Gaming in Dubuque County, Iowa." To date, we have obtained all governmental licenses, findings of suitability, registrations, permits and approvals necessary for the operation of the Diamond Jo and the racino. However, we can give no assurance that any additional licenses, permits and approvals that may be required will be given or that existing ones will be renewed or will not be revoked. Renewal is subject to, among other things, continued satisfaction of suitability requirements. Any failure to renew or maintain our licenses or to receive new licenses when necessary would have a material adverse effect on us. The approval of the Iowa Gaming Commission, and the approval of applicable Louisiana regulatory authorities are required for any material debt or equity financing, including the issuance of the notes, and the corporate transactions. The Iowa Gaming Commission and the applicable Louisiana regulatory authorities recently approved the offering of the notes, refinancing of our existing senior secured credit facilities and the corporate transactions. 28 Environmental Matters--We are subject to environmental laws and potential exposure to environmental liabilities. This may affect our ability to develop, sell or rent our property or to borrow money where such property is required to be used as collateral. We are subject to various federal, state and local environmental laws, ordinances and regulations, including those governing discharges to air and water, the generation, handling, management and disposal of petroleum products or hazardous substances or wastes, and the health and safety of our employees. Permits may be required for our operations and these permits are subject to renewal, modification and, in some cases, revocation. In addition, under environmental laws, ordinances or regulations, a current or previous owner or operator of property may be liable for the costs of removal or remediation of some kinds of hazardous substances or petroleum products on, under, or in its property, without regard to whether the owner or operator knew of, or caused, the presence of the contaminants, and regardless of whether the practices that resulted in the contamination were legal at the time they occurred. The presence of, or failure to remediate properly, the substances may adversely affect the ability to sell or rent the property or to borrow funds using the property as collateral. Additionally, the owner of a site may be subject to claims by third parties based on damages and costs resulting from environmental contamination emanating from a site. We have reviewed environmental assessments, in some cases including soil and groundwater testing, relating to our currently owned and leased properties in Dubuque, Iowa, and other properties we may lease from the City of Dubuque or other parties. As a result, we have become aware that there is contamination present on some of these properties apparently due to past industrial activities. With respect to parcels we currently own or lease, we believe, based on the types and amount of contamination identified, the anticipated uses of the properties and the potential that the contamination, in some cases, may have migrated onto our properties from nearby properties, that any cost to clean up these properties will not result in a material adverse effect on our earnings. We do not anticipate any material adverse effect on our earnings or competitive position relating to environmental matters, but it is possible that future developments could lead to material costs of environmental compliance for us and that these costs could have a material adverse effect on our business and financial condition. Taxation--An increase in the taxes and fees that we pay could have a material adverse effect on us, and might reduce the cash flow available to service our indebtedness, including under the notes. We are subject to significant taxes and fees relating to our gaming operations, which are subject to increase at any time. Currently, in Iowa, we are taxed at an effective rate of approximately 22% of our adjusted gross receipts by the State of Iowa and we pay the City of Dubuque a fee equal to $0.50 per patron. In addition, there will be two assessments due on June 1, 2005 and June 1, 2006 in an amount equal to 2.152% of the licensee's adjusted gross receipts for fiscal year 2004. These assessments will be used against future state gaming taxes paid by the licensee with a credit for 20% of the assessments paid allowed each year for five consecutive years beginning July 1, 2010. In addition, all Iowa riverboats share equally in costs of the Iowa Gaming Commission and related entities to administer gaming in Iowa, which is currently approximately $600,000 per year per riverboat. Recently enacted legislation eliminated the cruising requirement and now allows all riverboats licensed in the state to operate as either a self-propelled excursion gambling boat, an excursion gambling boat that has been removed from navigation and is designated as a permanently moored vessel by the United States Coast Guard, or a moored barge. Currently, in Louisiana, we are taxed at an effective rate of approximately 36.5% of our adjusted gross slot revenue and pay to the Louisiana State Racing Commission a fee of $0.25 for each patron who attends a live race at our horse racetrack, enters the racino during non-racing season, from the hours of noon to midnight, Thursday through Monday, or enters any one of our OTBs. In addition, there have been proposals in the past to tax all gaming establishments, including riverboat casinos, at the federal level. Any material increase in taxes or fees, or in costs of the Iowa Gaming Commission and related entities, would have a material adverse affect on us and our ability to service our indebtedness, including the notes. See "Regulatory Matters" for more information about the taxes and fees we are required to bear. 29 Difficulty in Attracting and Retaining Qualified Employees--If we are unable to attract and retain a sufficient number of qualified employees or are required to substantially increase our labor costs, our business, results of operations and financial condition will be materially adversely affected. The operation of our business requires qualified executives, managers and skilled employees with gaming industry experience and qualifications to obtain the requisite licenses. We may have difficulty attracting and retaining a sufficient number of qualified employees and may be required to pay higher levels of compensation than we have estimated in order to do so. If we are unable to attract and retain a sufficient number of qualified employees or are required to substantially increase our labor costs, we may not be able to operate our business in a cost effective manner or at all. We are dependent upon the available labor pool of unskilled and semi-skilled employees. We are also subject to the Fair Labor Standards Act, which governs matters such as minimum wage, overtime and other working conditions. In addition, Iowa law effectively requires that we pay Iowa employees 25% more than the federally mandated minimum wage rates. Changes in applicable state or federal laws and regulations, particularly those governing minimum wages, could increase labor costs, which could have a material adverse effect on the cash flow available to service our indebtedness. Interested Party Matters--All of the Company's voting equity interests are indirectly beneficially owned in the aggregate by managers and executive officers of PGP, and such ownership may give rise to conflicts of interest. All of the Company's voting equity interests are indirectly beneficially owned or controlled in the aggregate by Messrs. Stevens, Luzich, Oliver and Whittaker. Specifically, M. Brent Stevens, our Chief Executive Officer, is also the Chairman of the Board of Managers of PGP and the Chief Executive Officer of PGP, DJL, OED and PGL. Mr. Stevens indirectly beneficially owns or controls (through his beneficial ownership or control of voting equity interests in PGP) approximately 66.2% of the Company's equity interests. Michael Luzich, our President and Secretary, is also a Manager of PGP and the President and Secretary of PGP, DJL, OED and PGL. Mr. Luzich indirectly beneficially owns (through his ownership of voting equity interests in PGP) approximately 32.3% of the Company's equity interests. Terrance W. Oliver, a Manager of PGP, indirectly beneficially owns (through his direct ownership of interests in The Oliver Family Trust) approximately 1.5% of the Company's equity interests. Andrew Whittaker, a Manager of PGP, indirectly beneficially owns (through his indirect ownership of voting equity interests in PGP) approximately 4.2% (which is included in the calculation of the 66.2% owned or controlled by Mr. Stevens) of the Company's equity interests. In addition Mr. Stevens has the right to designate three of the five members of PGP's board of managers, including one of the two independent managers, and Mr. Luzich has the right to designate two of the five members of PGP's board of managers, including one of the two independent managers, for so long as Mr. Stevens and Mr. Luzich, respectively, beneficially hold at least 5% of the voting equity interests of PGP. See "Management," "Security Ownership of Certain Beneficial Owners and Management," and "Certain Relationships and Related Party Transactions." Mr. Stevens also is an Executive Vice President of the Initial Purchaser, and Mr. Whittaker also is a Vice Chairman of the Initial Purchaser. Certain affiliates, officers and employees of the Initial Purchaser also are members of PGP Investors, LLC, a Delaware limited liability company, which beneficially owns approximately 41.3% (which is included in the calculation of the 66.2% owned or controlled by Mr. Stevens) of the Company's equity interests. See "Plan of Distribution." There can be no assurance that the interests of these individuals or PGP will not conflict with your interests as a holder of notes. Because of their controlling interests, these individuals have the power to elect a majority of our managers, appoint new management and approve any action requiring the approval of holders of our equity interests, including adopting amendments to our certificate of formation, approving mergers or sales of substantially all of our assets or changes to our capital structure, or pursuing other transactions which may increase the value of their or PGP's equity investment even though these transactions may involve risks to you as a holder of notes. PGP is primarily responsible for managing the Diamond Jo and the racino, as well as supervising the construction of the racino. Neither PGP nor any of its affiliates is restricted from managing other gaming operations, including new gaming ventures or facilities that may compete with ours, except that certain restrictions under the 30 DRA Operating Agreement will terminate if we or any of our affiliates operate another facility in Dubuque County or the adjoining counties of Illinois or Wisconsin. If PGP or any of its affiliates decides to manage other gaming operations, such activities could require a significant amount of attention from PGP's officers and managers and require them to devote less time to managing our operations. While we believe that any new ventures will not detract from PGP's ability to manage and operate the Diamond Jo or the racino, there can be no assurance that such ventures would not have a material adverse effect on us or on PGP. 31 THE TRANSACTIONS The offering of the notes was conducted as part of our plan to refinance our existing debt to improve our financial and operating flexibility (the "Refinancing Plan"). In addition, in connection with the Refinancing Plan, we effected a series of corporate transactions (the "Corporate Transactions" and, together with the Refinancing Plan, the "Transactions") to, among other things, simplify our organizational structure. REFINANCING PLAN The elements of the Refinancing Plan included the following: Repurchase of OED Notes. In March 2004, OED commenced a tender offer and consent solicitation to repurchase all of its outstanding OED Notes and to solicit consents to certain proposed amendments to the indenture governing the OED Notes (the "Amendments") and to terminate the related collateral agreements and release the liens on the collateral that secures the OED Notes (the "Collateral Release" and, together with the Amendments, the "Proposals"). The Amendments eliminated substantially all of the restrictive covenants and events of default under the indenture governing the OED Notes, other than those relating to the payment of principal and interest. The Amendments required for adoption the consent of the holders of a majority in aggregate principal amount of the outstanding OED Notes (excluding for such purpose any OED Notes owned by OED or any of its affiliates) (the "Requisite Consents"). The tender offer and consent solicitation was conditioned on, among other things, there being validly tendered (and not withdrawn) of a majority of the aggregate principal amount of the outstanding OED Notes. OED received the Requisite Consents for the Amendments in its consent solicitation and tenders of a majority of the aggregate principal amount of the outstanding OED Notes. We used a portion of the net proceeds from the offering of the notes to redeem approximately $116 million principal amount of the outstanding OED Notes in the tender offer and to pay the related consent payments. OED Notes not purchased in the tender offer remain outstanding and do not have the benefit of substantially all of the restrictive covenants in the indenture or the liens on the collateral. Repurchase of DJL Notes. Under the indenture governing DJL's 12 1/4% Senior Secured Notes due 2006 (the "DJL Notes"), DJL had the right to redeem all of the DJL Notes at the redemption price set forth in such indenture. On the issue date of the notes, DJL deposited a portion of the net proceeds from the offering of the notes with the trustee for the purpose of defeasing the covenants and releasing the liens on the collateral that secure the DJL Notes. On May 17, 2004, the DJL Notes were redeemed. DJL used a portion of the proceeds from the offering of the notes to pay accrued distributions on its preferred membership interests. DJL was required to pay all accrued distributions on the preferred membership interests upon a refinancing of the DJL Notes. Refinancing of Existing Senior Secured Credit Facilities. On June 16, 2004, DJL and OED jointly entered into a Loan and Security Agreement with Wells Fargo Foothill, Inc. as the Arranger and Agent (the "PGL Credit Facility"). The PGL Credit Facility consists of a revolving credit facility which permits DJL and OED to request advances and letters of credit up to the lesser of the maximum revolver amount of $35 million (less amounts outstanding under letters of credit) and a specified borrowing base (the "Borrowing Base"). For the purposes of the PGL Credit Facility, the Borrowing Base is the lesser of the Combined EBITDA (as defined in the PGL Credit Facility) of OED and DJL for the twelve months immediately preceding the current month end multiplied by 150% and the Combined EBITDA of OED and DJL for the most recent quarterly period annualized multiplied by 150%. Immediately upon the closing of the PGL Credit Facility, DJL borrowed approximately $11.1 million to refinance outstanding obligations under the DJL Credit Facility and pay financing related fees and expenses and OED borrowed approximately $4.8 million to refinance outstanding obligations under the OED Credit Facility and pay financing related fees and expenses. Advances under the PGL Credit Facility bear an interest rate based on the borrower's option of LIBOR plus a margin of 3% -3.5% or Wells Fargo prime rate plus a margin of .5% -1% (current rate of 5.0%); provided that at no time shall the interest rate be lower than 4%. The PGL Credit Facility also contains a term loan in the amount of $14,666,667 (the "Term Loan"). The proceeds from the Term Loan were used to repay outstanding obligations under the OED FF&E Credit Facility. The Term Loan is secured by certain assets of OED and requires monthly payments of $333,333 starting July 1, 2004 until the full balance is paid, with a maturity no later than June 15, 2008. The Term Loan has an interest rate equal to 32 the Wells Fargo prime rate plus 2.5% (current rate of 6.5%); provided that at no time shall the interest rate be lower than 6%. Under the terms of the PGL Credit Facility, OED was required to issue a letter of credit in the amount of $3.2 million in favor of Wells Fargo related to the Term Loan. DJL and OED are jointly and severally liable under the PGL Credit Facility, other than for borrowings under the Term Loan. Borrowings under the PGL Credit Facility, other than borrowings under the Term Loan, are collateralized by substantially all assets of OED and DJL. Borrowings under the Term Loan will be secured by a separate lien on the furniture, fixtures and equipment of OED financed pursuant to the terms of the OED FF&E Facility. Borrowings under the PGL Credit Facility are guaranteed by Peninsula Gaming, LLC and Peninsula Gaming Corp. (formerly known as OED Capital Corp.). CORPORATE TRANSACTIONS The Corporate Transactions consisted of the following: Creation of New Parent Holding Company. On June 16, 2004, PGL became a new direct parent company of DJL and a direct wholly owned subsidiary of PGP. As part of the Corporate Transactions, PGL became an additional co-issuer of the notes, together with DJL and PGC. In addition, OED Corp. was renamed Peninsula Gaming Corp. ("PGC") and became a direct wholly owned subsidiary of PGL. PGC does not have any operations and is a co-issuer of the OED Notes. Following the redemption of the DJL Notes, Peninsula Gaming Corp. ("PGC Corp"), a subsidiary of DJL, was dissolved. Following the formation of PGL, DJL and OED became sister subsidiaries and continue to own and manage their respective gaming operations, the Diamond Jo riverboat casino in Dubuque, Iowa and the Evangeline Downs racino located near Lafayette, Louisiana, respectively. OEDA, formerly the parent of OED, became a direct wholly owned subsidiary of PGP and a sister company of PGL. 33 CORPORATE STRUCTURE Our corporate structure immediately following the offering of the old notes, and prior to the consummation of the Transactions, was as follows: DJL Diamond Jo Issuer of DJL Notes | ___________|____________ | | | | OEDA PGC Corp. Unrestricted Co-Issuer of Subsidiary DJL Notes | | OED Racino & OTBs Issuer of OED Notes | | OED Corp. Co-Issuer of OED Notes Our current corporate structure is as follows: PGL Co-Issuer ___________________|____________________ | | | PGC OED DJL Co-Issuer Rancino & OTBs Diamond Jo Guarantor Co-Issuer As part of the Transactions, PGL became an additional co-issuer of the notes at the time we entered into the PGL Credit Facility and PGC Corp. was dissolved. DJL is a co-issuer (and not a guarantor) of the notes. The indenture governing the notes permitted DJL and PGC to consummate the Corporate Transactions without requiring the consent of any of the holders of the notes following receipt by DJL and OED of requisite final regulatory approvals. 34 USE OF PROCEEDS This exchange offer is intended to satisfy our obligations under the registration rights agreement entered into in connection with the issuance of the old notes. We will not receive any proceeds from the issuance of the new notes in the exchange offer. You will receive, in exchange for old notes tendered by you and accepted by us in the exchange offer, new notes in the same principal amount. The old notes surrendered in exchange for the new notes will be retired and cancelled and cannot be reissued. Accordingly, the issuance of the new notes will not result in any increase of our existing debt. We used the net proceeds of the offering of the original notes to redeem all of DJL's outstanding 12 1/4% Senior Secured Notes due 2006 (including accrued interest and resulting call premium), to repay approximately $116.3 million aggregate principal amount of OED's 13% Senior Secured Notes due 2010 with Contingent Interest, to pay certain accrued distributions on DJL's outstanding preferred membership interests, to pay related fees and expenses and for other corporate purposes. 35 CAPITALIZATION The following table sets forth our cash and investments and capitalization at March 31, 2004 on an actual basis and on an adjusted basis to give effect to the offering of the Notes and the application of the net proceeds therefrom as set forth under the section entitled "Use of Proceeds" and the consummation of the other Transactions as set forth in the section entitled "The Transactions," as if such transactions had occurred on March 31, 2004. The following table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and notes thereto included elsewhere in this prospectus. AT MARCH 31, 2004 ----------------- AS ACTUAL ADJUSTED ------ ----------- (DOLLARS IN THOUSANDS) Cash, cash equivalents, restricted cash and restricted investments(1)............................................ $40,079 $41,753 ======= ======= DEBT: New Senior Secured Credit Facility(2)....................... $-- $32,148 DJL Credit Facility......................................... 11,100 -- OED Credit Facility......................................... 4,254 -- The Notes, net of discount.................................. -- 229,729 DJL Notes, net of discount.................................. 70,650 -- OED Notes, net of discount.................................. 120,984 6,786 OED FF&E Facility........................................... 15,667 -- Other debt.................................................. 4,290 4,290 ------- ------- Total senior debt........................................... 226,945 272,953 Preferred members' interests redeemable..................... 4,000 4,000 ------- ------- Total debt.................................................. 230,945 276,953 MEMBERS' EQUITY (DEFICIT): Common members' interests................................... 9,000 9,000 Accumulated deficit(3)...................................... (23,404) (60,023) ------- ------- Total members' (deficit).................................... (14,404) (51,023) ------- ------- Total capitalization........................................ $216,541 $225,930 ======== ======== - ---------- (1) Includes restricted cash and cash equivalents, purse settlements, restricted investments and restricted cash - Racino project. (2) On June 16, 2004, DJL and OED jointly entered into a Loan and Security Agreement with Wells Fargo Foothill, Inc. as the Arranger and Agent (the "PGL Credit Facility"). The PGL Credit Facility consists of a revolving credit facility which permits DJL and OED to request advances and letters of credit up to the lesser of the maximum revolver amount of $35 million (less amounts outstanding under letters of credit) and a specified borrowing base (the "Borrowing Base"). For the purposes of the PGL Credit Facility, the Borrowing Base is the lesser of the Combined EBITDA (as defined in the PGL Credit Facility) of OED and DJL for the twelve months immediately preceding the current month end multiplied by 150% and the Combined EBITDA of OED and DJL for the most recent quarterly period annualized multiplied by 150%. Advances under the PGL Credit Facility bear an interest rate based on the borrower's option of LIBOR plus a margin of 3% -3.5% or Wells Fargo prime rate plus a margin of .5% -1% (current rate of 5.0%); provided that, at no time shall the interest rate be lower than 4%. The PGL Credit Facility also contains a Term Loan in the amount of $14,666,667. The proceeds from the Term Loan were used to repay outstanding obligations under the FF&E Credit Facility. The Term Loan is secured by certain assets of OED and requires monthly payments 36 of $333,333 starting July 1, 2004 until the full balance is paid, with a maturity no later than June 15, 2008. The Term Loan has an interest rate equal to the Wells Fargo prime rate plus 2.5% (current rate of 6.5%); provided that, at no time shall the interest rate be lower than 6%. Under the terms of the PGL Credit Facility, at closing OED was required to issue a letter of credit in the amount of $3.2 million in favor of Wells Fargo related to the Term Loan. The proceeds of the PGL Credit Facility were used to repay the DJL Credit Facility, the OED Credit Facility, the OED FF&E Credit Facility and the remaining proceeds of $1.1 million were used to pay the fees and costs associated with the new facility and accrued interest on the prior borrowings. (3) In connection with the offering of the old notes and the consummation of our refinancing plan and the related corporate transaction as described in "The Transactions," the Company expensed, among other things, approximately $11.4 million of deferred financing fees associated with the repayment of the DJL Notes, the OED Notes, DJL's and OED's existing senior secured credit facilities and OED's FF&E credit facility, approximately $22.0 million in redemption premiums and consent payments associated with the DJL Notes and the OED Notes, approximately $0.4 million in unamortized bond discounts related to the DJL Notes, approximately $2.1 million in unamortized bond discounts related to the OED Notes and approximately $0.7 million of interest in respect of the 30 day call period relating to the redemption of the DJL Notes. 37 SELECTED CONSOLIDATED FINANCIAL DATA The selected historical consolidated financial data of PGL as of December 31, 2003 and 2002 and for each of the three years in the period ended December 31, 2003 have been derived from PGL's audited consolidated financial statements included elsewhere in this prospectus. The selected historical consolidated financial data of PGL as of December 31, 2001, 2000 and 1999 and for both the year ended December 31, 2000 and the period July 15, 1999 to December 31, 1999 have been derived from audited financial statements not included elsewhere in this prospectus. The selected historical financial data as of March 31, 2004 and for the three months ended March 31, 2004 and 2003 have been derived from our unaudited financial statements included elsewhere in this prospectus. The unaudited financial statements have been prepared by us on a basis consistent with the audited financial statements and include all normal recurring adjustments necessary for a fair presentation of information set forth therein. The data presented below is summary only, should be read in conjunction with, and is qualified in its entirety by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the notes thereto appearing elsewhere in this prospectus.
PERIOD FROM THREE THREE JULY 15, MONTHS MONTHS 1999 TO ENDED ENDED DECEMBER 31, MARCH 31, MARCH 31, 1999 2000 2001 2002 2003 2003 2004 ---------- ---------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Revenues: Casino ...................... $21,153 $45,519 $47,710 $48,262 $56,795 $11,782 $30,193 Racing ...................... -- -- -- 15,510 17,774 3,644 4,365 Food and beverage ........... 1,235 2,663 2,745 3,886 4,565 839 2,818 Other ....................... 122 169 132 145 589 58 201 Less: Promotional allowances ................ (1,017) (2,599) (2,470) (2,615) (3,221) (654) (2,012) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net revenues ................ 21,493 45,752 48,117 65,188 76,502 15,669 35,565 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Expenses: Casino ...................... 8,599 19,517 20,375 20,555 23,533 5,014 15,054 Racing ...................... -- -- -- 12,651 14,646 2,847 3,504 Food and beverage ........... 1,328 2,856 2,857 3,820 4,282 731 2,282 Boat operations ............. 991 2,242 2,259 2,296 2,322 567 573 Other ....................... 16 37 22 27 443 8 125 Selling, general and administrative ............ 3,736 6,459 6,681 8,740 12,343 2,518 5,528 Depreciation and amortization .............. 1,541 3,571 3,963 2,950 3,324 819 2,896 Pre-opening expense ......... -- -- -- -- 3,257 -- 221 Development costs ........... -- -- -- -- 102 -- 21 Management fee .............. -- -- -- -- -- -- 256 Litigation settlement ....... -- -- -- 1,600 -- -- -- Referendum .................. -- -- -- 771 -- -- -- State of Wisconsin government relations ...... -- -- 147 55 -- -- -- Non-recurring expenses ...... 3,134 -- -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total expenses .............. 19,345 34,682 36,304 53,465 64,252 12,504 30,460 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Income From Operations ...... 2,148 11,070 11,813 11,723 12,250 3,165 5,105
38
PERIOD FROM THREE THREE JULY 15, MONTHS MONTHS 1999 TO ENDED ENDED DECEMBER 31, MARCH 31, MARCH 31, 1999 2000 2001 2002 2003 2003 2004 ---------- ---------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Other income (expense): Interest income ............. 155 434 184 46 490 80 57 Interest expense, net of amounts capitalized .... (4,383) (9,507) (9,640) (11,888) (25,072) (5,032) (7,693) Loss on sale of assets ...... (68) (122) (152) (8) (50) (87) Interest expense related to preferred members' interest, redeemable(1) ............. -- -- -- -- (180) -- (90) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total other expense ......... (4,296) (9,195) (9,608) (11,850) (24,812) (5,039) (7,726) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Preferred member distributions(1) .......... (289) (630) (386) (373) (180) (91) Minority Interest ........... -- -- -- (232) -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income (loss) to common interests .......... $(2,437) $1,245 $1,819 $(732) $(12,742) $(1,965) $(2,621) ========== ========== ========== ========== ========== ========== ========== Ratio of earnings to fixed charges(2) ............ 0.4x 1.1x 1.2x 0.9x 0.5x 0.6x 0.7x
AS OF DECEMBER 31 --------------------------------------------------------------- AT MARCH 31, 1999 2000 2001 2002 2003 2004 ---- ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS) BALANCE SHEET DATA: Current assets ............................... $8,765 $9,134 $8,034 $12,160 $40,227 $35,111 Total assets ................................. 88,175 86,788 84,374 126,448 261,519 258,544 Current liabilities .......................... 4,370 3,533 3,964 35,358 46,321 46,821 Total debt(1) ................................ 70,680 70,764 70,860 102,944 228,825 230,945 Preferred members' interest, redeemable(1) ... 7,000 7,000 4,000 4,000 -- -- Total members' equity (deficit) .............. 6,277 5,604 5,663 3,671 (10,629) (14,404)
- ---------- (1) In May 2003, the FASB issued Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires the issuer to classify a financial instrument that is within the scope of the standard as a liability if such financial instrument embodies an obligation of the issuer. As a result of the adoption of SFAS No. 150 on July 1, 2003, we reclassified our $4 million mandatory redeemable preferred members' interest from the mezzanine section of the consolidated balance sheet to long-term debt. Further, preferred member distributions paid or accrued subsequent to adoption of SFAS No. 150 are required to be presented as interest expense separately from interest due to other creditors. We are precluded from reclassifying prior period amounts pursuant to this standard. 39 (2) For purposes of determining the ratio of earnings to fixed charges, earnings are defined as income before income taxes plus fixed charges. Fixed charges include interest expense on all indebtedness and amortization of deferred financing costs. Earnings were insufficient to cover fixed charges for the period from July 15, 1999 to December 31, 1999, the fiscal years ended December 31, 2002 and 2003 and the three months ended March 31, 2003 and 2004 by $2.4 million, $0.7 million, $12.7 million, $2.0 million and $2.6 million, respectively. 40 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the "Selected Consolidated Financial Data" and the consolidated financial statements and the related notes thereto appearing elsewhere in this prospectus. Certain statements contained in Management's Discussion and Analysis of Financial Condition and Results of Operations constitute "forward-looking statements" which involve risks and uncertainties. See "Forward-Looking Statements." OVERVIEW We own and operate (1) the Diamond Jo riverboat casino in Dubuque, Iowa with 749 slot machines and 17 table games, (2) the new Evangeline Downs racino development with 1,627 slot machines in Opelousas, Louisiana, (3) two OTBs, one in Port Allen, Louisiana and one in New Iberia, Louisiana, and (4) an existing horse racetrack near Lafayette, Louisiana. In December 2003 we began casino operations at the new racino and expect to begin scheduling live races at our new racetrack by the end of 2004. Upon the opening of the horse racing facilities at the new racino, we will close operations at the existing horse racetrack. During 2003, we also renovated our Port Allen OTB and began offering 100 video poker machines in May 2003. Through December 2003, these video poker machines were operated by a third-party until we received a license to operate them ourselves. Our operations began with the acquisition of the Diamond Jo in 1999 for $77.0 million. The Diamond Jo opened in May 1994 and was doubled in size by the replacement of the original smaller riverboat casino with the current riverboat casino in October 1995. During 2002, through a series of related transactions, we acquired OED for approximately $30.5 million. At that time, OED's operations consisted of the existing horse racetrack near Lafayette and the two OTBs. We situated the racino in Opelousas, which is in St. Landry Parish, because St. Landry Parish permits slot machines while Lafayette Parish, where the existing horse racetrack is located, does not permit slot machines. From 2000 to 2003, our net revenues have grown from $45.8 million to $76.5 million. During 2003, $22.5 million of net revenues were derived from our operations in Louisiana. Such operations were comprised largely of racing operations at the existing horse racetrack near Lafayette and the two OTBs. We attribute the remaining increase at the Diamond Jo to, among other things, our successful operating strategies that focus on maintaining a loyal customer base, maximizing game play and profitability through targeted marketing, and attracting new customers. In addition, during 2003 the City of Dubuque substantially completed its $188 million redevelopment project in the Port of Dubuque, where the Diamond Jo is located. We expect our operations to continue to benefit from this redevelopment project, which was designed to enhance the attractiveness of the Port of Dubuque as a convention center and tourist destination, by generating increased foot traffic around the site of, and increased admissions to, the Diamond Jo.
DIAMOND JO OED THREE MONTHS ENDED MARCH 31, THREE MONTHS ENDED MARCH 31, 2004 2003 2004 2003 ------------ ------------ ------------ ------------ Revenues: Casino $12,094,244 $11,782,204 $18,099,105 -- Racing -- -- 4,365,603 $3,644,330 Food and beverage 687,409 686,837 2,130,391 152,441 Other 58,869 37,415 142,248 20,562 Less promotional allowances (662,522) (654,226) (1,349,951) -- ------------ ------------ ------------ ------------
41
DIAMOND JO OED THREE MONTHS ENDED MARCH 31, THREE MONTHS ENDED MARCH 31, 2004 2003 2004 2003 ------------ ------------ ------------ ------------ Net revenues 12,178,000 11,852,230 23,387,396 3,817,333 ------------ ------------ ------------ ------------ Expenses: Casino 5,258,640 5,013,716 9,795,100 -- Racing -- -- 3,504,387 2,846,747 Food and beverage 630,871 655,485 1,650,494 75,554 Boat operations 573,061 567,348 -- -- Other 23,162 3,174 101,831 5,500 Selling, general and administrative 1,987,323 1,983,745 3,540,724 534,174 Depreciation and amortization 577,034 751,905 2,319,029 67,110 Pre-opening expense -- -- 221,283 -- Development costs 21,270 -- -- -- Management fee -- -- 256,375 -- ------------ ------------ ------------ ------------ Total expenses 9,071,361 8,975,373 21,389,223 3,529,085 ============ ============ ============ ============ Income from operations $3,106,639 $2,876,857 $1,998,173 $288,248
THREE MONTHS ENDED MARCH 31, 2004 COMPARED TO THREE MONTHS ENDED MARCH 31, 2003 Net revenues increased 127.0% to $35.6 million for the three months ended March 31, 2004 from $15.7 million for the three months ended March 31, 2003. Net revenues at OED increased $19.6 million to $23.4 million for the three months ended March 31, 2004 from $3.8 million for the three months ended March 31, 2003. Net revenues at OED increased due primarily to an increase in casino revenue of $18.1 million derived from OED's new racino which opened on December 19, 2003 and an increase in racing revenues of $0.7 million due to an increase in video poker revenues of approximately $0.8 million at OED's renovated OTB in Port Allen, Louisiana. Net revenues at the Diamond Jo increased $0.3 million to $12.2 million for the three months ended March 31, 2004 from $11.9 million for the three months ended March 31, 2003. This increase in net revenues at the Diamond Jo is due to an increase in slot revenue of 3.1%, or $0.3 million, for the three months ended March 31, 2004 compared to the three months ended March 31, 2003, primarily due to an increase in coin-in of 2.7% over the same period. We believe this increase in slot revenue was attributable to internal factors such as targeted promotions to capitalize on opportunities related to the recent economic development in the Port of Dubuque known as the America's River Project, where the Diamond Jo is located, which includes the opening of a new riverwalk and related amenities, a new riverfront hotel, which includes an indoor water park, and the National Mississippi River Museum and Aquarium as well as our continued focus on targeted players club promotions and maintenance of our slot mix, which includes the addition of 22 multi-denomination slot machines. Overall casino revenues increased $18.4 million to $30.2 million for the three months ended March 31, 2004 from $11.8 million for the three months ended March 31, 2003. Casino revenues of $18.1 million at OED consisted solely of revenues from slot machines at OED's recently opened racino. Casino win per gaming position per day at OED was $130 for the three months ended March 31, 2004. Casino revenues at the Diamond Jo increased 2.6% to $12.1 million for the three months ended March 31, 2004 from $11.8 million for the three months ended March 31, 2003. This increase was due to a 3.1% increase in slot revenues as discussed above. Casino revenues at the Diamond Jo were derived 87.7% from slot machines and 12.3% from table games for the three months ended March 31, 2004 compared to 87.2% from slot machines and 12.8% from table games for the three months ended March 31, 2003. Our slot win per unit per day at the Diamond Jo decreased 1.9% to $156 for the three months ended March 31, 2004 from $159 for the three months ended March 31, 2003. Our admissions at the Diamond Jo for the three months ended March 31, 2004 increased 1.2% to 232,000 from 229,000 for the three months ended March 31, 42 2003. For the three months ended March 31, 2004 our casino win per admission at the Diamond Jo increased 1.4% to $52 from $51 for the three months ended March 31, 2003. Racing revenues at OED increased $0.7 million to $4.4 million for the three months ended March 31, 2004 from $3.7 million for the three months ended March 31, 2003. The increase in racing revenues is due to an increase in video poker revenues of $0.8 million resulting from OED's Port Allen OTB facility renovation and the installation of 100 video poker machines during the second quarter of 2003. Net food and beverage revenues, other revenues and promotional allowances increased $0.8 million during the three months ended March 31, 2004 compared to the three months ended March 31, 2003 due primarily to food and beverage revenues generated from OED's new racino. Overall casino expenses increased $10.1 million to $15.1 million for the three months ended March 31, 2004 from $5.0 million for the three months ended March 31, 2003. Casino expenses of $9.8 million at OED primarily related to purse supplements and gaming taxes, which are based on net casino revenues, and casino related payroll. Casino operating expenses at the Diamond Jo increased 4.9%, or $0.3 million, to $5.3 million for the three months ended March 31, 2004 from $5.0 million for the three months ended March 31, 2003 due primarily to an increase in gaming taxes at the Diamond Jo of approximately $0.1 million associated with our increased casino revenues and an increase in players club promotions of approximately $0.1 million. Racing expenses increased 23.1% to $3.5 million for the three months ended March 31, 2004 from $2.8 million for the three months ended March 31, 2003 due primarily to (i) an increase in franchise fees, purse supplements and operating expenses of $0.5 million related to OED's video gaming devices at its renovated OTB in Port Allen, Louisiana and (ii) admission fees related to the OTB located at the racino of approximately $0.1 million (under current Louisiana law, OED must pay $0.25 to the Louisiana State Racing Commission per patron entering a building in which OED has an OTB, including the new racino). Food and beverage expenses increased $1.6 million to $2.3 million for the three months ended March 31, 2004 from $0.7 million for the three months ended March 31, 2003 due primarily to food and beverage expenses at OED of $1.7 million related to the opening of OED's new racino. Boat operation expenses at the Diamond Jo were substantially unchanged at $0.6 million for the three months ended March 31, 2004 and 2003. Selling, general and administrative expenses increased $3.1 million to $5.6 million for the three months ended March 31, 2004 from $2.5 million for the three months ended March 31, 2003. This increase was due primarily to an increase in general and administrative expenses at OED of $3.0 million due primarily to payroll, marketing and other general and administrative expenses associated with the new racino. Pre-opening expenses of $0.2 million for the three months ended March 31, 2004 relate to expenses incurred by OED with respect to start-up activities surrounding the racino project, including pre-opening costs associated with the continued construction of the racetrack portion of the project. Management fees of $0.3 million during the three months ended March 31, 2004 relate to management fees and board of director fees paid to related parties. Depreciation and amortization expenses increased $2.1 million to $2.9 million for the three months ended March 31, 2004 from $0.8 million for the three months ended March 31, 2003 due to depreciation of property and equipment at OED's racino of approximately $2.1 million during the three months ended March 31, 2004. During the first quarter of 2004, we performed our annual impairment test on goodwill and indefinite life intangible assets in accordance with SFAS No. 142. Based on that review, management determined that there was no impairment of goodwill and indefinite life intangible assets. Net interest expense, including interest expense related to our redeemable preferred member interests, increased 56.0% to $7.7 million for the three months ended March 31, 2004 from $5.0 million for the three months ended March 31, 2003. This increase is primarily due to (i) timing of the offering of the OED Notes, which occurred on February 25, 2003, resulting in approximately three months of interest expense during the three months ended March 31, 2004 compared to just over one month during the three months ended March 31, 2003 and (ii) our 43 adoption of FASB Statement No. 150 on July 1, 2003 which requires that interest expense associated with our redeemable preferred members interest be included in interest expense (prior to July 1, 2003, this amount was included as a separate line item above "Net income for common members' interest" and not included in "Total other expenses" with interest expense). Interest expense of approximately $0.2 million and $0.1 million was capitalized as part of our construction of the racino during the three months ended March 31, 2004 and 2003, respectively.
DIAMOND JO YEARS ENDED DECEMBER 31, EVANGELINE DOWNS -------------------------------------------- ---------------------------- PERIOD FROM FEBRUARY 15, YEAR ENDED 2002 TO DECEMBER 31, DECEMBER 31, 2003 2002 2001 2003 2002 Revenues: Casino $ 53,567,052 $ 48,262,485 $ 47,710,208 $ 3,227,477 -- Racing 17,773,481 $ 15,509,989 Food and beverage 3,027,064 2,806,118 2,745,333 1,538,374 1,080,208 Other 421,907 144,817 131,916 167,361 -- Less promotional allowances (3,011,987) (2,615,355) (2,470,310) (209,147) -- ------------ ------------ ------------ ------------ ------------ Net revenues 54,004,036 48,598,065 48,117,147 22,497,546 16,590,197 ------------ ------------ ------------ ------------ ------------ Expenses: Casino 21,624,237 20,554,920 20,375,265 1,908,730 -- Racing 14,646,351 12,650,996 Food and beverage 2,781,945 2,822,160 2,856,568 1,500,065 998,205 Boat operations 2,322,126 2,295,771 2,259,314 -- -- Other 383,030 27,471 21,801 59,934 -- Selling, general and administrative 8,890,080 7,285,166 6,680,581 3,452,507 1,454,476 Depreciation and amortization 2,499,597 2,766,543 3,963,350 823,944 183,826 Pre-opening expense -- -- -- 3,256,963 -- Development costs 102,272 -- -- -- -- Litigation settlement -- -- -- -- 1,600,000 Referendum -- 771,111 -- -- -- State of Wisconsin government relations -- 55,000 147,163 -- -- ------------ ------------ ------------ ------------ ------------ Total expenses 38,603,287 36,578,142 36,304,042 25,648,494 16,887,503 ------------ ------------ ------------ ------------ ------------ Income from operations $ 15,400,749 $ 12,019,923 $ 11,813,105 $ (3,150,948) $ (297,306)
TWELVE MONTHS ENDED DECEMBER 31, 2003 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 2002 Net revenues increased 17.4% to $76.5 million for the year ended December 31, 2003 from $65.2 million for the year ended December 31, 2002. The majority of this increase is due to an increase in the Diamond Jo's slot revenue of 10.7%, or $4.5 million, for the year ended December 31, 2003 compared to the year ended December 31, 2002, primarily due to an increase in coin-in of 9.5% over the same period. We believe this increase in slot revenue was largely attributable to the recent economic development in the Port of Dubuque known as the America's River Project, where the Diamond Jo is located, which includes the opening of a new riverwalk and related amenities, a new riverfront hotel, which includes an indoor water park and the National Mississippi River Museum and Aquarium. The increase in slot revenue was also attributable to (i) the construction of our new outdoor entertainment venue featuring nationally recognized musicians weekly from June through September, (ii) a decrease in competition in the Eastern Iowa market due to the temporary closing of a Native American casino approximately 125 miles southwest of the Diamond Jo and (iii) internal factors such as targeted promotions to capitalize on opportunities related to the Port of Dubuque development and reduced competition noted above as well as our continued focus on targeted players club promotions and maintenance of our slot mix, which includes the addition of 47 nickel slot machines. In addition, our table game revenue at the Diamond Jo increased 13.3%, or $0.8 million, for the year ended December 31, 2003 compared to the year ended December 31, 2002, primarily due to an increase in 44 the total table game drop of 6.0% and a 1.3 percentage point increase in our table game hold percentage over the same period. The majority of the remaining increase in our net revenues was due to an increase in net revenues at OED. Net revenues at OED increased due primarily to an increase in casino revenue of $3.2 million derived from OED's newly opened racino which opened its doors to the public on December 19, 2003 and an increase in racing revenues of $2.3 million due primarily to the fact that we did not acquire a 50% interest in OED until February 15, 2002, as well as an increase in video poker revenues of approximately $0.6 million at OED's renovated OTB in Port Allen, Louisiana. Our results of operations during the period ended December 31, 2002 only include ten and one-half months of OED operations compared to a full twelve months of operations during the year ended December 31, 2003. Casino gaming win in the Dubuque market increased 9.6% to $97.2 million for the year ended December 31, 2003 from $88.7 million for the year ended December 31, 2002. We believe this increase was primarily due to our ability to capitalize on the recent economic development in the Port of Dubuque, a decrease in competition in the Eastern Iowa market, strategic use of targeted players club promotions and a continued focus on maintenance of our slot mix as noted above combined with a continued focus by operators at the DGP on maintenance of their slot mix during such periods as well as benefiting from the reduced competition in the Eastern Iowa market as noted above. Our share of the Dubuque market casino gaming win increased to 55.1% for the year ended December 31, 2003 from 54.4% for the year ended December 31, 2002. Our casino revenues at the Diamond Jo increased 11.0% to $53.6 million for the year ended December 31, 2003 from $48.3 million for the year ended December 31, 2002. This percentage increase was the third highest percentage increase in casino revenues for all thirteen casinos in the State of Iowa as reported to the Iowa Gaming Commission for the year ended December 31, 2003 compared to the year ended December 31, 2002. This increase was due to a 10.7% increase in slot revenues and a 13.3% increase in table game revenues as discussed above. Casino revenues at the Diamond Jo were derived 87.6% from slot machines and 12.4% from table games for the year ended December 31, 2003 compared to 87.8% from slot machines and 12.2% from table games for the year ended December 31, 2002. Consistent with an increase in casino revenue, our casino win per gaming position per day at the Diamond Jo increased 9.1% to $171 for the year ended December 31, 2003 from $157 for the year ended December 31, 2002. Admissions to the casinos in the Dubuque market increased 6.1% to 2,080,000 for the year ended December 31, 2003 from 1,960,000 for the year ended December 31, 2002. For the year ended December 31, 2003, our share of the Dubuque market casino admissions increased to 50.7% from 50.5% for the year ended December 31, 2002. Our admissions at the Diamond Jo for the year ended December 31, 2003 increased 6.5% to 1,054,000 from 990,000 for the year ended December 31, 2002. For the year ended December 31, 2003 our casino win per admission at the Diamond Jo increased 4.2% to $50.81 from $48.76 for the year ended December 31, 2002. Casino revenues of $3.2 million at OED consisted solely of revenues from slot machines at OED's recently opened racino. Casino win per position at OED was $236 for the year ended December 31, 2003. Racing revenues at OED for the year ended December 31, 2003 were $17.8 million compared to $15.5 million for the period February 15, 2002 (the date OED was acquired) to December 31, 2003. The increase in racing revenues was directly related to the timing of the acquisition of OED as discussed above and an increase in video poker revenues of $0.6 million resulting from OED's Port Allen OTB facility renovation and the installation of 100 video poker machines during the second quarter of 2003. Net food and beverage revenues, other revenues and promotional allowances increased $0.5 million during the year ended December 31, 2003 compared to the year ended December 31, 2002 due primarily to food & beverage revenues generated from OED's new racino and revenues from the Diamond Jo's new outdoor entertainment venue as discussed above. Casino operating expenses increased 14.5%, or $3.0 million, to $23.5 million for the year ended December 31, 2003 from $20.6 million for the year ended December 31, 2002 due primarily to (i) casino expenses at OED of $1.9 million primarily related to purse supplements and gaming taxes which are based on net casino revenues and casino related payroll and (ii) an increase in gaming taxes at the Diamond Jo of $1.1 million associated with our increased casino revenues. Racing expenses increased 15.8% to $14.6 million for the year ended December 31, 2003 from $12.7 million for the period ended December 31, 2002 due primarily to (i) timing of the acquisition of OED in 2002 as discussed above and (ii) an increase in operating expenses of $0.6 million related to the addition of 100 new video gaming devices at OED's renovated OTB in Port Allen, Louisiana. Food and beverage expenses increased 12.1%, or $0.5 million, to $4.3 million for the year ended December 31, 2003 from 45 $3.8 million for the year ended December 31, 2002 due primarily to food and beverage expenses at OED related to the opening of OED's new racino. Boat operation expenses at the Diamond Jo were substantially unchanged at $2.3 million for the year ended December 31, 2003 and 2002. Other expenses increased $0.4 million primarily due to costs associated with the Diamond Jo's new outdoor entertainment venue as discussed above. Selling, general and administrative expenses increased 41.2% to $12.3 million for the year ended December 31, 2003 from $8.7 million for the year ended December 31, 2002. This increase was due to (i) an increase in general and administrative expenses at OED of $2.0 million due primarily to payroll, marketing and other general and administrative expenses associated with the new racino and the timing of the acquisition of OED (as discussed above), including an increase in professional fees at OED of approximately $0.2 million and an increase in insurance expense at OED of approximately $0.2 million, and (ii) an increase in general and administrative expenses at the Diamond Jo of approximately $1.6 million due primarily to an increase in management compensation at the Diamond Jo of $0.6 million, an increase in donations of $0.3 million related to a charitable giving agreement with an Iowa non-for-profit organization and an increase in insurance expense at the Diamond Jo of $0.1 million. Pre-opening expenses of $3.3 million for the year ended December 31, 2003 relate to payroll and other expenses incurred by OED with respect to start-up activities surrounding the racino project. Development costs of approximately $0.1 million related to expenses incurred relative to us entering into an exclusive agreement with the Worth County Development Authority pursuant to which the parties agreed to jointly submit an application for a license to operate a gaming facility in Worth County, Iowa. Under this agreement, we have agreed to design, construct, operate and manage a casino with no less than 700 gaming positions, a waterway, if necessary, a recreational vehicle park with a minimum capacity of 200 spaces, and, upon reaching a targeted rate of return on invested capital, a 100-room hotel development. Litigation settlement of $1.6 million for the year ended December 31, 2002 relates to OED's settlement with the Louisiana Horsemen's Benevolent and Protective Association 1993, Inc. (the "LHBPA") in February 2003. Referendum costs of $0.8 million during the year ended December 31, 2002 relate to various advertising and promotional expenses to promote the approval of continued gaming on riverboats in Dubuque County in 2002. During 2002, DJL incurred expenses of $55,000 related to a governmental relations services agreement with respect to gaming issues and developments in the State of Wisconsin which might affect DJL and its gaming operations. Depreciation and amortization expenses increased 12.6% to $3.3 million for the year ended December 31, 2003 from $3.0 million for the year ended December 31, 2002 due primarily to depreciation of property and equipment at OED's racino of approximately $0.3 million during the period December 19, 2003 (date at which the racino was opened to the public) through December 31, 2003. During the first quarter of 2002, DJL performed a transitional impairment test on goodwill in accordance with SFAS No. 142 "Goodwill and Other Intangible Assets" and determined the estimated fair value of DJL exceeded its carrying value as of that date. During the first quarter of 2003, DJL performed its annual impairment test on goodwill in accordance with SFAS No. 142 and determined that the estimated fair value of DJL exceeded its carrying value as of that date. Based on that review, management determined that there was no impairment of goodwill. Net interest expense, including interest expense related to our redeemable preferred member interests, increased 109.1% to $24.8 million for the year ended December 31, 2003 from $11.8 million for the year ended December 31, 2002. This increase is due to (i) an increase in net interest expense at OED of $12.7 million primarily associated with interest on the OED Notes and on OED's senior credit facilities with Wells Fargo Foothill, the amortization and write-off of deferred financing costs associated with OED's term loan with Wells Fargo Foothill, the PGP Note (as defined below) and the WET2 Note (as defined below) (all of which were repaid in February 2003 with the proceeds of the offering of the OED Notes) and timing of the OED acquisition as discussed above, (ii) DJL's adoption of FASB Statement No. 150 on July 1, 2003 which requires that interest expense associated with our redeemable preferred members interest be included in interest expense (prior to July 1, 2003, this amount was included as a separate line item above "Net income for common members' interest" and not included in "Total other expenses" with interest expense) and (iii) interest associated with DJL's senior secured credit facility with Wells Fargo Foothill dated February 23, 2001 (the "DJL Credit Facility"), $12.0 million of which was drawn down by DJL on February 15, 2002 to consummate the acquisition of OED, resulting in twelve months of interest during the year ended December 31, 2003 compared to only ten and one-half months of interest during the year ended December 31, 2002. Interest expense of approximately $2.2 million and $0.1 million was capitalized as part of our construction of 46 the racino during 2003 and 2002, respectively. The "PGP Note" means the note payable to PGP, issued by OEDA, bearing interest at a rate of 7% until January 31, 2003, thereafter at 8% until February 28, 2003, thereafter at 9% until March 31, 2003, and thereafter at the greater of 12% or the fixed rate on the OED Notes, and maturing on June 30, 2003. The "WET2 Note" means the note payable to WET2, bearing interest at a rate of 7% until March 31, 2003, and thereafter at the greater of 12% or the fixed rate on the OED Notes, and maturing on June 30, 2003. TWELVE MONTHS ENDED DECEMBER 31, 2002 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 2001 Net revenues increased 35.5% to $65.2 million for 2002 from $48.1 million for 2001 primarily due to net revenues from OED of $16.6 million and an increase in the Diamond Jo's casino revenues of $0.6 million. This increase in casino revenue was due to an increase in slot revenue of 3.8%, or $1.6 million for 2002 compared to 2001. This increase in slot revenues was a result of an increased marketing focus on the addition of new players club members as well as on targeting players club promotions towards more profitable market segments and an increase in the number of slot machines on the gaming floor. This increase in slot revenues was offset by a decrease in table games revenue at the Diamond Jo of $1.0 million. This decrease was a direct result of a 0.9 percentage point decrease in our table game hold percentage and a 10.4% decrease in table game drop. Casino gaming win in the Dubuque market increased 2.8% to $88.7 million for 2002 from $86.3 million for 2001. We believe this increase was primarily due to targeted players club promotions and a continued focus on maintenance of our slot mix as well as a continued focus by operators at the DGP on maintenance of their slot mix during such period. Our share of the Dubuque market casino gaming win decreased slightly to 54.4% for 2002 from 55.3% for 2001. This decrease was attributed to a decrease in our table game revenue as discussed above. Our casino revenues increased 1.2% to $48.3 million for 2002 from $47.7 million for 2001. This increase was due to an increase in slot revenue offset by a decrease in table game revenues as discussed above. Casino revenues were derived 87.8% from slot machines and 12.2% from table games for 2002 compared to 85.6% from slot machines and 14.4% from table games for 2001. Consistent with an increase in casino revenue, our casino win per gaming position per day at the Diamond Jo increased 4.0% to $157 for 2002 from $151 for 2001. Admissions to the casinos in the Dubuque market increased slightly to 1,959,709 for 2002 from 1,946,326 for 2001. For 2002, our share of the Dubuque market casino admissions decreased to 50.5% from 51.7% for 2001. We believe this decrease was primarily attributable to our targeted use of marketing dollars directed primarily towards more profitable market segments during 2002 compared to 2001. Our admissions at the Diamond Jo for 2002 decreased slightly to 989,865 for 2002 from 1,006,237 for 2001. For 2002 our casino win per admission at the Diamond Jo increased 2.8% to $48.76 from $47.41 for 2001. Racing revenues of $15.5 million related solely to revenues at OED for the period February 15, 2002 (the date OED was acquired) to December 31, 2002. Net food and beverage revenues, other revenues and promotional allowances increased to $1.4 million for 2002 from $0.4 million for 2001 due to food and beverage revenues at OED of $1.0 million. Casino operating expenses at the Diamond Jo increased slightly to $20.6 million for 2002 from $20.4 million for 2001 due mainly to an increase in gaming taxes paid, as a result of an increase in gaming revenues, of $0.1 million and an increase in the state admission fee imposed by the State of Iowa of $0.1 million. Racing expenses at OED were $12.7 million for the period February 15, 2002 (the date OED was acquired) to December 31, 2002. Food and beverage expenses increased to $3.8 million for 2002 from $2.9 million for 2001 due primarily to food and beverage expenses from OED of $0.9 million. Boat operation expenses and other expenses were $2.3 million for 2002 and 2001. Selling, general and administrative expenses increased to $8.7 million for 2002 from $6.7 million for 2001. This increase in such expenses resulted from selling, general and administrative expenses at OED of $1.5 million, an increase in legal expenses of approximately $0.3 million (resulting primarily from a credit of $0.2 million in legal expense during the prior year), and an increase in management bonuses of $0.2 million. Depreciation and amortization expenses decreased 25.6% to $3.0 million for 2002 from $4.0 million for 2001. This decrease was due to adoption of SFAS 142 which provides that goodwill and certain indefinite lived intangible assets will no longer be amortized but will be reviewed at least annually for impairment and written down and charged to income when their recorded value exceeds their estimated fair value. Goodwill amortization during 2001 was approximately $1.4 million. This decrease was offset by an increase in depreciation at the Diamond Jo of $0.2 million and at OED of $0.2 million. Litigation settlement of $1.6 million relates to OED's settlement with the LHBPA in February 2003. Although the settlement occurred after the date of the financial statements, Statement of 47 Financial Accounting Standards No. 5 "Accounting for Contingencies" requires DJL to accrue the loss contingency during 2002. During 2002, DJL incurred various advertising, promotional and other referendum related expenses totaling $0.8 million to promote the approval of continued gaming on riverboats in Dubuque County. During 2002 and 2001, DJL incurred expenses of $55,000 and $147,163, respectively, related to a governmental relations services agreement with respect to gaming issues and developments in the State of Wisconsin which might affect DJL and its gaming operations. Net interest expense increased 25.2% to $11.8 million for 2002 from $9.5 million for 2001. This increase was due to an increase in interest expense of $1.2 million associated with DJL's senior credit facility with Wells Fargo Foothill providing for commitments of up to $12.5 million which terminate in 2005, $12.0 million of which was drawn down by DJL on February 15, 2002 to consummate an investment in OED and net interest expense at OED of $1.1 million. Interest expense of approximately $0.1 million was capitalized as part of our construction of the racino during 2002. LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS FROM OPERATING, INVESTING AND FINANCING ACTIVITIES FOR THE THREE MONTHS ENDED MARCH 31, 2004 Our cash balance decreased $0.3 million during the three months ended March 31, 2004 to $20.8 million from $21.2 million at December 31, 2003. Cash flows used in operating activities of $4.4 million for the three months ended March 31, 2004 consisted of a net loss of $2.6 million increased by non-cash charges of $3.7 million, principally depreciation and amortization and amortization of deferred financing costs and a decrease in working capital of $5.5 million. The change in working capital is primarily due to a decrease in accrued interest of approximately $6.0 million related primarily to interest payments on the DJL Notes and the OED Notes during the three months ended March 31, 2004. Cash flows from investing activities for the three months ended March 31, 2004 was $3.2 million consisting of (i) draws from restricted cash accounts held by the trustee of the OED Notes of approximately $13.0 million, the proceeds of which were used to pay construction, architecture fees and other development costs associated with the racino project and (ii) cash proceeds from the maturity of restricted investments of $7.9 million, the proceeds of which were used to make the second interest payment on the OED Notes due March 1, 2004. These cash inflows were offset by (i) payments of approximately $16.9 million for construction, architecture fees and other development costs associated with the racino project and (ii) cash outflows of approximately $0.8 million used for capital expenditures mainly related to the purchase of new slot machines at the Diamond Jo and conversions of slot machines at OED to incorporate ticket-in, ticket-out technology, which we believe enhances customer service, produces operating efficiencies and eliminates hopper fills and the down time associated with them. We expect additional capital expenditures at the Diamond Jo and OED (other than the capital expenditures related to the racino project) to be approximately $2.6 million and $1.6 million, respectively, for the year ended December 31, 2004. We expect to meet our regulatory requirements for the racino project for fiscal 2004 with related additional capital expenditures of approximately $15.1 million. Consistent with our regulatory requirements, we also expect to continue construction on our turf track during fiscal 2005. Cash flows from financing activities for the three months ended March 31, 2004 of $0.9 million reflects the proceeds from OED's draws under its $16.0 million FF&E credit facility with Wells Fargo Foothill dated September 22, 2003 (the "OED FF&E Facility") of $3.5 million. These proceeds were offset by (i) aggregate principal payments on borrowings under our senior secured credit facility dated February 23, 2001 (as amended, the "DJL Credit Facility") of $0.2 million, (ii) aggregate principal payments on borrowings under OED's $15.0 million senior secured credit facility with Wells Fargo Foothill dated June 24, 2003 (as amended, the "OED Credit Facility") of $0.9 million, (iii) aggregate principal payments on borrowings under the OED FF&E Facility of $0.3 million and (iv) member distributions of $1.2 million. In March 2004, DJL amended its senior secured credit facility dated February 23, 2001 (the "DJL Credit Facility Amendment"). Under the terms of the DJL Credit Facility Amendment, the minimum interest rate on all outstanding borrowings under the DJL Credit Facility less than $10.0 million was reduced to 5.5% and the term of the DJL Credit Facility was extended by one year to March 12, 2006. 48 As of March 31, 2004, DJL had $11.1 million outstanding under the DJL Credit Facility and OED had $4.3 million and $15.7 million outstanding under the OED Credit Facility and the OED FF&E Facility, respectively. CASH FLOWS FROM OPERATING, INVESTING AND FINANCING ACTIVITIES FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2003 Our cash balance increased $10.6 million during the year ended December 31, 2003 to $21.2 million from $10.5 million at December 31, 2002. Cash flows used in operating activities of $0.8 million for the year ended December 31, 2003 consisted of a net loss of $12.7 million increased by non-cash charges of $6.7 million, principally depreciation and amortization and write-off and amortization of deferred financing costs and an increase in working capital of $6.8 million. The change in working capital is primarily due to an increase in accrued interest of approximately $5.3 million related to the OED Notes and an increase in accrued payroll of $1.5 million primarily related to the opening of OED's racino in December 2003. Cash flows used in investing activities for the year ended December 31, 2003 was $94.7 million consisting of (i) an increase in restricted cash--racino project and restricted investments of $43.9 million related to the investment of unused proceeds from the OED Notes into interest bearing cash equivalents and investments whose distribution is restricted as outlined in the Cash Collateral and Disbursement Agreement, (ii) approximately $55.3 million for construction, architecture fees and other development costs associated with the racino project and the purchase of land at St. Landry Parish where the racino is being developed, (iii) approximately $1.8 million in development costs related to the OED acquisition and OED's racing and gaming licenses and (iv) cash outflows of approximately $2.2 million used for capital expenditures mainly related to the purchase of new slot machines at the Diamond Jo and video poker machines at OED's Port Allen OTB, the construction of our concert area adjacent to the Diamond Jo which hosts weekly concerts throughout the summer months and the renovation of OED's Port Allen OTB to accommodate the purchase and installation of 100 video poker machines. These cash outflows were offset by (i) cash proceeds from the maturity of restricted investments of $8.1 million, the proceeds of which were used to make the first interest payment on the OED Notes due September 1, 2003 and (ii) cash proceeds from the sale of assets of $0.4 million. Cash flows from financing activities for the year ended December 31, 2003 of $104.6 million reflects the net proceeds from the offering of the OED Notes of $120.7 million, proceeds from OED's draws under the OED Credit Facility and the OED FF&E Facility of $17.6 million. These proceeds were partially offset by (i) principal payments to extinguish OED's obligations under OED's term loan with Wells Fargo Foothill, the PGP Note and the WET2 Note totaling $20.1 million, (ii) deferred financing costs paid of $11.5 million associated with the issuance of the OED Notes, the OED Credit Facility and the OED FF&E Credit Facility, (iii) member distributions of $1.6 million and (iv) aggregate principal payments on borrowings under the DJL Credit Facility of $0.6 million. As of December 31, 2003, DJL had $11.3 million outstanding under the DJL Credit Facility and OED had $5.1 million and $12.5 million outstanding under the OED Credit Facility and the OED FF&E Facility, respectively. Approximately $24.2 million of the net proceeds from the sale of the OED Notes were deposited into an interest reserve account in order to pay the first three payments of fixed interest on the OED Notes. Although OED's earnings for the year ended December 31, 2003 were not sufficient to cover their current fixed charges (which consist of interest on the OED Notes, including capitalized interest), OED does have sufficient funds deposited in the interest reserve account to satisfy its obligations under the OED Notes until March 1, 2005, after which, OED anticipates satisfying its interest obligations out of earnings from operations. In September 2003, $8.1 million of the initial proceeds deposited into the interest reserve account, along with interest earned on those proceeds, were used to pay the first fixed interest payment on the OED Notes. FINANCING ACTIVITIES The obligations of DJL under the DJL Credit Facility are senior to DJL's obligations under the DJL Notes. The DJL Credit Facility contains, among other things, covenants, representations and warranties and events of default customary for loans of this type. The most significant covenants include a minimum "EBITDA" (as defined 49 therein) requirement and the maintenance of certain financial ratios that limit our ability to make distributions and incur debt. At March 31, 2004, December 31, 2003 and 2002, DJL was in compliance with all such covenants. At March 31, 2004, DJL had outstanding borrowings of $11.1 million and outstanding letters of credit of $0.3 million under the DJL Credit Facility. In March 2004, DJL amended the DJL Credit Facility (the "DJL Credit Facility Amendment"). Under the terms of the DJL Credit Facility Amendment, the minimum interest rate on all outstanding borrowings under the DJL Credit Facility less than $10.0 million was reduced to 5.5% and the term of the DJL Credit Facility was extended by one year to March 12, 2006. The DJL Credit Facility was terminated and replaced with the PGL Credit Facility on June 16, 2004. On June 24, 2003, OED entered into the OED Credit Facility. The OED Credit Facility was terminated and replaced with the PGL Credit Facility on June 16, 2004. OED's obligations under the OED Credit Facility were secured by a lien on substantially all of its and its subsidiaries' current and future assets, other than the construction disbursement, interest reserve, completion reserve and excess cash flow accounts and certain other excluded assets as well as a pledge by OEDA of the capital stock of OED. Pursuant to the intercreditor agreement described below, the lien on the collateral securing the OED Credit Facility was senior to the lien on such collateral securing the OED Notes. The OED Credit Facility contained, among other things, covenants, representations and warranties and events of default customary for loans of this type. At March 31, 2004, OED was in compliance with all such covenants. Concurrently with the closing of the OED Credit Facility, the trustee under the indenture for the OED Notes (as secured party) entered into an intercreditor agreement with Wells Fargo Foothill as the lender under such credit facility, providing, among other things, that the lien securing the indebtedness under the OED Credit Facility was senior to the lien securing the indebtedness under the OED Notes (except that the construction disbursement, interest reserve, completion reserve and excess cash flow accounts were security only for the OED Notes). On September 22, 2003, OED entered into the OED FF&E Facility. Under the OED FF&E Facility, the lender agreed to make a series of term loans, up to a maximum amount of $16.0 million, to finance the purchase of gaming equipment and other furniture, fixtures and equipment. OED's obligations under the OED FF&E Facility were, subject to certain limitations, secured by a first priority lien on all of the furniture, fixtures and equipment, and all proceeds and products thereof. At March 31, 2004, OED had outstanding borrowings of $15.7 million under the OED FF&E Facility. The OED FF&E Facility was terminated and replaced by the Term Loan under the PGL Credit Facility on June 16, 2004. The OED FF&E Facility contained, among other things, covenants, representations and warranties and events of default customary for loans of this type. At December 31, 2003 OED was in compliance with all such covenants. In October 2003, OED entered into a purchase agreement to acquire 93 acres of land, divided into seven approximately equal parcels, for a total purchase price of $3,850,000. The purchase price under this second purchase agreement was financed by the seller with OED issuing a $3,850,000 note payable to the seller. The note is payable in seven equal annual installments of $550,000 beginning October 24, 2004 and bears interest at a rate of 4.75% of the unpaid balance due monthly in arrears on the fifth day of each month beginning on December 5, 2003. The note is collateralized by a mortgage on the property. Simultaneously with the payment of each $550,000 annual installment discussed above, the seller agrees to release one of the remaining parcels from the mortgage. In March 2003, OED entered into a participation agreement with a third party operator to own and operate 100 video poker machines at OED's OTB in Port Allen, Louisiana. In December 2003, OED obtained its license to own and operate video poker machines. In accordance with the participation agreement, OED assumed the remaining balance of an original $663,700 promissory note payable in exchange for ownership of the 100 video poker machines. The note bears interest at 9.5% and is payable in monthly installments of principal and interest of $31,250 with the last payment due July 1, 2005. The note is collateralized by a security interest in the machines. 50 On July 15, 1999, DJL authorized and issued $7.0 million of preferred membership units. The holders of all of DJL's preferred membership interests are entitled to receive, subject to certain restrictions contained in the indenture governing the DJL Notes, out of funds legally available therefor, cumulative preferred distributions payable semiannually at an annual rate of 9% of the original face amount thereof. Other than certain limited consent rights and as required by law, holders of DJL's preferred membership interests have no voting rights. DJL redeemed $3.0 million in original face amount of its preferred membership interests on January 19, 2001 at a redemption price of $3.0 million, plus a portion of accrued and unpaid distributions thereon of $170,000, the balance of which, in an amount equal to $145,000 plus accrued interest on such amount (the "Accrued Preferred Distribution"), was agreed to be paid by DJL at such time that such payment is permitted to be made pursuant to DJL's existing financing arrangements, but in no event later than January 15, 2003. The Accrued Preferred Distribution totaling $171,100 was paid on January 15, 2003. The balance of preferred membership interests not redeemed by DJL must be redeemed by DJL on or prior to October 13, 2006 at a redemption price of $4.0 million, plus any accrued and unpaid preferred distributions through the date of redemption. At March 31, 2004, accrued distributions related to the preferred membership interests was approximately $1.1 million. On March 9, 2004, OED commenced a tender offer and consent solicitation to repurchase all of its outstanding OED Notes and to solicit consents to certain proposed amendments to the indenture governing the OED Notes as set forth in OED's Offer to Purchase and Consent Solicitation Statement, dated March 9, 2004. On March 19, 2004, the expiration date of the consent solicitation, OED received the requisite consents and tenders from holders of a majority of the aggregate principal amount of the outstanding OED Notes. The tender offer expired on April 5, 2004, and OED redeemed approximately $116.3 million principal amount of OED Notes. On April 16, 2004, DJL and Old Evangeline Downs Capital Corp. completed a Rule 144A private placement of $233 million principal amount of 8 3/4% Senior Secured Notes due 2012 (the "Peninsula Gaming Notes"). The Peninsula Gaming Notes were issued at a discount of approximately $3.3 million. Interest on the Peninsula Gaming Notes is payable semi-annually on April 15 and October 15 of each year, beginning on October 15, 2004. We used the net proceeds from the sale of the Peninsula Gaming Notes as follows (all payments based on outstanding balances as of April 16, 2004): (1) to irrevocably deposit funds into an escrow account to redeem all of the DJL Notes in an amount (including call premium and accrued interest) of approximately $79.9 million; (2) to repurchase approximately $116.3 million principal amount of OED Notes for an aggregate amount (including tender premium, accrued interest and contingent interest) of approximately $134.6 million; (3) to pay accrued distributions on DJL's outstanding preferred membership interests-redeemable of approximately $1.1 million; (4) to pay related fees and expenses of approximately $13.4 million; and (5) for general corporate purposes. As a result of the issuance of the Peninsula Gaming Notes, DJL incurred a loss of approximately $8.9 million consisting of the write-off of deferred financing fees of approximately $2.1 million, the payment of a call premium on the DJL Notes of approximately $5.7 million, interest on the DJL Notes of approximately $0.7 million and write-off of bond discount of approximately $0.4 million. In connection therewith, OED also incurred a loss of approximately $26.8 million consisting of the write-off of deferred financing fees of approximately $8.4 million, the payment of a tender premium on the OED Notes of approximately $16.3 million and write-off of bond discount of approximately $2.1 million. In May 2004, PGP repurchased 147,553 of its convertible preferred membership interests from an unrelated third party for approximately $4.5 million. The repurchase was funded by a distribution of cash to PGP from DJL, its wholly-owned subsidiary. On June 16, 2004, DJL and OED jointly entered into a Loan and Security Agreement with Wells Fargo Foothill, Inc. as the Arranger and Agent (the "PGL Credit Facility"). The PGL Credit Facility consists of a revolving credit facility which permits DJL and OED to request advances and letters of credit up to the lesser of the maximum revolver amount of $35 million (less amounts outstanding under letters of credit) and a specified borrowing base (the "Borrowing Base"). For the purposes of the PGL Credit Facility, the Borrowing Base is the lesser of the Combined EBITDA (as defined in the PGL Credit Facility) of OED and DJL for the twelve months immediately preceding the current month end multiplied by 150% and the Combined EBITDA of OED and DJL for the most recent quarterly period annualized multiplied by 150%. Immediately upon the closing of the PGL Credit Facility, 51 DJL borrowed approximately $11.1 million to refinance outstanding obligations under the DJL Credit Facility and pay financing related fees and expenses and OED borrowed approximately $4.8 million to refinance outstanding obligations under the OED Credit Facility and pay financing related fees and expenses. Advances under the PGL Credit Facility bear an interest rate based on the borrower's option of LIBOR plus a margin 3% -3.5% or Wells Fargo prime rate plus a margin of .5% -1% (current rate of 5.0%) however, at no time shall the interest rate be lower than 4%. The PGL Credit Facility also contains a Term Loan in the amount of $14,666,667. The proceeds from the Term Loan were used to repay outstanding obligations under the FF&E Credit Facility. The Term Loan is secured by certain assets of OED and requires monthly payments of $333,333 starting July 1, 2004 until the full balance is paid, with a maturity no later than June 15, 2008. The Term Loan has an interest rate equal to the Wells Fargo prime rate plus 2.5% (current rate of 6.5%) however, at no time shall the interest rate be lower than 6%. Under the terms of the PGL Credit Facility, at closing OED was required to issue a letter of credit in the amount of $3.2 million in favor of Wells Fargo related to the Term Loan. In addition, following the closing of the offering of the old notes, we effected a series of corporate transactions to, among other things, simplify our organizational structure. See "The Transactions". GENERAL We currently have the following sources of funds for our business: (i) cash flows from OED's existing racetrack operations and casino operations, (ii) cash flows from DJL's existing casino operations, and (iii) available borrowings under the PGL Credit Facility. Our level of indebtedness will have several important effects on our future operations including, but not limited to, the following: (i) a significant portion of our cash flow from operations will be required to pay interest on our indebtedness and the indebtedness of our subsidiaries; (ii) the financial covenants contained in certain of the agreements governing such indebtedness will require us and/or our subsidiaries to meet certain financial tests and may limit our respective abilities to borrow additional funds or to dispose of assets; (iii) our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired; and (iv) our ability to adapt to changes in the gaming industry which affect the markets in which we operate could be limited. Subject to the foregoing, we believe that cash and cash equivalents on-hand, cash generated from operations and available borrowings under our new credit facility will be sufficient to satisfy our working capital and capital expenditure requirements, and satisfy our other current debt service requirements, including interest payments on the Peninsula Gaming Notes and the OED Notes, for the next twelve months. If cash and cash equivalents on-hand or cash we are able to generate or borrow are insufficient to meet our obligations, we may have to refinance our debt or sell some or all of our assets to meet our obligations. CONTRACTUAL OBLIGATIONS AND CONTINGENT LIABILITIES AND COMMITMENTS Our future contractual obligations related to long-term debt, capital leases and operating leases at March 31, 2004 were as follows (in millions of dollars): PAYMENTS DUE BY PERIOD ---------------------- LESS THAN 1-3 4-5 CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR YEARS YEARS THEREAFTER - ----------------------- ----- ------ ----- ----- ---------- Long-Term Debt................$233.5 $5.5 $98.9 $4.8 $124.3 Operating Leases.............. 1.1 0.6 0.5 -- -- Litigation Settlement......... 0.8 0.4 0.4 -- -- Total Contractual Cash Obligations.................$235.4 $6.5 $99.8 $4.8 $124.3 52 The following shows our other contingent obligations at March 31, 2004 based on expiration dates (in millions): LESS THAN 1-3 4-5 1 YEAR YEARS YEARS THEREAFTER ------ ----- ----- ---------- Standby letters of credit........... $3.5 -- -- -- OFF-BALANCE SHEET TRANSACTIONS DJL and OED do not maintain any off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonable likely to have a material current or future effect on DJL's or OED's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. SEASONALITY AND INFLATION Our operations are subject to seasonal fluctuations. Our Iowa operations are typically weaker from November through February as a result of adverse weather conditions, and are typically stronger from March through October. Our Louisiana operations are also subject to seasonal fluctuations. Although we are currently in our first year of casino operations in Louisiana, our horse racing operations are usually stronger during live racing season which runs from April through October. In general, our payroll and general and administrative expenses are affected by inflation. Although inflation has not had a material effect on our business to date, we could experience more significant effects of inflation in future periods. RECENT ACCOUNTING PRONOUNCEMENTS In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." This new pronouncement also amends ARB No. 51 "Consolidated Financials Statements," to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. SFAS No. 144 requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired and also broadens the presentation of discontinued operations to include more disposal transactions. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. Adoption of SFAS No. 144 on January 1, 2002, did not have any impact on our financial position or results of operations for the years ended December 31, 2003 and 2002. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies the previous guidance on the subject. This statement requires, among other things, that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The provisions for this statement are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material effect on DJL results of operations or financial position for the year ended December 31, 2003. In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45). FIN 45 expands the disclosure requirements related to certain guarantees, including product warranties, and requires DJL to recognize a liability for the fair value of all guarantees issued or modified after December 31, 2002. FIN 45 did not impact DJL's financial position or net income. 53 In May 2003, the FASB issued Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires the issuer to classify a financial instrument that is within the scope of the standard as a liability if such financial instrument embodies an obligation of the issuer. As a result of the adoption of SFAS No. 150 on July 1, 2003, DJL reclassified its $4 million mandatorily redeemable preferred members' interest from the mezzanine section of the Condensed Consolidated Balance Sheet to long-term debt. Further, preferred member distributions paid or accrued subsequent to adoption of SFAS No. 150 are required to be presented as interest expense separately from interest due to other creditors. DJL was not required to record a cumulative effect of change in an accounting principle as the redeemable preferred members' interest was recorded at fair value prior to July 1, 2003. We are precluded from reclassifying prior period amounts pursuant to this standard. In 2003, the FASB issued Interpretation (FIN) No. 46, Consolidation of Variable Interest Entities, which addresses the consolidation and related disclosures of these entities by business enterprises. These are entities in which either the equity investment at risk is not sufficient to absorb the probable loss without additional subordinated financial support from other parties, or the investors with equity at risk lack certain essential characteristics of a controlling interest. Under the Interpretation, DJL must consolidate any variable interest entities (VIEs) in which DJL holds variable interests and DJL is deemed the primary beneficiary. The effective date for the adoption of FIN 46 for interests in VIEs created prior to February 1, 2003 was July 1, 2003 and applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which DJL obtains an interest after that date. The adoption of FIN 46 did not impact DJL's financial position or net loss available to common members' interest. CRITICAL ACCOUNTING POLICIES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. We periodically evaluate our policies and the estimates and assumptions related to such policies. We also periodically evaluate the carrying value of our assets in accordance with generally accepted accounting principles. We and our subsidiaries operate in a highly regulated industry and are subject to regulations that describe and regulate operating and internal control procedures. The majority of our revenues are in the form of cash, which by its nature, does not require complex estimations. In addition, we made certain estimates surrounding our application of purchase accounting related to the acquisition and the related assignment of costs to goodwill and other intangible assets. In addition, contingencies are accounted for in accordance with SFAS No. 5, "Accounting for Contingencies." SFAS No. 5 requires that we record an estimated loss from a loss contingency when information available prior to issuance of our financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Accounting for contingencies such as legal matters requires us to use judgment. Many of these legal contingencies can take years to be resolved. Generally, as the time period increases over which the uncertainties are resolved, the likelihood of changes to the estimate of the ultimate outcome increases. However, an adverse outcome could have a material impact on our financial condition and operating results. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain market risks which are inherent in our financial instruments which arise from transactions entered into in the normal course of business. Market risk is the risk of loss from adverse changes in market prices and interest rates. We do not currently utilize derivative financial instruments to hedge market risk. We also do not hold or issue derivative financial instruments for trading purposes. We are exposed to interest rate risk due to changes in interest rates with respect to our long-term variable interest rate debt borrowing under our and OED's credit facilities. As of March 31, 2004, DJL and OED had $11.1 million and $19.9 million, respectively, in borrowings under loan and security agreements with Wells Fargo 54 Foothill that have variable interest rates. We have estimated our market risk exposure using sensitivity analysis. We have defined our market risk exposure as the potential loss in future earnings and cash flow with respect to interest rate exposure of our market risk sensitive instruments assuming a hypothetical increase in market rates of interest of one percentage point. Assuming DJL and OED borrow the maximum amount allowed under the current loan and security agreements with Wells Fargo Foothill (currently an aggregate amount of $42.6 million), if market rates of interest on our variable rate debt increased by one percentage point, the estimated consolidated market risk exposure under the credit facilities would be approximately $0.4 million. We are also exposed to fair value risk due to changes in interest rates with respect to our long-term fixed interest rate debt borrowings. Our fixed rate debt instruments are not generally affected by a change in the market rates of interest, and therefore, such instruments generally do not have an impact on future earnings. However, future earnings and cash flows may be impacted by changes in interest rates related to indebtedness incurred to fund repayments as such fixed rate debt matures. The following table contains information relating to our fixed rate debt borrowings as of March 31, 2004 (dollars in millions):
FIXED INTEREST CARRYING DESCRIPTION MATURITY RATE VALUE FAIR VALUE - ----------- -------- ---- ----- ---------- 13% Senior Secured Notes with Contingent Interest of OED............................ March 1, 2010 13% $123.2 $ 140.4* 12 1/4% Senior Secured Notes of DJL........... July 1, 2006 12 1/4% 71.0 76.7* Note Payable.................................. October 1, 2010 4 3/4% 3.9 3.9 Note Payable.................................. July 1, 2005 9 1/2% 0.4 0.4 Preferred Membership Interests - Redeemable ................................ October 16, 2006 9% 4.0 4.0
* Represents fair value as of March 31, 2004 based on information provided by an independent investment banking firm. 55 BUSINESS THE COMPANY We own and operate both the Evangeline Downs pari-mutuel horse racetrack and casino, or "racino," near Lafayette, Louisiana and the Diamond Jo riverboat casino in Dubuque, Iowa. Evangeline Downs, located approximately 20 miles north of Lafayette, Louisiana at the intersection of Interstate 49 and U.S. Highway 190, began casino operations in December 2003. Evangeline Downs' new horse racetrack is expected to begin scheduling live racing meets in the second half of 2004, at which time its existing horse racetrack will cease operations. We believe, because of its close proximity to Lafayette and ease of access from major interstates and highways, Evangeline Downs will become the primary source of gaming entertainment for Lafayette, its primary market. As one of only two licensed gaming operations in Dubuque, the Diamond Jo has consistently captured more than 50% of Dubuque's casino gaming revenues since 1995, its first full year of operations. We believe Evangeline Downs and the Diamond Jo operate in favorable environments, benefiting from strong market demographics and limited competition. Both of these operations primarily focus on local markets, repeat customers and higher margin, less volatile slot machine play while offering unique and diverse gaming experiences. PROPERTIES Evangeline Downs. Our new Evangeline Downs racino in Opelousas has a Southern Louisiana Cajun roadhouse theme on the exterior, with a complementary regional Acadian atmosphere on the interior. The racino currently includes a casino with 1,627 slot machines, parking spaces for approximately 2,229 cars, 60 semis and 5 buses, and several dining options. Our dining options include a 312-seat Cajun buffet, an 82-seat fine dining Evangeline's restaurant, a 192-seat Lagniappe food court and a 202-seat Mojo's sports bar with an additional 98-seat screened patio, in addition to a raised bar and lounge area with 120 seats, known as Zydeco's, occupying the center of our casino floor. The single floor casino contains 15,000 square feet of designated gaming space, which equates to a casino floor area of approximately 40,000 square feet (excluding OTBs, see below). In accordance with our regulatory requirements for the racino, we expect to complete construction of a one-mile dirt track, stables for 980 horses, a grandstand and clubhouse with seating for 1,295 patrons, and apron and patio space for an additional 3,000 patrons by the end of fiscal 2004 with related additional capital expenditures of approximately $____ million. Consistent with our regulatory requirements, we also expect to continue construction on our turf track during fiscal 2005. Diamond Jo. The Diamond Jo is a three-story, approximately 48,000 square foot riverboat casino, replicating a classic 19th century paddlewheel riverboat. The Diamond Jo has an approved capacity for 1,394 patrons, features a spacious two-story atrium and a 48-seat capacity deli and offers 749 slot machines and 17 table games on approximately 19,000 square feet of gaming space. Adjacent to the Diamond Jo is a two-story, approximately 36,000 square foot dockside pavilion, featuring our 142-seat capacity Lighthouse Grill restaurant, our 140-seat capacity High Steaks restaurant, our 25-seat capacity Club Wild players lounge and our 205-seat capacity Harbor View Room, a full service banquet facility. We share our dockside pavilion with the Spirit of Dubuque dinner-boat. Approximately 1,200 convenient parking spaces are available to our patrons, including valet parking. The Diamond Jo operates from, and the dockside pavilion is located in, the Port of Dubuque, a waterfront development on the Mississippi River in downtown Dubuque. OTBs. We currently operate two OTBs, one in Port Allen, Louisiana and one in New Iberia, Louisiana. Each of these OTBs offers simulcast pari-mutuel wagering seven days a week and is equipped with a bar to serve alcoholic and non-alcoholic beverages and kitchen that prepares short order food. The Port Allen OTB is located immediately off Interstate 10, across the Mississippi River from Baton Rouge. The two-story Port Allen facility offers off-track betting, 100 video poker machines which began operating in May 2003, a newly renovated bar, a cafe and a VIP lounge. The New Iberia OTB, located on U.S. Highway 182, approximately 20 miles outside Lafayette, Louisiana, offers off-track betting and a limited food offering. Under Louisiana's racing and off-track betting laws, we have a right of prior approval with respect to any applicant seeking a permit to operate an OTB within a 55-mile radius of our horse racetrack. This effectively gives us the exclusive right, at our option, to operate OTBs within a 55-mile radius of our horse racetrack, provided that such OTB is not also within a 55-mile radius of another horse racetrack. 56 Existing horse racetrack. Our existing horse racetrack facility is located approximately five miles north of Lafayette off Interstate 49 and is comprised of a 94,200 square foot pari-mutuel wagering complex, an approximate 2,000-space parking lot, 7/8-mile dirt track and stables for approximately 1,000 horses. The complex features an approximate 750-seat grandstand, an approximate 3,000-person capacity apron and patio, an approximately 850-seat restaurant, four concession stands and four bars. The horse racetrack offers live thoroughbred and quarter horse races a minimum of 80 days a year from mid-April through October. The horse racetrack also offers simulcast pari-mutuel wagering seven days a week year-round. MARKETS Dubuque. The Diamond Jo operates next to the dockside pavilion which is located in the Port of Dubuque, a waterfront development on the Mississippi River in downtown Dubuque and is accessible from each of the major highways in the area. On average, more than 30,000 vehicles pass by the Diamond Jo per day. Dubuque has a diverse employer base, which includes John Deere Dubuque Works, Flexsteel Industries, and Eagle Window and Door, Prudential and McKesson, as well as local schools and hospitals. The Diamond Jo currently draws approximately 85% of its patrons from within a 100-mile radius of Dubuque, an area of approximately 2.4 million residents. Dubuque is situated at the intersection of Illinois, Iowa and Wisconsin and acts as the region's trade hub. Casino gaming revenues in Dubuque have grown at a compound annual rate of 7.0% since 1996, and there are no betting or loss limits in Iowa. In addition to the America's River Project, Dubuque contains several tourist attractions, drawing more than one million visitors annually, and Galena, Illinois, a historic community located 15 miles east of Dubuque, draws more than one million visitors annually. During 2003, the City of Dubuque substantially completed a $188 million redevelopment project of the Port of Dubuque, where the Diamond Jo is located. This redevelopment project, known as the America's River Project, is designed to enhance the attractiveness of the Port of Dubuque as a community center and tourist destination. The America's River Project is the result of a partnership between city, state and private enterprises including the City of Dubuque, the Dubuque Area Chamber of Commerce, the Dubuque County Historical Society, Dubuque County, the State of Iowa Vision Iowa Fund and Platinum Hospitality Group. The America's River Project is the only place along the entire 2,400-mile stretch of the Mississippi River offering a multi-faceted campus celebrating the historical, environmental, educational and recreational majesty of the Mississippi River. Components of the America's River Project include: (1) The Grand Harbor Resort and Waterpark featuring 194 guest rooms, including 31 suites, 2,500 square feet of meeting space and a 25,000-square foot themed indoor waterpark; (2) The Grand River Center with 86,000 square feet of state-of-the-art conference and event space that is connected by an enclosed walkway to the Grand Harbor Resort; (3) The National Mississippi River Museum & Aquarium featuring, among other things, several large aquariums, working riverboats, a wetland nature trail, barge theater, touch pools, live animals, and living history presentations, and (4) The Mississippi Riverwalk area featuring the Alliant Energy Amphitheater for special events, music and live entertainment, the Mississippi Riverwalk trail, and the 5,000-square foot River's Edge Plaza that will serve as the docking site for the Delta Queen Company riverboats and other large excursion vessels. Lafayette and Surrounding Areas. Louisiana generated approximately $2.0 billion of casino gaming revenue in 2003, excluding Native American casinos. Such amount grew at a compound annual rate of 8.7% since 1996 and 6.0% since 2001. We believe that our centralized location in Louisiana will afford us the opportunity to participate in this large and growing market. There are approximately 300,000 adults living within 35 miles of the racino site, mostly within the Lafayette metropolitan area, our primary market. In addition, there are 1.5 million adults living within 100 miles of the racino site. This area includes secondary markets from which we believe we will attract patrons due to our ease of access from major interstates or highways compared to our competitors in those areas, as well as our offering of pari-mutuel live horse racing. Approximately 39,000 vehicles per day pass through the intersection of Interstate 49 and U.S. Highway 190 where the racino site is located. In addition, the racino site is 57 located adjacent to a recently opened shopping center, which currently includes a Wal-Mart Supercenter. A Lowe's and a Home Depot are currently under construction nearby, affording us an opportunity to attract additional patrons. OPERATING STRATEGY Maintain/Develop Loyal Local Customer Base. We believe that the Diamond Jo is among the principal entertainment venues for residents in and around Dubuque. In order to maintain and enhance goodwill within the Dubuque area, we sponsor numerous community events. We believe we are Dubuque's largest sponsor of such events, which include air shows, concerts and holiday celebrations, such as 4th of July fireworks. We have also implemented employee incentives and training programs designed to provide a high level of personalized service to our customers. Because we believe that Evangeline Downs will become one of the principal entertainment venues for the residents of the Acadian region, which includes Lafayette, Opelousas and their surrounding communities, we intend to utilize these proven strategies for developing a similar loyal local customer base for Evangeline Downs. Maximize Profitability Through Target Marketing. We have developed marketing and promotional strategies designed to target and reward frequent gaming customers in our players' club through mailings, gaming incentives, and food and beverage discounts. Our state-of-the-art electronic player tracking system allows us to monitor slot machine activity in real time, as well as the frequency and level of play for our players' club members, of which there are more than 100,000 at the Diamond Jo and already over 50,000 at Evangeline Downs. This system enables us to focus our marketing efforts on our most valued customers, regularly adjust our overall game mix to appeal to our target market, and increase revenues from our existing customer base. Focus on Slot Machine Play. Approximately 88% of the Diamond Jo's gaming revenue is generated from slot machines, and all of Evangeline Downs casino gaming revenues are generated from slot machines. Slot machines are typically both the highest margin and most predictable component of the gaming industry. Slot machines do not have the staffing requirements of table games nor do they have the variation in hold percentages attributable to "luck" which characterize the table game side of the casino business. We believe that this affords us a more stable and predictable revenue stream, as well as consistently higher margins than those facilities that have significant table game operations. In addition, due to our local market focus and limited competition within our markets, we believe our marketing costs are much less compared to casinos which focus primarily on patrons outside of their local markets and/or who face more competition in their markets. The Diamond Jo has added ticket-in ticket-out technology to over 300 slot machines and Evangeline Downs currently has over 1,040 slot machines with this technology. We believe this technology enhances customer service, produces operating efficiencies, allows for players to continue play during most jackpots and eliminates hopper fills and the down time associated with them. COMPETITION Diamond Jo. The Diamond Jo's principal competitor is the DGP, the only other licensed gaming facility in Dubuque. The DGP, which opened its casino in 1995, is located three miles north of the Diamond Jo and currently offers 600 slot machines and live greyhound racing from May through October with simulcasts from other greyhound tracks. Furthermore, the DGP is permitted to operate up to 1,000 slot machines and is in the process of expanding its facilities to accommodate additional machines, which expansion is anticipated to be completed by June 2005. In addition, a group of private investors is planning to construct a hotel adjacent to the DGP, which is expected to be completed in June 2005. The DGP also offers, on a limited basis, simulcasts of horse races. The DGP is owned and operated by the DRA. As a not-for-profit organization, the DRA distributes a percentage of its cash flow to the City of Dubuque and local charities. Although Iowa law currently prohibits the DGP from conducting some kinds of gaming operations, including table games, video poker, video keno and other electronic games of skills, legislation has been enacted that would allow the DGP to offer table games and video games that simulate table games, subject to DJL and the DGP filing with the Iowa Gaming Commission an agreement with respect thereto that also allows DJL to operate as a barge. See "Risk Factor--Risks Relating to Our Business--Competition." Riverboat gaming licenses in the State of Iowa are granted to not-for-profit "qualified sponsoring organizations" and can be issued jointly to a not-for-profit qualified sponsoring organization and a boat operator. The granting of new licenses requires regulatory approval, which includes, among other things, satisfactory 58 feasibility studies. The DRA is the not-for-profit qualified sponsoring organization that, pursuant to a contract between the parties, holds the excursion riverboat gaming license together with us as the boat operator. The Iowa Gaming Commission recently rescinded its rule limiting riverboat gaming licenses in Iowa to its existing number. However, a rule still exists that prohibits existing licensees from increasing the number of gaming positions at their gaming facilities without prior Iowa Gaming Commission approval. The Dubuque gaming market borders other neighboring gaming markets. These neighboring markets include: (1) Elgin and Aurora, Illinois to the east; (2) Marquette, Iowa and Native American gaming in Wisconsin and Minnesota to the north; (3) Des Moines, Iowa and Native American gaming in Tama, Iowa to the west; and (4) Clinton, Iowa and the Quad Cities (Bettendorf and Davenport, Iowa and Moline and Rock Island, Illinois) to the south. We believe that the Diamond Jo competes only indirectly with gaming facilities in these neighboring markets. Illinois enacted legislation providing for dockside gaming in 1999. Illinois limits the number of dockside gaming licenses to ten. Nine of the ten licenses have already been issued--the tenth is currently pending for a dockside gaming facility in the Chicago area. Evangeline Downs. The nearest competitor to Evangeline Downs is a Native American casino located approximately 50 miles to the south of Lafayette, including several miles off the highway in Marksville. Beyond that, patrons in Lafayette need to drive approximately 50 miles to reach riverboat casinos in Baton Rouge and approximately 70 miles to reach riverboat casinos in Lake Charles and Native American casinos in Marksville and Kinder. Because our competition in Marksville is situated more than 20 miles off the highway, we believe that patrons of the Marksville casino may find the ease of highway access to our racino more convenient. Louisiana law currently places limitations on the number and types of gaming facilities that may operate in the State. Currently, there are only four horse racetracks in Louisiana with licenses to conduct live racing. Under the Pari-Mutuel Act, each of the four horse racetracks (including our racino) are permitted to install slot machines at their facilities. The horse racetrack nearest to the racino site that is allowed to have gaming operations is located in Vinton, Louisiana, near Lake Charles, which is over 100 miles away. In addition, current Louisiana law permits only 15 riverboat gaming licenses to be awarded. The fifteenth and last license was recently awarded to operate a riverboat casino to be constructed in Lake Charles. Also, under current Louisiana law, the only non-Native American land-based casino permitted to operate in the State is the land-based casino currently operating in New Orleans, over 100 miles from Lafayette. Native American gaming facilities operate pursuant to compacts with the State of Louisiana. There currently are only four federally-recognized Native American tribes in Louisiana and only three Native American casinos currently operating in Louisiana, the closest being in Marksville and Kinder which are approximately 50 miles from the racino site. The fourth tribe, which does not have a compact with the State of Louisiana as of the date of this prospectus, has proposed to develop a casino in DeSoto Parish, over 150 miles from the racino. WORTH COUNTY, IOWA On November 11, 2003, we entered into an exclusive agreement with the Worth County Development Authority pursuant to which the parties agreed to jointly submit an application for a license to operate a gaming facility in Worth County, Iowa. Under this agreement, we have agreed to design, construct, operate and manage a casino with no less than 700 gaming positions, a waterway, if necessary, a recreational vehicle park with a minimum capacity of 200 spaces, and, upon reaching a targeted rate of return on invested capital, a 100-room hotel development. Worth County is located on the border of Minnesota, approximately 200 miles from the Diamond Jo. 59 EMPLOYEES We maintain a staff of approximately 400 to 420 full-time equivalent employees at the Diamond Jo and staff approximately 700 to 800 full-time equivalent employees at Evangeline Downs, depending upon the time of the year. None of our employees are covered by a collective bargaining agreement. We have not experienced any labor problems resulting in a work stoppage, and believe we maintain good relations with our employees. PROPERTIES We own a fee interest in the dockside pavilion, consisting of approximately 36,000 square feet, a surface parking lot within close proximity to the dockside pavilion, and the walkway connecting the dockside pavilion to the ramp, which leads to where the Diamond Jo is moored. In addition to the properties we purchased, we currently lease property used as surface parking consisting of approximately 194 parking spaces that are in close proximity to the Diamond Jo. This leased property is currently owned by the City of Dubuque and leased to DRA, which in turn subleases this property to us. The sublease requires us to pay one dollar per year as rent. The terms of the DRA lease with the City of Dubuque and our sublease with the DRA have each been extended through December 31, 2008. We are also party to a parking agreement by and among the City of Dubuque, DRA, the Dubuque County Historical Society and the Spirit of Dubuque, which governs the use of additional parking spaces we currently use. This parking agreement gives our patrons the right to use the approximately 194 parking spaces currently subleased from DRA. The agreement also gives our patrons and employees the non-exclusive right to use approximately 633 additional parking spaces that are owned by the City of Dubuque and the Dubuque County Historical Society and are located in close proximity to the Diamond Jo. In exchange for these parking rights and the extension of the sublease with the DRA, we are required, under some circumstances, to share costs of maintaining the subleased parking lots. We lease the land on which our existing horse racetrack in Lafayette is located and own the related building and improvements. The ground lease annual rental is $0 per year, and the lease term expires on the earlier of December 31, 2004 or the first day OED opens a new racetrack facility for business in St. Landry Parish, Louisiana. Our new racino sits on and is bounded by approximately 649 acres of owned land located in Opelousas that we purchased in 2002 and 2003. Subsequent to the initial acquisition of approximately 532 aces of land in 2002, in May 2003 we executed three separate purchase agreements to purchase approximately 10.78 acres of land adjacent to the new racino for a total cost of $842,466. In October 2003, we executed two separate purchase agreements to purchase approximately 106 acres of land adjacent to the new racino. Under the first purchase agreement, we purchased approximately 13 acres for a total purchase price of $550,000. The source of funds for the purchase price included a $50,000 deposit paid in February 2003 and $500,000 from the construction disbursement account paid on October 24, 2003. Under the second purchase agreement, we purchased an additional 93 acres of land, divided into seven approximately equal parcels, for a total purchase price of $3,850,000. The purchase price under this second purchase agreement was financed by the seller with our issuing a $3,850,000 note payable to the seller. The note is payable in seven equal annual installments of $550,000 beginning October 24, 2004 and bears interest at a rate of 4.75% of the unpaid balance due monthly in arrears on the fifth day of each month beginning on December 5, 2003. The note is collateralized by a mortgage on the property. Simultaneously with the payment of each $550,000 annual installment discussed above, seller agrees to release one of the remaining parcels from the mortgage. In addition to our existing horse racetrack and new racino, we own the land, building and improvements of our Port Allen OTB and lease the facility that comprises our New Iberia OTB. 60 LEGAL PROCEEDINGS Neither we nor our subsidiaries are a party to, and none of our nor our subsidiaries' property is the subject of, any pending legal proceedings other than litigation arising in the normal course of business. We do not believe that adverse determinations in any or all such other litigation would have a material adverse effect on our financial condition, results of operations or cash flows. 61 REGULATORY MATTERS We and our subsidiaries are subject to regulation by the State of Iowa, the State of Louisiana, and, to a lesser extent, by federal law. We and our subsidiaries are subject to regulations that apply specifically to live racing facilities and the gaming and pari-mutuel industry, in addition to regulations applicable to businesses generally. Our racino is subject to the Pari-Mutuel Act and the Louisiana Horse Racing Act. Laws and regulations applicable to our current racetrack and our racino are administered by the Louisiana State Gaming Control Board and the Louisiana State Racing Commission. Legislative or administrative changes in applicable legal requirements, including legislation to prohibit casino gaming, have been proposed in the past. It is possible that the applicable requirements to operate an Iowa gaming facility will become more stringent and burdensome, and that taxes, fees and expenses may increase. It is also possible that the number of authorized gaming licenses in Iowa may increase, which would intensify the competition that we face. Our failure to comply with detailed regulatory requirements may be grounds for the suspension or revocation of one or more of our respective licenses which would have a material adverse effect on our respective businesses. IOWA RIVERBOAT GAMING REGULATION Our Diamond Jo operations are subject to Chapter 99F of the Iowa Code and the regulations promulgate under that Chapter and the licensing and regulatory control of the Iowa Gaming Commission. Under Iowa law, the legal age for gaming is 21, and wagering on a "gambling game" is legal when conducted by a licensee on an "excursion gambling boat." An "excursion gambling boat" is an excursion boat or moored barge and a "gambling game" is any game of chance authorized by the Iowa Gaming Commission. Permanent dockside casino gaming was recently authorized by the Iowa Legislature. The legislation permitting riverboat gaming in Iowa authorizes the granting of licenses to "qualified sponsoring organizations." A "qualified sponsoring organization" is defined as a nonprofit corporation organized under Iowa law, whether or not exempt from federal taxation, or a person or association that can show to the satisfaction of the Iowa Gaming Commission that the person or association is eligible for exemption from federal income taxation under sections 501(c)(3), (4), (5), (6), (7), (8), (10) or (19) of the Internal Revenue Code. Such nonprofit corporation may operate the riverboat itself, or it may enter into an agreement with another boat operator to operate the riverboat on its behalf. A boat operator must be approved and licensed by the Iowa Gaming Commission. DRA, a not-for-profit corporation organized for the purpose of operating a pari-mutuel greyhound racing facility in Dubuque, Iowa, first received a riverboat gaming license in 1990 and has served as the "qualified sponsoring organization" of the Diamond Jo since March 18, 1993. DRA subsequently entered into the DRA Operating Agreement with Greater Dubuque Riverboat Entertainment Company, the previous owner and operator of the Diamond Jo, authorizing Greater Dubuque Riverboat Entertainment Company to operate riverboat gaming operations in Dubuque. The DRA Operating Agreement was approved by the Iowa Gaming Commission on March 18, 1993. The term of the DRA Operating Agreement expires on December 31, 2008. We assumed the rights and obligations of Greater Dubuque Riverboat Entertainment Company under the DRA Operating Agreement. Under Iowa law, a license to conduct gaming may be issued in a county only if the county electorate has approved the gaming. The electorate of Dubuque County, Iowa, which includes the City of Dubuque, approved gaming on May 17, 1994 by referendum, including gaming conducted by the Diamond Jo. In addition, a referendum must be held every eight years in each of the counties where gambling games are conducted and the proposition to continue to allow gambling games in such counties must be approved by a majority of the county electorate voting on the proposition. Such a referendum took place on November 5, 2002 with 79% of the electorate voting on the proposition favoring continued gaming on riverboats in Dubuque County. The next referendum is scheduled for 2010. If any reauthorization referendum is defeated, Iowa law provides that any previously issued gaming license will remain valid and subject to renewal for a total of nine years from the date of original issuance of the license, subject to earlier non-renewal or revocation under Iowa law and regulations applicable to all licenses. Proposals to amend or supplement Iowa's gaming statutes are frequently introduced in the Iowa state legislature. In addition, the state legislature sometimes considers proposals to amend or repeal Iowa law and regulations, which could effectively prohibit riverboat gaming in the State of Iowa, limit the expansion of existing operations or otherwise affect our operations. Although we do not believe that a prohibition of riverboat gaming in 62 Iowa is likely, we can give no assurance that changes in Iowa gaming laws will not occur or that the changes will not have a material adverse effect on our business. The Gaming Commission adopted in 1998 a rule that prohibits licensees, including the Diamond Jo, from increasing the number of gaming positions without Iowa Gaming Commission approval. This approval is based on several factors, including whether the increase will: (1) positively impact the community in which the licensee operates, (2) result in permanent improvements and land-based developments, and (3) have a detrimental impact on the financial viability of other licensees operating in the same market. As a result of this rule, we may be unable to increase the number of gaming positions on the Diamond Jo. Substantially all of the Diamond Jo's material transactions are subject to review and approval by the Iowa Gaming Commission. All contracts or business arrangements, verbal or written, with any related party or in which the term exceeds three years or the total value of the contract exceeds $100,000 are agreements that qualify for submission to and approval by the Iowa Gaming Commission subject to certain limited exceptions. The agreement must be submitted within 30 days of execution and approval must be obtained prior to implementation unless the agreement contains a written clause stating that the agreement is subject to commission approval. Additionally, contracts negotiated between the Diamond Jo and a related party must be accompanied by economic and qualitative justification. We must submit detailed financial, operating and other reports to the Iowa Gaming Commission. We must file weekly gaming reports indicating adjusted gross receipts received from gambling games. Additionally, we must file annual financial statements covering all financial activities related to our operations for each fiscal year. We must also keep detailed records regarding our equity structure and owners. Iowa has a graduated wagering tax on riverboat gambling equal to five percent of the first one million dollars of adjusted gross receipts, ten percent on the next two million dollars of adjusted gross receipts and twenty two percent on adjusted gross receipts of more than three million dollars. In addition, there will be two assessments due on June 1, 2005 and June 1, 2006 in an amount equal to 2.152% of the licensee's adjusted gross receipts for fiscal year 2004. These assessments will be used against future state gaming taxes paid by the licensee with a credit for 20% of the assessments paid allowed each year for five consecutive years beginning July 1, 2010. In addition, Iowa riverboats share equally in costs of the Iowa Gaming Commission and related entities to administer gaming in Iowa. For the fiscal year ended December 31, 2003, our share of such expenses was approximately $605,000. Further, the Diamond Jo pays to the City of Dubuque a fee equal to $.50 per passenger. If the Iowa Gaming Commission decides that a gaming law or regulation has been violated, the Iowa Gaming Commission has the power to assess fines, revoke or suspend licenses or to take any other action as may be reasonable or appropriate to enforce the gaming rules and regulations. In addition, renewal is subject to, among other things, continued satisfaction of suitability requirements. We are required to notify the Iowa Gaming Commission as to the identity of, and may be required to submit background information regarding, each director, corporate officer and owner, partner, joint venture, trustee or any other person who has a beneficial interest of five percent or more, direct or indirect, in DJL. The Iowa Gaming Commission may also request that we provide them with a list of persons holding beneficial ownership interests in DJL of less than five percent. For purposes of these rules, "beneficial interest" includes all direct and indirect forms of ownership or control, voting power or investment power held through any contract, lien, lease, partnership, stockholding, syndication, joint venture, understanding, relationship, present or reversionary right, title or interest, or otherwise. The Iowa Gaming Commission may determine that holders of the DJL Notes, DJL's common membership interests and preferred membership interests, and PGP's common membership interests and convertible preferred membership interests have a "beneficial interest" in us. The Iowa Gaming Commission may limit, make conditional, suspend or revoke the license of a licensee in which a director, corporate officer or holder of 63 a beneficial interest in the person includes or involves any person or entity which is found to be ineligible as a result of want of character, moral fitness, financial responsibility, or professional qualifications or due to failure to meet other criteria employed by the Iowa Gaming Commission. If any gaming authority, including the Iowa Gaming Commission, requires any person, including a record or beneficial owner of the securities, to be licensed, qualified or found suitable, the person must apply for a license, qualification or finding of suitability within the time period specified by the gaming authority. The person would be required to pay all costs of obtaining the license, qualification or finding of suitability. If a record or beneficial owner of any of the DJL Notes or any membership interest of PGP or DJL is required to be licensed, qualified or found suitable and is not licensed, qualified or found suitable by the gaming authority within the applicable time period, the DJL Notes or membership interests will be subject to regulatory redemption procedures. The DJL Notes to be redeemed under a required regulatory redemption are redeemable by us, in whole or in part, at any time upon not less than 20 business days nor more than 60 days notice, or such earlier date as may be ordered by any governmental authority. As of the date of this report, the Iowa Gaming Commission has not required the security holders to apply for a finding of suitability to own the securities. However, the Iowa Gaming Commission could require a holder of the securities to submit an application in the future. THE HORSE RACING ACT AND THE PARI-MUTUEL ACT The Horse Racing Act has been in effect since 1968 and is the basis for the current statutory scheme regulating live and off-track betting for horse racing. The Horse Racing Act states, among other things, that certain policies of Louisiana with respect to horse racing are to encourage the development of the business of horse racing with pari-mutuel wagering on a high plane; to encourage the development of the breeding and ownership of race horses; to regulate the business of horse racing by licensed horse racing tracks in the state and to provide the orderly conduct of racing; to provide financial assistance to encourage the business of racing horses; and to provide a program for the regulation, ownership, possession, licensing, keeping and inoculation of horses. The Pari-Mutuel Act became effective on July 9, 1997, and provides for numerous controls and supervision over the operation of slot facilities and requires us to comply with complex and extensive requirements. Failure to adhere to these statutes and regulations will result in serious disciplinary action against us, including monetary fines and suspension or revocation of our licenses. The Pari-Mutuel Act allows only one facility in each of St. Landry Parish, Bossier Parish, Calcasieu Parish and Orleans Parish to be licensed to operate slot machines at a live horse racing facility. OED is presently the only "eligible facility" in St. Landry Parish under the Pari-Mutuel Act. The Pari-Mutuel Act requires (among other things) that two conditions be met prior to the opening and operation of a slot machine casino at a live racing venue. First, a parish-wide election must approve the operation. In 1997, voters in St. Landry Parish voted to approve the slot machine casino at the racino site. Secondly, the Pari-Mutuel Act requires that an appropriate tax be levied on the slot machine operation. In 2000, an 18.5% license tax was levied upon taxable net slot machine proceeds. Therefore, we believe that both of the conditions required by the Pari-Mutuel Act have been met with respect to the racino at our site in Opelousas within St. Landry Parish. The Pari-Mutuel Act also provides that the "designated gaming space" in any eligible facility cannot exceed 15,000 ft2, that the licensee will not allow underage gaming and that notice of toll-free telephone assistance for compulsive gamblers will be posted at the facility. The Pari-Mutuel Act requires that licensees supplement horse racing purses and pay certain other fees from slot machine proceeds. The Pari-Mutuel Act also levies taxes on the net slot machine proceeds. Licensees must pay fifteen (15%) percent of gross slot machine proceeds to supplement purses at their facilities, pay two (2%) percent to the Louisiana Thoroughbred Breeders Association and also pay one (1%) percent to the Louisiana Quarter Horse Breeders Association. In addition to these payments, we will pay eighteen and one-half (18.5%) percent of the net slot machine proceeds (net of the payments described above) as state taxes and four (4%) percent as local taxes. The effective rate of total taxes and fees is therefore approximately 36.5% of our adjusted gross slot revenue. Additionally, we will also have to pay $0.25 for each patron who attends a live race at our horse racetrack, enters the 64 racino during non-racing season, from the hours of noon to midnight, Thursday through Monday, or enters any one of our OTBs. To remain an "eligible facility" under the Pari-Mutuel Act, we must, among other things, have a minimum of 80 live racing days in a consecutive 20-week period each year of live horse race meetings at the new horse racetrack. THE LOUISIANA STATE GAMING CONTROL BOARD In 1996, Louisiana created the Louisiana Gaming Control Board, which was granted all of the regulatory authority, control and jurisdiction to license and monitor gaming facilities in Louisiana, including our planned racino. To receive a gaming license an applicant and its management must apply to the Louisiana Gaming Control Board and be investigated by the Louisiana State Police prior to licensing. The Louisiana Gaming Control Board and Louisiana State Police must determine that the applicant is suitable to conduct the gaming operations, including that the applicant (and its owners, officers, directors and key employees) is of good character, honesty and integrity, that its prior activities, reputation and associations pose no threat to the public interest or to the effective regulation of the industry and that the applicant is capable of conducting the operation of the slot machine facility. The Louisiana Gaming Control Board must also determine that the applicant has adequate financing from a source suitable and acceptable to the Louisiana Gaming Control Board. The applicant for a gaming license, its directors, officers, key personnel, partners, and persons holding a five (5%) percent or greater equity or economic interest in the applicant will be required to be found suitable by the Louisiana Gaming Control Board. To receive a license the applicant must file an extensive application with the Louisiana Gaming Control Board, disclosing personal, financial, criminal, business and other information. The applicant is required to pay all costs of investigation. An application for a finding of suitability of a person may be denied for any cause deemed reasonable by the Louisiana Gaming Control Board. Any other person who is found to have a material relationship to or a material involvement with a gaming company also may be required to be investigated in order to be found suitable or be licensed as a business associate of an applicant. Key employees, controlling persons or others who exercise significant influence upon the management or affairs of a gaming company may be deemed to have such a relationship or involvement. If the Louisiana Gaming Control Board were to find a director, officer or key employee of an applicant unsuitable for licensing purposes or unsuitable to continue having a relationship with an applicant, the applicant would have to dismiss and sever all relationships with such person. The applicant would have similar obligations with regard to any person who refuses to file appropriate applications. Each gaming employee must obtain a gaming employee permit which may be revoked upon the occurrence of certain specified events. An applicant must also demonstrate that the proposed gaming operation has adequate financial resources generated from suitable sources and adequate procedures to comply with the operating controls and requirements imposed by the laws and regulations in the State of Louisiana. Additionally, the applicant must submit plans and specifications of the gaming premises specifying the layout and design of the gaming space. Proof of tax compliance, both state and federal, is also required. This submission is followed by a thorough investigation by the regulatory authorities of the applicant, its business probity, the premises and other matters. An application for any gaming license, approval or finding of suitability may be denied for any cause that the regulatory authorities deem reasonable. We received our gaming license to operate slot machines at our racino from the Louisiana Gaming Control Board on January 21, 2003. Our license has a term of five years and is renewable for succeeding five year periods upon application for such renewal. The Louisiana Gaming Control Board retains absolute discretion over the right to renew our license upon the termination of its initial term. OED's gaming license authorizes the use of 15,000 square feet of designated gaming space. On February 18, 2003, OED submitted for approval its layout for the casino, which incorporated 1,631 slot machines. OED's layout was approved based on the type of machines which were all upright machines. Should OED change the manufacturer, type and/or design of its slot machines prior to installation, it must once again go before the Louisiana Gaming Control Board to obtain approval for the new machines. Once the machines are installed, they 65 must be inspected by regulators and tested prior to the approval of their operation. The moving of the machines also requires the approval of the Louisiana Gaming Control Board. Maintaining our gaming license is contingent in certain respects on our horse racetrack operations at our planned racino. First, our failure to complete construction of the horse racetrack at the racino or to establish a schedule of live racing meets at the new horse racetrack by January 21, 2005, will result in the cancellation of our gaming license. While Louisiana allows us to operate slot machines at the racino prior to completion of the new horse racing facility and the commencement of live racing at the new horse racetrack, Louisiana gaming regulations and our gaming license require that the racino must be constructed and a schedule of live racing meets at the new horse racetrack be established by January 21, 2005, which is within two years from the date of the grant of our gaming license. Second, to maintain our gaming license, we must remain an "eligible facility" under the Pari-Mutuel Act. This means that we must, among other things, have a minimum of 80 live racing days in a consecutive 20-week period each year of live horse race meetings at the new horse racetrack and must be a licensed racing association. Although we have obtained our license to conduct slot machine operations, we continue to be subject to ongoing monitoring and compliance requirements by the Louisiana Gaming Control Board and the Louisiana State Police. We have obtained from the Louisiana Gaming Control Board a video draw poker establishment license and owner device license. The video draw poker establishment license allows us to operate video draw poker devices at our approved OTB locations but not the racino, and the owner device license allows us to own those machines. Regulations require us to comply with rigorous accounting and operating procedures, including the submission of detailed financial and operating reports. Our accounting records must include accurate, complete and permanent records of all transactions pertaining to revenue. Detailed ownership records must be kept on site available for inspection. All records must be retained for a period of five years. Audited financial statements are required to be submitted to the Louisiana State Police. Internal controls have been approved and in place beginning the first day of operation. These controls will include handling of cash, tips and gratuities, slot operations, and count room procedures and management information systems. Each licensed facility is required by the Louisiana Gaming Control Board to maintain cash or cash equivalent amounts on site sufficient to protect patrons against defaults in gaming debts owed by the licensee. In addition, licensees are subject to currency transaction report regulations. We must also strictly comply with mandated operating procedures and supply detailed reports disclosing such compliance. Regulation of a casino's methods of operations is extensive and will include substantially all aspects of our casino operation. Operating procedures that are subject to regulation include slot machine maintenance and operation, cash management and cash procedures, cage procedures, drop procedures, regulation of weapons in the casino, parking, access to the premises and records by regulators, gaming credit and advertising, surveillance and security standards, safeguards against underage gambling, compulsive gambling programs, physical layout and progressive jackpots. The Louisiana Gaming Control Board retains the power to suspend, revoke, condition, limit or restrict our license to conduct slot machine operations as a sanction for violating licensing terms or for any cause they deem reasonable. In addition, monetary fines for violations may be levied against us, and our gaming operation revenues may be forfeited to the state under certain circumstances. Initial enforcement actions against a licensee are brought by the Louisiana State Police and are heard before an administrative law judge to whom the Louisiana Gaming Control Board has delegated decision making power. Either party may appeal the ruling of the administrative law judge before the full Louisiana Gaming Control Board. Either party may further appeal the ruling of the Louisiana Gaming Control Board in state court. The laws, regulations and procedures pertaining to gaming are subject to the interpretation of the regulatory authorities and may be amended. Any changes in such laws or regulations, or their current interpretations, could have a material adverse effect on our business, financial condition, results of operations and ability to meet our payment obligations under the Notes and our other indebtedness. The Louisiana Gaming Control Board has broad regulatory power over securities issuances and incurrence of indebtedness by gaming facilities. Substantially all loans, leases, private sales of securities, extensions of credit, refinancings and similar financing transactions entered into by a licensee must be approved by the Louisiana Gaming Control Board. Pursuant to a letter dated January 31, 2003, the Louisiana Gaming Control Board exempted the notes offering from any requirement for prior approval by the Louisiana Gaming Control Board. However, at any time, any holder of the notes may be called before the Louisiana Gaming Control Board to undergo a suitability 66 investigation in the event the Louisiana Gaming Control Board determines that such holder exercises a material influence over us or our operations. At any time the Louisiana Gaming Control Board may investigate and require the finding of suitability of any shareholder or beneficial shareholder (and if the shareholder is a corporate or partnership entity, then the shareholders or partners of the entity), officer, partner, member, manager or director of a licensee if the Louisiana Gaming Control Board believes such holder exercises a material influence over the licensee. Furthermore, all holders of more than a 5% interest in the licensee, or proposed purchasers of more than a 5% interest are automatically investigated and are required to submit to suitability requirements of the Louisiana Gaming Control Board. Any sale or transfer of more than a 5% interest in any riverboat or slot project is subject to the approval of the Louisiana Gaming Control Board. Although the Pari-Mutuel Act does not specifically require debt holders to be licensed or to be found suitable, the Louisiana Gaming Control Board, in its sole discretion, may require the holders of debt securities to file applications and obtain suitability certificates from it. Furthermore, if the Louisiana Gaming Control Board finds that any holder exercises a material influence over the gaming operations, a suitability certificate will be required. If the Louisiana Gaming Control Board finds that any security holder or proposed security holder, including a holder of the notes, is not qualified pursuant to the existing laws, rules and regulations, and if as a result it determines that the licensee is no longer qualified to continue as a licensee, it can propose action necessary to protect the public interest, including the suspension or revocation of a license or permit. It may also issue, under penalty of revocation of license, a condition of disqualification naming the person and declaring that such person may not (a) receive dividends or interest on securities of the licensee, (b) exercise any right conferred by securities of the licensee, (c) receive remuneration or any other economic benefit from the licensee or (d) continue in an ownership or economic interest in the licensee or remain as a director, partner, officer, or manager of the licensee. A security issued by a licensee must generally disclose these restrictions. LOUISIANA STATE RACING COMMISSION Pari-mutuel betting and the conducting of live horse race meets in Louisiana are strictly regulated by the Louisiana State Racing Commission, which was created pursuant to the Horse Racing Act. The Louisiana Racing Commission is comprised of ten members and is domiciled in New Orleans, Louisiana. In order to be approved to conduct a live race meet and to operate pari-mutuel wagering (including off-track betting), an applicant must show, among other things: racing experience; financial qualifications; moral and financial qualifications of applicant and applicant's partners, officers and officials; the expected effect on the breeding and horse industry; and the expected effect on the State's economy. In 2000, we received from the Louisiana State Racing Commission a license to conduct live race meets and to operate pari-mutuel wagering at our existing facility. The initial term of this license is ten years subject to renewal in 2010. On December 19, 2002, we received approval to transfer our operations under our license from Lafayette Parish to St. Landry Parish upon completion of the new horse racetrack. As a condition to the approval of our racing license, we are required to offer pari-mutuel wagering in the defined casino gaming space at the time we begin conducting slot machine gaming. Our racino includes monitors and other equipment to facilitate live and simulcast wagering within the casino area in compliance with this condition. The Louisiana State Racing Commission promulgates rules, regulations and conditions for the holding, conducting and operating of all racetracks in the state. Failure to adhere to these regulations may result in substantial fines or the suspension or revocation of our racing license. A revocation or suspension of the racing license would, in turn, result in the revocation or suspension of our gaming license to conduct slot machine operations. Any alteration in the regulation of these activities could have a material adverse effect on our operations. FEDERAL REGULATION OF SLOT MACHINES We are required to make annual filings with the U.S. Attorney General in connection with the sale, distribution or operation of slot machines. We are currently in compliance with such filing requirements. 67 POTENTIAL CHANGES IN TAX AND REGULATORY REQUIREMENTS In the past, federal and state legislators and officials have proposed changes in tax law, or in the administration of the laws, affecting the gaming industry. Regulatory commissions and state legislatures sometimes consider limitations on the expansion of gaming in jurisdictions where we operate and other changes in gaming laws and regulations. Proposals at the national level have included a federal gaming tax and limitations on the federal income tax deductibility of the cost of furnishing complimentary promotional items to customers, as well as various measures which would require withholding on amounts won by customers or on negotiated discounts provided to customers on amounts owed to gaming companies. It is not possible to determine with certainty the likelihood of possible changes in tax or other laws or in the administration of the laws. The changes, if adopted, could have a material adverse effect on our financial results. LIQUOR REGULATIONS The sale of alcoholic beverages by us in Iowa is or will be subject to the licensing, control and regulation by liquor agencies, which include the City of Dubuque and the Alcohol Beverage Control Division of the Iowa Department of Commerce. The applicable Iowa liquor laws allow the sale of liquor during legal hours which are Monday through Saturday from 6 a.m. to 2 a.m. the next day and Sunday from 8 a.m. to 2 a.m. on Monday. Subject to few exceptions, all persons who have a financial interest in us, by ownership, loan or otherwise, must be disclosed in an application filed with, and are subject to investigation by, Iowa's liquor agencies. Persons who have a direct or indirect interest in any Iowa liquor license, other than hotel or restaurant liquor licenses, may be prohibited from purchasing or holding our Existing Notes. All licenses are subject to annual renewal, are revocable and are not transferable. The liquor agencies have the full power to limit, condition, suspend or revoke any license or to place a liquor licensee on probation with or without conditions. Any disciplinary action could, and revocation would, have a material adverse effect upon the operations of our business. Many of our owners, officers and managers must be investigated by the liquor agencies in connection with our liquor permits. Changes in licensed positions must be approved by the liquor agencies. The sale of alcoholic beverages by us in Louisiana is subject to the licensing, control and regulation by the State of Louisiana, Department of Revenue, Office of Alcohol and Tobacco Control, as well as the cities of Opelousas, Carencro, Port Allen, New Iberia and the parish of West Baton Rouge. The applicable liquor laws in the city of Opelousas where the racino is located allow the sale of liquor 24 hours a day 7 days a week. UNITED STATES COAST GUARD The Diamond Jo is also regulated by the United States Coast Guard, whose regulations affect boat design and stipulate on-board facilities, equipment and personnel, including requirements that each vessel be operated by a minimum complement of licensed personnel, in addition to restricting the number of persons who can be aboard the boat at any one time. Our riverboat must hold, and currently possesses, a Certificate of Inspection ("COI") and a Certificate of Documentation from the United States Coast Guard. Loss of the COI would preclude our use of the Diamond Jo as an operating riverboat. In addition, the riverboat is subject to United States Coast Guard regulations requiring periodic hull inspections. The United States Coast Guard, upon our request, allowed us to conduct an underwater hull inspection instead of the traditional out of water dry dock inspection. We completed the underwater inspection in March 2003. The underwater hull inspection did not result in any loss of services of the riverboat. We will be required to perform another hull inspection within 60 months from the date of the completion of the underwater hull inspection. At that time, we may again seek approval from the Coast Guard for an underwater hull inspection in order to avoid any loss of services of the riverboat, although no assurances can be given that the Coast Guard will agree to our request. Due to changes in Iowa law, we may operate a gaming vessel that is not required to cruise, without a COI. We have applied to the US Army Corp of Engineers and the Coast Guard to give up our COI and become a Permanently Moored Vessel (PMV). The process of becoming a PMV is expected to take at least several months and, if granted, will allow us to reduce our marine personnel to a level fitting of a non-cruising vessel. All of our marine employees employed on United States Coast Guard regulated vessels, even those who have nothing to do with the actual operation of the vessel, such as dealers, cocktail hostesses and security personnel, 68 may be subject to maritime law at certain times of the year, which, among other things, exempts those employees from state limits on workers' compensation awards. We maintain workers' compensation insurance in compliance with applicable Iowa law. THE MARITIME TRANSPORTATION SECURITY ACT AND HOMELAND SECURITY The Maritime Transportation Security Act was passed and signed into law following the September 11 attacks. The Coast Guard has published regulations implementing the Act, requiring covered vessels and associated shore facilities to develop and implement comprehensive security plans for preventing and responding to potential terrorist threats. We are in the process of implementing an Alternative Security Plan at the Diamond Jo developed by the American Gaming Association to satisfy the Coast Guard regulations. However, it is not possible to predict the precise impact of these regulations, or other regulations relating to homeland security contemplated by the Coast Guard, upon access to our facility or gaming operations. THE SHIPPING ACT OF 1916; THE MERCHANT MARINE ACT OF 1936 The Shipping Act of 1916, and the Merchant Marine Act of 1936, and applicable regulations contain provisions which would prevent persons who are not citizens of the United States from holding in the aggregate more than 25% of our outstanding membership interests, directly or indirectly. DJL's and PGP's respective operating agreements contain prohibitions against any purchase or transfer of the Company's, DJL's or PGP's respective membership interests to any person or entity if, following the purchase or transfer, more than 25% of DJL's membership interests are owned, directly or indirectly, by persons who are not citizens of the United States. Any such purchase or transfer in violation of the Company's, DJL's or PGP's respective operating agreements is null and void, and the Company's, DJL and PGP will not recognize the purchaser, transferee or purported beneficial owner as a direct or indirect holder of an interest in the Company, DJL or PGP, respectively, for any purpose. To the extent required by maritime laws, the managing member, managers and the officers of the Company, DJL and PGP must be citizens of the United States. OTHER REGULATIONS We and our subsidiaries are subject to federal, state and local environmental and safety and health laws, regulations and ordinances that apply to non-gaming businesses generally, such as the Clean Air Act, Federal Water Pollution Control Act, Occupational Safety and Health Act, Resource Conservation Recovery Act, Oil Pollution Act of 1990 and Comprehensive Environmental Response, Compensation and Liability Act, each as amended. We have not incurred, and do not expect to incur, material expenditures with respect to these laws. There can be no assurances, however, that we will not incur material liability under these laws in the future. 69 MANAGEMENT EXECUTIVE OFFICERS AND MANAGERS PGP is the Company's sole managing member. The following table sets forth the names and ages of the executive officers of the Company and of the managers of PGP. NAME AGE POSITION M. Brent Stevens......... 43 Chief Executive Officer of the Company and Chairman of the Board of Managers of PGP Jonathan Swain........... 36 Chief Operating Officer of the Company Michael S. Luzich........ 50 President and Secretary of the Company and Manager of PGP Natalie A. Schramm....... 34 Chief Financial Officer of the Company Terrance W. Oliver....... 54 Manager of PGP Andrew Whittaker......... 42 Manager of PGP MANAGEMENT PROFILES Following is a brief description of the business experience of each of the executive officers of PGL and of the managers of PGP listed in the preceding table. Presently, PGP's board of managers is comprised of five managers; however, the fifth manager has not been appointed. M. Brent Stevens. Mr. Stevens is our Chief Executive Officer and is the Chairman of the Board of Managers of PGP. Mr. Stevens also serves as Chief Executive Officer of DJL and OED. Since 1990, Mr. Stevens has been employed by the Initial Purchaser, and presently is an Executive Vice President in the Investment Banking department. Jonathan Swain. Mr. Swain was hired as Chief Operating Officer of PGL in July 2004. Mr. Swain served from 2000 through July 2004 as Vice President and General Manager of three Station Casinos properties including, Palace Station, Santa Fe Station and Sunset Station, the largest property of Station Casinos Inc., a hotel and gaming company headquartered in Las Vegas, Nevada. In 1999 and 2000, Mr. Swain served as Vice President and General Manager of the Hard Rock Hotel and Casino in Las Vegas. From 1995 through 1999, Mr. Swain worked for the Aztar Resorts Inc. serving as the Corporate Vice President of Marketing and President of the Las Vegas Tropicana. Aztar Resorts, Inc. is a hotel and gaming company headquartered in Phoenix Arizona. From 1993 to 1995, Mr. Swain served as Vice President of Marketing and as Executive Director of International Marketing with the Trump Taj Mahal in Atlantic City, New Jersey. Michael S. Luzich. Mr. Luzich is our President and Secretary and a manager of PGP. Mr. Luzich also serves as President and Secretary of DJL and OED. Mr. Luzich is the founder and President of the Cambridge Investment Group, LLC, an investment and development company located in Las Vegas, Nevada. Prior to October 1995, Mr. Luzich was a founding partner and director of Fitzgeralds New York, Inc. and Fitzgeralds Arizona Management, Inc., which are development companies responsible for the Turning Stone Casino near Syracuse, New York for the Oneida Tribe and the Cliff Castle Casino near Sedona, Arizona for the Yavapai-Apachi Tribe, respectively. Natalie A. Schramm. Ms. Schramm is our Chief Financial Officer. Ms. Schramm also serves as Chief Financial Officer of DJL and OED. Ms. Schramm served as Assistant General Manager of DJL from April 1, 2000 to December 31, 2002. On January 1, 2003, Ms. Schramm was appointed General Manager of DJL. Ms. Schramm joined our predecessor, Greater Dubuque Riverboat Entertainment Company, L.C., in November 1996 and was formerly employed by Aerie Hotels and Resorts in Oak Brook, Illinois as Corporate Accounting Manager since 1992. She was responsible for the corporate accounting functions of the Silver Eagle, the Eagle Ridge Inn and Resorts, located in Galena, Illinois and the Essex Hotel, located in Chicago, Illinois. She served as Internal Audit Manager for the Silver Eagle and was a member of a development team that successfully pursued a riverboat gaming license in Indiana. 70 Terrance W. Oliver. Mr. Oliver is a manager of PGP. Since 1993, Mr. Oliver has served as a director of and consultant to Mikohn Gaming Corporation, a gaming equipment manufacturer headquartered in Las Vegas. From 1988 until 1993, Mr. Oliver served as Chairman of the Board to the predecessor company of Mikohn. From 1984 until 1996, Mr. Oliver was a founding shareholder, board member and executive officer of Fitzgeralds Gaming Corporation. Mr. Oliver retired as the Chief Operating Officer of Fitzgeralds Gaming Corporation in 1996. Andrew Whittaker. Mr. Whittaker is a manager of PGP. Since 1990 Mr. Whittaker has been employed by the Initial Purchaser, where he is presently a Vice Chairman. Upon consummation of the Transactions, each person holding a position as an officer of DJL and OED was appointed to the same position as an officer of PGL. We hired Jonathan Swain as our new Chief Operating Officer as of July 15, 2004. George T. Papanier resigned from his position as our Chief Operating Officer effective June 20, 2004. We do not expect our transition to a new chief operating officer to cause any disruptions in our operations. 71 EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table sets forth information for the years indicated concerning the compensation awarded to, earned by or paid to our Chief Executive Officer and our four other most highly paid executive officers, who each served as executive officers of DJL or OED during 2003, for services rendered in all capacities to DJL and OED, as applicable, during such periods.
ANNUAL COMPENSATION ------------------- OTHER ANNUAL ALL OTHER NAME AND FISCAL SALARY BONUS COMPENSATION LONG-TERM COMPENSATION PRINCIPAL POSITION YEAR ($) ($) ($) COMPENSATION ($) ------------------ ---- --- --- --- ------------ --- M. Brent Stevens(1) 2003 -- -- -- -- -- Chief Executive 2002 -- -- -- -- -- Officer 2001 -- -- -- -- -- George T. Papanier 2003 $375,000 $630,000 $9,350(2) -- $6,000(8) Chief Operating 2002 350,046 190,000 12,465(3)(4) -- $5,500(8) Officer 2001 299,489 -- 13,150(4)(5) 5,250(8) Natalie A. Schramm 2003 $149,531 $42,500 $3,360(6) -- $6,000(8) Chief Financial 2002 136,955 40,000 3,408(7) -- 5,500(8) Officer 2001 129,567 19,328 4,200(7) 5,082(8) Michael S. Luzich 2003 -- -- -- -- -- President and 2002 -- -- -- -- -- Secretary 2001 -- -- -- -- --
- ---------- (1) Mr. Stevens receives board of manager fees for his services as a manager on the board of managers of PGP. See " --Compensation of Managers." (2) Represents automobile allowances. (3) Includes $3,115 in club membership fees and $9,350 in automobile allowances. (4) In connection with his relocation in 2000, DJL acquired Mr. Papanier's current residence for which he paid all property taxes, utility expenses and other out-of-pocket costs related to maintaining such residence, excluding the fair market value equivalent of rental expense. (5) Includes $2,950 in club membership fees and $10,200 in automobile allowances. (6) Represents club membership fees. (7) Represents club membership fees. (8) Represents matching contributions made by DJL to our 401(k) plan. 72 EMPLOYMENT AND CONSULTING AGREEMENTS NATALIE A. SCHRAMM--CHIEF FINANCIAL OFFICER In July 2004, Ms. Schramm entered into an employment agreement with PGL. Under the terms of this employment agreement, Ms. Schramm is entitled to receive from PGL a base annual salary of $230,000 in the twelve months beginning July 1, 2004, which will be adjusted upward annually by not less than five percent (5%) of the prior year's compensation. In addition to the base salary, Ms. Schramm is entitled to receive an annual cash bonus payable by PGL based on her performance during the previous fiscal year, which shall be consistent with the bonus plan in place for similarly situated executive officers of PGL. Ms. Schramm was paid a bonus of $80,000 in February of 2004 for her performance in the 2003 fiscal year. The employment agreement has an initial term of three years. MICHAEL S. LUZICH--PRESIDENT AND SECRETARY Mr. Luzich is party to a consulting agreement with PGP and OED pursuant to which he is entitled to receive compensation in an aggregate annual amount equal to (a) 2% of DJL's unconsolidated earnings before interest, taxes, depreciation, amortization and other non-recurring charges during the preceding calendar year, plus (b) 2.5% of OED's earnings before interest, taxes, depreciation, amortization and other non-recurring charges during the preceding calendar year commencing on the first day of the month succeeding the month in which OED commences gaming operations. Mr. Luzich is also entitled to additional commercially reasonable compensation consistent with the level of compensation payable under his agreement for consulting services rendered in respect of each riverboat or land-based casino or gaming operation acquired, directly or indirectly, by PGP in the future. The consulting agreement has a one-year term and, subject to the occurrence of various termination events, is renewable automatically for successive one-year terms. Under this agreement, Mr. Luzich is also entitled to reimbursement of reasonable business expenses as approved by the board of managers of PGP. For the three months ended March 31, 2004 and the years ended 2003, 2002 and 2001, Mr. Luzich received $171,018, $289,153, $336,829 and $327,128, respectively, from PGP and $283,500 from OED during the three months ended March 31, 2004 under his consulting agreements. GEORGE T. PAPANIER--FORMER CHIEF OPERATING OFFICER In July 2000, Mr. Papanier commenced employment with DJL. Under the terms of his employment, Mr. Papanier was entitled to receive a base annual salary in an amount determined by the Board of Managers of PGP each year. Mr. Papanier's base annual salary for the 2003 fiscal year was $375,000. In addition to his base salary, Mr. Papanier was entitled to receive an annual cash bonus based on specified performance criteria with respect to the prior fiscal year and determined by the Board of Managers of PGP. Mr. Papanier was paid a bonus of $200,000 in February of 2004 in respect of performance in the 2003 fiscal year. Mr. Papanier was not party to a written employment agreement with us. Mr. Papanier resigned from DJL effective June 20, 2004, and he received a pro rata portion of his annual base salary for the 2003 fiscal year from the beginning of the 2004 fiscal year through June 20, 2004. JONATHAN SWAIN--CHIEF OPERATING OFFICER In July 2004, Mr. Swain entered into an employment agreement with PGL to serve as Chief Operating Officer. Under the terms of his employment agreement, Mr. Swain is entitled to receive from PGL a base annual salary of $400,000 in the first twelve months of his employment, plus a cash bonus of $30,000 upon commencing his employment and an additional $30,000 in October 2004. In addition to the base salary, Mr. Swain is entitled to receive an annual cash bonus payable by PGL based on his performance during the previous fiscal year, which shall be consistent with the bonus plan in place for similarly situated executive officers of PGL. Mr. Swain was also granted 2% of PGL's outstanding capital interests which will vest over the term of his employment agreement. The employment agreement has an initial term of three years. 73 COMPENSATION OF MANAGERS All managers serving on the board of managers of PGP are reimbursed for their travel and out-of-pocket expenses related to their attendance at board of managers meetings and receive annual payments of $25,000 (other than Mr. Stevens who receives $175,000 annually per gaming property). COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION We have no standing compensation committees. All compensation decisions are made by the executive committee of the board of managers of PGP. See "Certain Relationships and Related Party Transactions--Operating Agreement of PGP." PGP INCENTIVE UNIT PLAN Concurrently with the consummation of the Transactions, PGP amended its operating agreement and adopted an incentive units plan (the "Plan") to provide for the grant of profits interests to existing and future executive officers, managers, employees, and members of PGP and its subsidiaries. Generally, profits interests granted under the Plan will be subject to terms and conditions customary for such plans, including vesting requirements, transfer restrictions, satisfaction of budget related performance criteria and similar conditions and qualifications, in each case, as approved by PGP's board of managers or a subcommittee thereof. Holders of profits interests issued under the Plan will be entitled to receive distributions from operating profits on a pro rata basis with holders of all other capital interests of PGP. Holders of profits interests are entitled to receive distributions on liquidation only to the extent of their pro rata share of appreciation in the fair market value of capital interests after the date of grant. Under the Plan, PGP may grant profits interest representing up to ten percent of its outstanding capital interests on a fully diluted basis. 74 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT PGP currently owns all of the Company's outstanding common membership interests of the Company and is the sole managing member of the Company. See "Risk Factors--Risks Relating to Our Business--Interested Party Matters." Greater Dubuque Riverboat Entertainment Company holds 100% of DJL's issued and outstanding preferred membership interests, which, subject to limited exceptions, have no voting rights, except as required by applicable law. On July 15, 1999, PGP issued 499,982 convertible preferred membership interests, each of which is initially convertible into one PGP non-voting common membership interest, representing 33.33% of the fully diluted common membership interests of PGP on such date. In May 2004, PGP repurchased 147,553 of its convertible preferred membership inerest from an unrelated third party. PGP does not have outstanding any of its non-voting common membership interests. Unless otherwise indicated, the address of each manager or executive officer of PGP is c/o Diamond Jo, LLC, 400 East Third Street, P.O. Box 1750, Dubuque, Iowa, 52001-1750. The table below sets forth, as of June 30, 2004, information regarding the beneficial ownership of the voting common membership interests of PGP by: (a) each person or entity known by us to own beneficially 5% or more of the common membership interests of PGP; (b) each manager and executive officer of PGP; and (c) all managers and executive officers of PGP as a group. The following information is helpful to an understanding of, and qualifies the beneficial ownership data contained in, the table set forth below. Mr. Stevens holds 248,334 PGP common membership interests directly and 413,333 PGP common membership interests indirectly through PGP Investors, LLC. Mr. Stevens is the sole managing member of PGP Investors, LLC and exercises voting and investment power over the PGP common membership interests owned by PGP Investors, LLC. Mr. Stevens and Mr. Whittaker, managers of PGP, are an Executive Vice President and a Vice Chairman, respectively, of the Initial Purchaser. In addition, the Initial Purchaser and some of its affiliates, officers and employees are members of PGP Investors, LLC. Mr. Whittaker holds an economic interest in approximately 41,667 PGP common membership interests indirectly through his membership in PGP Investors, LLC, but does not exercise voting or investment power with respect to these PGP common membership interests. Mr. Oliver holds his interest through The Oliver Family Trust. The total holdings of all managers and executive officers as a group includes the 413,333 PGP common membership interests held by PGP Investors, LLC, over which Mr. Stevens exercises voting and investment power. 75 VOTING COMMON MEMBERSHIP NAME AND ADDRESS INTERESTS PERCENT OF OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS - ------------------- ------------------ ----- M. Brent Stevens.............................. 661,667 66.17% c/o Diamond Jo, LLC 3rd Street Ice Harbor P.O. Box 1750 Dubuque, Iowa 52004 PGP Investors, LLC(1)......................... 413,333 41.33% 11100 Santa Monica, 10th Floor Los Angeles, CA 90071 Michael S. Luzich............................. 323,333 32.33% c/o Diamond Jo, LLC 3rd Street Ice Harbor P.O. Box 1750 Dubuque, Iowa 52004 Terrance Oliver............................... 15,000 1.50% c/o Diamond Jo, LLC 3rd Street Ice Harbor P.O. Box 1750 Dubuque, Iowa 52004 Andrew Whittaker(1)........................... 41,667 4.17% c/o Diamond Jo, LLC 3rd Street Ice Harbor P.O. Box 1750 Dubuque, Iowa 52004 All managers and executive officers as a group (6 persons)............................. 1,000,000 100.00% - ---------- (1) These interests are attributable to Mr. Stevens and are included in the calculation of his beneficial ownership and percentage of ownership data. 77 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS RELATIONSHIP WITH INITIAL PURCHASER Andrew Whittaker, a Vice Chairman of the Initial Purchaser, is a manager of PGP. M. Brent Stevens, our Chief Executive Officer and an Executive Vice President of the Initial Purchaser, is also a manager of PGP and Chairman of the Board of Managers of PGP. Due to these relationships, those individuals may receive money from us or our affiliates for management fees and other amounts paid by us to PGP. See the sections entitled "Risk Factors--Risks Relating to Our Business--Interested Party Matters". RELATIONSHIP WITH DUBUQUE RACING ASSOCIATION The DRA is a not-for-profit corporation organized for the purpose of operating DGP, a pari-mutuel greyhound racing facility in Dubuque, Iowa. On February 22, 1993, DRA entered into the DRA Operating Agreement which authorizes us to operate riverboat gaming operations in Dubuque. The DRA Operating Agreement has since been amended several times and expires by its terms on March 31, 2008. Under the DRA Operating Agreement, subject to limited conditions, we are also required to pay the DRA, for the right to operate the Diamond Jo, an amount equal to the excess of 32% of the first $30 million of the combined gaming revenues of the DRA and the Diamond Jo, plus 8% of the next $12 million of these total gaming revenues, plus, if there are no competing gaming operations in neighboring counties of Illinois and Wisconsin, 8% of the next $4 million of total gaming revenues, over the DRA's gaming revenues from DGP. Gaming revenues under this contract means adjusted gross receipts less gaming taxes. This formula is subject to change if the DRA ceases to operate DGP or if we operate a riverboat smaller than the current Diamond Jo. We are currently not required to make any such payments to the DRA because the DRA's revenues from DGP are greater than the specified percentage of DJL's total gaming revenues. However, we do pay a fee to the DRA equal to $0.50 per patron. MANAGING MEMBER INDEMNIFICATION Under our operating agreement and the operating agreement of PGP, we and PGP have agreed, subject to few exceptions, to indemnify and hold harmless PGP and the members of PGP, as the case may be, from liabilities incurred as a result of their positions as our sole manager and as members of PGP. OPERATING AGREEMENT OF PGP Under PGP's operating agreement, the management of PGP is vested in an executive committee consisting of Messrs. Michael Luzich and M. Brent Stevens. The executive committee of PGP manages our operations. The executive committee meets weekly or as otherwise agreed upon between Messrs. Luzich and Stevens. In accordance with PGP's operating agreement, the board of managers of PGP is composed of five individuals, two of whom must be independent managers. At any time that M. Brent Stevens, together with any entity controlled by Mr. Stevens, beneficially holds at least 5% of the voting common membership interests of PGP, Mr. Stevens is entitled to designate three of PGP's managers, including one of the two independent managers. The two independent managers are required to serve as members of the independent committee. Under PGP's operating agreement, PGP Advisors, LLC, a Delaware limited liability company, of which Mr. Stevens is the sole managing member, may render financial advisory and consulting services to PGP and is entitled to receive commercially reasonable fees for the services consistent with industry practices. To date, PGP has not entered into any such arrangements with Mr. Stevens. At any time that Michael Luzich, together with any entity controlled by Mr. Luzich, beneficially holds at least 5% of the voting common membership interests of PGP, Mr. Luzich is entitled to designate two of PGP's managers, including the other independent manager. In consideration for their execution of personal guarantees to provide credit support for OED's credit facilities, each of Messrs. Luzich and Stevens were granted profits interests of 1.5% of PGP's fully diluted membership interests by PGP's board of managers. Messrs. Stevens and Luzich are entitled to receive distributions on liquidation in respect of such profits interests 77 only to the extent of any appreciation in the fair market value of PGP interests since the date of grant of such profits interests. Presently, PGP's board of managers is composed of four managers. If not appointed earlier, a fifth manager will be appointed by Mr. Stevens at a future meeting of managers. A manager may resign at any time, and the member who designates a manager may remove or replace that manager from the board of managers at any time. MANAGEMENT SERVICES AGREEMENT DJL and OEDA (together, the "Operator") manage and operate OED's racino near Lafayette, Louisiana and OED's OTBs in New Iberia and Port Allen, Louisiana pursuant to a management services agreement. Although the Operator may obtain services from affiliates to the extent necessary to perform its obligations, the Operator is fully responsible for all obligations under the agreement. OED, a guarantor, pays 75% of the Operator fees (described below) under the management services agreement to DJL, a co-issuer of the Notes. OED pays 25% of the Operator fees under the management services agreement to OEDA, which fees will be subject to the limitation on "Management Arrangements" under the indenture governing the Notes. Pursuant to the terms of the management services agreement, the Operator is entitled to receive pre-opening service fees equal to $40,000 per month, commencing June 27, 2001. Payments in respect of these pre-opening service fees have been accrued but not yet been paid. The Operator is also entitled to be reimbursed for all reasonable and documented out-of-pocket expenses permitted to be incurred under the management services agreement, including, but not limited to, tax preparation, accounting, legal and administrative fees and expenses. The Operator is also entitled to receive a basic management fee equal to 1.75% of net revenue (less net food and beverage revenue) and an incentive fee equal to: o 3.0% of the first $25.0 million of EBITDA (as defined below); o 4.0% of the amount in excess of $25.0 million but less than $30.0 million of EBITDA; and o 5.0% of the amount in excess of $30.0 million of EBITDA. Under the management services agreement, "EBITDA" is defined as earnings before interest, income taxes, depreciation and amortization. In calculating earnings, the basic management fee, the incentive fee and reimbursables payable under the management services agreement are excluded. 78 DESCRIPTION OF SENIOR SECURED CREDIT FACILITY The following summary of certain provisions of the instruments evidencing our material indebtedness does not purport to be complete and is subject to, and qualified in its entirety by reference to, all of the provisions of the corresponding agreements, including the definitions of certain terms therein that are not otherwise defined in this prospectus. NEW SENIOR SECURED CREDIT FACILITY General. On June 16, 2004, DJL and OED jointly entered into a Loan and Security Agreement with Wells Fargo Foothill, Inc. as the Arranger and Agent (the "PGL Credit Facility"). The PGL Credit Facility consists of a revolving credit facility which permits DJL and OED to request advances and letters of credit up to the lesser of the maximum revolver amount of $35 million (less amounts outstanding under letters of credit) and a specified borrowing base (the "Borrowing Base"). For the purposes of the PGL Credit Facility, the Borrowing Base is the lesser of the Combined EBITDA (as defined in the PGL Credit Facility) of OED and DJL for the twelve months immediately preceding the current month end multiplied by 150% and the Combined EBITDA of OED and DJL for the most recent quarterly period annualized multiplied by 150%. Immediately upon the closing of the PGL Credit Facility, DJL borrowed approximately $11.1 million to refinance outstanding obligations under the DJL Credit Facility and pay financing related fees and expenses and OED borrowed approximately $4.8 million to refinance outstanding obligations under the OED Credit Facility and pay financing related fees and expenses. Advances under the PGL Credit Facility bear an interest rate based on the borrower's option of LIBOR plus a margin of 3% - -3.5% or Wells Fargo prime rate plus a margin of .5% -1% (current rate of 5.0%); provideed that at no time shall the interest rate be lower than 4%. Interest payments under the prime rate option are due monthly and interest payments under the LIBOR option are due the last month of the respective LIBOR period. The respective margins are determined by the Combined EBITDA of OED and DJL as of the end of each fiscal quarter. The PGL Credit Facility also contains a term loan in the amount of $14,666,667 (the "Term Loan"). The proceeds from the Term Loan were used to repay outstanding obligations under the FF&E Credit Facility. The Term Loan is secured by certain assets of OED and requires monthly payments of $333,333 starting July 1, 2004 until the full balance is paid, with a maturity no later than June 15, 2008. The Term Loan has an interest rate equal to the Wells Fargo prime rate plus 2.5% (current rate of 6.5%); provideed that at no time shall the interest rate be lower than 6%. Under the terms of the PGL Credit Facility, at closing OED was required to issue a letter of credit in the amount of $3.2 million in favor of Wells Fargo related to the Term Loan. Guarantees and Collateral. DJL and OED are jointly and severally liable under the PGL Credit Facility, other than borrowings under the Term Loan, and borrowings under the PGL Credit Facility are collateralized by substantially all the tangible and intangible assets of OED and DJL. Borrowings under the Term Loan will be secured by a separate lien on the furniture, fixtures and equipment of OED financed pursuant to the terms of the OED FF&E Facility. The lien on the collateral that secures the notes and the guarantees are contractually subordinated to the liens securing the PGL Credit Facility pursuant to an intercreditor agreement. Borrowings under the PGL Credit Facility are guaranteed by PGL and PGC Covenants, Conditions and Events of Default. The PGL Credit Facility contains a number of restrictive covenants and agreements, including covenants that limit DJL's and OED's ability to, among other things: (1) incur more debt; (2) create liens; (3) enter into any merger, consolidation, reorganization, or recapitalization, or reclassify its capital stock; (4) dispose of certain assets; (5) guarantee debt of others; (6) pay dividends or make other distributions; (7) make investments; (8) enter into transactions with affiliates. The PGL Credit Facility also contains financial covenants including a minimum Combined EBITDA of OED and DJL, limitations to capital expenditure amounts at OED and DJL and minimum OED EBITDA plus the premium paid in connection with the April 2004 repurchase of a portion of the OED Notes. The PGL Credit Facility also contains, among other things, representations and warranties, conditions to the extension of credit, and events of default customary for loans of this type. The description is not intended to be exhaustive and is qualified in its entirety by reference to the provisions of the definitive PGL Credit Facility documentation. 79 THE EXCHANGE OFFER PURPOSE AND EFFECT; REGISTRATION RIGHTS On April 16, 2004 (the "Issue Date"), we sold 8 3/4% Senior Secured Notes due 2012 in a private placement to Jefferies & Company, Inc., as the initial purchaser. The initial purchaser then resold those notes under an offering circular dated March 31, 2004 in reliance on Rule 144A and other available exemptions under the Securities Act of 1933, as amended. On April 16, 2004, we, the guarantors and the initial purchasers also entered into a registration rights agreement (the "Registration Rights Agreement") pursuant to which each of us and the guarantors agreed that we will, at our expense, for the benefit of the holders of the notes, subject to certain exceptions: o file a registration statement (the "Exchange Offer Registration Statement") with the Securities and Exchange Commission (the "Commission") promptly, but no later than 90 days after the Issue Date; o will use our reasonable best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act promptly, but no later than 180 days after the Issue Date; o will keep the Exchange Offer Registration Statement effective until the consummation of the exchange offer; and o will use our reasonable best efforts to commence and complete the exchange offer promptly, but no later than 45 days after the date on which the Exchange Offer Registration Statement has become effective, and hold the exchange offer open for not less than 20 business days and exchange notes for all Registrable Securities that have been properly tendered and not withdrawn on or prior to the expiration of the exchange offer. "Registrable Securities" means the notes (together with the guarantees thereon); provided, however, that any such security shall cease to be a Registrable Security when (i) it has been exchanged for an exchange note in an exchange offer as contemplated in Section 2(a) of the Registration Rights Agreement (provided, that any exchange note that, as described in the following paragraph, is included in a prospectus for use in connection with resales by broker-dealers shall be deemed to be a Registrable Security with respect to specified sections of the Registration Rights Agreement until resale of such Registrable Security has been effected within the period referred to in the following paragraph); (ii) a Shelf Registration Statement registering such security under the Securities Act has been declared or becomes effective and such security has been sold or otherwise transferred by the holder thereof pursuant to and in a manner contemplated by such effective Shelf Registration Statement; (iii) such security is sold pursuant to Rule 144 under the Securities Act under circumstances in which any legend borne by such security relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed by the Issuers or pursuant to the Indenture; (iv) such security is eligible to be sold pursuant to paragraph (k) of Rule 144 under the Securities Act; or (v) such security shall cease to be outstanding. Under existing Commission interpretations, we believe that the exchange notes would in general be freely transferable after the exchange offer without further registration under the Securities Act, except that broker-dealers receiving exchange notes in the exchange offer will be subject to a prospectus delivery requirement with respect to resales of those exchange notes. The Commission has taken the position that such broker-dealers may fulfill their prospectus delivery requirements with respect to the exchange notes (other than a resale of an unsold allotment from the original sale of the notes) by delivery of the prospectus contained in the Exchange Offer Registration Statement. Under the Registration Rights Agreement, the Issuers have agreed to allow such broker-dealers to use the prospectus contained in the Exchange Offer Registration Statement in connection with the resale of the exchange notes. The Issuers and the Guarantors will use their respective reasonable best efforts to keep the Exchange Offer Registration Statement effective for such period of time as such Persons must comply with such requirements in order to resell the Exchange Securities, the "Applicable Period"). If (i) prior to the time the exchange offer is completed (A) existing Commission interpretations are changed such that the exchange notes received in the exchange offer would not in general be, upon receipt, transferable by holders thereof without restrictions under the Securities Act or (B) the interests of the Holders, taken as a whole, 80 would be materially adversely affected by the consummation of the exchange offer; (ii) the exchange offer has not been completed within 225 days following the Issue Date; or (iii) the exchange offer is not available to any holder of the notes, the Issuers and the Guarantors shall, in lieu of (or, in the case of clause (iii), in addition to) conducting the exchange offer, file under the Securities Act a "shelf" registration statement providing for the registration of, and the sale on a continuous or delayed basis by the holders of, all of the Registrable Securities (the "Shelf Registration Statement"). The Registration Rights Agreement will provide that the Issuers: o will file the Shelf Registration Statement with the Commission as soon as practicable, but no later than 30 days after the time such obligation to file arises; o will use their reasonable best efforts to cause the Shelf Registration Statement to become or be declared effective under the Securities Act no later than 60 days after the date such Shelf Registration Statement is filed; and o will use their reasonable best efforts to keep such Shelf Registration Statement continuously effective for a period ending on the earlier of the second anniversary of the date such Shelf Registration Statement became or was declared effective or such time as all Registrable Securities covered by the Shelf Registration have been sold or there are no longer any Registrable Securities outstanding. A Holder that sells notes pursuant to the Shelf Registration Statement generally would be required to be named as a selling security-holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such a Holder (including certain indemnification obligations). The Issuers will provide a copy of the Registration Rights Agreement to prospective investors upon request. In the event that: o the Issuers have not filed the Exchange Offer Registration Statement or Shelf Registration Statement on or before the date on which such registration statement is required to be filed, or o such Exchange Offer Registration Statement or Shelf Registration Statement has not become effective or been declared effective by the Commission on or before the date on which such registration statement is required to become or be declared effective, or o the exchange offer has not been completed within 30 days after the initial effective date of the Exchange Offer Registration Statement relating to the exchange offer (if the exchange offer is then required to be made), or o any Exchange Offer Registration Statement or Shelf Registration Statement is filed and declared effective but shall thereafter either be withdrawn by the Issuers or shall become subject to an effective stop order suspending the effectiveness of such registration statement without being succeeded within 30 days by an additional registration statement filed and declared effective (each such event referred to in clauses (a) through (d), a "Registration Default" and, each period during which a Registration Default has occurred and is continuing, a "Registration Default Period"), then, in addition to the interest on the notes, liquidated damages ("Liquidated Damages") shall accrue at an amount per week per $1,000 principal amount of Registrable Securities equal to $0.05 for the first 90 days of the Registration Default Period, increasing by an additional $0.05 per week per $1,000 principal amount of Registrable Securities with respect to each subsequent 90-day period, up to a maximum of $0.25 per week per $1,000 principal amount of Registrable Securities. Liquidated Damages shall be paid on interest payment dates to holders of record for the payment of interest. 81 Holders of notes will be required to make certain representations to us and to deliver information to be used in connection with the Shelf Registration Statement (in each case, as described in the Registration Rights Agreement) and will be required to provide comments on the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their notes included in the Shelf Registration Statement and benefit from the provisions regarding Liquidated Damages set forth above. The notes and the exchange notes will be considered collectively to be a single class for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase, and for purposes of "The Exchange Offer" section (except with respect to liquidated damages above), all references herein to "notes" shall be deemed to refer collectively to notes and any exchange notes, unless the context otherwise requires. EXPIRATION DATE; EXTENSIONS The expiration date of the exchange offer is , 2004 at 5:00 p.m., New York City time. We may extend the exchange offer in our sole discretion. If we extend the exchange offer, the expiration date will be the latest date and time to which the exchange offer is extended. We will notify the exchange agent of any extension by oral or written notice and will make a public announcement of the extension no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. We expressly reserve the right, in our sole and absolute discretion: o to delay accepting any notes; o to extend the exchange offer; o if any of the conditions under "--Conditions of the Exchange Offer" have not been satisfied, to terminate the exchange offer; and o to waive any condition or otherwise amend the terms of the exchange offer in any manner. If the exchange offer is amended in a manner we deem to constitute a material change, we will promptly disclose the amendment by means of a prospectus supplement that will be distributed to the registered holders of the notes. Any delay in acceptance, extension, termination or amendment will be followed promptly by an oral or written notice of the event to the exchange agent. We will also make a public announcement of the event. Without limiting the manner in which we may choose to make any pubic announcement and subject to applicable law, we have no obligation to publish, advertise or otherwise communicate any pubic announcement other than by issuing a release to a national news service. TERMS OF THE EXCHANGE OFFER We are offering, upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal, to exchange $1,000 in principal amount of the new notes for each $1,000 in principal amount of outstanding notes. We will accept for exchange any and all old notes that are validly tendered on or before 5:00 p.m., New York City time, on the expiration date. Tenders of the old notes may be withdrawn at any time before 5:00 p.m., New York City time, on the expiration date. The exchange offer is not conditioned upon any minimum principal amount of old notes being tendered for exchange. However, the exchange offer is subject to the terms of the registration rights agreement and the satisfaction of the conditions described under "--Conditions of the Exchange Offer." Old notes may be tendered only in multiples of $1,000. Holders of notes may tender less than the aggregate principal amount represented by their old notes if they appropriately indicate this fact on the letter of transmittal accompanying the tendered old notes or indicate this fact under the procedures for book-entry transfer described below. As of the date of this prospectus, $233.0 million in aggregate principal amount of the old notes were outstanding. Solely for reasons of administration, we have fixed the close of business on , 2004 as the 82 record date for purposes of determining the persons to whom this prospectus and the letter of transmittal will be mailed initially. There will be no fixed record date for determining the eligible holders of the old notes who are entitled to participate in the exchange offer. We believe that, as of the date of this prospectus, no holder of notes (other than Jefferies & Company, Inc., which may be our affiliate) is our "affiliate," as defined in Rule 405 under the Securities Act of 1933. We will be deemed to have accepted validly tendered old notes when, as and if we give oral or written notice of our acceptance to the exchange agent. The exchange agent will act as agent for the tendering holders of old notes and for purposes of receiving the new notes from us. If any tendered old notes are not accepted for exchange because of an invalid tender or otherwise, certificates for the unaccepted old notes will be returned, without expense, to the tendering holder promptly after the expiration date. Holders of old notes do not have appraisal or dissenters' rights under applicable law or the indenture as a result of the exchange offer. We intend to conduct the exchange offer in accordance with the applicable requirements of the Securities Exchange Act of 1934 and the rules and regulations under the Securities Exchange Act of 1934, including Rule 14e-1. Holders who tender their old notes in the exchange offer will not be required to pay brokerage commissions or fees or, following the instructions in the letter of transmittal, transfer taxes with respect to the exchange of old notes under the exchange offer. We will pay all charges and expenses, other than transfer taxes in some circumstances, in connection with the exchange offer. See "--Fees and Expenses" for more information about the costs of the exchange offer. We do not make any recommendation to holders of old notes as to whether to tender any of their old notes under the exchange offer. In addition, no one has been authorized to make any recommendation. Holders of old notes must make their own decision whether to participate in the exchange offer and, if the holder chooses to participate in the exchange offer, the aggregate principal amount of old notes to tender, after reading carefully this prospectus and the letter of transmittal and consulting with their advisors, if any, based on their own financial position and requirements. CONDITIONS OF THE EXCHANGE OFFER You must tender your old notes in accordance with the requirements of this prospectus and the letter of transmittal in order to participate in the exchange offer. Notwithstanding any other provision of the exchange offer, or any extension of the exchange offer, we will not be required to accept for exchange any old notes, and we may terminate or amend the exchange offer, if we are not permitted to effect the exchange offer under applicable law or any interpretation of applicable law by the staff of the Securities and Exchange Commission. If we determine in our sole discretion that any of these events or conditions has occurred, we may, subject to applicable law, terminate the exchange offer and return all old notes tendered for exchange or may waive any condition or amend the terms of the exchange offer. We expect that the above conditions will be satisfied. The above conditions are for our sole benefit and may be waived by us at any time in our sole discretion. Our failure at any time to exercise any of the above rights will not be a waiver of those rights and each right will be deemed an ongoing right that may be asserted at any time, provided that all conditions to the exchange offer, other than any involving governmental approval, must be satisfied or waived before the expiration of the exchange offer. Any determination by us concerning the events described above will be final and binding upon all parties. INTEREST AND LIQUIDATED DAMAGES Each new note will bear interest from the most recent date to which interest has been paid or duly provided for on the old note surrendered in exchange for the new note or, if no interest has been paid or duly provided for on the old note, from April 16, 2004. Holders of the old notes whose old notes are accepted for exchange will not receive accrued interest on their old notes for any period from and after the last interest payment date to which 83 interest has been paid or duly provided for on their old notes prior to the original issue date of the new notes or, if no interest has been paid or duly provided for, will not receive any accrued interest on their old notes, and will be deemed to have waived the right to receive any interest on their old notes accrued from and after such interest payment date or, if no such interest has been paid or duly provided for, from and after April 16, 2004. As a consequence of our filing this registration statement with the Securities and Exchange Commission after the date we were required to do so under the Registration Rights Agreement, record holders of the notes will be entitled to receive liquidated damages in the form of additional interest on October 15, 2004. See "The Exchange Offer - Purpose and Effect; Registration Rights". PROCEDURES FOR TENDERING OLD NOTES The tender of a holder's old notes and our acceptance of old notes will constitute a binding agreement between the tendering holder and us upon the terms and conditions of this prospectus and the letter of transmittal. Unless a holder tenders old notes according to the guaranteed delivery procedures or the book-entry procedures described below, the holder must transmit the old notes, together with a properly completed and executed letter of transmittal and all other documents required by the letter of transmittal, to the exchange agent at its address before 5:00 p.m., New York City time, on the expiration date. The method of delivery of old notes, letters of transmittal and all other required documents is at the election and risk of the tendering holder. If delivery is by mail, we recommend delivery by registered mail, properly insured, with return receipt requested. Instead of delivery by mail, we recommend that each holder of notes use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. Any beneficial owner of the old notes whose old notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender old notes in the exchange offer should contact that registered holder promptly and instruct that registered holder to tender on its behalf. If the beneficial owner wishes to tender directly, it must, prior to completing and executing the letter of transmittal and tendering old notes, make appropriate arrangements to register ownership of the old notes in its name. Beneficial owners should be aware that the transfer of registered ownership may take considerable time. Any financial institution that is a participant in DTC's Book-Entry Transfer Facility system may make book-entry delivery of the old notes by causing DTC to transfer the old notes into the exchange agent's account in accordance with DTC's procedures for the transfer. To be timely, book-entry delivery of old notes requires receipt of a confirmation of a book-entry transfer before the expiration date. Although delivery of the old notes may be effected through book-entry transfer into the exchange agent's account at DTC, the letter of transmittal, properly completed and executed, with any required signature guarantees and any other required documents or an agent's message, as described below, must in any case be delivered to and received by the exchange agent at its address on or before the expiration date, or the guaranteed delivery procedure set forth below must be complied with. DTC has confirmed that the exchange offer is eligible for DTC's Automated Tender Offer Program. Accordingly, participants in DTC's Automated Tender Offer Program may, instead of physically completing and signing the applicable letter of transmittal and delivering it to the exchange agent, electronically transmit their acceptance of the exchange offer by causing DTC to transfer old notes to the exchange agent in accordance with DTC's Automated Tender Offer Program procedures for transfer. DTC will then send an agent's message to the exchange agent. The term "agent's message" means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, which states that DTC has received an express acknowledgment from a participant in DTC's Automated Tender Offer Program that is tendering old notes that are the subject of the book-entry confirmation; that the participant has received and agrees to be bound by the terms of the applicable letter of transmittal or, in the case of an agent's message relating to guaranteed delivery, that the participant has received and agrees to be bound by the applicable notice of guaranteed delivery; and that we may enforce the agreement against that participant. Each signature on a letter of transmittal or a notice of withdrawal must be guaranteed unless the old notes are tendered: o by a registered holder who has not completed the box entitled "Special Delivery Instructions;" or o for the account of an eligible institution, as described below. 84 If a signature on a letter of transmittal or a notice of withdrawal is required to be guaranteed, the signature must be guaranteed by a participant in a recognized medallion signature program. If the letter of transmittal is signed by a person other than the registered holder of the old notes, the old notes surrendered for exchange must be endorsed by the registered holder, with the signature guaranteed by a medallion signature guarantor. If any letter of transmittal, endorsement, bond power, power of attorney or any other document required by the letter of transmittal is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, that person should sign in that capacity when signing. The person must submit to us evidence satisfactory, in our sole discretion, of his or her authority to so act unless we waive the requirement. As used in this prospectus with respect to the old notes, a "registered holder" is any person in whose name the old notes are registered on the books of the registrar. An "eligible institution" is a firm that is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or any other "eligible guarantor institution" as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. We will determine in our sole discretion all questions as to the validity, form, eligibility, including time of receipt, acceptance and withdrawal of old notes tendered for exchange. Our determination will be final and binding. We reserve the absolute right to reject old notes not properly tendered and to reject any old notes if acceptance might, in our judgment or our counsel's judgment, be unlawful. We also reserve the absolute right to waive any defects or irregularities or conditions of the exchange offer as to particular old notes at any time, including the right to waive the ineligibility of any holder who seeks to tender old notes in the exchange offer. Our interpretation of the terms and conditions of the exchange offer, including the letter of transmittal and its instructions, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old notes for exchange must be cured within the period of time as we determine. Neither our company nor the exchange agent is under any duty to give notification of defects in the tenders or will incur any liability for failure to give the notification. The exchange agent will use reasonable efforts to give notification of defects or irregularities with respect to tenders of old notes for exchange but will not incur any liability for failure to give the notification. Tenders of old notes will not be deemed to have been made until the irregularities have been cured or waived. By tendering, you will represent to us that, among other things: o you are not our "affiliate," as defined in Rule 405 under the Securities Act of 1933; o you will acquire the new notes in the ordinary course of your business; o you are not a broker-dealer that acquired your notes directly from us in order to resell them in reliance on Rule 144A of the Securities Act of 1933 or any other available exemption under the Securities Act of 1933; o if you are a broker-dealer that acquired your notes as a result of market-making or other trading activities, you will deliver a prospectus in connection with any resale of new notes; and o you are not participating, do not intend to participate and have no arrangement or understanding with any person to participate in the distribution of the new notes. In connection with a book-entry transfer, each participant will confirm that it makes the representations and warranties contained in the letter of transmittal. GUARANTEED DELIVERY PROCEDURES If you wish to tender your old notes and: 85 o your old notes are not immediately available; o you are unable to deliver on time your old notes or any other document that you are required to deliver to the exchange agent; or o you cannot complete the procedures for delivery by book-entry transfer on time; you may tender your old notes according to the guaranteed delivery procedures described in the letter of transmittal. Those procedures require that: o tender must be made by or through an eligible institution and a notice of guaranteed delivery must be signed by the holder; o on or before the expiration date, the exchange agent must receive from the holder and the eligible institution on a properly completed and executed notice of guaranteed delivery by facsimile, mail or hand delivery containing the name and address of the holder, the certificate number or numbers of the tendered old notes, the principal amount of tendered old notes, a statement that the tender is being made, and a guarantee that within three business days after the expiration date, the certificates representing the old notes in proper form for transfer or a book-entry confirmation and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent; and o properly completed and executed documents required by the letter of transmittal and the tendered old notes in proper form for transfer or confirmation of a book-entry transfer of the old notes into the exchange agent's account at DTC must be received by the exchange agent within three business days after the expiration date of the exchange offer. Any holder who wishes to tender old notes under the guaranteed delivery procedures must ensure that the exchange agent receives the notice of guaranteed delivery and letter of transmittal relating to the old notes before 5:00 p.m., New York City time, on the expiration date. ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES Upon satisfaction or waiver of all the conditions to the exchange offer, we will accept old notes that are properly tendered in the exchange offer prior to 5:00 p.m., New York City time, on the expiration date. The new notes will be delivered promptly after acceptance of the old notes. For purposes of the exchange offer, we will be deemed to have accepted validly tendered old notes when, as and if we have given notice to the exchange agent. WITHDRAWAL RIGHTS Tenders of the old notes may be withdrawn by delivery of a written or facsimile transmission notice to the exchange agent at its address set forth under "--The Exchange Agent; Assistance" at any time before 5:00 p.m., New York City time, on the expiration date. Any such notice of withdrawal must: o specify the name of the person having deposited the old notes to be withdrawn; o identify the old notes to be withdrawn, including the certificate number or numbers and principal amount of the old notes, or, in the case of old notes transferred by book-entry transfer, the name and number of the account at DTC to be credited; o be signed by the holder in the same manner as the original signature on the letter of transmittal by which old notes were tendered, including any required signature guarantees, or be accompanied by a bond power in the name of the person withdrawing the tender, in satisfactory form as determined by us in our sole discretion, executed by the registered holder, with the signature guaranteed by a medallion signature guarantor, together with the other documents required upon transfer by the indenture; and 86 o specify the name in which the old notes are to be re-registered, if different from the person who deposited the old notes. All questions as to the validity, form and eligibility, including time of receipt, of the notices will be determined by us, in our sole discretion. Any old notes withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer and will be returned to the holder without cost as promptly after withdrawal. Properly withdrawn old notes may be retendered following the procedures described under "--Procedures for Tendering Old Notes" at any time on or before the expiration date. THE EXCHANGE AGENT; ASSISTANCE U.S. Bank, N.A. is the exchange agent. All tendered old notes, executed letters of transmittal and other related documents should be directed to the exchange agent. Questions and requests for assistance and requests for additional copies of the prospectus, the letter of transmittal and other related documents should be addressed to the exchange agent as follows: BY REGISTERED OR CERTIFIED MAIL: BY HAND OR OVERNIGHT COURIER: BY TELEPHONE OR FACSIMILE: U.S. Bank National Association U.S. Bank National Association Phone: (651) 244-8677 180 East Fifth Street 180 East Fifth Street Facsimile: (651) 244-0711 St. Paul, MN 55101 St. Paul, MN 55101 Attn. Corporate Trust-- Attn. Corporate Trust-- Specialized Finance Specialized Finance
FEES AND EXPENSES We will bear the expenses of soliciting old notes for exchange. The principal solicitation is being made by mail by the exchange agent. Additional solicitation may be made by telephone, facsimile or in person by officers and regular employees of our company and our affiliates and by persons so engaged by the exchange agent. We will pay the exchange agent reasonable and customary fees for its services and will reimburse the exchange agent for its reasonable out-of-pocket expenses in connection with its services and pay other registration expenses, including fees and expenses of the trustee under the indenture, filing fees, blue sky fees and printing and distribution expenses. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or others soliciting acceptance of the exchange offer. We will pay all transfer taxes, if any, applicable to the exchange of old notes under the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of old notes under the exchange offer, then the amount of those transfer taxes, whether imposed on the registered holder or any other persons, will be payable by the tendering holder. If satisfactory evidence of payment of those taxes or exemption is not submitted with the letter of transmittal, the amount of those transfer taxes will be billed directly to the tendering holder. ACCOUNTING TREATMENT The new notes will be recorded at the same carrying value as the old notes, as reflected in our accounting records on the date of the exchange. Accordingly, we will recognize no gain or loss for accounting purposes. The expenses of the exchange offer will be amortized over the term of the new notes. CONSEQUENCES OF NOT EXCHANGING OLD NOTES As a result of this exchange offer, we will have fulfilled most of our obligations under the registration rights agreement. Holders who do not tender their old notes, except for limited instances involving the initial purchasers or holders of old notes who are not eligible to participate in the exchange offer or who do not receive 87 freely transferable new notes under the exchange offer, will not have any further registration rights under the registration rights agreement or otherwise and will not have rights to receive additional interest. Accordingly, any holder who does not exchange its old notes for new notes will continue to hold the untendered old notes and will be entitled to all the rights and subject to all the limitations applicable under the indenture, except to the extent that the rights or limitations, by their terms, terminate or cease to have further effectiveness as a result of the exchange offer. Any old notes that are not exchanged for new notes under the exchange offer will remain restricted securities within the meaning of the Securities Act of 1933. In general, the old notes may be resold only: o to us or any of our subsidiaries; o inside the United States to a "qualified institutional buyer" in compliance with Rule 144A under the Securities Act of 1933; o inside the United States to an institutional "accredited investor," as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, or an "accredited investor" that, prior to the transfer, furnishes or has furnished on its behalf by a U.S. broker-dealer to the trustee under the indenture a signed letter containing various representations and agreements relating to the restrictions on transfer of the new notes, the form of which letter can be obtained from the trustee; o outside the United States in compliance with Rule 904 under the Securities Act of 1933; o in reliance on the exemption from registration provided by Rule 144 under the Securities Act of 1933, if available; or o under an effective registration statement under the Securities Act of 1933. Each accredited investor that is not a qualified institutional buyer and that is an original purchaser of any of the old notes from the initial purchasers will be required to sign a letter confirming that it is an accredited investor under the Securities Act of 1933 and that it acknowledges the transfer restrictions summarized above. RESALES OF THE NEW NOTES We are making the exchange offer in reliance on the position of the staff of the Securities and Exchange Commission as set forth in interpretive letters addressed to third parties in other transactions. However, we have not sought our own interpretive letter. Although there has been no indication of any change in the staff's position, we cannot assure you that the staff of the Securities and Exchange Commission would make a similar determination with respect to the exchange offer as it has in its interpretive letters to third parties. Based on these interpretations by the staff, and except as provided below, we believe that new notes may be offered for resale, resold and otherwise transferred by a holder who participates in the exchange offer and is not a broker-dealer without further compliance with the registration and prospectus delivery provisions of the Securities Act of 1933. In order to receive new notes that are freely tradeable, a holder must acquire the new notes in the ordinary course of its business and may not participate, or have any arrangement or understanding with any person to participate, in the distribution, within the meaning of the Securities Act of 1933, of the new notes. Holders wishing to participate in the exchange offer must make the representations described in "--Procedures for Tendering Old Notes" above. Any holder of old notes: o who is our "affiliate," as defined in Rule 405 under the Securities Act of 1933; o who did not acquire the new notes in the ordinary course of its business; o who is a broker-dealer that purchased old notes from us to resell them under Rule 144A of the Securities Act of 1933 or any other available exemption under the Securities Act of 1933; or 88 o who intends to participate in the exchange offer for the purpose of distributing, within the meaning of the Securities Act of 1933, new notes; will be subject to separate restrictions. Each holder in any of the above categories: o will not be able to rely on the interpretations of the staff of the Securities Act of 1933 in the above-mentioned interpretive letters; o will not be permitted or entitled to tender old notes in the exchange offer; and o must comply with the registration and prospectus delivery requirements of the Securities Act of 1933 in connection with any sale or other transfer of old notes, unless the sale is made under an exemption from such requirements. In addition, if you are a broker-dealer holding old notes acquired for your own account, then you may be deemed a statutory "underwriter" within the meaning of the Securities Act of 1933 and must deliver a prospectus meeting the requirements of the Securities Act of 1933 in connection with any resales of your new notes. Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it acquired the old notes for its own account as a result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act of 1933 in connection with any resale of those new notes. The letter of transmittal states that, by making the above acknowledgment and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933. Based on the position taken by the staff of the Securities and Exchange Commission in the interpretive letters referred to above, we believe that "participating broker-dealers," or broker-dealers that acquired old notes for their own accounts, as a result of market-making or other trading activities, may fulfill their prospectus delivery requirements with respect to the new notes received upon exchange of old notes, other than old notes that represent an unsold allotment from the original sale of the old notes, with a prospectus meeting the requirements of the Securities Act of 1933, which may be the prospectus prepared for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of the new notes. Accordingly, this prospectus, as it may be amended or supplemented, may be used by a participating broker-dealer during the period referred to below in connection with resales of new notes received in exchange for old notes where the old notes were acquired by the participating broker-dealer for its own account as a result of market-making or other trading activities. Subject to the provisions of the registration rights agreement, we have agreed that this prospectus may be used by a participating broker-dealer in connection with resales of the new notes. See "Plan of Distribution." However, a participating broker-dealer that intends to use this prospectus in connection with the resale of new notes received in exchange for old notes pursuant to the exchange offer must notify us, or cause us to be notified, on or before the expiration date of the exchange offer, that it is a participating broker-dealer. This notice may be given in the space provided for that purpose in the letter of transmittal or may be delivered to the exchange agent at the address set forth under "--The Exchange Agent; Assistance." Any participating broker-dealer that is our "affiliate" may not rely on these interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act of 1933 in connection with any resale transaction. Each participating broker-dealer that tenders old notes pursuant to the exchange offer will be deemed to have agreed, by execution of the letter of transmittal, that upon receipt of notice from us of the occurrence of any event or the discovery of any fact that makes any statement contained in this prospectus untrue in any material respect or that causes this prospectus to omit to state a material fact necessary in order to make the statements contained in this prospectus, in light of the circumstances under which they were made, not misleading or of the occurrence of other events specified in the registration rights agreement, the participating broker-dealer will suspend the sale of new notes pursuant to this prospectus until we have amended or supplemented this prospectus to correct the misstatement or omission and have furnished copies of the amended or supplemented prospectus to the participating broker-dealer or we have given notice that the sale of the new notes may be resumed, as the case may be. 89 DESCRIPTION OF NOTES GENERAL The old notes were, and the new notes will be, issued pursuant to an indenture (the "Indenture") among the Issuers, the Subsidiary Guarantors and U.S. Bank National Association, as trustee (the "Trustee"). The old notes and the new notes are together referred to as the "Notes". The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Notes are subject to all such terms, and the Holders are referred to the Indenture and the Trust Indenture Act for a statement thereof. The form and terms of the new notes are substantially identical to the form and terms of the old notes, except that the new notes: o will be registered under the Securities Act; and o will not bear any legends restricting transfer. We will issue the new notes solely in exchange for an equal principal amount of old notes in denominations of $1,000 and integral multiples of $1,000. The following summary of certain provisions of the Indenture, the Security Documents (defined below), the Intercreditor Agreement (defined below) and the Registration Rights Agreement among the Issuers, the Subsidiary Guarantors and the Initial Purchaser (the "Registration Rights Agreement") is not purported to be complete and is qualified in its entirety by reference to the Indenture, the Security Documents, the Intercreditor Agreement and the Registration Rights Agreement, respectively, including the definitions therein of certain terms used below. Copies of the forms of Indenture, the Security Documents, the Intercreditor Agreement and the Registration Rights Agreement are available from the Issuers upon request as described below under the section of this Prospectus entitled "Available Information." You can find the definitions of certain terms used in this Description of Notes under "Certain Definitions" and throughout this Description of Notes. The Notes are senior secured obligations of the Issuers and rank senior in right of payment to all existing and future subordinated Indebtedness of the Issuers and pari passu in right of payment with all existing and future senior Indebtedness of the Issuers. The Notes are unconditionally guaranteed by the Subsidiary Guarantors, as described below under "Subsidiary Guarantors," and the Notes and the Subsidiary Guaranties are secured by a security interest in substantially all of our and the Subsidiary Guarantors' current and future assets, other than the Excluded Assets, as described below under "Security." The Notes are without recourse to the Members. Our new senior secured credit facility (the "New Senior Credit Facility"), also is secured by substantially all of our and the Subsidiary Guarantors' current and future assets (including the Collateral that secures the Notes and the Subsidiary Guaranties), other than certain excluded assets. The collateral securing the New Senior Credit Facility also includes some assets that are not part of the Collateral securing the Notes. See "Senior Credit Facility" below. The lenders under the New Senior Credit Facility, the Trustee and the Issuers and the Subsidiary Guarantors party to the New Senior Credit Facility have entered into the Intercreditor Agreement, as described below under "Intercreditor Agreement," setting forth their respective rights and obligations with respect to the Collateral. Pursuant to the Intercreditor Agreement, the Lien on the collateral securing the New Senior Credit Facility is contractually senior to the Lien on the Collateral securing the Notes and the Subsidiary Guaranties. Under certain circumstances, the Issuers may designate certain Subsidiaries formed or acquired after the Issue Date as Unrestricted Subsidiaries. Unrestricted Subsidiaries are not subject to any of the restrictive covenants set forth in the Indenture. As of the Issue Date, none of our subsidiaries is an Unrestricted Subsidiary. The Notes were issued in registered form, without coupons, and in denominations of $1,000 and integral multiples thereof. 90 ISSUERS As used in this Description of Notes, all references to the "Issuers," "we," "our" or "us" mean Peninsula Gaming, LLC ("PGL"), Diamond Jo, LLC ("DJL") and Peninsula Gaming Corp. ("PGC", formerly known as The Old Evangeline Downs Capital Corp.) and their respective successors in accordance with the terms of the Indenture, and not any of their respective subsidiaries. PGC is a wholly owned subsidiary of the Company and serves as a co-issuer of the Notes in order to facilitate the offering of the Notes. PGC does not have any operations or assets and will not have any revenues. As a result, prospective investors should not expect PGC to participate in servicing the principal, interest, liquidated damages, if any, premium or any other payment obligations on the Notes. See "Certain Covenants--Restrictions on Activities of PGC" PRINCIPAL, MATURITY AND INTEREST The Indenture does not limit the aggregate principal amount of Notes that may be issued thereunder. We initially issued Notes in an aggregate principal amount of $233,000,000. In addition, the Indenture provides that, subject to the covenant in the Indenture described under "Certain Covenants--Limitation on Incurrence of Indebtedness," additional Notes may be issued thereunder from time to time, without the consent of the Holders of previously issued Notes, in an aggregate principal amount to be determined from time to time by the Issuers. The terms of the Notes being offered in this offering and the terms of any additional Notes that may be subsequently issued under the Indenture will be substantially identical other than the issuance dates and the dates from which interest will accrue. Because, however, any additional Notes may not be fungible with the Notes for federal income tax purposes, they may have a different CUSIP number or numbers, be represented by a different Global Note or Notes, and otherwise be treated as a separate class or classes of Notes for other purposes. Unless the context otherwise requires, for all purposes of the Indenture and this "Description of the Notes," references to the "Notes" include any additional Notes actually issued. The Notes being offered in this offering and any such additional Notes, would be treated as a single series of notes under the Indenture and would vote together as one series on all matters with respect to the Notes, including with respect to the provisions of the Indenture described below under "Amendment, Supplement and Waiver." Any additional Notes would be secured, equally and ratably with the Notes being offered in this offering, and as a result, the issuance of additional Notes would have the effect of diluting the security interest of the Collateral for the then outstanding Notes. The Notes will mature on April 15, 2012. Interest on the Notes will be payable semiannually on April 15 and October 15 of each year, commencing on October 15, 2004, to Holders of record on the immediately preceding April 1 and October 1, respectively. The Notes will bear interest at 8 3/4% per annum from the date of original issuance. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The Notes will be payable both as to principal and interest at the office or agency of the Issuers maintained for such purpose within the City of New York; provided, that at the option of the Issuers, payment of interest may be made by check mailed to the Holders at their respective addresses set forth in the register of the Notes. Until otherwise designated by the Issuers, the Issuers' office or agency will be the office of the Trustee maintained for such purpose. If a payment date is a Legal Holiday, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. The Trustee will initially act as Paying Agent and Registrar. The Issuers may change the Paying Agent or Registrar without prior notice to Holders and, subject to certain exceptions, the Issuers or any of their respective Subsidiaries may act as Paying Agent or Registrar. REDEMPTION At the Option of the Issuers. Except as set forth below, the Notes are not redeemable at the Issuers' option prior to April 15, 2008. Thereafter, the Notes will be subject to redemption at the option of the Issuers, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to the applicable date of redemption, if redeemed during the 12-month period beginning on April 15 of the years indicated below: 91 YEAR PERCENTAGE - ---- ---------- 2008.......................................................... 104.375% 2009.......................................................... 102.917% 2010.......................................................... 101.458% 2011 and thereafter........................................... 100.000% Notwithstanding the foregoing, at any time or from time to time, prior to April 15, 2007, we may redeem up to 35% of the aggregate principal amount of the outstanding Notes at a redemption price of 108.75% of their principal amount, plus accrued and unpaid interest, if any, through the date of redemption, with the net cash proceeds of one or more Equity Offerings; provided, that (i) the redemption occurs within 60 days of the date of closing of such Equity Offering and (ii) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after giving effect to each such redemption. The restrictions on the optional redemption contained in the Notes do not limit the right of the Issuers or any of the Subsidiaries to separately make open market, privately negotiated or other purchases of the Notes from time to time. Required Regulatory Redemption. Notwithstanding any other provisions hereof, Notes to be redeemed pursuant to a Required Regulatory Redemption will be redeemable by the Issuers, in whole or in part, at any time upon not less than 20 Business Days nor more than 60 days notice (or such earlier date as may be ordered by any applicable Governmental Authority) at a price equal to the lesser of (i) the Holder's cost thereof and (ii) 100% of the principal amount thereof, plus in either case accrued and unpaid interest thereon, if any, to the date of redemption (or such earlier period as ordered by such Governmental Authority). Under the Indenture, the Issuers are not required to pay or reimburse any Holder or beneficial owner of the Notes for the expenses of any such Holder or beneficial owner related to the application for any Gaming License, qualification or finding of suitability in connection with a Required Regulatory Redemption. Such expenses of any such Holder or beneficial owner will, therefore, be the obligation of such Holder or beneficial owner. Mandatory. The Notes will not be entitled to any mandatory redemption (except for a Required Regulatory Redemption) or have the benefit of any sinking fund. Redemption Procedures. If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee deems to be fair and appropriate; provided, that Notes in denominations of $1,000 or less may not be redeemed in part. Except in the case of a Required Regulatory Redemption requiring less notice, notice of redemption will be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each Holder to be redeemed at such Holder's registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note will state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the date of redemption, interest will cease to accrue on Notes or portions thereof called for redemption, unless the Issuers default in making such redemption payment. SUBSIDIARY GUARANTORS The repayment of the Notes will be unconditionally and irrevocably guaranteed, jointly and severally, on a senior secured basis by each of our present and future Restricted Subsidiaries, other than Foreign Subsidiaries and other than any Restricted Subsidiary which is a co-Issuer of the Notes. On the Issue Date, we did not have any Foreign Subsidiaries, and each of the Subsidiaries (other than PGC and DJL, which are co-Issuers of the Notes) will be a Subsidiary Guarantor. See "The Transactions" for information regarding the corporate structure of the Issuers and the Subsidiaries as of the Issue Date. The Indenture will provide that, so long as any Notes remain outstanding, any and all future Restricted Subsidiaries, other than Foreign Subsidiaries and other than any Restricted Subsidiary which is a co-Issuer of the Notes, shall enter into a Subsidiary Guaranty. For additional information on the 92 Subsidiary Guaranties, see "Certain Covenants--Subsidiary Guarantors" and "--Release of Subsidiary Guarantors" below. The Subsidiary Guaranties will be secured by a security interest in substantially all of the assets (other than the Excluded Assets) of the Subsidiary Guarantors, as described below under "Security." However, the Obligations of each Subsidiary Guarantor under its Subsidiary Guaranty will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the Obligations of such other Subsidiary Guarantor under the Subsidiary Guaranty, result in the Obligations of such Subsidiary Guarantor under the Subsidiary Guaranty not constituting a fraudulent conveyance or fraudulent transfer under federal or state law and not rendering a Subsidiary Guarantor insolvent. See "Security--Certain Bankruptcy Limitations" below. SECURITY The Issuers and the Subsidiary Guarantors will pledge, and will cause any and all future Subsidiary Guarantors to pledge, as collateral (the "Collateral") to the Trustee, for the benefit of the Trustee and the Holders, as security for the Issuers' obligations with respect to the Notes and the Subsidiary Guarantors' obligations with respect to the Subsidiary Guaranties, respectively, all of their respective existing and future interests in the following: o the riverboat and the land-based facility comprising the Diamond Jo, including without limitation all leased property; o the assets of the horse racetrack and casino owned and operated by OED, including without limitation all leased property; o the assets relating to the OTB Operations; o all owned real property and leasehold interests in all leased real property and all additions and improvements to real property; o substantially all furniture, fixtures and equipment, inventory, accounts receivable, contract rights and other general intangibles, trademarks and trade names; o all licenses and permits, other than any Gaming License or Racing License, o certain designated deposit accounts and cash that is deposited in such accounts; o the Equity Interests of the Restricted Subsidiaries; o all other existing and future property of the Issuers and the Restricted Subsidiaries that does not constitute Excluded Assets; and o all proceeds and products of any of the foregoing. Notwithstanding the foregoing, the Collateral will not include the following (collectively, the "Excluded Assets"): o cash, other than cash deposited in deposit accounts; o assets securing FF&E Financing, Purchase Money Obligations or Capital Lease Obligations permitted to be incurred under the Indenture to the extent acquired or refinanced with the proceeds of such FF&E Financing, Purchase Money Obligations and Capital Lease Obligations; 93 o all Gaming Licenses and Racing Licenses; o any of the parcels of the Warner Land that are subject to the mortgage granted by OED to the seller of such land, unless OED or the Company has obtained the consent of such seller to subject such parcels to a Lien under the Security Documents; o any motor vehicles; o any agreements, permits, licenses or the like that cannot be subject to a Lien under the Security Documents without the consent of third parties (including any Governmental Authority), which consent is not obtained by the Issuers; o Equity Interests of each Foreign Restricted Subsidiary directly owned by the Company or any of the Domestic Restricted Subsidiaries to the extent that such Equity Interests held by the Company or such Domestic Restricted Subsidiary, as the case may be, exceed 65% of the total combined voting power of all classes of voting Equity Interests of such Foreign Restricted Subsidiary, provided, however, such excess of any class of Capital Stock of such Foreign Subsidiary shall not be an Excluded Asset to the extent the Company is able to receive an opinion of counsel nationally recognized in tax matters to the effect that the pledge of such excess will not result in an income inclusion under section 951 et. seq. of the Code; and o OEDA's rights under or in respect of the Management Services Agreement and proceeds thereof (including fees paid to OEDA pursuant thereto); provided, that Excluded Assets does not include the proceeds of assets under clause (ii), (iii), (iv), (v), (vi), (vii) or (viii) or of any other Collateral to the extent such proceeds do not constitute Excluded Assets. In addition, there can be no assurance that the security interest in the designated deposit accounts and the cash deposited therein can be perfected under applicable laws. The security interest in favor of the Trustee and the Holders will be created in the riverboat Collateral pursuant to a first preferred ship mortgage (the "Ship Mortgage"), in real property Collateral pursuant to a mortgage (the "Shore Mortgage" and, together with the Ship Mortgage, the "Mortgages"), and in all other Collateral pursuant to a security agreement from the Issuers (and any future Subsidiary Guarantors) in favor of the Trustee (the "Security Agreement"). Other than during the continuance of an Event of Default, and subject to certain terms and conditions in the Indenture and the Security Documents, each of the Company and the Subsidiary Guarantors will be entitled to receive all cash dividends, interest and other payments made upon or with respect to the Equity Interests of any of the Restricted Subsidiaries and to exercise any voting, consensual rights and other rights pertaining to such Collateral. Upon the occurrence and during the continuance of an Event of Default, subject to the terms of the Intercreditor Agreement, upon notice from the Trustee, (a) all rights of the Company or such Subsidiary Guarantor, as the case may be, to exercise such voting, consensual rights, or other rights shall cease and all such rights shall become vested in the Trustee, which, to the extent permitted by law, shall have the sole right to exercise such voting, consensual rights or other rights, (b) all rights of the Company or such Subsidiary Guarantor, as the case may be, to receive all cash dividends, interest and other payments made upon or with respect to the Collateral shall cease, and such cash dividends, interest and other payments shall be paid to the Trustee, and (c) the Trustee may sell the Collateral or any part thereof in accordance with, and subject to the terms of, the Security Documents. All funds distributed under, and pursuant to, the Security Documents and received by the Trustee for the ratable benefit of the holders of the Notes shall be distributed by the Trustee in accordance with the provisions of the Indenture. Certain Limitations With Respect to the Collateral. Pursuant to the terms of the Intercreditor Agreement, the Trustee's security interest in the Collateral will be contractually subordinated to a Lien securing Indebtedness outstanding under the Senior Credit Facility. The Trustee's ability to exercise rights and remedies in respect of the Collateral also will be subject to the terms of the Intercreditor Agreement. For a discussion of some of the risks 94 related to the Collateral, see "Intercreditor Agreement" and "Senior Credit Facility" below and "Risk Factors--Risks Relating to this Offering." If an Event of Default occurs and is continuing, the Trustee, on behalf of itself and the Holders, in addition to any rights or remedies available to it under the Indenture and the Security Documents, may, subject to the Intercreditor Agreement, take such action as it deems advisable to protect and enforce its rights in the Collateral, including the institution of sale or foreclosure proceedings. While Indebtedness under the Senior Credit Facility has not been fully paid, rights of the Holders and the Trustee will be subject to the terms of the Intercreditor Agreement. The proceeds received by the Trustee from any such sale or foreclosure will, subject to the Intercreditor Agreement, be applied by the Trustee first to pay the expenses of such sale or foreclosure and fees and other amounts then payable to the Trustee under the Indenture, and thereafter to pay amounts due and payable with respect to the Notes. Release of Collateral. Upon the full and final payment and performance of all our and the Subsidiary Guarantors' Obligations under the Indenture, the Notes and the Subsidiary Guaranties, the Security Documents will terminate, and all of the Collateral will be released. In addition, the Trustee shall release from the Lien created by the Indenture and the Security Documents: (a) Collateral that is sold, transferred, disbursed or otherwise disposed of in accordance with the provisions of the Indenture and the Security Documents; provided that the Trustee, as collateral agent, will not release such liens in the event that the transaction is subject to the covenant "Limitation on Merger, Sale or Consolidation;" (b) Collateral that is released with the consent of the Holders of not less than 75% of the outstanding Notes as provided under "Amendments, Supplements and Waivers;" (c) all Collateral upon defeasance of the Indenture in accordance with the provisions under "Legal Defeasance and Covenant Defeasance" or discharge of the Indenture in accordance with the provisions under "Satisfaction and Discharge;" provided that the funds deposited with the Trustee, in trust, for the benefit of the Holders as required by such provisions shall not be released; and (d) Collateral of a Subsidiary Guarantor whose Subsidiary Guaranty is released in accordance with the Indenture and the Security Documents; provided, that the Trustee, as collateral agent, has received all documentation required by the Trust Indenture Act in connection therewith. Certain Gaming Law Limitations. The Trustee's ability to foreclose upon the Collateral will be limited by relevant gaming and racing laws, which generally require that Persons who own or operate a casino or a horse racetrack or who purchase or sell gaming equipment hold a valid Gaming License, and require the approval of the relevant Gaming Authorities for any transfer of a Gaming License. No Person can hold a Gaming License in the State of Iowa or the State of Louisiana unless that Person is found qualified and suitable by the relevant Gaming Authorities. In order for the Trustee to be found qualified and suitable, such Gaming Authorities would have discretionary authority to require the Trustee and any or all of the Holders to file applications, be investigated and be found qualified or suitable as an owner or operator of gaming establishments. The applicant for qualification, a finding of suitability or licensing must pay all costs of such investigation. If the Trustee is unable or chooses not to qualify, is not found to be suitable, or is unable or chooses not be licensed to own or operate such assets, it would have to retain an entity so qualified, suitable or licensed to own or operate such assets or another entity that could obtain the appropriate license to own or operate such assets. This licensing process requires a considerable amount of time, taking several months at a minimum. In addition, in any foreclosure sale or subsequent resale by the Trustee, licensing requirements under the relevant gaming laws may limit the number of potential bidders and may delay any sale, either of which events could have an adverse effect on the sale price of such Collateral. Therefore, the practical value of realizing on the Collateral may, without the appropriate Gaming Authority approval or timeliness, be limited. Moreover, if an Event of Default occurs after a disapproval of gaming in Iowa in the 2010 Referendum, a foreclosure of the Collateral relating to the Diamond Jo may be limited or impaired as the Iowa Gaming Commission might be legally prohibited from permitting the existing Iowa Gaming License to be 95 transferred or from issuing a new Gaming License for the Diamond Jo. See "Risk Factors--Risks Relating to Our Business--Reauthorization of Gaming in Dubuque County, Iowa." Certain Bankruptcy and Other Limitations. The right of the Trustee to repossess and dispose of the Collateral upon the occurrence and during the continuance of an Event of Default is likely to be significantly impaired by applicable bankruptcy laws if a bankruptcy proceeding were to be commenced by or against any of the Issuers prior to the Trustee having repossessed and disposed of the Collateral. Under the Bankruptcy Code, a secured creditor is prohibited from repossessing its security from a debtor in a bankruptcy case, or from disposing of security repossessed from such debtor, without bankruptcy court approval. Moreover, the Bankruptcy Code permits the debtor to continue to retain and to use collateral owned as of the date of the bankruptcy filing (and collateral consisting of the proceeds, products, offspring, rents or profits of such collateral to the extent provided by the security documents and by applicable nonbankruptcy law) even though the debtor is in default under the applicable debt instruments; provided, that the secured creditor is given "adequate protection." The meaning of the term "adequate protection" may vary according to circumstances. In view of the lack of a precise definition of the term "adequate protection" and the broad discretionary powers of a bankruptcy court, it is impossible to predict how long payments under the Notes could be delayed following commencement of a bankruptcy case, whether or when the Trustee could repossess or dispose of the Collateral or whether or to what extent Holders would be compensated for any delay in payment or loss of value of the Collateral through the requirement of "adequate protection." Furthermore, in the event a bankruptcy court determines the value of the Collateral is not sufficient to repay all amounts due on the Notes, the Holders would hold secured claims only to the extent of the value of the Collateral to which the Holders are entitled, and would hold unsecured claims with respect to such shortfall. Applicable federal bankruptcy laws do not permit the payment and/or accrual of post-petition interest, costs and attorneys' fees during a debtor's bankruptcy case unless the claims are oversecured or the debtor is solvent at the time of reorganization. In addition, if any Issuer becomes the subject of a bankruptcy case, the bankruptcy court, among other things, may avoid certain transfers made by the entity that is the subject of the bankruptcy filing, including, without limitation, transfers held to be fraudulent conveyances or preferences. Further, certain limitations exist under the Merchant Marine Act of 1936 on the ability of non-U.S. citizens to realize upon collateral consisting of vessels documented under the laws of the United States. To the extent that the Holders are non-U.S. citizens, such limitation could adversely affect the ability of the Trustee to complete a foreclosure on the riverboat Collateral. This ownership limitation may also reduce the number of potential purchasers of the riverboat Collateral if the Trustee seeks to sell the riverboat Collateral as a means of repaying the Notes. The Trustee may be required to foreclose through a federal admiralty court proceeding. Such a proceeding would entail compliance with notice and other procedural requirements, and could require posting of a substantial bond. In addition, because a portion of the Collateral may, in the future, consist of pledges of a portion of the Equity Interests of certain of our Foreign Restricted Subsidiaries, the validity of those pledges under applicable foreign law, and the ability of the Holders to realize upon that Collateral under applicable foreign law, may be limited by such law, which limitations may or may not affect such Liens. SENIOR CREDIT FACILITY The New Senior Secured Credit Facility is secured by substantially the same assets that secure the Notes and the Subsidiary Guaranties, other than certain excluded assets. However, to the extent that portions of the collateral securing borrowings under the New Senior Secured Credit Facility consist of assets that are not perfected by filing a UCC financing statement, or that require that we or any Subsidiary Guarantor, as applicable, cause the Trustee to obtain "control" (as defined in the Uniform Commercial Code) or possession of such assets (and, after commercially reasonable efforts, we or such Subsidiary Guarantor, as applicable, are unable to cause the Trustee to obtain such control or possession), such portions of the collateral securing borrowings under the New Senior Secured Credit Facility may not constitute part of the Collateral securing the Notes. The lenders under the New Senior Secured Credit Facility, the Trustee and the Issuers and the Subsidiary Guarantors party to such New Senior Secured Credit Facility have entered into the Intercreditor Agreement, as described below under "Intercreditor Agreement," setting forth their respective rights and obligations with respect to 96 the Collateral. Pursuant to the Intercreditor Agreement, the Lien on the collateral securing the Senior Credit Facility is contractually senior to the Lien on the Collateral securing the Notes and the Subsidiary Guaranties. INTERCREDITOR AGREEMENT The lenders under the New Senior Secured Credit Facility, the Trustee and the Issuers and the Subsidiary Guarantors party to such Senior Credit Facility have entered into an intercreditor agreement (the "Intercreditor Agreement"), in substantially the form attached as an exhibit to the Indenture, setting forth their respective rights and obligations with respect to the Collateral. The following description of the principal terms of the Intercreditor Agreement is subject to and qualified entirely by reference to the definitive Intercreditor Agreement. The Intercreditor Agreement provides that the Liens securing the Notes and the Subsidiary Guaranties on any Collateral that also secure the obligations under the New Senior Secured Credit Facility will be subordinated to the Liens securing up to the maximum amount of indebtedness under the Senior Credit Facility and related interest, fees, indemnities, costs and expenses. Under the Intercreditor Agreement, if the Notes become due and payable prior to the stated maturity thereof for any reason or are not paid in full at the stated maturity thereof at a time during which Indebtedness under the New Senior Secured Credit Facility has not been fully paid, the Trustee, as collateral agent under the Security Documents, will only have the right to foreclose upon any Collateral that also secures the obligations under the New Senior Secured Credit Facility if the lender[s] under the New Senior Secured Credit Facility either (i) fail to take steps to exercise remedies with respect to or in connection with such collateral within 180 days following notice to such lenders of the occurrence of an Event of Default under the Indenture or (ii) fail to continue to pursue any such exercise of remedies while such Event of Default is then continuing and no insolvency proceeding is pending. The Intercreditor Agreement will prevent the Trustee, as collateral agent under the Security Documents, and the holders of the Notes from pursuing remedies with respect to such collateral in all other instances during which indebtedness under the New Senior Secured Credit Facility has not be fully paid, including during any insolvency proceeding. The Intercreditor Agreement provides that the net proceeds from any disposition of the shared collateral will first be applied to repay Indebtedness outstanding under the New Senior Secured Credit Facility and thereafter to repay all of our and the Subsidiary Guarantors' Obligations under the Indenture, the Notes and the Subsidiary Guaranties. REPURCHASE UPON CHANGE OF CONTROL Upon the occurrence of a Change of Control, the Issuers will offer to repurchase all of the Notes then outstanding (the "Change of Control Offer") at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Issuers must mail or cause to be mailed a notice to each Holder stating, among other things: o the purchase price and the purchase date, which will be no earlier than 30 days nor later than 45 days from the date such notice is mailed (the "Change of Control Payment Date"); o that any Holder electing to have Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the paying agent with respect to the Notes (the "Paying Agent") at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; and o that the Holder will be entitled to withdraw such election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased. The Issuers will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with 97 the repurchase of the Notes in connection with a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the "Change of Control" provisions of the Indenture, the Issuers will comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations under the "Change of Control" provisions of the Indenture by virtue thereof. On the Change of Control Payment Date, the Issuers will, to the extent lawful, (i) accept for payment the Notes or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and not withdrawn, and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted, together with an Officers' Certificate stating that the Notes or portions thereof tendered to the Issuers are accepted for payment. The Paying Agent will promptly mail to each Holder of Notes so accepted payment in an amount equal to the purchase price for such Notes, and the Trustee will authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided, that each such new Note will be in the principal amount of $1,000 or an integral multiple thereof. The Issuers will announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders to require that the Issuers repurchase or redeem the Notes in the event of a takeover, recapitalization or similar restructuring. There can be no assurance that sufficient funds will be available at the time of any Change of Control Offer to make required repurchases. The Issuers will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Issuers, and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. The use of the term "all or substantially all" in provisions of the Indenture such as in the definition of "Change of Control" and under "Merger, Consolidation or Sale of Assets" has no clearly established meaning under New York law (which governs the Indenture) and has been the subject of limited judicial interpretation in only a few jurisdictions. Accordingly, there may be a degree of uncertainty in ascertaining whether any particular transaction would involve a disposition of "all or substantially all" of the assets of a Person. As a consequence, in the event the Holders elect to exercise their rights under the Indenture and the Issuers elect to contest such election, there could be no assurance as to how a court would interpret the phrase under New York law, which may have the effect of preventing the Trustee or the Holders from successfully asserting that a Change of Control has occurred. Management of the Company has no present intention to engage in a transaction involving a Change of Control, although it is possible that the Company could determine to do so in the future. Subject to the limitations discussed below, the Company could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that would increase the amount of Indebtedness outstanding at such time or otherwise affect the Company's capital structure or credit ratings. Restrictions on the ability of the Issuers and the Restricted Subsidiaries to incur additional Indebtedness are contained in the covenant described under "Limitation on Incurrence of Indebtedness." Such restrictions can only be waived with the consent of the holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenant, however, the Indenture will not contain any covenants or protections that may afford Holders protection in the event of a highly leveraged transaction. Each Change of Control Offer will be conducted in compliance with applicable regulations under the Federal securities laws, including Exchange Act Rule 14e 1. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control Offer provisions of the Indenture, the Issuers will comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations under the Change of Control Offer provisions of the Indenture by virtue thereof. 98 CERTAIN COVENANTS Limitation on Restricted Payments. The Issuers will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly make a Restricted Payment unless, at the time of such Restricted Payment: (a) no Default or Event of Default has occurred and is continuing or would occur as a consequence thereof, and (b) immediately after giving effect to such Restricted Payment on a pro forma basis, the Company could incur at least $1.00 of additional Indebtedness under the Interest Coverage Ratio test set forth in the covenant described under "Limitation on Incurrence of Indebtedness," and (c) such Restricted Payment (the value of any such payment, if other than cash, being determined in good faith by the Managers of the Company and evidenced by a resolution set forth in an Officers' Certificate delivered to the Trustee), together with the aggregate of all other Restricted Payments made after the Issue Date (including Restricted Payments permitted by clauses (i), (ii), (ix) and (x) of the next following paragraph and excluding Restricted Payments permitted by the other clauses therein), is less than the sum of: (1) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first full fiscal quarter immediately following the Issue Date to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, 100% of such deficit), plus (2) 100% of the aggregate net cash proceeds (or of the net cash proceeds received upon the conversion of non-cash proceeds into cash) received by the Company from (x) the issuance or sale, other than to a Subsidiary, of Equity Interests of the Company (other than Disqualified Capital Stock) and (y) any equity contribution from a holder of the Company's Capital Stock (other than a Subsidiary), in each case, after the Issue Date and on or prior to the time of such Restricted Payment, plus (3) 100% of the aggregate net cash proceeds (or of the net cash proceeds received upon the conversion of non-cash proceeds into cash) received by the Company from the issuance or sale, other than to a Subsidiary, of any convertible or exchangeable debt security of the Company that has been converted or exchanged into Equity Interests of the Company (other than Disqualified Capital Stock) pursuant to the terms thereof after the Issue Date and on or prior to the time of such Restricted Payment (including any additional net cash proceeds received by the Company upon such conversion or exchange), plus (4) the aggregate Return from Unrestricted Subsidiaries after the Issue Date and on or prior to the time of such Restricted Payment. The foregoing provisions will not prohibit: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would not have been prohibited by the provisions of the Indenture; (ii) the redemption, purchase, retirement or other acquisition of any Equity Interests of the Company or Indebtedness of the Company or any Restricted Subsidiary in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Subsidiary) of, other Equity Interests of the Company (other than Disqualified Capital Stock); 99 (iii) with respect to each tax year or portion thereof that the Company qualifies as a Flow Through Entity and so long as clause (a) above is satisfied, the payment of Permitted Tax Distributions (whether paid in such tax year or portion thereof, or any subsequent tax year); provided, that (A) prior to the first payment of Permitted Tax Distributions during any particular calendar year the Company provides an Officers' Certificate and an Opinion of Counsel to the effect that the Company and each other Flow Through Entity in respect of which such distributions are being made qualify as Flow Through Entities for Federal income tax purposes and for the states in respect of which such distributions are being made for such tax year or portion thereof, (B) at the time of such distribution, the most recent audited financial statements of the Company for periods including such tax year or portion thereof provided to the Trustee pursuant to the covenant described under the caption "Reports" provide that the Company and each subsidiary of the Company in respect of which such distributions are being made was treated as a Flow Through Entity for the period of such financial statements, and (C) in the case of the portion, if any, of any Permitted Tax Distribution that is proposed to be distributed for a particular taxable period or portion thereof, which portion of such Permitted Tax Distribution is attributable to a Flow Through Entity that is not a Restricted Subsidiary, such portion of such proposed Permitted Tax Distribution shall be limited to the Excess Cash Distribution Amount for Taxes; (iv) the redemption, repurchase or payoff of any Indebtedness of the Company or a Restricted Subsidiary with proceeds of any Refinancing Indebtedness permitted to be incurred pursuant to clause (xi) of the provision described under "Limitation on Incurrence of Indebtedness;" (v) distributions or payments to PGP for or in respect of (A) tax preparation, accounting, licensure, legal and administrative fees and expenses, including travel and similar reasonable expenses, incurred on behalf of the Issuers or their respective Subsidiaries or in connection with PGP's ownership of the Issuers or their respective Subsidiaries, consistent with industry practice, (B) so long as clause (a) above is satisfied, distributions pursuant to, and in accordance with, Management Arrangements and (C) so long as clause (a) above is satisfied, reasonable and customary directors' or managers' fees to, and indemnity provided on behalf of, the Managers of PGP and the Company, and reimbursement of customary and reasonable travel and similar expenses incurred in the ordinary course of business; (vi) (A) the repurchase, redemption or other retirement or acquisition of Equity Interests of the Company or any Restricted Subsidiary from our employees, members or managers (or their heirs or estates) or employees, members or managers (or their heirs or estates) of the Restricted Subsidiaries or (B) any dividend, distribution or other payment to PGP to enable PGP to repurchase, redeem, or otherwise retire or acquire Equity Interests of PGP from any of its employees, members or managers (or their heirs or estates) or employees, members or managers (or their heirs or estates) of any of their respective subsidiaries, in the case of each of the preceding clauses (A) and (B) upon the death, disability or termination of employment or pursuant to the terms of any subscription, stock option, stockholder or other agreement or plan in effect on the Issue Date in an aggregate amount pursuant to this clause (vi) to all such employees, members or managers (or their heirs or estates) not to exceed $750,000 in any twelve month period on and after the Issue Date (provided, however, that any amounts not used in any such twelve month period may be carried forward to the next succeeding twelve month period until used); (vii) the redemption and repurchase of any Equity Interests or Indebtedness of PGP, the Company or any of the Restricted Subsidiaries to the extent required by any Gaming Authority or Racing Authority; (viii)the payment of (i) accrued distributions under the Seller Preferred in accordance with its terms and (ii) an amount not in excess of the face amount of the Seller Preferred outstanding on the Issue Date, plus accrued and unpaid distributions thereon as of the redemption date; (ix) any dividend, distribution or other payment by any of the Restricted Subsidiaries on its Equity Interests that is paid pro rata to all holders of such Equity Interests; 100 (x) the declaration and payment of dividends and distributions to holders of Disqualified Equity Interests of the Company or any of the Restricted Subsidiaries issued or incurred in accordance with the covenant "--Limitation on Incurrence of Additional Indebtedness;" (xi) consummation on the Issue Date of the Transactions as described in this prospectus in the section entitled "The Transactions;" and (xii) so long as clause (a) above is satisfied, Restricted Payments not otherwise permitted by this covenant in an aggregate amount pursuant to this clause (xii) not to exceed $15.0 million. Promptly following the end of each fiscal quarter during which any Restricted Payment was made pursuant to clause (c) above, the Company will deliver to the Trustee an Officers' Certificate stating that each such Restricted Payment was permitted and setting forth the basis upon which the calculations required by this covenant were computed, which calculations may be based upon the Company's latest available internal financial statements. For purposes of this covenant, the amount of any Restricted Payment made or returned, if other than in cash, shall be the fair market value thereof, as determined in the reasonable good faith judgment of the Managers of the Company, unless stated otherwise, at the time made or returned, as applicable. For purposes of determining compliance with this covenant, if a Restricted Payment meets the criteria of more than one of the exceptions described in clauses (i) through (x) and (xii) above or is entitled to be made according to the first paragraph of this covenant, the Company may, in its sole discretion, classify the Restricted Payment in any manner that complies with this covenant. Limitation on Incurrence of Indebtedness. The Issuers will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, (x) create, incur, issue, assume, guaranty or otherwise become directly or indirectly liable with respect to, contingently or otherwise (collectively, "incur"), any Indebtedness (including, without limitation, Acquired Debt) or (y) issue any Disqualified Capital Stock; provided, that the Company and the Restricted Subsidiaries may incur Indebtedness (including, without limitation, Acquired Debt) and issue shares of Disqualified Capital Stock if (a) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a pro forma basis to such incurrence or issuance, and (b) the Interest Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Capital Stock is issued would have been not less than 2.0 to 1.0 determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as set forth in the definition of Interest Coverage Ratio, as if the additional Indebtedness had been incurred, or the Disqualified Capital Stock had been issued, as the case may be, at the beginning of such four-quarter period. Notwithstanding the foregoing, the foregoing limitations will not prohibit the incurrence of: (i) Indebtedness under a Senior Credit Facility; provided, that the aggregate principal amount of Indebtedness so incurred on any date, together with all other Indebtedness incurred pursuant to this clause (i) and outstanding on such date, shall not exceed $35.0 million, less the aggregate amount of commitment reductions contemplated by clause (iii)(c) under the caption "Limitation on Asset Sales;" provided, however, that Indebtedness permitted to be incurred pursuant to this clause (i) shall be increased by $15.0 million (A) upon the acquisition of any Gaming Property or (B) to effectuate a Gaming Property Financing, provided further, that any increase pursuant to this proviso shall be reduced dollar-for-dollar by the amount of Acquired Debt secured by the assets of such Gaming Property (unless such Acquired Debt could have been incurred under, and reduces the amount available under, clause (ii) below); (ii) FF&E Financing and Indebtedness represented by Capital Lease Obligations, mortgage financings or other Purchase Money Obligations; provided, that (1) no Indebtedness incurred under the Notes is utilized for the purchase or lease of FF&E financed with such FF&E Financing or such other Indebtedness, and (2) the aggregate principal amount of such Indebtedness (including any Acquired Debt referred to in the parenthetical in clause (i) above and including any Refinancing Indebtedness and any other Indebtedness incurred to repay, redeem, discharge, retire, defease, 101 refund, refinance or replace any Indebtedness pursuant to this clause (ii)) outstanding at any time (excluding any Gaming FF&E Financing incurred pursuant to this clause (ii)) does not exceed the product of (x) $7.5 million times (y) the number of Gaming Properties owned and controlled after the Issue Date by any of the Company and the Restricted Subsidiaries on the date of such incurrence; (iii) Indebtedness solely in respect of bankers acceptances, letters of credit payment obligations in connection with self-insurance or similar requirements, security for workers' compensation claims, appeal bonds, surety bonds, insurance obligations or bonds, and performance bonds, and similar bonds or obligations, all incurred in the ordinary course of business (including, without limitation, to maintain any license or permits) in accordance with customary industry practices; (iv) Hedging Obligations incurred to fix or hedge interest rate risk with respect to any fixed or variable rate Indebtedness otherwise permitted by the Indenture; provided, that the notional principal amount of each such Hedging Obligation does not exceed the principal amount of the Indebtedness to which such Hedging Obligation relates; (v) Indebtedness of any Issuer, any Subsidiary Guarantor or any Restricted Subsidiary owed to and held by a Subsidiary Guarantor or an Issuer, as the case may be, that is unsecured and subordinated in right of payment to the Notes and the Subsidiary Guaranties, as the case may be; provided, that any subsequent issuance or transfer of any Capital Stock that results in any such Subsidiary Guarantor or Restricted Subsidiary, as the case may be, ceasing to be a Subsidiary Guarantor or a Restricted Subsidiary, or any transfer of such Indebtedness (other than to an Issuer or a Subsidiary Guarantor) shall be deemed, in each case, to constitute the incurrence of such Indebtedness by such Issuer, such Subsidiary Guarantor or such Restricted Subsidiary, as the case may be; (vi) Indebtedness outstanding on the Issue Date, including the Notes outstanding on the Issue Date, but excluding Indebtedness under any Senior Credit Facility (other than the OED FF&E Facility) outstanding on the Issue Date; (vii) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; (viii)the accrual of interest, the accretion or amortization of original issue discount and the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms; (ix) Indebtedness arising from agreements for indemnification, adjustment of purchase price or similar obligations, in each case, incurred in connection with the disposition of any business or assets of the Company, any of the Subsidiary Guarantors or any of the Restricted Subsidiaries; provided that the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company or the applicable Subsidiary Guarantor or Restricted Subsidiary in connection with such disposition; (x) any Subsidiary Guaranty of the Notes; (xi) Indebtedness issued in exchange for, or the proceeds of which are substantially contemporaneously used to extend, repay, redeem, discharge, refinance, renew, replace, or refund (collectively, "Refinance"), Indebtedness incurred pursuant to the Interest Coverage Ratio test set forth in the immediately preceding paragraph, clause (vi) above, this clause (xi) or clause (xiii) below (the "Refinancing Indebtedness"); provided, that (a) the principal amount of such Refinancing Indebtedness does not exceed the principal amount of Indebtedness so Refinanced (plus any required premiums and out-of-pocket expenses reasonably incurred in connection therewith), (b) the Refinancing Indebtedness has a final scheduled maturity that equals or exceeds 102 the final stated maturity, and a Weighted Average Life to Maturity that is equal to or greater than the Weighted Average Life to Maturity, of the Indebtedness being Refinanced and (c) the Refinancing Indebtedness ranks, in right of payment, no more favorable to the Notes or applicable Subsidiary Guaranty, as the case may be, than the Indebtedness being Refinanced; (xii) guarantees by Restricted Subsidiaries of Indebtedness of any Restricted Subsidiary or the Company or guarantees by the Company of Indebtedness of any Restricted Subsidiaries if the Indebtedness so guaranteed is permitted under another provision of this covenant and so long as such guarantee otherwise complies with the Indenture; (xiii)Indebtedness (including, without limitation, Acquired Debt) to acquire one or more Gaming Properties if: (a) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a pro forma basis to such incurrence, and (b) the Interest Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is to be incurred (the "Four Quarter Reference Period") would have been greater than (x) 1.5 to 1.0 if the last fiscal quarter in the Four Quarter Reference Period is either the first or second fiscal quarter of 2004, (y) 1.75 to 1.0 if the last fiscal quarter in the Four Quarter Reference Period is either in the third or fourth fiscal quarter of 2004 and (z) 2.0 to 1.0 otherwise, in each case determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as set forth in the definition of Interest Coverage Ratio, as if such additional Indebtedness had been incurred at the beginning of such four-quarter period; and (xiv) Indebtedness not otherwise permitted by clauses (i) through (xiii) above in an aggregate principal amount (or accreted value, as applicable) at any time outstanding pursuant to this clause (xiv), including all Refinancing Indebtedness incurred to repay, redeem, discharge, retire, defease, refund, refinance or replace any Indebtedness incurred pursuant to this clause (xiv), not to exceed $10.0 million. Upon each incurrence of Indebtedness, if such Indebtedness could have been incurred under more than one provision of this covenant, (i) the Company may designate pursuant to which provision of this covenant such Indebtedness is being incurred, (ii) the Company may subdivide an amount of Indebtedness and designate more than one provision pursuant to which such amount of Indebtedness is being incurred and shall be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify, all or a portion of such item of Indebtedness, in any manner that complies with this covenant, and (iii) such Indebtedness shall not be deemed to have been incurred or outstanding under any other provision of this covenant except that all incurrences under the Notes, the Subsidiary Guaranties and the Indenture shall be deemed to have been incurred pursuant to clause (vi) above. Limitation on Asset Sales. The Issuers will not, and will not permit any Restricted Subsidiary to, make any Asset Sale unless: (i) such Issuer or such Restricted Subsidiary receives consideration at the time of such Asset Sale not less than the fair market value of the assets subject to such Asset Sale (as determined by the Company's Managers in good faith); (ii) at least 75% of the consideration for such Asset Sale is in the form of either (a) cash or Cash Equivalents or liabilities of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Subsidiary Guaranty) that are assumed by the transferee of such assets (provided, that following such Asset Sale, there is no further recourse to the Company or the Restricted Subsidiaries or the Company and the Restricted Subsidiaries are fully indemnified with respect to such liabilities; provided, further, that the 75% limitation set forth in this clause (ii) of this paragraph shall not apply to any proposed Asset Sale for which an independent certified accounting firm has certified to the Managers of the Company and the Trustee that the after-tax cash portion of the consideration to be received by the Company or such Restricted Subsidiary in such proposed Asset Sale is equal to or greater than what the net after-tax 103 cash proceeds would have been had such proposed Asset Sale complied with the 75% limitation set forth in this clause (ii) of this paragraph), or (b) assets of the type described in clause (iii)(a) below; and (iii) within 360 days of such Asset Sale, the Net Proceeds thereof are (a) invested in assets related to the business of the Company or the Restricted Subsidiaries (which, in the case of an Asset Sale of the Diamond Jo or any replacement Gaming Vessel (a "Replacement Vessel"), must be a Gaming Vessel having a fair market value, as determined by an independent appraisal, at least equal to the fair market value of the Diamond Jo or such Replacement Vessel immediately preceding such Asset Sale), (b) applied to repay Indebtedness under Purchase Money Obligations incurred in connection with the assets so sold, (c) applied to repay Indebtedness under the Senior Credit Facility and permanently reduce the commitment thereunder in the amount of the Indebtedness so repaid or (d) to the extent not used as provided in clauses (a), (b), or (c) or any combination thereof, applied to make an offer to purchase Notes as described below (an "Excess Proceeds Offer"); provided, that the Company will not be required to make an Excess Proceeds Offer until the amount of Excess Proceeds is greater than $10.0 million. All Net Proceeds from an Event of Loss shall be used as follows: (1) first, the Company shall use such net cash proceeds to the extent necessary to rebuild, repair, replace or restore the assets subject to such Event of Loss with comparable assets and (2) then, to the extent any Net Proceeds from an Event of Loss are not used as described in the preceding clause (1), all such remaining Net Proceeds shall be reinvested or used as provided in the immediately preceding clause (iii). Pending the final application of any Net Proceeds, the Company may temporarily reduce Indebtedness under the Senior Credit Facility or temporarily invest such Net Proceeds in Cash Equivalents. Net Proceeds not invested or applied as set forth in any of the preceding subclause (a), (b) or (c) of clause (iii) above constitute "Excess Proceeds." If the Company elects, or becomes obligated to make an Excess Proceeds Offer, the Issuers will offer to purchase Notes having an aggregate principal amount equal to the Excess Proceeds (the "Purchase Amount"), at a purchase price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the purchase date. The Issuers must commence such Excess Proceeds Offer not later than 30 days after the expiration of the 360 day period following the Asset Sale that produced such Excess Proceeds. If the aggregate purchase price for the Notes tendered pursuant to the Excess Proceeds Offer is less than the Excess Proceeds, the Company and the Restricted Subsidiaries may use the portion of the Excess Proceeds remaining after payment of such purchase price for general corporate purposes. The Indenture will provide that each Excess Proceeds Offer will remain open for a period of 20 Business Days and no longer, unless a longer period is required by law (the "Excess Proceeds Offer Period"). Promptly after the termination of the Excess Proceeds Offer Period, the Issuers will purchase and mail or deliver payment for the Purchase Amount for the Notes or portions thereof tendered, pro rata or by such other method as may be required by law, or, if less than the Purchase Amount has been tendered, all Notes tendered pursuant to the Excess Proceeds Offer. The principal amount of Notes to be purchased pursuant to an Excess Proceeds Offer may be reduced by the principal amount of Notes acquired by the Issuers through purchase or redemption (other than pursuant to a Change of Control Offer) subsequent to the date of the Asset Sale and surrendered to the Trustee for cancellation. Each Excess Proceeds Offer will be conducted in compliance with applicable regulations under the Federal securities laws, including Exchange Act Rule 14e-1. To the extent that the provisions of any securities laws or regulations conflict with the "Asset Sale" provisions of the Indenture, the Issuers will comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations under the "Asset Sale" provisions of the Indenture by virtue thereof. The Indenture will provide that the Issuers will not, and will not permit any of the Restricted Subsidiaries to, create or suffer to exist or become effective any restriction that would impair the ability of the Issuers to make an Excess Proceeds Offer upon an Asset Sale or, if such Excess Proceeds Offer is made, to pay for the Notes tendered for purchase. 104 There can be no assurance that sufficient funds will be available at the time of any Excess Proceeds Offer to make required repurchases. Limitation on Liens. The Issuers will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien on any asset (including, without limitation, all real, tangible or intangible property) of the Company or any Restricted Subsidiary, whether now owned or hereafter acquired, or on any income or profits therefrom, or assign or convey any right to receive income therefrom, except Permitted Liens. Limitation on Restrictions on Subsidiary Dividends. The Issuers will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (i) pay dividends or make any other distributions to the Company or any of the Restricted Subsidiaries (a) on such Restricted Subsidiary's Capital Stock or (b) with respect to any other interest or participation in, or measured by, such Restricted Subsidiary's profits, or (ii) pay any Indebtedness owed to the Company or any of the Restricted Subsidiaries, or (iii) make loans or advances to the Company or any of the Restricted Subsidiaries, or (iv) transfer any of its assets to the Company or any of the Restricted Subsidiaries, except, with respect to clauses (i) through (iv) above, for such encumbrances or restrictions existing under or by reason of: (a) a Senior Credit Facility containing dividend or other payment restrictions that are not more restrictive in any material respect than those contained in the Indenture on the Issue Date; (b) the Indenture, the Security Documents and the Notes; (c) applicable law or any applicable rule or order of any Governmental Authority; (d) Acquired Debt; provided, that such encumbrances and restrictions are not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; (e) customary non-assignment and net worth provisions of any contract, lease or license entered into in the ordinary course of business; (f) customary restrictions on the transfer of assets subject to a Permitted Lien imposed by the holder of such Lien; (g) the agreements governing Refinancing Indebtedness; provided, that such restrictions contained in any agreement governing such Refinancing Indebtedness are no more restrictive in any material respect than those contained in any agreements governing the Indebtedness being refinanced; (h) the provisions of any Indebtedness or other agreements existing on the Issue Date, as such agreements are in effect on the Issue Date, without giving effect to any amendment or supplement thereto or modification thereof, in each case, to the extent not more restrictive in any material respect than such provisions as in effect on the Issue Date; (i) any restrictions with respect to a Restricted Subsidiary imposed pursuant to a binding agreement that has been entered into for the sale or disposition of all or substantially all of the Equity 105 Interests or assets of such Restricted Subsidiary; provided, that such restrictions only apply to the Equity Interests or assets of such Restricted Subsidiary being sold; and (j) customary restrictions imposed on the transfer of copyrighted, trademarked or patented materials. Merger, Consolidation or Sale of Assets. No Issuer may consolidate or merge with or into (regardless of whether such Issuer is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets (determined on a consolidated basis for such Issuer and its Restricted Subsidiaries) in one or more related transactions to, any other Person, unless: (i) either (A) such Issuer is the surviving Person or (B) the Person formed by or surviving any such consolidation or merger (if other than such Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made is either (x) a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia or (y) if at least one Issuer following any such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition is a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia, a limited liability company formed and existing under the laws of the United States of America, any state thereof or the District of Columbia; (ii) the Person formed by or surviving any such consolidation or merger (if other than such Issuer) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition has been made assumes all the Obligations of such Issuer under the Notes, the Indenture, the Security Documents, the Intercreditor Agreement and the Registration Rights Agreement, pursuant to a supplemental indenture to the Indenture and joinders, as applicable, to the Security Documents, the Intercreditor Agreement and the Registration Rights Agreement, each in a form reasonably satisfactory to the Trustee, (iii) immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default exists; (iv) such transaction would not result in the loss or suspension or material impairment of any Gaming License unless a comparable replacement Gaming License is effective prior to or simultaneously with such loss, suspension or material impairment; and (v) such Issuer, or any Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made, will be permitted, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, to incur at least $1.00 of additional Indebtedness pursuant to the applicable Interest Coverage Ratio test set forth in the first paragraph of or in clause (xiii) of the covenant described under "Limitation on Incurrence of Indebtedness." In the event of any transaction (other than a lease or a transfer of less than all of the Issuers' assets) described in and complying with the conditions listed in the immediately preceding paragraph in which such Issuer is not the surviving Person, such surviving Person or transferee shall succeed to, and be substituted for, and may exercise every right and power of, such Issuer under, and such Issuer shall be discharged from its Obligations under, the Indenture, the Notes, the Security Documents and the Registration Rights Agreement, with the same effect as if such successor Person had been named as such Issuer herein or therein. Limitation on Transactions with Affiliates. The Issuers will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into any contract, agreement, understanding, loan, advance or guaranty with, or for the benefit of, any Affiliate of the Issuers or any of the Restricted Subsidiaries (each of the foregoing, an "Affiliate Transaction"), except for: 106 (i) Affiliate Transactions that, together with all related Affiliate Transactions, have an aggregate value of not more than $1.0 million; provided, that such transactions are conducted in good faith and on terms that are no less favorable to such Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time by such Issuer or such Restricted Subsidiary on an arm's-length basis from a Person that is not an Affiliate of such Issuer or such Restricted Subsidiary; (ii) Affiliate Transactions that, together with all related Affiliate Transactions, have an aggregate value of not more than $5.0 million; provided, that (a) a majority of the disinterested Managers of the Company or, if none, a disinterested committee appointed by the Managers of the Company for such purpose, determine that such transactions are conducted in good faith and on terms that are no less favorable to such Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time by such Issuer or such Restricted Subsidiary on an arm's-length basis from a Person that is not an Affiliate of such Issuer or such Restricted Subsidiary and (b) prior to entering into such transaction the Company shall have delivered to the Trustee an Officers' Certificate certifying to such effect; or (iii) Affiliate Transactions for which the Company delivers to the Trustee an opinion issued by an accounting, appraisal or investment banking firm of national standing (other than Jefferies & Company, Inc. or any of its Affiliates) as to the fairness of such transaction to such Issuer or such Restricted Subsidiary from a financial point of view. Notwithstanding the foregoing, the following will be deemed not to be Affiliate Transactions: (a) transactions between or among the Issuers and/or any or all of the Restricted Subsidiaries; (b) Restricted Payments permitted by the provisions of the Indenture described above under "Limitations on Restricted Payments;" (c) reasonable and customary compensation (including directors' fees) paid to, and indemnity and customary employee benefit arrangements (including directors' and officer's liability insurance) provided for the benefit of, any director, officer, employee or consultant of the Company or any Restricted Subsidiary, or Manager of PGP, in each case entered into in the ordinary course of business and for services provided to the Company, such Restricted Subsidiary or PGP, respectively, as determined in good faith by the Managers of the Company; (d) any agreement or arrangement as in effect on the Issue Date among the Issuers and/or one or more Restricted Subsidiaries, on the one hand, and any officers or Managers thereof and/or any Affiliates of the Company, on the other hand (without giving effect to any amendment or supplement thereto or modification thereof, except for any such amendment, supplement, modification or replacement agreement that is not more disadvantageous to the Holders in any material respect than the original agreement thereof as in effect on the Issue Date), and any transactions contemplated thereby; (e) Permitted Investments (other than Permitted Investments pursuant to clause (xiv) of the definition thereof); and (f) transactions with a joint venture engaged in a Related Business; provided, that all the outstanding ownership interests of such joint venture are controlled only by the Company or the Restricted Subsidiaries and Persons who are not Affiliates of the Company. Restriction on Sale and Issuance of Subsidiary Stock. The Issuers will not, and will not permit any Restricted Subsidiary to, issue or sell any Equity Interests (other than directors' qualifying shares) of any Restricted Subsidiary to any Person other than the Company or a Wholly Owned Subsidiary of the Company; provided, that the Company and the Restricted Subsidiaries may sell all (but not less than all) of the Capital Stock of a Restricted Subsidiary 107 owned by the Company and the Restricted Subsidiaries if the Net Proceeds from such Asset Sale are used in accordance with the terms of the covenant described under "Limitation on Asset Sales." Rule 144A Information Requirement. The Issuers (and the Subsidiary Guarantors) will furnish to the Holders or beneficial holders of Notes, upon their written request, and to prospective purchasers thereof designated by such Holders or beneficial holders, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act for so long as is required for an offer or sale of the Notes to qualify for an exemption under Rule 144A. Subsidiary Guarantors. The Issuers will cause each Restricted Subsidiary (other than a Foreign Subsidiary and other than a Restricted Subsidiary which is a co-Issuer) to (i) execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee, pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Issuers' Obligations under the Notes and the Indenture on the terms set forth in the Indenture and (ii) deliver to the Trustee an Opinion of Counsel that such supplemental indenture has been duly authorized, executed and delivered by such Restricted Subsidiary and constitutes a legal, valid, binding and enforceable obligation, of such Restricted Subsidiary, in each case subject to customary qualifications. Thereafter, such Restricted Subsidiary shall be a Subsidiary Guarantor for all purposes of the Indenture. Release of Subsidiary Guarantors. Upon the sale or disposition (including by merger or sale or transfer of all of the Equity Interests) of a Subsidiary Guarantor (as an entirety) to a Person which is not and is not required to become a Subsidiary Guarantor, or the designation of a Restricted Subsidiary as an Unrestricted Subsidiary, which transaction is otherwise in compliance with the Indenture (including, without limitation, the provisions of the covenants "--Limitation on Asset Sales" and "--Restriction on Sale and Issuance of Subsidiary Stock"), such Subsidiary Guarantor will be deemed released from its Obligations under its Subsidiary Guaranty and the Security Agreements; provided, however, that any such termination shall occur only to the extent that all obligations of such Subsidiary Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure, any Indebtedness of the Issuers or any Indebtedness of any other of the Restricted Subsidiaries shall also terminate upon such release, sale or transfer and none of its Equity Interests are pledged for the benefit of any holder of any Indebtedness of the Issuers or any Indebtedness of any of the Restricted Subsidiaries. Additional Collateral. The Issuers will, and will cause each of the Subsidiary Guarantors to, grant to the Trustee a first priority security interest in all Collateral, whether owned on the Issue Date or thereafter acquired, and to execute and deliver all documents and to take all action reasonably necessary to perfect and protect such a security interest in favor of the Trustee, in each case, subject to the terms of the Intercreditor Agreement. Restrictions on Activities of PGC PGC may not hold any assets, become liable for any obligations or engage in any business activities; provided, that PGC may be a co-obligor of the Notes pursuant to the terms of the Indenture, may be a co-obligor of the OED 13% Senior Secured Notes due 2010 pursuant to the terms of the OED Indenture, may be a co-obligor under the OED Credit Facility and the OED FF&E Facility, to the extent they remain outstanding after the Issue Date, and may engage in any activities directly related or necessary in connection therewith. Entity Classification. The Company is classified as a Flow Through Entity and will not take, or fail to take, any action which would result in the Company no longer being classified as a Flow Through Entity except (i) pursuant to a Permitted C-Corp Conversion or (ii) any transaction permitted under the covenant "Merger, Consideration or Sale of Assets." Reports. Regardless of whether required by the rules and regulations of the Securities and Exchange Commission (the "Commission"), so long as any Notes are outstanding, the Company will furnish to the Trustee and Holders, within 15 days after the Company is or would have been required to file such with the Commission, (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including for each a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's independent certified public accountants and (ii) all information that would be required to be contained in a filing with the Commission on Form 8-K if the Company were required to file such reports. From and after the time the Company files a registration statement with the 108 Commission with respect to the Notes, the Company shall, in lieu of providing such information to the Trustee and the Holders, file such information with the Commission so long as the Commission will accept such filings. EVENTS OF DEFAULT AND REMEDIES Each of the following will constitute an Event of Default under the Indenture: (i) default for 30 days in the payment when due of interest on the Notes; (ii) default in payment of principal (or premium, if any) on the Notes when due at maturity, redemption, by acceleration or otherwise; (iii) default in the performance or breach of the covenants in the Indenture described under "Repurchase Upon Change of Control," or "Limitation on Asset Sales," or "Merger, Consolidation or Sale of Assets;" (iv) failure by the Issuers or any Restricted Subsidiary for 60 days after written notice is given to the Issuers by the Trustee or to the Issuers and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes outstanding to comply with any other agreements in the Indenture or the Notes; (v) an event of default occurs under (after giving effect to any waivers, amendments, applicable grace periods or any extension of any maturity date) any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Issuers or any Restricted Subsidiary (or the payment of which is guaranteed by the Issuers or any Restricted Subsidiary), whether such Indebtedness or guaranty now exists or is created after the Issue Date, if (a) either (1) such default results from the failure to pay principal of or interest on such Indebtedness or (2) as a result of such event of default the maturity of such Indebtedness has been accelerated, and (b) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness with respect to which such a payment event of default (after the expiration of any applicable grace period or any extension of the maturity date) has occurred, or the maturity of which has been so accelerated, exceeds $5.0 million in the aggregate; (vi) failure by the Issuers or any Restricted Subsidiary to pay final judgments (other than to the extent of any judgment as to which a reputable insurance company has accepted liability) aggregating in excess of $5.0 million, which judgments are not discharged, bonded or stayed within 60 days after their entry; (vii) the cessation of substantially all gaming operations of the Company and the Restricted Subsidiaries, taken as a whole, for more than 90 days, except as a result of an Event of Loss; (viii)any revocation, suspension, expiration (without previous or concurrent renewal) or loss of any Gaming License of the Company or any Restricted Subsidiary for more than 90 days; (ix) any Subsidiary Guaranty of a Subsidiary Guarantor which is a Significant Subsidiary ceases to be in full force and effect or shall be held in any judicial proceeding to be unenforceable or invalid or is declared null and void (other than in accordance with the terms of the Subsidiary Guaranty and the Indenture) or any Subsidiary Guarantor which is a Significant Subsidiary denies or disaffirms its Obligations under its Subsidiary Guaranty or the Security Documents (in each case, other than by reason of the termination of the Indenture or the release of any such Subsidiary Guaranty in accordance with the Indenture); (x) (A) any event of default under a Security Document (after giving effect to any applicable grace periods, applicable notice periods, waivers or amendments) or (B) the failure of the Issuers or any 109 Restricted Subsidiary to comply with any material agreement or covenant in, or material provision of, any of the Security Documents, or any breach in any material respect of any material representation or warranty made by the Issuers or any Restricted Subsidiary in any Security Document, and the continuance of such failure or breach for a period of 30 days after written notice is given to the Issuers by the Trustee or to the Issuers and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes outstanding; (xi) any of the Security Documents ceases to be in full force and effect or any of the Security Documents ceases to give the Trustee (or, in the case of a mortgage, ceases to give the Trustee or any other trustee under such mortgage) any of the Liens, rights, powers or privileges purported to be created thereby, or any of the Security Documents is declared null and void, or any of the Issuers or any Subsidiary Guarantor denies that it has any further liability under any Security Document to which it is a party or gives notice of such effect (in each case other than by reason of the termination of the Indenture or any such Security Document in accordance with its terms or the release of any Subsidiary Guarantor in accordance with the Indenture) and the continuance of such failure for a period of 30 days after written notice is given to the Issuers by the Trustee or to the Issuers and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes outstanding; and (xii) certain events of bankruptcy or insolvency with respect to the Issuers, any of the Subsidiary Guarantors or any Restricted Subsidiary that is a Significant Subsidiary. If an Event of Default occurs and is continuing, the Trustee may declare by written notice to the Issuers, or the Holders of at least 25% in principal amount of the then outstanding Notes may declare by written notice to the Issuers and the Trustee all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising under paragraph (xii) above, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Holders of a majority in aggregate principal amount of the Notes then outstanding, by written notice to the Trustee, may on behalf of the Holders of all of the Notes (i) waive any existing Default or Event of Default and its consequences under the Indenture (x) except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes or (y) a Default or an Event of Default with respect to any covenant or provision which cannot be modified or amended without the consent of the Holder of each outstanding Note affected or supermajority approval, which Default or Event of Default may be waived only with the consent of each outstanding Note affected or such supermajority approval, respectively, and/or (ii) rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree if all existing Events of Default (except nonpayment of principal or interest that has become due solely because of the acceleration) have been cured or waived. The Issuers are required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default and what action the Issuers are taking or propose to take with respect thereto. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator, stockholder, member or controlling person of any of the Issuers or any Subsidiary Guarantor, as such, will have any liability for any obligations of any of the Issuers or any Subsidiary Guarantor under the Notes, the Indenture, the Security Documents or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release will be part of the consideration for issuance of the Notes and the Subsidiary Guaranties. Such waiver may not be effective to waive liabilities under the federal securities laws, and it is the view of the Commission that such a waiver is against public policy. 110 LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Issuers may, at their option and at any time, elect to have all of their obligations discharged with respect to the outstanding Notes and the Subsidiary Guarantors' obligations discharged with respect to the Subsidiary Guaranties ("Legal Defeasance") (whereupon the Security Documents shall terminate and the Trustee shall release the Collateral from the Liens created by the Security Documents as provided above under "Security") except for (i) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due from the trust referred to below, (ii) the Issuers' obligations concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and the Issuers' and the Subsidiary Guarantors' obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Issuers may, at their option and at any time, elect to have their obligations released with respect to certain material covenants that are described herein and the Subsidiary Guarantors' obligations discharged with respect to the Subsidiary Guaranties ("Covenant Defeasance") (whereupon the Security Documents shall terminate and the Trustee shall release the Collateral from the Liens created by the Security Documents as provided above under "Security") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Issuers must irrevocably deposit or cause to be irrevocably deposited with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Issuers must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, the Issuers shall have delivered to the Trustee an Opinion of Counsel confirming that (a) the Issuers have received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the Issue Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Issuers shall have delivered to the Trustee an Opinion of Counsel confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit); (v) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which the Issuers or any of the Subsidiaries is a party or by which the Issuers or any of the Subsidiaries is bound; 111 (vi) the Issuers must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Issuers with the intent of preferring the Holders over the other creditors of the Issuers with the intent of defeating, hindering, delaying or defrauding creditors of the Issuers or others; and (vii) each of the Issuers must deliver to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating, subject to certain factual assumptions and bankruptcy and insolvency exceptions, that all conditions precedent provided for in the Indenture relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SATISFACTION AND DISCHARGE The Indenture provides that the Issuers may terminate their obligations and the obligations of the Subsidiary Guarantors under the Indenture, the Notes, the Subsidiary Guaranties and the Security Documents (except as described below) (whereupon the Trustee shall release the Collateral from the Liens created by the Security Documents as provided above under "Security") when: (1) either: (a) all the Notes previously authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced and Notes for whose payment money has theretofore been deposited with the Trustee or the paying agent in trust or segregated and held in trust by the Issuers and thereafter repaid to the Issuers or a Subsidiary Guarantor or discharged from such trust) have been delivered to the Trustee for cancellation; or (b) all Notes have been called for redemption pursuant to the provisions under "Redemption--At the Option of the Issuers" by mailing to holders a notice of redemption or all Notes otherwise have become due and payable; and (i) the Issuers have irrevocably deposited or caused to be irrevocably deposited with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, and interest and liquidated damages, if any, on the Notes to the date of redemption or maturity, as the case may be, together with irrevocable instructions from the Issuers directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (ii) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit); (iii) such deposit shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than the Indenture) to which we, any of the Subsidiary Guarantors or any of the Restricted Subsidiaries are a party or by which we, any of the Subsidiary Guarantors or any of the Restricted Subsidiaries are bound; and (2) each of the Issuers and the Subsidiary Guarantors has paid all other sums payable by it under the Indenture, the Notes, the Subsidiary Guaranties, the Intercreditor Agreement and the Security Documents; and (3) we shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel confirming the satisfaction of all conditions set forth in clauses (1) and (2) above. 112 TRANSFER AND EXCHANGE A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents, and the Issuers may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuers will not be required to transfer or exchange any Note selected for redemption. The Issuers will not be required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered holder of a Note will be treated as the owner of it for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the three succeeding paragraphs, the Indenture, the Notes and, subject to the Intercreditor Agreement, the Security Documents may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for Notes) and any existing Default or Event of Default (except certain payment defaults) or compliance with any provision of the Indenture, the Notes or, subject to the Intercreditor Agreement, the Security Documents may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (i) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (ii) reduce the principal of, or the premium (including, without limitation, redemption premium but not including, except as described in clause (iii) below, any redemption premium relating to the covenants "--Repurchase Upon Change of Control" and "--Limitation on Asset Sales") on, or change the fixed maturity of, any Note; (iii) alter the price at which repurchases of the Notes may be made pursuant to an Excess Proceeds Offer or Change of Control Offer after the corresponding Asset Sale or Change of Control has occurred; (iv) reduce the rate of or change the time for payment of interest, including default interest, on any Note (other than any advance notice requirement with respect to any redemption of the Notes); (v) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on, or redemption payment with respect to, any Note (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); (vi) make any Note payable in money other than that stated in the Notes; (vii) make any change in the provisions of the Indenture relating to waivers of past Defaults with respect to, or the rights of Holders to receive, payments of principal of or interest on the Notes; (viii)waive a redemption payment with respect to any Note (other than, except as described in clause (iii) above, provisions relating to or payments required by the covenants described under the covenants "--Repurchase Upon Change of Control" and "--Limitation on Asset Sales"); (ix) adversely affect the contractual ranking of the Notes or Subsidiary Guaranties; or 113 (x) make any change in the foregoing amendment and waiver provisions. Notwithstanding the foregoing and subject to the Intercreditor Agreement, no portion of the collateral may be released from the Lien of the Security Documents (except in accordance with the provisions of the Indenture and the Security Documents), and none of the Security Documents or the provisions of the Indenture relating to the Collateral may be amended or supplemented, and the rights of any Holders thereunder may not be waived or modified, without, in each case, the consent of the Holders of at least 75% in aggregate principal amount of the then outstanding Notes. Notwithstanding the foregoing and subject to the Intercreditor Agreement, without the consent of the Holders, the Issuers, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture, the Notes, the Registration Rights Agreement or, subject to the Intercreditor Agreement, the Security Documents to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of any of the Issuers' or the Subsidiary Guarantors' obligations to Holders in the case of a merger or consolidation, to provide for the issuance of additional Notes in accordance with the terms of the Indenture, to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights of any such Holder under the Indenture or the Notes, to release any Subsidiary Guaranty permitted to be released under the terms of the Indenture, or to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. CONCERNING THE TRUSTEE The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Issuers, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; provided, that, if the Trustee acquires any conflicting interest, it must eliminate such conflict within 90 days, apply to the Commission for permission to continue, or resign. The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default occurs (and is not cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent person in the conduct of his or her own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full definition of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "2010 Referendum" means a gaming reauthorization referendum to be submitted to the Dubuque County, Iowa electorate in the general election to be held in 2010. "Acquired Debt" means Indebtedness of a Person or any of its subsidiaries existing at the time such Person is merged with or into the Company or a Restricted Subsidiary, becomes a Restricted Subsidiary or Indebtedness assumed in connection with the acquisition of assets from such Person other than Indebtedness incurred in connection with, or in contemplation of, such Person merging with or into the Company or a Restricted Subsidiary or becoming a Restricted Subsidiary or such acquisition of assets. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, will mean (a) the possession, directly or indirectly, of the power to direct or 114 cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise or (b) beneficial ownership of 10% or more of the voting securities of such Person. Notwithstanding the foregoing, the Initial Purchaser shall be deemed not to be an Affiliate of PGP, the Company or any Restricted Subsidiary. "Applicable Capital Gain Tax Rate" means a rate equal to the sum of: (a) the highest marginal Federal income tax rate applicable to net capital gain of an individual who is a citizen of the United States, plus (b) (x) the greatest of (i) an amount equal to the sum of the highest marginal state and local income tax rates applicable to net capital gain of an individual who is a resident of the State of California, (ii) an amount equal to the sum of the highest marginal state and local income tax rates applicable to net capital gain of an individual who is a resident of the State of Louisiana, and (iii) an amount equal to the sum of the highest marginal state and local income tax rates applicable to net capital gain of an individual who is a resident of the State of Iowa, multiplied by (y) a factor equal to 1 minus the highest marginal Federal income tax rate described in clause (a) above. "Applicable Income Tax Rate" means a rate equal to the sum of: (a) the highest marginal Federal ordinary income tax rate applicable to an individual who is a citizen of the United States, plus (b) (x) the greatest of (i) an amount equal to the sum of the highest marginal state and local ordinary income tax rates applicable to an individual who is a resident of the State of California, (ii) an amount equal to the sum of the highest marginal state and local ordinary income tax rates applicable to an individual who is a resident of the State of Louisiana, and (iii) an amount equal to the sum of the highest marginal state and local income tax rates applicable to net capital gain of an individual who is a resident of the State of Iowa, multiplied by (y) a factor equal to 1 minus the highest marginal Federal income tax rate described in clause (a) above. "Asset Sale" means: (i) any direct or indirect sale, assignment, transfer, lease, conveyance, or other disposition (including, without limitation, by way of merger or consolidation) (collectively, a "transfer"), other than in the ordinary course of business, of any assets of the Company or any Restricted Subsidiary; or (ii) direct or indirect issuance or sale of any Equity Interests of any Restricted Subsidiary (other than directors' qualifying shares), in each case to any Person (other than the Company or a Restricted Subsidiary). For purposes of this definition, (a) any series of transactions that are part of a common plan shall be deemed a single Asset Sale and (b) the term "Asset Sale" shall not include: (1) any exchange of gaming equipment or furniture, fixtures or other equipment for replacement items in the ordinary course of business, (2) any transaction or series of transactions that have a fair market value (or result in gross proceeds) of less than $1.0 million, (3) any disposition of all or substantially all of the assets of the Company that is governed under and complies with the terms of the Indenture as described under "--Repurchase Upon Change of Control" and "Certain Covenants--Merger, Consolidation or Sale of Assets," 115 (4) any Investments that are not prohibited by the covenant described under "Certain Covenants--Limitation on Restricted Payments," (5) (A) any transfer of inventory, equipment, receivables or other assets acquired and held for resale in the ordinary course of business or (B) any transfer or liquidation of Cash Equivalents, (6) any transfer of damaged, worn out or other obsolete personal property so long as such property is no longer necessary for the proper conduct of the business of the Company or such Restricted Subsidiary, as applicable, (7) any grant of any Liens not otherwise prohibited by the Indenture, or (8) any transfer of properties or assets by the Company or a Restricted Subsidiary to the Company or any other Restricted Subsidiary. "Bankruptcy Code" means the United States Bankruptcy Code, codified at 11 U.S.C. ss.101-1330, as amended. "beneficial owner" has the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether or not applicable, except that a "person" shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP, and the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Capital Stock" means, (i) with respect to any Person that is a corporation, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (ii) with respect to a limited liability company, any and all membership interests, (iii) with respect to any other Person, any and all partnership or other equity interests of such Person. "Cash Equivalent" means (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) time deposits and certificates of deposit and commercial paper issued by the parent corporation of any domestic commercial bank of recognized standing having capital and surplus in excess of $250.0 million and commercial paper issued by others rated at least A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2 or the equivalent thereof by Moody's Investors Service, Inc. and in each case maturing within one year after the date of acquisition; (iii) investments in money market funds substantially all of whose assets comprise securities of the type described in clauses (i) and (ii) above and (iv) repurchase obligations for underlying securities of the types and with the maturities described above. "Change of Control" means the occurrence of any of the following events: (a) any merger or consolidation of the Company or PGP with or into any Person or any sale, transfer or other conveyance, whether direct or indirect, of all or substantially all of the assets of the Company or PGP, on a consolidated basis, in one transaction or a series of related transactions, if, immediately after giving effect to such transaction(s), any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) (other than an Excluded Person) is or becomes the "beneficial owner," directly or indirectly, of more than 50% of the total voting power in the aggregate of the Voting Stock of the transferee(s) or surviving entity or entities; 116 (b) any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) (other than an Excluded Person) is or becomes the "beneficial owner," directly or indirectly, of more than 50% of the total voting power in the aggregate of the Voting Stock of the Company or PGP; (c) after any bona fide underwritten registered public offering of Capital Stock of the Company, during any period of 24 consecutive months after the Issue Date, individuals who at the beginning of any such 24-month period constituted the Managers of the Company (together with any new Managers whose election by such Managers or whose nomination for election by the Members was approved by a vote of a majority of the Managers then still in office who were either Managers at the beginning of such period or whose election or nomination for election was previously so approved, including new Managers designated in or provided for in an agreement regarding the merger, consolidation or sale, transfer or other conveyance, of all or substantially all of the assets of the Company, if such agreement was approved by a vote of such majority of Managers) cease for any reason to constitute a majority of the Managers of the Company then in office, provided, however, that there shall be no Change of Control pursuant to this clause (iii) if during such 24-month period any of the Excluded Persons continues to control or manage, directly or indirectly, the day-to-day operations of the Company; (d) the Company adopts a plan of liquidation or dissolution; or (e) the first day on which the Company fails to own 99% of the issued and outstanding Equity Interests of PGC; provided, that a "Change of Control" shall not occur solely by reason of a Permitted C-Corp Conversion. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means Peninsula Gaming, LLC, a Delaware limited liability company, and its successors in accordance with the terms of the Indenture, and not any of its subsidiaries. "Consolidated EBITDA" means, with respect to any Person (the referent Person) for any period, the sum of Consolidated Net Income of such Person and the Restricted Subsidiaries for such period, without duplication; plus (i) consolidated income tax expense of such Person and the Restricted Subsidiaries paid or accrued in accordance with GAAP for such period and the amount of Permitted Tax Distributions subtracted from Net Income in the determination of the Consolidated Net Income of such Person for such period; plus (ii) Consolidated Interest Expense, to the extent that such Consolidated Interest Expense was deducted in computing such Consolidated Net Income; plus (iii) Consolidated Non-Cash Charges, to the extent deducted in computing such Consolidated Net Income; plus (iv) pre-opening costs and expenses, to the extent deducted in computing such Consolidated Net Income, with respect to any Gaming Property that was, or is under, construction; minus (v) (x) extraordinary non-cash charges increasing such Consolidated Net Income and (y) the amount of all cash payments made by such Person or any of the Restricted Subsidiaries during such period to the extent such payments relate to non-cash charges that were added back in determining Consolidated EBITDA for such period or any prior period; provided, however, that in determining Consolidated EBITDA with respect to OED for any period ending on or about: (A) March 31, 2004, Consolidated EBITDA of OED for such period shall be deemed to be equal to the 117 product of (x) Consolidated EBITDA of OED for the period from January 1, 2004 to the last day of such period and (y) 4, (B) June 30, 2004, Consolidated EBITDA of OED for such period shall be deemed to be equal to the product of (x) Consolidated EBITDA of OED for the period from January 1, 2004 to the last day of such period and (y) 2, and (C) September 30, 2004, Consolidated EBITDA of OED for such period shall be deemed to be equal to the product of (x) Consolidated EBITDA of OED for the period from January 1, 2004 to the last day of such period and (y) 1.333. "Consolidated Interest Expense" means, with respect to any Person for any period, (a) the consolidated interest expense of such Person and the Restricted Subsidiaries for such period, net of interest income, whether capitalized, paid, accrued or scheduled to be paid or accrued (including amortization of original issue discount, noncash interest payment, the interest component of Capital Lease Obligations and all commissions, discounts and other fees and charges owed with respect to bankers' acceptances and letters of credit financings), to the extent such expense was deducted in computing Consolidated Net Income of such Person for such period less (b) amortization expense, write-off of deferred financing costs and any charge related to any premium or penalty paid, in each case accrued during such period in connection with redeeming or retiring any Indebtedness before its stated maturity, as determined in accordance with GAAP, to the extent such expense, cost or charge was included in the calculation made pursuant to clause (a) above, provided, that any premiums, fees and expenses (including the amortization thereof) payable in connection with the offering of the Notes and the application of the net proceeds therefrom or any other refinancing of Indebtedness will be excluded. "Consolidated Net Income" means, with respect to any Person (the referent Person) for any period, the sum of (a) the aggregate of the Net Income of such Person and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP; provided, that (i) the Net Income of any other Person (other than a Restricted Subsidiary of the referent Person) shall be included only to the extent of the amount of dividends or distributions paid to the referent Person or a Wholly Owned Subsidiary of the referent Person, and (ii) the Net Income of any Restricted Subsidiary will not be included to the extent that declarations of dividends or similar distributions by that Restricted Subsidiary are not at the time permitted, directly or indirectly, by operation of the terms of its organizational documents or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its owners, and (b) Consolidated Non-Cash Charges described in clauses (ii) and (iv) of the definition of "Consolidated Non-Cash Charges," of such Person and the Restricted Subsidiaries to the extent deducted in computing such Net Income. "Consolidated Net Worth" means, with respect to any Person, the total stockholders' (or members') equity of such Person determined on a consolidated basis in accordance with GAAP, adjusted to exclude (to the extent included in calculating such stockholders' (or members') equity), (i) the amount of any such stockholders' (or members') equity attributable to Disqualified Capital Stock or treasury stock of such Person and its consolidated subsidiaries, and (ii) all upward revaluations and other write-ups in the book value of any asset of such Person or a consolidated subsidiary of such Person subsequent to the Issue Date, and (iii) all Investments in subsidiaries of such Person that are not consolidated subsidiaries and in Persons that are not subsidiaries of such Person. "Consolidated Non-Cash Charges" means, with respect to any Person for any period, (a) the aggregate depreciation and amortization expense for such Person and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP and (b) all other non-cash charges of such Person and the Restricted Subsidiaries for such period, in each case, determined on a consolidated basis in accordance with GAAP, including, without limitation, non-cash charges related to (i) Management Arrangements or the pricing or repricing or issuances of Equity Interests of the Company or PGP to employees of the Company (whether accruing at or subsequent to the time of such repricing or issuance), (ii) impairment of goodwill, intangibles or fixed assets, (iii) purchase accounting adjustments, and (iv) restructuring charges, non-capitalized transaction costs and other non-cash charges incurred in connection with actual or proposed financings, acquisitions or divestitures (including, without limitation, the issuance of the Notes, borrowings under the Senior Credit Facility, refinancing of the Company's 12 1/4% Senior Secured Notes due 2006 and the OED 13% Senior Secured Notes due 2010 with Contingent Interest or otherwise) of such Person and the Restricted Subsidiaries for such period; but, in each case, excluding (x) any such charges constituting an extraordinary item or loss, and (y) any such charge which requires an accrual of or a reserve for cash charges for any future period. 118 "Default" means any event that is, or after notice or the passage of time or both would be, an Event of Default. "Disqualified Capital Stock" means any Equity Interest that (i) either by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) is or upon the happening of an event would be required to be redeemed or repurchased prior to the final stated maturity of the Notes or is redeemable at the option of the holder thereof at any time prior to such final stated maturity, or (ii) is convertible into or exchangeable at the option of the issuer thereof or any other Person for debt securities that are pari passu or senior in respect of payment to the Notes. Notwithstanding the foregoing, any Equity Interests that would constitute Disqualified Capital Stock solely because such Equity Interests mature or become mandatorily redeemable, or give the holders thereof the right to require the Company to repurchase such Equity Interests, in each case, upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Capital Stock if the terms of such Equity Interests provide that the Company may not repurchase or redeem any such Equity Interests pursuant to such provisions prior to the Company's purchase of the Notes as are required to be purchased pursuant to the provisions of the Indenture as described under "--Repurchase Upon Change of Control" and "--Certain Covenants--Limitation on Asset Sales." "DJL" means Diamond Jo, LLC (formerly named Peninsula Gaming Company, LLC), a Delaware limited liability company. "Domestic Restricted Subsidiary" means any Restricted Subsidiary other than a Foreign Subsidiary. "Equity Holder" means (a) with respect to a corporation, each holder of stock of such corporation, (b) with respect to a limited liability company or similar entity, each member of such limited liability company or similar entity, (c) with respect to a partnership, each partner of such partnership, (d) with respect to any entity described in clause (a)(iv) of the definition of "Flow Through Entity," the owner of such entity, and (e) with respect to a trust described in clause (a)(v) of the definition of "Flow Through Entity," an owner thereof. "Equity Interests" means Capital Stock or warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means (i) an underwritten offering of Qualified Capital Stock of the Company pursuant to a registration statement filed with and declared effective by the Commission in accordance with the Securities Act or (ii) an offering of Qualified Capital Stock of the Company pursuant to an exemption from the registration requirements of the Securities Act. "Event of Loss" means, with respect to any property or asset, any (i) loss, destruction or damage of such property or asset or (ii) any condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such property or asset, or confiscation or requisition of the use of such property or asset. "Excess Cash Distribution Amount for Taxes" means the excess of (x) the aggregate actual cash distributions received by the Company or a Restricted Subsidiary from all Flow Through Entities that are not Restricted Subsidiaries of the Company during the period commencing with the Issue Date and continuing to and including the date on which a proposed Permitted Tax Distribution is to be made under clause (iii) of the second sentence contained in the description of "--Certain Covenants--Limitations on Restricted Payments" over (y) the aggregate amount of such cash distributions described in the immediately preceding clause (x) that have already been taken into account for purposes of making (I) Permitted Tax Distributions previously made and which was attributable to a Flow Through Entity that was not a Restricted Subsidiary at the time such Permitted Tax Distribution was made plus (II) Restricted Payments permitted by clause (1) or (4) of clause (c) of the first sentence contained in the description of "--Certain Covenants--Limitations on Restricted Payments" (treating such cash distributions described in this clause (y)(II) as used to make a Restricted Payment during such period only to the extent that in such period, the total amount of Restricted Payments actually made during such period exceeded the excess of (m) the total amount of Restricted Payments permitted to be made in such period over (n) the amount of such cash distributions described in the immediately preceding clause (x) that were actually received by the Company or a Restricted Subsidiary during such period and that were not previously used to make a Permitted Tax Distribution. 119 "Excluded Person" means (i) PGP, (ii) PGP Investors, LLC, (iii) M. Brent Stevens, (iv) Michael S. Luzich, (v) OEDA, (vi) any Affiliate or Manager of PGP, PGP Investors, LLC, OEDA, M. Brent Stevens or Michael S. Luzich (collectively, the "Existing Holders"), (vii) any trust, corporation, partnership or other entity (a) controlled by the Existing Holders and members of the immediate family of the Existing Holders or (b) 80% of the beneficiaries, stockholders, partners or owners of which consist solely of the Existing Holders and members of the immediate family of the Existing Holders or (viii) any partnership the sole general partners of which consist solely of the Existing Holders and members of the immediate family of the Existing Holders. "FF&E" means furniture, fixtures and equipment (including Gaming Equipment) acquired by the Issuers and the Restricted Subsidiaries in the ordinary course of business for use in the construction and business operations of the Company or the Restricted Subsidiaries. "FF&E Financing" means Indebtedness, the proceeds of which are used solely by the Issuers and the Restricted Subsidiaries (and concurrently with the incurrence of such Indebtedness) to acquire or lease or improve or refinance, respectively, FF&E; provided, that (x) the principal amount of such FF&E Financing does not exceed the cost (including sales and excise taxes, installation and delivery charges, capitalized interest and other direct fees, costs and expenses) of the FF&E purchased or leased with the proceeds thereof or the cost of such improvements, as the case may be, and (y) such FF&E Financing is secured only by the assets so financed and assets which, immediately prior to the incurrence of such FF&E Financing, secured other Indebtedness of the Issuers and the Restricted Subsidiaries (to the extent such other Indebtedness and the Liens securing such other Indebtedness are permitted under the Indenture) to the lender of such FF&E Financing. "Flow Through Entity" means an entity that (a) for Federal income tax purposes constitutes (i) an "S corporation" (as defined in Section 1361(a) of the Code), (ii) a "qualified subchapter S subsidiary" (as defined in Section 1361(b)(3)(B) of the Code), (iii) a "partnership" (within the meaning of Section 7701(a)(2) of the Code) other than a "publicly traded partnership" (as defined in Section 7704 of the Code), (iv) an entity that is disregarded as an entity separate from its owner under the Code, the Treasury regulations or any published administrative guidance of the Internal Revenue Service, or (v) a trust, the income of which is includible in the taxable income of the grantor or another person under sections 671 through 679 of the Code (the entities described in the immediately preceding clauses (i), (ii), (iii), (iv) and (v), a "Federal Flow Through Entity") and (b) for state and local jurisdictions in respect of which Permitted Tax Distributions are being made, is subject to treatment on a basis under applicable state or local income tax law substantially similar to a Federal Flow Through Entity. "Foreign Restricted Subsidiary" means any Restricted Subsidiary that is also a Foreign Subsidiary. "Foreign Subsidiary" means any Subsidiary which (i) is not organized under the laws of the United States, any state thereof or the District of Columbia and (ii) conducts substantially all of its business operations outside the United States of America. "GAAP" means generally accepted accounting principles, as in effect from time to time, set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, and in the rules and regulations of the Commission. "Gaming Authorities" means any agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of the United States Federal government, any foreign government, any state, province or city or other political subdivision or otherwise, whether now or hereafter existing, or any officer or official thereof, including, without limitation, the Iowa Gaming Commission, the Louisiana Gaming Control Board, the Louisiana State Racing Commission and any other agency, in each case, with authority to regulate any gaming or racing operation (or proposed gaming or racing operation) owned, managed or operated by the Company or any of the Subsidiaries. "Gaming Equipment" means slot machines, video poker machines, and all other gaming equipment and related signage, accessories and peripheral equipment. 120 "Gaming FF&E Financing" means FF&E Financing, the proceeds of which are used solely by the Issuers and the Restricted Subsidiaries to acquire or lease FF&E that constitutes Gaming Equipment. "Gaming Licenses" means every material license, material franchise, material registration, material qualification, findings of suitability or other material approval or authorization required to own, lease, operate or otherwise conduct or manage riverboat, dockside or land-based gaming or racing activities in any state or jurisdiction in which the Company or any of the Restricted Subsidiaries conducts business (including, without limitation, all such licenses granted by the Gaming Authorities), and all applicable liquor and tobacco licenses. "Gaming Property" means: (i) the Diamond Jo and the Evangeline Downs horse racetrack and casino, in each case, so long as it is owned by the Company or a Restricted Subsidiary and (ii) any other gaming facility or gaming operation owned and controlled or to be owned and controlled after the Issue Date by the Company or a Restricted Subsidiary and that contains, or that based upon a plan approved by the Company's Managers will contain upon the completion of the construction or development thereof, an aggregate of at least 500 slot machines or other gaming devices; provided, in each case, that the property and assets (other than Excluded Assets) of such Gaming Property constitute Collateral. "Gaming Property Financing" means a financing, in whole or in part, of (x) the acquisition of any Gaming Property, (y) the construction of any Gaming Property (but only to the extent that the proceeds of such Indebtedness are used to acquire land, furniture, fixtures and equipment, prepare the site or construct improvements thereon) or (z) an investment in any Gaming Property. "Gaming Vessel" means a riverboat casino (i) which is substantially similar in size and space to the Diamond Jo, (ii) with at least the same overall qualities and amenities as the Diamond Jo, and (iii) that is developed, constructed and equipped to be in compliance with all federal, state and local laws, including, without limitation, the cruising requirements of Chapter 99F of the Iowa Code. In the event the laws of the State of Iowa change to permit the development and operation of additional land-based casinos, the term "Gaming Vessel" shall be deemed to include a land-based casino meeting the requirements of clauses (i), (ii) and (iii) above. "Government Securities" means (i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Security or a specific payment of principal of or interest on any such Government Security held by such custodian for the account of the holder of such depository receipt; provided, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Security or the specific payment of principal of or interest on the Government Security evidenced by such depository receipt. "Governmental Authority" means any agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of the United States or foreign government, any state, province or any city or other political subdivision or otherwise and whether now or hereafter in existence, or any officer or official thereof, and any maritime authority. "guaranty" or "guarantee," used as a noun, means any guaranty (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other Obligation. "guarantee" or "guaranty" used as a verb, has a correlative meaning. "Hedging Obligations" means, with respect to any Person, the Obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements, interest rate exchange agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates, including any arrangement whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a fixed or floating rate of interest on a stated notional amount in 121 exchange for periodic payments made by such Person calculated by applying a fixed or floating rate of interest on the same notional amount. "Holder" means the Person in whose name a Note is registered in the register of the Notes. "Indebtedness" of any Person means (without duplication) (i) all liabilities and obligations, contingent or otherwise, of such Person (a) in respect of borrowed money (regardless of whether the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (b) evidenced by bonds, debentures, notes or other similar instruments, (c) representing the deferred purchase price of property or services (other than trade payables on customary terms incurred in the ordinary course of business), (d) created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) representing Capital Lease Obligations, (f) under bankers' acceptance and letter of credit facilities, (g) to purchase, redeem, retire, defease or otherwise acquire for value any Disqualified Capital Stock, or (h) in respect of Hedging Obligations; (ii) all Indebtedness of others that is guaranteed by such Person; and (iii) all Indebtedness of others that is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; provided, that the amount of such Indebtedness shall (to the extent such Person has not assumed or become liable for the payment of such Indebtedness) be the lesser of (1) the fair market value of such property at the time of determination and (2) the amount of such Indebtedness. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. The principal amount outstanding of any Indebtedness issued with original issue discount is the accreted value of such Indebtedness. "Interest Coverage Ratio" means, for any period, the ratio of (i) Consolidated EBITDA of the Company for such period, to (ii) Consolidated Interest Expense of the Company for such period. In calculating Interest Coverage Ratio for any period, (a) pro forma effect shall be given to the incurrence, repayment or retirement by the Company or any of the Restricted Subsidiaries of any Indebtedness (other than Indebtedness incurred in the ordinary course of business for general corporate purposes pursuant to working capital facilities) subsequent to the commencement of the period for which the Interest Coverage Ratio is being calculated, as if the same had occurred at the beginning of the applicable period; (b) acquisitions that have been made by the Company or any of the Restricted Subsidiaries, including all mergers and consolidations, subsequent to the commencement of such period shall be calculated on a pro forma basis, assuming that all such acquisitions, mergers and consolidations had occurred on the first day of such period, including giving effect to reductions in costs for such period that are directly attributable to the elimination of duplicative functions and expenses (regardless of whether such cost savings could then be reflected in pro forma financial statements under GAAP, Regulation S-X promulgated by the SEC or any other regulation or policy of the SEC) as a result of such acquisition, merger or consolidation, provided that (x) such cost savings were identified and quantified in an Officers' Certificate delivered to the Trustee at the time of the consummation of such acquisition, merger or consolidation and such Officers' Certificate states that such officers believe in good faith that actions will be commenced or initiated within 90 days of the consummation of such acquisition, merger or consolidation to effect such cost savings and sets forth the specific steps to be taken within the 90 days after such acquisition, merger or consolidation to accomplish such cost savings, and (y) with respect to each acquisition, merger or consolidation completed prior to the 90th day preceding such date of determination, actions were commenced or initiated by the Company or any of its Restricted Subsidiaries within 90 days of such acquisition, merger or consolidation to effect the cost savings identified in such Officers' Certificate (regardless, however, of whether the corresponding cost savings have been achieved). Without limiting the foregoing, the financial information of the Company with respect to any portion of such period that falls before the Issue Date shall be adjusted to give pro forma effect to the issuance of the Notes and the application of the proceeds therefrom as if they had occurred at the beginning of such period. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of loans, guarantees, advances or capital contributions (excluding (i), payroll commission, travel and similar advances to officers and employees of such Person made in the ordinary course of business and (ii) bona fide accounts receivable arising from the sale of goods or services in the ordinary course of 122 business consistent with past practice), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "Iowa Code" means the Code of Iowa (2003), as amended from time to time. "Iowa Gaming Commission" means the Iowa Racing and Gaming Commission, or any successor Gaming Authority. "Issue Date" means the date upon which the Notes are first issued. "Issuers" means PGL, DJL and PGC and their respective successors in accordance with the terms of the Indenture, and not any of their respective subsidiaries. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, regardless of whether filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Management Arrangements" means profits interests grants or similar equity interest arrangements, employment agreements, consulting agreements, management agreements and other similar arrangements between the Company or any of its Affiliates and any manager, officer, member or employee thereof or consultant thereto and such or similar agreements as may be modified, supplemented, amended, entered into or restated from time to time consistent with industry practice and approved by the Managers of PGP or the Company, provided that the aggregate amount of payments made to an Excluded Person (other than the Company or any of the Restricted Subsidiaries) pursuant to any such equity interest, employment, consulting, management or similar agreements or arrangements for any fiscal year shall not exceed 4.0% of the Consolidated EBITDA of the Company for the immediately preceding fiscal year. "Management Services Agreement" means the Amended and Restated Management Services Agreement, dated as of February 25, 2003, by and among DJL, OEDA and OED, as in effect on the Issue Date, without giving effect to any amendment or supplement thereto or modification thereof, except to the extent that such amendment, supplement or modification would otherwise have been permitted under the covenant "Limitation on Transactions with Affiliates" if OEDA were not a Restricted Subsidiary. "Managers" means, with respect to any Person (i) if such Person is a limited liability company, the board member, board members, manager or managers appointed pursuant to the operating agreement of such Person as then in effect or (ii) otherwise, the members of the board of directors or other governing body of such Person. "Members" means the holders of all of the Voting Stock of the Company. "Net Income" means, with respect to any Person for any period, (a) the net income (or loss) of such Person for such period, determined in accordance with GAAP, excluding (to the extent included in calculating such net income) (i) any gain or loss, together with any related taxes paid or accrued on such gain or loss, realized in connection with any Asset Sales and dispositions pursuant to sale-leaseback transactions and (ii) any extraordinary gain or loss, together with any taxes paid or accrued on such gain or loss, reduced by (b) the maximum amount of Permitted Tax Distributions attributable to such net income for such period. 123 "Net Proceeds" means the aggregate proceeds received in the form of cash or Cash Equivalents in respect of any Asset Sale (including issuance or other payments in an Event of Loss and payments in respect of deferred payment obligations and any cash or Cash Equivalents received upon the sale or disposition of any non-cash consideration received in any Asset Sale, in each case when received), net of: (a) the reasonable and customary direct out-of-pocket costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions), other than any such costs payable to an Affiliate of the Company, (b) taxes required to be paid by the Company, any of the Subsidiaries, or any Equity Holder of the Company (or, in the case of any Company Equity Holder that is a Flow Through Entity, the Upper Tier Equity Holder of such Flow Through Entity) in connection with such Asset Sale in the taxable year that such sale is consummated or in the immediately succeeding taxable year, the computation of which shall take into account the reduction in tax liability resulting from any available operating losses and net operating loss carryovers, tax credits and tax credit carryforwards, and similar tax attributes, (c) amounts required to be applied to the permanent repayment of Indebtedness in connection with such Asset Sale, and (d) appropriate amounts provided as a reserve by the Company or any Restricted Subsidiary, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Company or such Restricted Subsidiary, as the case may be, after such Asset Sale (including, without limitation, as applicable, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations arising from such Asset Sale). "Obligation" means any principal, premium, interest, penalty, fee, indemnification, reimbursement, damage (including, without limitation, liquidated damages) and other obligation and liability payable under the documentation governing any liability. "OED" means The Old Evangeline Downs, L.L.C., a Louisiana limited liability company. "OED 13% Senior Secured Notes due 2010" means the 13% Senior Secured Notes due 2010 with Contingent Interest issued under the OED Indenture. "OED Indenture" means that certain Indenture, dated as of February 25, 2003, among OED, The Old Evangeline Downs Capital Corp., the Guarantors (as defined therein) and U.S. Bank National Association, as trustee. "OEDA" means OED Acquisition, LLC, a Delaware limited liability company. "Officers' Certificate" means the officers' certificate to be delivered upon the occurrence of certain events as set forth in the Indenture. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee. Such counsel may be an employee of or counsel to any of the Issuers, any Subsidiary of any of the Issuers or the Trustee. "OTB Operations" means all of the assets and properties of the Company and its subsidiaries (including, but not limited to, all Gaming Licenses) related to the business operation of any off-track betting parlor or similar facility operated or owned by the Company or such subsidiary. "Permitted C-Corp Conversion" means a transaction resulting in the Company becoming subject to tax under the Code as a corporation (a "C Corporation"); provided, that: 124 (1) the C Corporation resulting from such transaction, if a successor to Peninsula Gaming, LLC, (a) is a corporation, limited liability company or other entity organized and existing under the laws of any state of the United States or the District of Columbia, (b) assumes all of the obligations of the Company under the Notes, the Security Documents and the Indenture pursuant to a supplemental indenture in form reasonably satisfactory to the Trustee and (c) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction; (2) after giving effect to such transaction no Default or Event of Default exists; (3) prior to the consummation of such transaction, the Company shall have delivered to the Trustee (a) an Opinion of Counsel to the effect that the holders of the outstanding Notes will not recognize income gain or loss for Federal income tax purposes as a result of such Permitted C-Corp Conversion and will be subject to Federal income tax on the same amounts, in the same manner, and at the same times as would have been the case if such Permitted C-Corp Conversion had not occurred and (b) an Officer's Certificate as to compliance with all of the conditions set forth in paragraphs (1), (2) and (3)(a) above; and (4) such transaction would not (a) result in the loss or suspension or material impairment of any Gaming License unless a comparable replacement Gaming License is effective prior to or simultaneously with such loss, suspension or material impairment or (b) require any holder or beneficial owner of Notes to obtain a Gaming License or be qualified or found suitable under any applicable gaming or racing laws. "Permitted Investments" means: (i) Investments in the Company or in any Wholly Owned Subsidiary; (ii) Investments in Cash Equivalents; (iii) Investments in a Person, if, as a result of such Investment, such Person (a) becomes a Wholly Owned Subsidiary, or (b) is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary; (iv) Hedging Obligations; (v) Investments as a result of consideration received in connection with an Asset Sale made in compliance with the covenant described under the caption "Limitation on Asset Sales;" (vi) Investments existing on the Issue Date; (vii) Investments paid for solely with CapitaL Stock (other than Disqualified Capital Stock) of the Company; (viii)credit extensions to gaming customers in the ordinary course of business, consistent with industry practice; (ix) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company (a) in satisfaction of judgments or (b) pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of trade creditors or customers; and (x) loans or other advances to employees of the Company and the Subsidiaries made in the ordinary course of business in an aggregate amount not to exceed $500,000 at any one time outstanding; 125 (xi) intercompany Indebtedness incurred pursuant to clause (v) of the covenant "Limitation on Incurrence of Indebtedness;" (xii) Investments in the Notes or any Additional Notes; (xiii)Investments not otherwise permitted by clauses (i) through (xii) above, not to exceed $10.0 million. "Permitted Liens" means: (i) Liens securing Indebtedness of the Company or any of the Restricted Subsidiaries incurred pursuant to clause (i) under the caption "Limitation on Incurrence of Indebtedness;" (ii) Liens arising by reason of any judgment, decree or order of any court for an amount and for a period not resulting in an event of default with respect thereto, so long as such Lien is being contested in good faith and is adequately bonded, and any appropriate legal proceedings that may have been duly initiated for the review of such judgment, decree or order shall not have been finally adversely terminated or the period within which such proceedings may be initiated shall not have expired; (iii) security for the performance of bids, tenders, trade, contracts (other than contracts for the payment of borrowed money) or leases, surety and appeal bonds, performance and return-of-money bonds and other obligations of a like nature incurred in the ordinary course of business, consistent with industry practice; (iv) Liens for taxes, assessments or other governmental charges either (a) not yet delinquent or (b) that are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Company or the Restricted Subsidiaries in accordance with GAAP; (v) Liens of carriers, warehousemen, mechanics, landlords, material men, suppliers, repairmen or other like Liens arising by operation of law in the ordinary course of business consistent with industry practices and Liens on deposits made to obtain the release of such Liens if (a) the underlying obligations are not overdue for a period of more than 30 days or (b) such Liens are being contested in good faith and by appropriate proceedings and adequate reserves with respect thereto are maintained on the books of the Company or the Restricted Subsidiaries in accordance with GAAP; (vi) easements, rights of way, zoning and similar restrictions and other similar encumbrances or title defects incurred in the ordinary course of business, and that do not materially detract from the value of the property subject thereto (as such property is used by the Company or a Restricted Subsidiary) or materially interfere with the ordinary conduct of the business of the Company or any of the Restricted Subsidiaries; (vii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security legislation or otherwise arising from statutory or regulatory requirements of the Company or any of the Restricted Subsidiaries; (viii)Liens securing Refinancing Indebtedness incurred in compliance with the Indenture to refinance Indebtedness secured by Liens; provided, (a) such Liens do not extend to any additional property or assets; (b) if the Liens securing the Indebtedness being refinanced were subordinated to or pari passu with the Liens securing the Notes, the Subsidiary Guaranties or any intercompany loan, as applicable, such new Liens are subordinated to or pari passu with such Liens to the same extent, 126 and any related subordination or intercreditor agreement is confirmed; and (c) such Liens are no more adverse to the interests of Holders than the Liens replaced or extended thereby; (ix) Liens that secure Acquired Debt or Liens on property of a Person existing at the time such Person is merged into or consolidated with, or such property was acquired by, the Company or any Restricted Subsidiary; provided, that such Liens do not extend to or cover any other property or assets and were not put in place in anticipation of such acquisition, merger or consolidation; (x) any interest or title of a lessor under any Capital Lease Obligation or operating lease; provided that such Liens do not extend to any property or assets which are not leased property subject to such Capital Lease Obligation; (xi) Liens that secure Purchase Money Obligations, Capital Lease Obligations or FF&E Financing permitted to be incurred under the Indenture; provided that such Liens do not extend to or cover any property or assets other than those being acquired, leased or developed and property and assets which, immediately prior to the incurrence of such Purchase Money Obligations, Capital Lease Obligations or FF&E Financing, secured other Indebtedness of the Issuers and the Restricted Subsidiaries (to the extent such other Indebtedness and the Liens securing such other Indebtedness are permitted under the Indenture) to the lender of such Purchase Money Obligations, Capital Lease Obligations or FF&E Financing; (xii) whether or not existing on the Issue Date, Liens securing Obligations under the Indenture, the Notes, the Subsidiary Guaranties or the Security Documents; (xiii) with respect to any vessel included in the Collateral, certain maritime liens, including liens for crew's wages and salvage; (xiv) Liens in favor of the Company or any Subsidiary Guarantor, in which a security interest has been granted to the Trustee to secure the payment of the Notes or a Subsidiary Guaranty, respectively; (xv) Liens arising from precautionary Uniform Commercial Code financing statement filing regarding operating leases entered into by the Company or any of the Subsidiaries in the ordinary course of business; (xvi) Liens incurred in the ordinary course of business securing Hedging Obligations, which Hedging Obligations relate to Indebtedness that is otherwise permitted under the Indenture; (xvii) Liens existing on the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date; (xviii) Liens on a pledge of the Capital Stock of any Unrestricted Subsidiary securing any Indebtedness of such Unrestricted Subsidiary; (xix) leases or subleases granted to others not interfering in any material respect with the business of the Company or any of the Restricted Subsidiaries or materially detracting from the value of the relative assets of the Company or any Restricted Subsidiary; (xx) Liens securing reimbursement obligations with respect to commercial letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (xxi) Liens securing intercompany Indebtedness incurred pursuant to clause (v) of the covenant "Limitation on Incurrence of Indebtedness;" 127 (xxii) Liens securing guarantees by Subsidiary Guarantors of Indebtedness issued by the Company if such guarantees are permitted by the covenant "Limitation on Incurrence of Indebtedness;" (xxiii) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; and (xxiv) Liens securing Indebtedness of the Company or any of the Restricted Subsidiaries incurred pursuant to clause (xiii) under the caption "Limitation on Incurrence of Indebtedness;" provided that (a) such Liens do not extend to or cover any property or assets other than those of the Gaming Property being acquired and (b) such Liens are contractually subordinated to the Liens securing the Senior Credit Facility, the Notes and the Subsidiary Guaranties. "Permitted Tax Distributions" in respect of the Company means, with respect to any taxable year or portion thereof in which the Company is a Flow Through Entity, the sum of: (i) the product of (a) the excess of (1) all items of taxable income or gain (other than capital gain) of the Company for such year or portion thereof over (2) all items of taxable deduction or loss (other than capital loss) of the Company for such year or portion thereof and (b) the Applicable Income Tax Rate, plus (ii) the product of (a) the net capital gain (i.e., net long-term capital gain over net short-term capital loss), if any, of the Company for such year or portion thereof and (b) the Applicable Capital Gain Tax Rate, plus (iii) the product of (a) the net short-term capital gain (i.e., net short-term capital gain in excess of net long-term capital loss), if any, of the Company for such year or portion thereof and (b) the Applicable Income Tax Rate, minus (iv) the aggregate Tax Loss Benefit Amount for the Company for such year or portion thereof; provided, that in no event shall the Applicable Income Tax Rate or the Applicable Capital Gain Tax Rate exceed the greater of (i) the greater of (a) the highest aggregate applicable effective marginal rate of Federal, state, and local income tax to which a corporation doing business in the state of California and (b) the highest aggregate applicable effective marginal rate of Federal, state, and local income tax to which a corporation doing business in the state of Louisiana, would be subject to in the relevant year of determination (as certified to the Trustee by a nationally recognized tax accounting firm) plus 5% and (ii) 60%. For purposes of calculating the amount of the Permitted Tax Distributions the items of taxable income, gain, deduction or loss (including capital gain or loss) of any Flow Through Entity of which the Company is treated for Federal income tax purposes as a member (but only for periods for which such Flow Through Entity is treated as a Flow Through Entity), which items of income, gain, deduction or loss are allocated to or otherwise treated as items of income, gain, deduction or loss of the Company for Federal income tax purposes, shall be included in determining the taxable income, gain, deduction or loss (including capital gain or loss) of the Company. Estimated tax distributions may be made within thirty days following March 15, May 15, August 15, and December 15 based upon an estimate of the excess of (x) the tax distributions that would be payable for the period beginning on January 1 of such year and ending on March 31, May 31, August 31, and December 31 if such period were a taxable year (computed as provided above) over (y) distributions attributable to all prior periods during such taxable year. The amount of the Permitted Tax Distribution for a taxable year shall be re-computed promptly after (i) the filing by the Company and each subsidiary of the Company that is treated as a Flow Through Entity of their respective annual income tax returns and (ii) an appropriate Federal or state taxing authority finally determines that the amount of the items of taxable income, gain, deduction, or loss of the Company or any such subsidiary that is treated as a Flow Through Entity for such taxable year or the aggregate Tax Loss Benefit Amount carried forward to such taxable year should be adjusted (each of clauses (i) and (ii) a "Tax Calculation Event"). To the extent that the Permitted Tax Distributions previously distributed in respect of any taxable year are either greater than (a "Tax Distribution Overage") or less than (a "Tax Distribution Shortfall") the Permitted Tax Distributions with respect to such taxable year, as determined by reference to the computation of the amount of the items of income, gain, deduction, or loss of the Company and each such subsidiary in connection with a Tax Calculation Event, the amount of the estimated Permitted Tax Distributions that may be made on the estimated tax distribution date immediately following such Tax Calculation Event shall be reduced or increased as appropriate to the extent of the Tax Distribution Overage or the Tax Distribution Shortfall. To the extent that a Tax Distribution Overage remains after the estimated tax distribution date immediately following such Tax Calculation Event, the amount of the estimated 128 Permitted Tax Distribution that may be made on the subsequent estimated tax distribution date shall be reduced to the extent of such Tax Distribution Overage. Prior to making any Permitted Tax Distributions, the Company shall require each Equity Holder to agree that promptly after the second estimated tax distribution date following a Tax Calculation Event, such Equity Holder shall reimburse the Company to the extent of its pro rata share (based on the portion of Permitted Tax Distributions distributed to such Equity Holder for the taxable year) of any remaining Tax Distribution Overage. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof, or any other entity. "PGC" means Peninsula Gaming Corp. (formerly named The Old Evangeline Downs Capital Corp.), a Delaware corporation, and its successors in accordance with the terms of the Indenture, and not any of its subsidiaries. "PGL" means Peninsula Gaming, LLC, a Delaware limited liability company. "PGP" means Peninsula Gaming Partners, LLC, a Delaware limited liability company, the direct parent and sole manager of the Company, and the indirect parent of PGC. "Purchase Money Obligations" means Indebtedness representing, or incurred to finance (or to Refinance Indebtedness incurred to finance), the cost (i) of acquiring any assets (including FF&E) and (ii) of construction or build-out of facilities (including Purchase Money Obligations of any other Person at the time such other Person is merged with or into or is otherwise acquired by the Issuers); provided, that (a) the principal amount of such Indebtedness does not exceed 75% of such cost, including construction charges, (b) any Lien securing such Indebtedness does not extend to or cover any other asset or property other than the asset or property being so acquired, constructed or built and assets which, immediately prior to the incurrence of such Purchase Money Obligations, secured other Indebtedness of the Issuers and the Restricted Subsidiaries (to the extent such other Indebtedness and the Liens securing such other Indebtedness are permitted under the Indenture) to the lender of such Purchase Money Obligations, and (c) such Indebtedness is (or the Indebtedness being Refinanced was) incurred, and any Liens with respect thereto are granted, within 180 days of the acquisition or commencement of construction or build-out of such property or asset. "Qualified Capital Stock" means, with respect to any Person, Capital Stock of such Person other than Disqualified Capital Stock. "Related Business" means any business in which PGP, the Company or any Subsidiary of the Company was engaged on the Issue Date and any and all other businesses that in the good faith judgment of the Managers of the Company are similar, related, ancillary or complementary to such business, including, but not limited to, the entertainment and hotel businesses and food and beverage distribution operations. "Related Person" means any Person who controls, is controlled by or is under common control with an Excluded Person; provided, that for purposes of this definition "control" means the beneficial ownership of more than 50% of the total voting power of the Voting Stock of a Person. "Reorganization Transactions" means the following transactions, satisfying all of the following requirements: (a) the transfer or contribution by PGP of all of the Equity Interests of DJL to PGL, provided that: (1) immediately prior to such transfer or contribution, PGL is a wholly owned subsidiary of PGP and does not hold any assets, is not liable for any obligations and has not previously engaged in any business activities; 129 (2) concurrently with such transfer or contribution, PGL executes (w) a supplemental indenture, in substantially the form attached as an exhibit to the Indenture, pursuant to which PGL becomes a party to the Indenture and an "Issuer" for all purposes under the Notes, the Indenture, the Security Documents, the Intercreditor Agreement and the Registration Rights Agreement and liable for all Obligations of an "Issuer" thereunder, (x) a joinder to each of the Purchase Agreement, the Registration Rights Agreement and the Intercreditor Agreement, in substantially the form attached as an exhibit thereto, (y) a supplement to the applicable Security Documents, in substantially the form attached as an exhibit thereto, and (z) such other documents as may be necessary to reflect the PGL becoming an "Issuer" of the Notes; and (3) immediately after giving effect to such transfer or contribution, DJL is a direct, Wholly Owned Subsidiary of PGL, a Restricted Subsidiary and a co-Issuer of the Notes; (b) following the transfer or contribution described in paragraph (a) above, PGL causing each of its Wholly Owned Subsidiaries to transfer or distribute all of the Equity Interests of PGC to PGL, with the result that immediately after giving effect to such transfer or distribution, PGC is a direct, wholly owned subsidiary of PGL and remains a co-Issuer of the Notes; (c) following the transfer or distribution described in paragraph (b) above, PGL causing each of its Wholly Owned Subsidiaries to transfer or distribute all of the Equity Interests of OED to PGL, with the result that: (1) OED shall remain a Subsidiary Guarantor, notwithstanding the provisions of the Indenture governing the release of Subsidiary Guarantors upon their sale or disposition; and (2) immediately after giving effect to such transfer or distribution, OED is a direct, wholly owned subsidiary of PGL, a Subsidiary Guarantor and a Restricted Subsidiary; (d) following the transfer or distribution described in paragraph (c) above, the designation of OEDA as an Unrestricted Subsidiary, and PGL causing its Wholly Owned Subsidiary DJL, to transfer or distribute all of the Equity Interests of OEDA to PGP with the result that OEDA becomes a sister entity to PGL; provided, however, that the transactions described in this paragraph (d) shall be excluded from the definition of an Asset Sale, an Affiliate Transaction or a Restricted Payment and shall not be subject to any covenant in the Indenture to the extent, and only to the extent, that such transactions could have been consummated on the Issue Date prior to issuance of the Notes, assuming that the requisite regulatory approvals had been obtained prior to the Issue Date, and assuming that the transfer or distribution described in paragraph (c) above had occurred prior to the transactions described in this paragraph (d) (it being understood and agreed, for the avoidance of doubt, that no such transaction that could have been consummated on the Issue Date could have included any assets acquired by OEDA subsequent to the Issue Date (other than as a result of the Management Services Agreement)); and (e) the liquidation or dissolution of Peninsula Gaming Capital Corp. ("PGC Corp."), a Delaware corporation and a co-obligor of DJL's 12 1/4% Senior Secured Notes due 2006 (the "DJL Notes"); provided, that (i) none of the DJL Notes are outstanding and (ii) PGC Corp. does not hold any assets, is not liable for any obligations and has not engaged in any business activities other than being a co-obligor of the DJL Notes; provided further that (i) immediately prior to the foregoing transactions, no Event of Default exists, and (ii) the foregoing transactions would not result in the loss or suspension or material impairment of any Gaming License unless a comparable replacement Gaming License is effective prior to or simultaneously with such loss, suspension or material impairment. 130 For the avoidance of doubt, an agreement or arrangement shall not cease to constitute an agreement or arrangement "as in effect on the Issue Date" solely because PGL has been substituted for DJL or OED as a party thereto, or has otherwise become a party thereto, in each case solely as a result of or in connection with the Reorganization Transactions. "Required Regulatory Redemption" means a redemption by the Issuers of any Holder's Notes pursuant to, and in accordance with, any order of any Governmental Authority with appropriate jurisdiction and authority relating to a Gaming License, or to the extent necessary in the reasonable, good faith judgment of the Managers of the Company to prevent the loss, failure to obtain or material impairment or to secure the reinstatement of, any Gaming License, where such redemption or acquisition is required because the Holder or beneficial owner of Notes is required to be found suitable or to otherwise qualify under any gaming or similar laws and is not found suitable or so qualified within 30 days after being requested to do so (or such lesser period that may be required by any Governmental Authority). "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Payments" means: (i) any dividend or other distribution declared or paid on account of any Equity Interests of the Company or any of the Restricted Subsidiaries or any other payment to any Excluded Person of Affiliate thereof (other than, in each case, (a) dividends or distributions payable in Equity Interests (other than Disqualified Capital Stock) of the Company or (b) amounts payable to the Company or any Restricted Subsidiary); (ii) any payment to purchase, redeem or otherwise acquire or retire for value any Equity Interest of the Company, any Restricted Subsidiary or any other Affiliate of the Company (other than any such Equity Interest owned by the Company or any Restricted Subsidiary); (iii) any principal payment on, or purchase, redemption, defeasance or other acquisition or retirement for value of, any Indebtedness of the Company or any Subsidiary Guarantor that is contractually subordinated in right of payment to the Notes or such Subsidiary Guarantor's Subsidiary Guaranty thereof, as the case may be, prior to any scheduled principal payment, sinking fund payment or other payment at the stated maturity thereof; or (iv) any Restricted Investment. "Restricted Subsidiary" means any Subsidiary which at the time of determination is not an Unrestricted Subsidiary. "Return from Unrestricted Subsidiaries" means (a) 50% of any dividends or distributions received by the Company or a Restricted Subsidiary from an Unrestricted Subsidiary, to the extent that such dividends or distributions were not otherwise included in Consolidated Net Income of the Company, plus (b) to the extent not otherwise included in Consolidated Net Income of the Company, an amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from (i) repayments of the principal of loans or advances or other transfers of assets to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries or (ii) the sale or liquidation of any Unrestricted Subsidiaries, plus (c) to the extent that any Unrestricted Subsidiary of the Company is designated to be a Restricted Subsidiary, the fair market value of the Company's Investment in such Subsidiary on the date of such designation. "Security Documents" means, collectively, the Security Agreement, the Mortgages and all mortgages, deeds of trust, security agreements, pledge agreements, control agreements, collateral assignment agreements and other agreements, instruments, financing statements and other documents evidencing, creating, setting forth or limiting any Lien on Collateral in favor of the Trustee (or, in the case of mortgages, deeds of trust or similar agreements, in favor of the Trustee or another trustee thereunder), for the benefit of the Holders. 131 "Seller Preferred" means $4.0 million face amount of DJL's redeemable preferred membership interests held by Greater Dubuque Riverboat Entertainment Company, L.C. on the Issue Date (without giving effect to any amendment or supplement thereto or modification thereof, except for any such amendment, supplement or modification that is not more disadvantageous to the Holders in any material respect than the original terms thereof as in effect on the Issue Date). "Senior Credit Facility" means any one or more revolving credit agreements or similar instruments, including, without limitation, working capital, construction financing or equipment purchase lines of credit, entered into by the Company or any of the Restricted Subsidiaries governing the terms of a bona fide borrowing from (i) a third party financial institution that is primarily engaged in the business of commercial lending or (ii) a vendor or other provider of financial accommodations in connection with the purchase of equipment, in either case for valid business purposes, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith and, in each case, as amended, renewed, refunded, replaced or refinanced from time to time, whether in whole or in part; provided, that such agreements or instruments do not permit the Company and the Restricted Subsidiaries, taken as a whole, to incur Indebtedness under all such agreements or instruments in an aggregate principal amount at any time outstanding in excess of the maximum aggregate principal amount of Indebtedness permitted to be incurred pursuant to clause (i) of the covenant "Limitation on Incurrence of Indebtedness." "Significant Subsidiary" shall have the meaning provided under Regulation S-X of the Securities Act, as in effect on the Issue Date. "subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity (including a limited liability company) of which more than 50% of the total voting power of shares of Voting Stock thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other subsidiaries of that Person or a combination thereof and (ii) any partnership in which such Person or any of its subsidiaries is a general partner. "Subsidiary" means any subsidiary of the Company. "Subsidiary Guarantor" means any Subsidiary that has executed and delivered in accordance with the Indenture a Subsidiary Guaranty, and such Person's successors and assigns. "Subsidiary Guaranty" means an unconditional and irrevocable guaranty by a Subsidiary Guarantor of the Obligations of the Issuers under the Notes and the Indenture, on a senior unsecured basis, as set forth in the Indenture, as amended from time to time in accordance with the terms thereof. "Tax Loss Benefit Amount" means with respect to any taxable year, the amount by which the Permitted Tax Distributions would be reduced were a net operating loss or net capital loss from a prior taxable year of the Company ending subsequent to the Issue Date carried forward to the applicable taxable year; provided, that for such purpose the amount of any such net operating loss or net capital loss shall be used only once and in each case shall be carried forward to the next succeeding taxable year until so used. For purposes of calculating the Tax Loss Benefit Amount, the proportionate part of the items of taxable income, gain, deduction, or loss (including capital gain or loss) of any Subsidiary that is a Flow Through Entity for a taxable year of such Subsidiary ending subsequent to the Issue Date shall be included in determining the amount of net operating loss or net capital loss of the Company. "Unrestricted Subsidiary" means any Subsidiary that, at or prior to the time of determination, shall have been designated by the Managers of the Company as an Unrestricted Subsidiary and each subsidiary of such Subsidiary; provided, that such Subsidiary or any of its subsidiaries does not hold any Indebtedness or Capital Stock of, or any Lien on any assets of, the Company or any Restricted Subsidiary. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary as of such date. The Managers of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted 132 Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under the Interest Coverage Ratio test set forth in the covenant described under the caption "Limitation on Incurrence of Indebtedness" calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Default or Event of Default would be in existence following such designation. The Company shall be deemed to make an Investment in each Subsidiary designated as an Unrestricted Subsidiary immediately following such designation in an amount equal to the Investment in such Subsidiary and its subsidiaries immediately prior to such designation. Any such designation by the Managers of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Managers giving effect to such designation and an Officers' Certificate certifying that such designation complies with the foregoing conditions and is permitted by the covenant described above under the caption "Limitation on Incurrence of Indebtedness." "Upper Tier Equity Holder" means, in the case of any Flow Through Entity the Equity Holder of which is, in turn, a Flow Through Entity, the person that is ultimately subject to tax on a net income basis on the items of taxable income, gain, deduction, and loss of the Company and the Subsidiaries that are Flow Through Entities. "Voting Stock" means, with respect to any Person, (i) one or more classes of the Capital Stock of such Person having general voting power to elect at least a majority of the Board of Directors, managers or trustees of such Person (regardless of whether at the time Capital Stock of any other class or classes have or might have voting power by reason of the happening of any contingency) and (ii) any Capital Stock of such Person convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (i) above. "Warner Land" means the 93-acres of land adjacent to the racino acquired by OED from Bart C. Warner pursuant to the Sale with Mortgage, dated October 24, 2003. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years (rounded to the nearest one-twelfth) obtained by dividing (i) the then outstanding principal amount of such Indebtedness into (ii) the total of the product obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment. "Wholly Owned Subsidiary" of any Person means a subsidiary of such Person all the Capital Stock of which (other than directors' qualifying shares and, in the case of DJL, other than the Seller Preferred) is owned directly or indirectly by such Person; provided, that with respect to the Company, the term Wholly Owned Subsidiary shall exclude Unrestricted Subsidiaries. 133 BOOK-ENTRY; DELIVERY AND FORM The old notes offered and sold to qualified institutional buyers of the old notes are currently represented by one or more fully registered global notes without interest coupons. The new notes issued in exchange for the old notes will be represented by one or more fully registered global notes, without interest coupons and will be deposited upon issuance with the Trustee as custodian for The Depository Trust Company ("DTC"), in New York, New York, and registered in the name of DTC or its nominee, in each case, for credit to an account of a direct or indirect participant as described below. Except as described below, the global notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the global notes may not be exchanged for notes in certificated form except in limited circumstances. See "--Certificated Securities" for more information about the circumstances in which certificated notes may be issued. Transfers of beneficial interests in the global notes are subject to the applicable rules and procedures of DTC and its direct or indirect participants, which may change. The notes may be presented for registration of transfer and exchange at the offices of the Registrar. DEPOSITORY PROCEDURES DTC has advised the Issuers that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of Participants. The Participants include securities brokers and dealers (including the Initial Purchaser), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or Indirect Participants. The ownership interest and transfer of ownership interest of each actual purchaser of each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants. DTC has also advised the Issuers that pursuant to procedures established by it, (i) upon deposit of the Global Notes, DTC will credit the accounts of Participants designated by the Initial Purchaser with portions of the principal amount of Global Notes and (ii) ownership of such interests in the Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to Participants) or by Participants and the Indirect Participants (with respect to other owners of beneficial interests in the Global Notes). Investors in the Global Notes may hold their interests therein directly through DTC, if they are Participants in such system, or indirectly through organizations that are Participants in such system. All interests in a Global Note may be subject to the procedures and requirements of DTC. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interest in a Global Note to such persons may be limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants and certain banks, the ability of a person having a beneficial interest in a Global Note to pledge such interest to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate evidencing such interest. For certain other restrictions on the transferability of the Notes, see "Exchange of Book-Entry Notes for Certificated Notes." EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE. 134 Payments in respect of the principal, premium, liquidated damages, if any, and interest on a Global Note registered in the name of DTC or its nominee will be payable by the Trustee to DTC or its nominee in its capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the Issuers and the Trustee will treat the persons in whose names the Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, none of the Issuers, the Trustee or any agent of the Issuers or the Trustee have or will have any responsibility or liability for (i) any aspect of DTC's records or any Participant's or Indirect Participant's records relating to or payments made on account of beneficial ownership interests in the Global Notes, or for maintaining, supervising or reviewing any of DTC's records or any Participant's or Indirect Participant's records relating to the beneficial ownership interests in the Global Notes or (ii) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants. DTC has advised the Issuers that its current practices, upon receipt of any payment in respect of securities such as the Notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date, in amounts proportionate to their respective holdings in principal amount of beneficial interests in the relevant security such as the Global Notes as shown on the records of DTC. Payments by Participants and the Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practices and will not be the responsibility of DTC, the Trustee or the Issuers. None of the Issuers or the Trustee will be liable for any delay by DTC or its Participants in identifying the beneficial owners of the Notes, and the Issuers and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee as the registered owner of the Notes for all purposes. Interests in the Global Notes will trade in DTC's Same-Day Funds Settlement System and secondary market trading activity in such interests will, therefore, settle in immediately available funds, subject in all cases to the rules and procedures of DTC and its Participants. Transfers between Participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds. DTC has advised the Issuers that it will take any action permitted to be taken by a Holder of Notes only at the direction of one or more Participants to whose account DTC interests in the Global Notes are credited and only in respect of such portion of the aggregate principal amount of the Notes as to which such Participant or Participants has or have given direction. However, if there is an Event of Default under the Notes, DTC reserves the right to exchange Global Notes for legended Notes in certificated form, and to distribute such Notes to its Participants. The information in this section concerning DTC and its book-entry system has been obtained from sources believed to be reliable, but the Issuers take no responsibility for the accuracy thereof. Although DTC has agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among Participants in DTC, it is under no obligation to perform or to continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Initial Purchaser nor the Trustee will have any responsibility for the performance by DTC or its Participants or Indirect Participants of their respective obligations under the rules and procedures governing their operations. EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES A Global Note is exchangeable for definitive Notes in registered certificated form if (i) DTC (a) notifies the Issuers that it is unwilling or unable to continue as depositary for the Global Note and the Issuers thereupon fail to appoint a successor depositary within 90 days or (b) has ceased to be a clearing agency registered under the Exchange Act, or (ii) the Issuers, at their option, notify the Trustee in writing that they elect to cause the issuance of the Notes in certificated form. In addition, beneficial interests in a Global Note may be exchanged for certificated Notes upon request but only upon at least 20 days' prior written notice given to the Trustee by or on behalf of DTC in accordance with customary procedures. In all cases, certificated Notes delivered in exchange for any Global Note or beneficial interest therein will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures) and will bear the restrictive legend referred to in "Notice to Investors" unless the Issuers determine otherwise in compliance with applicable law. 135 CERTIFICATED NOTES Subject to certain conditions, any person having a beneficial interest in a Global Note may, upon request to the Trustee, exchange such beneficial interest for Notes in certificated form (a "Certificated Note"). Upon any such issuance, the Trustee is required to register such Certificated Notes in the name of, and cause the same to be delivered to, such person or persons (or the nominee of any thereof). All such Certificated Notes would be subject to the legend requirements described herein under "Notice to Investors." In addition, if (i) the Issuers notify the Trustee in writing that DTC (x) is no longer willing or able to act as a depositary and the Issuers are unable to locate a qualified successor within 90 days or (y) has ceased to be a clearing agency registered under the Exchange Act or (ii) the Issuers, at their option, notify the Trustee in writing that they elect to cause the issuance of Notes in the form of Certificated Notes under the Indenture, then, upon surrender by the Global Note Holder of its Global Note, Notes in such form will be issued to each person that the Global Note Holder and the DTC identify as being the beneficial owner of the related Notes. None of the Issuers or the Trustee will be liable for any delay by the Global Note Holder or the DTC in identifying the beneficial owners of Notes and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the Global Note Holder or the DTC for all purposes. 136 SPECIFIC UNITED STATES FEDERAL INCOME TAX CONSEQUENCES Except to the extent stated herein, the following constitutes the opinion of Mayer, Brown, Rowe & Maw LLP, counsel to Peninsula Gaming, LLC, as to the material United States federal income tax consequences of the issuance of the new notes and the exchange offer, and of the acquisition, ownership and disposition of the notes. This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), United States Treasury regulations, judicial decisions, published positions of the Internal Revenue Service ("IRS") and other applicable authorities, all as in effect as of the date hereof, all of which may be repealed, revoked or modified with possible retroactive effect. No IRS ruling has been or will be sought regarding any matter discussed herein. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax aspects set forth below. Although this discussion summarizes the material United States federal income tax consequences of the issuance of the new notes and the exchange offer, and of the ownership and disposition of the notes, the United States federal income tax consequences to a holder of notes may vary from those set forth below depending upon the holder's particular situation. This summary does not deal with holders that may be subject to special tax rules (including, but not limited to, insurance companies, tax-exempt organizations or private foundations, financial institutions, dealers in securities or currencies, holders whose functional currency is not the United States dollar, holders that hold the notes as a hedge against currency risks or as part of a straddle, synthetic security, conversion transaction or other integrated investment comprised of the notes and one or more other investments, or certain expatriates or former long-term residents of the United States). This summary deals only with persons that hold the notes as capital assets within the meaning of Section 1221 of the Code. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE EXCHANGE OF OLD NOTES FOR NEW NOTES, AND OF THE OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR FOREIGN TAX LAWS. CONSEQUENCES OF THE EXCHANGE OFFER TO EXCHANGING HOLDERS For United States federal income tax purposes, the exchange of a new note for an old note pursuant to the exchange offer will not be a taxable event for an exchanging holder; the new note will in effect be treated as the continuation of the old note. As a result, for United States federal income tax purposes, (i) an exchanging holder will not recognize any gain or loss on the exchange, (ii) an exchanging holder will be required to include interest on a new note in gross income in the manner described below, (iii) the holding period for the new note will include the holding period for the old note, and (iv) the holder's adjusted tax basis in the new note will be the same as its basis in the old note immediately before the exchange. LIQUIDATED DAMAGES Under the Registration Rights Agreement, Liquidated Damages have begun to accrue. We believe and intend to take the position that the total amount of Liquidated Damages that is payable is "incidental" and that the possibility of our being obligated to pay additional Liquidated Damages is "remote," as such terms are defined in United States Treasury regulations. Under such regulations, a payment on a debt instrument, such as a note, is "incidental" if under all reasonably expected market conditions the potential amount of the payment is insignificant relative to the total expected amount of the remaining payments on the instrument; a payment is "remote" if there is a remote likelihood that such payment will occur. Furthermore, under such regulations, our determination that such contingencies are "incidental" and "remote" is binding on all holders of the notes, except such holders that disclose a contrary position on their tax returns. Since we believe these payments to be "incidental" and "remote," respectively, we therefore believe and intend to take the position that the notes are not treated as contingent payment debt instruments ("CPDIs") under United States Treasury regulations. However, because of a lack of authority on point, our counsel, Mayer, Brown, Rowe & Maw LLP, is unable to opine as to any of the consequences of our obligation to pay Liquidated Damages. Moreover, our determinations are not binding on the IRS, and if the IRS successfully challenged any of the foregoing positions, the notes would be treated as CPDIs and the tax consequences for a holder of notes would be different than those described herein. Under rules applicable to CPDIs, holders that use the cash method of accounting would be put on the accrual method with respect to stated interest on the notes. These rules would also require that a portion of the Liquidated Damages be includible in income as ordinary income when paid, and, upon a taxable disposition of the notes, that the portion of the amount realized allocable to the Liquidated Damages be treated in part as ordinary income. Holders of notes should consult their own tax advisors as to the consequences of our obligation to pay Liquidated Damages. The remainder of this "Specific United States Federal Income Tax Consequences" assumes the correctness of our position that the amounts of Liquidated Damages payable are "incidental," that the possibility of our having to pay additional Liquidated Damages is "remote," and that the notes are not CPDIs. UNITED STATES HOLDERS As used herein, the term "United States Holder" means a beneficial owner of a note that is or is treated for United States federal income tax purposes as (i) a citizen or resident of the United States, (ii) a corporation or partnership created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate the income of which is subject to United States federal income tax without regard to its source or (iv) a trust if (x) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust or (y) the trust has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person. If a partnership (including any entity treated as a partnership or other pass through entity for United States federal income tax purposes) is a holder of the notes, the United States federal income tax treatment of a partner in such a partnership will generally depend on the status of the partner and the activities of the partnership. Partners and partnerships should consult their own tax advisors as to the particular United States federal income tax consequences applicable to them of the partnership's acquisition of the new notes under the exchange offer, and the ownership and disposition of notes. Payments of Interest. Payments of stated interest on the notes generally will be taxable to a United States Holder as ordinary interest income at the time such payments are accrued or received (in accordance with the United States Holder's method of accounting for United States federal income tax purposes). United States Treasury regulations appear to require treatment of a payment of Liquidated Damages to a United States Holder as a repayment of principal and thus not subject to United States federal income tax. However, our counsel is unable to opine on the matter, and some or all of the payments of Liquidated Damages could be includible in income when paid. Holders of notes should consult their own tax advisors as to the proper treatment of payments of Liquidated Damages in their particular circumstances. 137 Disposition of Notes. Upon the sale, redemption, retirement or other disposition of a note, a United States Holder will generally recognize capital gain or loss equal to the difference between the amount realized on the sale, redemption, retirement or other disposition and the United States Holder's adjusted tax basis in the note. For these purposes, the amount realized on the sale, redemption, retirement or other disposition of a note does not include any amount received that is attributable to accrued but unpaid interest, which will be taxable as ordinary income as described above unless previously taken into account. Prior to the receipt of Liquidated Damages, a United States Holder's adjusted tax basis in the note will equal the cost to such holder of acquiring the note. United States Treasury regulations appear to require treatment of the amount of Liquidated Damages received by such United States Holder as reducing the holder's adjusted tax basis in the note, but our counsel is unable to opine on the matter. If some or all of the payments of Liquidated Damages were includible in income when paid as described in "--Payments of Interest" above, such includible amount would not reduce the holder's basis. Holders of notes should consult their own tax advisors as to the effect of payments of Liquidated Damages on their adjusted tax bases. Capital gain or loss on the sale, redemption, retirement or other disposition of a note will be long-term if the United States Holder's holding period for the note is more than one year at the time. See "--Consequences of the Exchange Offer to Exchanging Holders" above with regard to the holder's holding period in a note. Purchasers of Notes at Other Than Original Issuance. The above summary does not discuss special rules that may affect the treatment of United States Holders that acquired old notes other than at original issuance, including those provisions of the Code relating to the treatment of "market discount" and "acquisition premium." Any United States Holder should consult its tax advisor as to the consequences to the holder of the acquisition, ownership and disposition of notes. NON-UNITED STATES HOLDERS A "Non-United States Holder" is any beneficial holder of a note that is not a United States Holder. Under present United States federal income tax law, subject to the discussion of backup withholding and information reporting below: (a) payments on the notes to any Non-United States Holder will not be subject to United States federal income, branch profits or withholding tax, provided that (i) the Non-United States Holder does not actually or constructively own 10% or more of our capital or profits interests or 10% or more of the capital or profits interest in PGP, (ii) the Non-United States Holder is not a controlled foreign corporation that is related to us or PGP (directly or indirectly) through stock ownership, (iii) such interest payments are not effectively connected with a United States trade or business and (iv) certain certification requirements are met. Such certification will be satisfied if the beneficial owner of the note certifies on IRS Form W-8BEN or a substantially similar substitute form, under penalties of perjury, that it is not a United States person and provides its name and address and, prior to the payment of interest, (x) such beneficial owner delivers such form to the withholding agent or (y) in the case of a note held through a foreign partnership or intermediary, the beneficial owner and the foreign partnership or intermediary satisfy certification requirements of applicable United States Treasury regulations; and (b) a Non-United States Holder will not be subject to United States federal income or branch profits tax on gain realized on the sale, exchange, redemption, retirement or other disposition of a note, unless (i) the gain is effectively connected with a trade or business carried on by such holder within the United States and, if a treaty applies (and the holder complies with applicable certification and other requirements to claim treaty benefits), is generally attributable to a United States permanent establishment maintained by the holder, or (ii) the holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other requirements are met. BACKUP WITHHOLDING AND INFORMATION REPORTING In general, proceeds of the sale, exchange, redemption, retirement or other disposition of the notes payable by a United States paying agent or other United States intermediary, as well as interest payments on the notes, will be subject to information reporting (except in the case of certain exempt recipients, including corporations, or Non-United States Holders that provide the certification on IRS Form W-8BEN described above or otherwise provide evidence of exempt status). In addition, backup withholding at the applicable rate (currently 28%) will generally apply to these amounts if (i) in the case of a United States Holder, the holder fails to provide an accurate United States taxpayer identification number, or fails to certify that such holder is not subject to backup withholding or fails to report all interest and dividends required to be shown on its United States federal income tax returns, or (ii) in the 138 case of a Non-United States Holder, the holder fails to provide the certification on IRS Form W-8BEN described above or otherwise does not provide evidence of exempt status. Certain United States Holders (including, among others, corporations) are not subject to backup withholding. Any amount paid as backup withholding will be creditable against the holder's United States federal income tax liability, provided that the required information is timely furnished to the IRS. Holders of notes should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining such an exemption. 139 PLAN OF DISTRIBUTION Each broker-dealer that receives new notes for its own account as a result of market-making activities or other trading activities in connection with the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of new notes. This prospectus, as it may be amended or supplemented, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where such old notes were acquired as a result of market-making activities or other trading activities. Until , 2004 (90 days after the date of this prospectus), all dealers effecting transactions in the new notes may be required to deliver a prospectus. We will receive no proceeds in connection with the exchange offer or any sale of new notes by broker-dealers. New notes received by broker-dealers for their own account pursuant to the exchange offer may be sold in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the new notes or a combination of these methods of resale, at market prices prevailing at the time of resale, at prices related to prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers that may receive compensation in the form of commissions or concessions from the broker-dealers or the purchasers of any new notes. Any broker-dealer that resells new notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of new notes may be deemed to be an "underwriter" within the meaning of the Securities Act of 1933, and any profit on any resale of new notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act of 1933. The letter of transmittal states that by acknowledging that it will deliver, and by delivering, a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933. See "The Exchange Offer--Resales of the New Notes" for additional information on resales of the new notes. LEGAL MATTERS The validity of the new notes will be passed upon for us by Mayer, Brown, Rowe & Maw LLP, New York, New York. EXPERTS The consolidated financial statements of Peninsula Gaming, LLC as of December 31, 2003 and 2002, and for each of the three years in the period ended December 31, 2003 and the related financial statement schedule; the financial statements of The Old Evangeline Downs, L.L.C., a wholly owned subsidiary of Peninsula Gaming LLC, as of December 31, 2003 and 2002, and for the year ended December 31, 2003 and the period August 31, 2002 through December 31, 2002; and the financial statements of The Old Evangeline Downs, L.C. for the period January 1, 2002 through August 30, 2002 and the year ended December 31, 2001 included in this prospectus have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports appearing herein (the reports for Peninsula Gaming, LLC and The Old Evangeline Downs, L.C. express an unqualified opinion and include an explanatory paragraph referring to Peninsula Gaming, LLC and The Old Evangeline Downs, L.C. changing their method of accounting for goodwill and intangible assets to conform to Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets), and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION We have filed with the Commission a registration statement pursuant to the Securities Act, and the rules and regulations promulgated thereunder, covering the new notes being offered hereby. This prospectus does not contain all the information set forth in the registration statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to us and the new notes, reference is hereby made to the registration statement. Statements made in this prospectus as to the contents of any contract, agreement or other document referred to in the registration statement are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the registration statement, reference 140 is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference. We will continue to be subject to the periodic and other informational requirements of the Exchange Act. Periodic reports and other information filed by us with the Commission may inspected at the Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information as to the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. Such materials may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov. 141 INDEX TO FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS OF PENINSULA GAMING, LLC: Report of Independent Registered Public Accounting Firm......................F-2 Consolidated Balance Sheets December 31, 2003 and 2002.......................F-3 Consolidated Statements of Operations Years Ended December 31, 2003, 2002 and 2001..........................................................F-4 Consolidated Statements of Changes in Members' Equity (Deficit) Years Ended December 31, 2003, 2002 and 2001.................................F-5 Consolidated Statements of Cash Flows Years Ended December 31, 2003, 2002 and 2001..........................................................F-6 Notes to Consolidated Financial Statements...................................F-7 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF PENINSULA GAMING, LLC: Condensed Consolidated Balance Sheets (Unaudited) March 31, 2004 and December 31, 2003.....................................................F-23 Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, 2004 and 2003..................................F-24 Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2004 and 2003..................................F-25 Notes to Condensed Consolidated Financial Statements (Unaudited)............F-26 FINANCIAL STATEMENTS OF THE OLD EVANGELINE DOWNS, L.L.C.: Report of Independent Registered Public Accounting Firm.....................F-37 Report of Independent Registered Public Accounting Firm.....................F-38 Balance Sheets December 31, 2003 and 2002...................................F-39 Statements of Operations The Year Ended December 31, 2003 and the Period August 31 to December 31, 2002 (Successor Company) the Period January 1 to August 30, 2002 and the Year Ended December 31, 2001 (Predecessor Company)..............................................................F-41 Statements of Changes In Members' Equity (Deficit) The Year Ended December 31, 2003 and the Period August 31 to December 31, 2002 (Successor Company) the Period January 1 to August 30, 2002 and the Year Ended December 31, 2001 (Predecessor Company)..............................................................F-42 Statements of Cash Flows The Year Ended December 31, 2003 and the Period August 31 to December 31, 2002 (Successor Company) the Period January 1 to August 30, 2002 and the Year Ended December 31, 2001 (Predecessor Company)..............................................................F-43 Notes to Financial Statements...............................................F-45 FINANCIAL STATEMENT SCHEDULE OF PENINSULA GAMING, LLC: Valuation and Qualifying Accounts for the Years Ended December 31, 2003, 2002, and 2001...........................................F-57 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Members of Peninsula Gaming, LLC Dubuque, Iowa We have audited the accompanying consolidated balance sheets of Peninsula Gaming, LLC and subsidiaries (the "Company") as of December 31, 2003 and 2002, and the related consolidated statements of operations, changes in members' equity (deficit), and cash flows for the years ended December 31, 2003, 2002 and 2001. Our audits also included the financial statement schedule listed in the Index to Financial Statements. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Peninsula Gaming, LLC and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for the years ended December 31, 2003, 2002 and 2001 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 2 to the consolidated financial statements, effective January 1, 2002, the Company changed its method of accounting for goodwill and other intangible assets to conform to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. /s/DELOITTE & TOUCHE LLP Cedar Rapids, Iowa March 10, 2004 (June 16, 2004 as to Note 1) F-2 PENINSULA GAMING, LLC CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2003 AND 2002
DECEMBER 31, 2003 DECEMBER 31, 2002 ----------------- ----------------- CURRENT ASSETS: Cash and cash equivalents ............................................... $ 21,158,295 $ 10,510,205 Restricted cash--purse settlements ...................................... 1,589,125 840,366 Restricted investments .................................................. 15,778,883 Accounts receivable, less allowance for doubtful accounts of $61,922 and $45,648, respectively ............................................. 309,188 275,822 Interest receivable ..................................................... 173,034 Inventory ............................................................... 403,376 138,405 Prepaid expenses ........................................................ 815,009 395,056 -------------- -------------- Total current assets ............................................ 40,226,910 12,159,854 -------------- -------------- RESTRICTED CASH--RACINO PROJECT .............................................. 20,013,291 -------------- -------------- PROPERTY AND EQUIPMENT, NET .................................................. 102,477,345 25,702,742 -------------- -------------- OTHER ASSETS: Deferred financing costs, net of amortization of $5,288,572 and $3,229,782, respectively .............................................. 12,702,387 4,064,987 Goodwill ................................................................ 53,083,429 53,083,429 Other intangibles ....................................................... 32,257,963 31,329,834 Deposits and other assets ............................................... 757,789 106,938 -------------- -------------- Total other assets .............................................. 98,801,568 88,585,188 -------------- -------------- TOTAL ........................................................................ $ 261,519,114 $ 126,447,784 ============== ============== LIABILITIES AND MEMBERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable ........................................................ $ 2,972,608 $ 1,960,200 Construction payable--St. Landry Parish ................................. 20,156,591 2,376,494 Purse settlement payable ................................................ 1,589,125 846,778 Accrued payroll and payroll taxes ....................................... 2,788,224 1,340,395 Accrued interest ........................................................ 9,904,778 4,763,919 Other accrued expenses .................................................. 4,811,106 3,345,294 Current maturity of long-term debt ...................................... 4,098,222 600,000 Notes payable ........................................................... 4,500,000 Term loan payable ....................................................... 8,300,000 Note payable to parent .................................................. 7,325,000 -------------- -------------- Total current liabilities ....................................... 46,320,654 35,358,080 -------------- -------------- LONG-TERM LIABILITIES: 12 1/4% Senior secured notes, net of discount ........................... 70,616,221 70,493,155 13% Senior secured notes, net of discount ............................... 120,923,436 Senior secured facilities ............................................... 15,754,301 11,250,000 FF&E credit facility .................................................... 9,921,557 Capital lease obligations ............................................... 475,781 Notes payable ........................................................... 3,511,654 Other accrued expenses .................................................. 1,100,000 1,200,000 Preferred members' interest, redeemable ................................. 4,000,000 -------------- -------------- Total long-term liabilities ..................................... 225,827,169 83,418,936 -------------- -------------- Total liabilities ............................................... 272,147,823 118,777,016 COMMITMENTS AND CONTINGENCIES PREFERRED MEMBERS' INTEREST, REDEEMABLE ...................................... 4,000,000 MEMBERS' EQUITY (DEFICIT) Common members' interest ................................................ 9,000,000 9,000,000 Accumulated deficit ..................................................... (19,628,709) (5,329,232) -------------- -------------- Total members' equity (deficit) ................................. (10,628,709) 3,670,768 -------------- -------------- TOTAL ......................................................................... $ 261,519,114 $ 126,447,784 ============== ==============
See notes to consolidated financial statements. F-3 PENINSULA GAMING, LLC CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
2003 2002 2001 ------------ ------------ ------------ REVENUES: Casino ............................................................................ $ 56,794,529 $ 48,262,485 $ 47,710,208 Racing ............................................................................ 17,773,481 15,509,989 Food and beverage ................................................................. 4,565,438 3,886,326 2,745,333 Other ............................................................................. 589,268 144,817 131,916 Less promotional allowances ....................................................... (3,221,134) (2,615,355) (2,470,310) ------------ ------------ ------------ Total net revenues ........................................................... 76,501,582 65,188,262 48,117,147 ------------ ------------ ------------ EXPENSES: Casino ............................................................................ 23,532,967 20,554,920 20,375,265 Racing ............................................................................ 14,646,351 12,650,996 Food and beverage ................................................................. 4,282,010 3,820,365 2,856,568 Boat operations ................................................................... 2,322,126 2,295,771 2,259,314 Other ............................................................................. 442,964 27,471 21,801 Selling, general and administrative ............................................... 12,342,587 8,739,642 6,680,581 Depreciation and amortization ..................................................... 3,323,541 2,950,369 3,963,350 Pre-opening expense ............................................................... 3,256,963 Development costs ................................................................. 102,272 Litigation settlement ............................................................. 1,600,000 Referendum ........................................................................ 771,111 State of Wisconsin government relations ........................................... 55,000 147,163 ------------ ------------ ------------ Total expenses ............................................................... 64,251,781 53,465,645 36,304,042 ------------ ------------ ------------ INCOME FROM OPERATIONS ............................................................ 12,249,801 11,722,617 11,813,105 ------------ ------------ ------------ OTHER INCOME (EXPENSE): Interest income ................................................................... 489,800 46,475 183,912 Interest expense, net of amounts capitalized ...................................... (25,071,656) (11,887,979) (9,639,947) Interest expense related to preferred members' interest, redeemable ............... (180,000) Loss on sale of assets ............................................................ (49,735) (8,000) (151,415) ------------ ------------ ------------ Total other expense .......................................................... (24,811,591) (11,849,504) (9,607,450) ------------ ------------ ------------ NET INCOME (LOSS) BEFORE PREFERRED MEMBER DISTRIBUTIONS AND MINORITY INTEREST ..... (12,561,790) (126,887) 2,205,655 LESS PREFERRED MEMBER DISTRIBUTIONS ............................................... (180,544) (373,050) (386,174) LESS MINORITY INTEREST ............................................................ (232,056) ------------ ------------ ------------ NET INCOME (LOSS) TO COMMON MEMBERS' INTEREST ..................................... $(12,742,334) $ (731,993) $ 1,819,481 ============ ============ ============
See notes to consolidated financial statements. F-4 PENINSULA GAMING, LLC CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY (DEFICIT) YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
TOTAL COMMON MEMBERS' MEMBERS' ACCUMULATED EQUITY INTEREST DEFICIT (DEFICIT) ------------ ------------ ------------ BALANCE, DECEMBER 31, 2000 ................ $ 9,000,000 $ (3,395,800) $ 5,604,200 Net income to common members' interest .... 1,819,481 1,819,481 Member distributions ...................... (1,760,908) (1,760,908) ------------ ------------ ------------ BALANCE, DECEMBER 31, 2001 ................ 9,000,000 (3,337,227) 5,662,773 Net loss to common members' interest ...... (731,993) (731,993) Member distributions ...................... (1,260,012) (1,260,012) ------------ ------------ ------------ BALANCE, DECEMBER 31, 2002 ................ 9,000,000 (5,329,232) 3,670,768 Net loss to common members' interest ...... (12,742,334) (12,742,334) Member distributions ...................... (1,557,143) (1,557,143) ------------ ------------ ------------ BALANCE, DECEMBER 31, 2003 ................ $ 9,000,000 $(19,628,709) $(10,628,709) ============ ============ ============
See notes to consolidated financial statements. F-5 PENINSULA GAMING, LLC CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
2003 2002 2001 ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ....................................................... $ (12,742,334) $ (731,993) $ 1,819,481 Adjustments to reconcile net income (loss) to net cash flows provided by operating activities: Depreciation and amortization ................................... 3,323,541 2,950,369 3,963,350 Provision for doubtful accounts ................................. 149,214 138,751 152,158 Amortization of deferred financing costs and bond discount ...... 3,161,023 1,493,671 911,272 Loss on sale of assets .......................................... 49,735 8,000 151,415 Minority interest ............................................... 232,056 Changes in operating assets and liabilities: Restricted cash - purse settlements ............................. (748,759) 639,655 Receivables ..................................................... (355,614) (91,398) (183,479) Inventory ....................................................... (264,972) 5,285 15,906 Prepaid expenses and other assets ............................... (1,071,419) (27,301) 326,699 Accounts payable ................................................ 2,183,072 60,088 (375,121) Accrued expenses ................................................ 7,485,459 5,506,627 468,743 Litigation settlement ........................................... (400,000) 1,600,000 ------------- ------------- ------------- Net cash flows from operating activities ............... 768,946 11,783,810 7,250,424 ------------- ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of subsidiary, net of cash acquired ......................... (29,275,862) (500,000) Business acquisition and licensing costs ................................ (1,781,746) (1,503,944) (518,047) Racino project development costs ........................................ (55,303,006) (5,315,279) (246,753) Restricted cash--racino project ......................................... (20,013,291) Purchase of restricted investments ...................................... (23,922,971) Maturity of restricted investments ...................................... 8,144,088 Purchase of property and equipment ...................................... (2,206,388) (1,695,075) (1,602,930) Proceeds from sale of property and equipment ............................ 387,906 51,378 ------------- ------------- ------------- Net cash flows from investing activities ........................ (94,695,408) (37,790,160) (2,816,352) ------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Deferred financing costs ................................................ (11,516,099) (1,703,706) (511,634) Preferred members' interest redeemed .................................... (3,000,000) Principal payments on debt .............................................. (20,725,000) (318,379) Proceeds from senior secured notes ...................................... 120,736,000 Proceeds from senior credit facilities .................................. 5,104,301 20,450,000 Proceeds from FF&E credit facility ...................................... 12,532,493 Proceeds from notes payable ............................................. 11,825,000 Member distributions .................................................... (1,557,143) (1,260,012) (1,760,908) ------------- ------------- ------------- Net cash flows from financing activities ........................ 104,574,552 28,992,903 (5,272,542) ------------- ------------- ------------- NET INCREASE (DECREASE) IN CASH .............................................. 10,648,090 2,986,553 (838,470) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............................. 10,510,205 7,523,652 8,362,122 ------------- ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................... $ 21,158,295 $ 10,510,205 $ 7,523,652 ============= ============= ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for interest ....................................... $ 18,331,536 $ 5,701,057 $ 8,728,788 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Property additions acquired on construction payable which were accrued, but not paid ................................................................... $ 19,681,300 $ 2,376,494 Property and equipment purchased in exchange for indebtedness ................ $ 4,398,940 Exchange of Private OED Notes for Registered OED Notes ....................... $ 123,200,000
See notes to consolidated financial statements F-6 PENINSULA GAMING, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION, BUSINESS PURPOSE AND BASIS OF PRESENTATION Diamond Jo, LLC, a Delaware limited liability company ("DJL"), owns and operates the Diamond Jo riverboat casino in Dubuque, Iowa, and was a wholly owned subsidiary of Peninsula Gaming Partners, LLC, a Delaware limited liability company ("PGP"). DJL had two direct wholly owned subsidiaries, (i) Penninsula Gaming Corp., which had no assets or operations and was formed solely to facilitate the offering of DJL's 12 1/4% Senior Secured Notes due 2006 (the "DJL Notes"), and (ii) OED Acquisition, LLC, a Delaware limited liability company ("OEDA"), and the parent company of The Old Evangeline Downs, L.L.C., a Louisiana limited liability company ("OED"), that currently owns and operates a horse track in Lafayette, Louisiana and is constructing a new casino and racetrack facility in St. Landry Parish, Louisiana (the "racino project"). The Old Evangeline Downs Capital Corp. was a wholly owned subsidiary of OED which has no assets or operations and was formed solely to facilitate the offering by OED of its 13% Senior Secured Notes due 2010 with Contingent Interest (the "OED Notes"). On June 16, 2004, a corporate restructuring occurred, which is reflected in these consolidated financial statements, pursuant to which Peninsula Gaming, LLC, a Delaware limited liability company (the "Company"), became a new direct parent company of DJL, OED and Peninsula Gaming Corp. ("PGC", formerly known as The Old Evangeline Downs Capital Corp.), a Delaware limited liability company. The Company is a wholly owned subsidiary of PGP. In connection with the corporate restructuring, OEDA became a sister company to the Company and a wholly owned subsidiary of PGP in a corporate spin-off which was recorded as a distribution on June 16, 2004. OED's results of operations and cash flows for the year ended December 31, 2003 and the period February 15, 2002 (date of acquisition) to December 31, 2002 have been consolidated into the Company's consolidated financial statements. During the period February 15, 2002 to August 30, 2002, the Company had substantive control of OED and recorded a minority interest related to the portion not owned. On August 31, 2002, OED became a wholly owned subsidiary of the Company. All intercompany transactions have been eliminated. RACINO DEVELOPMENT In order to provide funding for the racino project and to repay certain then existing indebtedness, on February 25, 2003, OED completed a private placement of $123.2 million of its 13% Senior Secured Notes due 2010 with Contingent Interest (the "Private OED Notes"). On September 10, 2003, OED exchanged the Private OED Notes for notes registered with the Securities and Exchange Commission otherwise identical in all respects to the Private OED Notes (the "Registered OED Notes," and together with the Private OED Notes, the "OED Notes"). The construction and development of the racino project is expected to be completed in two phases. The first phase involves the construction of the casino and related casino amenities which was substantially completed and opened to the public on December 19, 2003. Construction of the second phase, which involves the construction of the horse racetrack and related facilities, is currently underway. OED expects to begin scheduling live racing meets at the racino in December 2004, at which time it expects to cease operations at its existing horse racetrack. The total remaining capital expenditures expected to complete the racino project as of December 31, 2003 is approximately $17.5 million. The source of funds to complete construction and development of the racino will be (i) a portion of the proceeds from the offering of the OED Notes, (ii) available borrowings under OED's $15.0 million senior secured credit facility, (iii) available borrowings under OED's $16.0 million furniture, fixtures and equipment financing facility and (iv) cash flows from existing racetrack operations and future cash flows from future racino operations. See Note 4 for further information about the OED Notes, the senior credit facility and the furniture, fixtures and equipment financing facility. F-7 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION--The consolidated financial statements include the financial information of the Company and its wholly owned subsidiaries DJL, OEDA, OED and PGC. All significant intercompany transactions have been eliminated. CASH AND CASH EQUIVALENTS--The Company considers all cash on hand and in banks, certificates of deposit and other highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents. RESTRICTED CASH--Restricted cash represents amounts for purses to be paid during the live meet racing season at OED. Additionally, restricted cash includes entrance fees for a special futurity race during the racing season, plus any interest earnings. These funds will be used to pay the purse for the race. A separate interest bearing bank account is required for these funds. RESTRICTED INVESTMENTS--As of December 31, 2003, OED had approximately $15.8 million invested in government securities with original maturities of greater than 90 days from the date of initial investment. These investments have been classified as held-to-maturity and have contractual maturities of $8.0 million on both February 15, 2004 and August 15, 2004. Proceeds from the maturity of these investments will be used to help make payments of fixed interest on the OED Notes due March 1, 2004 and September 1, 2004 in accordance with the terms of the Cash Collateral and Disbursement Agreement, dated February 25, 2003, among OED, U.S. Bank National Association (as trustee and disbursement agent) and an independent construction consultant (the "Cash Collateral and Disbursement Agreement"). ALLOWANCE FOR DOUBTFUL ACCOUNTS--The allowance for doubtful accounts is maintained at a level considered adequate to provide for possible future losses. The provision for doubtful accounts of $184,179, $138,751 and $152,158 were recorded in 2003, 2002 and 2001, respectively. INVENTORIES--Inventories consisting principally of food, beverage, retail items, and operating supplies are stated at the lower of first-in, first-out cost or market. RESTRICTED CASH--RACINO PROJECT--"Restricted cash--racino project" represents unused proceeds from the sale of the OED Notes, the use and disbursement of which are restricted to the design, development, construction, equipping and opening of the racino in accordance with the Cash Collateral and Disbursement Agreement. As of December 31, 2003, OED had $14.4 million in cash equivalents deposited in a construction disbursement account, $0.2 million in cash equivalents deposited in an interest reserve account that will be used toward payment of fixed interest on the OED Notes, $5.0 million in cash equivalents deposited in a completion reserve account that will be used to fund potential cost overruns and contingency amounts with respect to the design, development, construction, equipping and opening of the racino and $0.4 million in cash in a local financial institution. The funds deposited in these accounts are invested in cash or securities that are readily convertible to cash. PROPERTY AND EQUIPMENT--Property and equipment are recorded at cost and capitalized lease assets are recorded at their fair market value at the inception of the lease. Major renewals and improvements are capitalized, while maintenance and repairs are expensed as incurred. Depreciation and amortization are computed on a straight-line basis over the following estimated useful lives: F-8 Land improvements............................................ 20-40 years Building and building improvements........................... 9-40 years Riverboat and improvements................................... 5-20 years Furniture, fixtures and equipment............................ 3-10 years Computer equipment........................................... 3-5 years Vehicles..................................................... 5 years * OED currently leases the land on which the OED building and leasehold improvements are located. The ground lease annual rental is $0 per year and the lease term expires on the earlier of December 31, 2004 or the first day OED opens a new racetrack facility for business in St. Landry Parish, Louisiana. LONG-LIVED ASSETS--Effective January 1, 2002, the Company assesses the impairment of long-lived assets, excluding goodwill and indefinite-lived intangible assets, in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." This new pronouncement also amends ARB No. 51 "Consolidated Financials Statements," to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. SFAS No. 144 requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired and also broadens the presentation of discontinued operations to include more disposal transactions. The Company evaluates the carrying value of long-lived assets when events and circumstances warrant such a review. If the carrying value of the long-lived asset is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the asset. The adoption of SFAS No. 144 did not have an impact on our financial position or results of operations for the years ended December 31, 2003 and 2002. CAPITALIZED INTEREST--The Company capitalizes interest costs associated with debt incurred in connection with the racino project. When debt is specifically identified as being incurred in connection with the development of the racino project, the Company capitalizes interest on amounts expended on the racino project at the Company's average cost of borrowed money. Capitalization of interest will cease when the project is substantially complete. The amount capitalized during 2003 and 2002 was $2.2 million and $0.1 million, respectively. DEFERRED FINANCING COSTS--Costs associated with the issuance of debt (see Note 4) have been deferred and are being amortized over the life of the related indenture/agreement using the effective interest method. GOODWILL AND OTHER INTANGIBLE ASSETS--At December 31, 2003 and 2002, "Goodwill" and "Other intangibles" consists of goodwill, licensing costs and the acquired tradename associated with the purchase of the Diamond Jo and OED. To the extent the purchase price exceeded the fair value of the net identifiable assets acquired, such excess has been recorded as goodwill. SFAS No. 142 "Goodwill and Other Intangible Assets" provides that goodwill and certain indefinite lived intangible assets will no longer be amortized but will be reviewed at least annually for impairment and written down and charged to income when their recorded value exceeds their estimated fair value. During the first quarter of 2002, the Company performed a transitional impairment test on goodwill, recorded within the Diamond Jo segment, in accordance with SFAS No. 142 and determined that the estimated fair value of the Diamond Jo exceeded its carrying value as of that date. During the first quarter of 2003, the Company performed its annual impairment test on goodwill in accordance with SFAS No. 142 and determined that the estimated fair value of the Diamond Jo exceeded its carrying value as of that date. Based on that review, management determined that there was no impairment of goodwill. Goodwill amortization during 2001 was $1,413,987. Assuming the non-amortization provisions of these standards had been adopted at the beginning of 2001, the Company's adjusted net income for 2001 would have been $3,233,468. As of December 31, 2003, the Company had recorded approximately $3.8 million on its balance sheet for directly related legal and other incremental costs associated with the acquisition of OED and obtaining the relevant gaming licenses to conduct gaming operations associated with the racino project in Louisiana. These costs are included as a cost of the acquisition and have been evaluated under SFAS No. 141 "Business Combinations" and F-9 SFAS No. 142. Intangible assets of $28.4 million acquired as part of the OED acquisition were identified and valued as follows (in millions): Slot Machine and Electronic Video Game Licenses........... $24.6 Tradename................................................. $ 2.5 Horse Racing Licenses..................................... $ 1.3 ----- Total..................................................... $28.4 For purposes of the valuations set forth above, each of the identified intangible assets were treated as having indefinite lives and valued separately. The methodology employed by an independent valuation specialist to arrive at such valuations required evaluating the fair market value of the existing horse racing business on a stand-alone basis without taking into account any right to obtain slot machine and electronic video game licenses. Such valuation was based in part upon other transactions in the industry and OED's historical results of operations. A value was also derived for the tradename using market based royalty rates. A significant portion of the purchase price is attributable to the slot machine and electronic video game license rights, which were valued based upon the market value paid by other operators and upon projected cash flows from operations. These valuations and related intangible assets are subject to impairment by, among other things, significant changes in the gaming tax rates in Louisiana, significant new competition which could substantially reduce profitability, non-renewal of OED's racing or gaming licenses due to regulatory matters, changes to OED's tradename or the way OED's tradename is used in connection with its business and regulatory changes that could adversely affect OED's business by, for example, limiting or reducing the number of slot machines or video poker machines that they are permitted to operate. CONSTRUCTION PAYABLE--ST. LANDRY PARISH--At December 31, 2003 and 2002, OED had $20.2 million and $2.4 million, respectively, in payables and accruals related to construction and development costs associated with the racino project. FINANCIAL INSTRUMENTS--The carrying amount for financial instruments included among cash and cash equivalents, accounts receivable, restricted cash, accounts payable and security deposits approximates their fair value based on the short maturity of those instruments. REVENUE RECOGNITION--In accordance with common industry practice, our casino revenue is the net win from gaming activities, which is the difference between gaming wins and losses. Racing revenues include our share of pari-mutuel wagering on live races after payment of amounts returned as winning wagers, and our share of wagering from import and export simulcasting as well as our share of wagering from our off-track betting parlors. PROMOTIONAL ALLOWANCES--Food, beverage, and other items furnished without charge to customers are included in gross revenues at a value which approximates retail and then deducted as promotional allowances to arrive at net revenues. The cost of such complimentary services have been included as casino expenses on the accompanying statements of operations. Such estimated costs of providing complimentary services allocated from the food and beverage and other operating departments to the casino department were $689,972 and $35,642 for food and beverage and other, respectively, in 2003, $592,539 and $4,672, respectively, in 2002 and $568,098 and $8,977, respectively, in 2001. SELLING, GENERAL AND ADMINISTRATIVE--In October 2002, DJL entered into a charitable giving agreement with an Iowa non-for-profit organization in which DJL has agreed, subject to certain contingencies, to give such organization a total contribution of $450,000. The agreement calls for a payment of $50,000 upon the signing of the agreement and $50,000 on March 1 of each of the next seven years beginning on March 1, 2003. The first two payments were made by the Company in October 2002 and March 2003, respectively. As all significant contingencies surrounding the agreement were met during the third quarter of 2003, DJL expensed the remaining unpaid contribution of $350,000. Such expense is included in "Selling, general and administrative" expenses in the Consolidated Statement of Operations. DEVELOPMENT EXPENSE--During 2003, DJL entered into an exclusive agreement with the Worth County Development Authority pursuant to which the parties agreed to jointly submit an application for a license to operate a gaming facility in Worth County, Iowa. Under this agreement, DJL has agreed to design, construct, operate and manage a casino with no less than 700 gaming positions, a waterway, if necessary, a recreational vehicle park with a F-10 minimum capacity of 200 spaces, and, upon reaching a targeted rate of return on invested capital, a 100-room hotel development. During 2003, DJL incurred expenses of $102,272 related to its entering into this agreement. REFERENDUM EXPENSES--In accordance with Iowa law, a referendum must be held every eight years in each of the counties where gambling games are conducted and the proposition to continue to allow gambling games in such counties must be approved by a majority of the county electorate voting on the proposition. Such a referendum took place on November 5, 2002. During 2002, DJL incurred various advertising, promotional and other referendum related expenses totaling $771,111 to promote the approval of continued gaming in Dubuque County. The measure was approved on November 5, 2002 with 79% of the electorate voting on the proposition favoring continued gaming on riverboats in Dubuque County. As DJL will not be required to be a part of another referendum until 2010, such referendum related costs are not expected to be incurred in the future until that time. STATE OF WISCONSIN GOVERNMENT RELATIONS--During 2002 and 2001, DJL incurred expenses for a governmental relations services agreement with respect to gaming issues and developments in Wisconsin which might affect the Company and its gaming operations. Such expenses in 2002 and 2001 totaled $55,000 and $147,163, respectively. MINORITY INTEREST--Minority interest on the Consolidated Statement of Operations represents the 50% portion of net income from OED allocated to the remaining 50% membership interest holder in OED during the period February 15, 2002 through August 30, 2002. INCOME TAXES--The Company is a limited liability company. In lieu of corporate income taxes, the members of a limited liability company are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. We periodically evaluate our policies and the estimates and assumptions related to these policies. We also periodically evaluate the carrying value of our assets in accordance with generally accepted accounting principles. We operate in a highly regulated industry and are subject to regulations that describe and regulate operating and internal control procedures. The majority of our revenues are in the form of cash, which by its nature, does not require complex estimates. In addition, we made certain estimates surrounding our application of purchase accounting related to the acquisition and the related assignment of costs to goodwill and other intangible assets. In addition, contingencies are accounted for in accordance with SFAS No. 5, "Accounting for Contingencies." SFAS No. 5 requires that we record an estimated loss from a loss contingency when information available prior to issuance of our financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Accounting for contingencies such as legal matters requires us to use judgment. Many of these legal contingencies can take years to be resolved. Generally, as the time period increases over which the uncertainties are resolved, the likelihood of changes to the estimate of the ultimate outcome increases. However, an adverse outcome could have a material impact on our financial condition and operating results. CONCENTRATIONS OF RISK--The Company's customer base consists of eastern Iowa and southwest Louisiana. Although the Company is directly affected by the economic viability of the area, management does not believe significant risk exists at December 31, 2003. The Company maintains deposit accounts at three banks. At December 31, 2003 and 2002, and various times during the years then ended, the balance at the banks exceeded the maximum amount insured by the FDIC. Management believes any credit risk related to the uninsured balance is minimal. F-11 RECLASSIFICATIONS--Certain prior year amounts have been reclassified to conform with current year presentation. RECENTLY ISSUED ACCOUNTING STANDARDS--In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies the previous guidance on the subject. This statement requires, among other things, that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The provisions for this statement are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material effect on the Company's results of operations or financial position of the Company for the year ended December 31, 2003. In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45). FIN 45 expands the disclosure requirements related to certain guarantees, including product warranties, and requires the Company to recognize a liability for the fair value of all guarantees issued or modified after December 31, 2002. FIN 45 did not impact the Company's financial position or net income. In 2003, the FASB issued Interpretation (FIN) No. 46, Consolidation of Variable Interest Entities, which addresses the consolidation and related disclosures of these entities by business enterprises. These are entities in which either the equity investment at risk is not sufficient to absorb the probable loss without additional subordinated financial support from other parties, or the investors with equity at risk lack certain essential characteristics of a controlling interest. Under the Interpretation, the Company must consolidate any variable interest entities (VIEs) in which the Company holds variable interests and the Company is deemed the primary beneficiary. The effective date for the adoption of FIN 46 for interests in VIEs created prior to February 1, 2003 was July 1, 2003 and applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which the Company obtains an interest after that date. The adoption of FIN 46 did not impact the Company's financial position or net loss available to common members' interest. In May 2003, the FASB issued Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires the issuer to classify a financial instrument that is within the scope of the standard as a liability if such financial instrument embodies an obligation of the issuer. As a result of the adoption of SFAS No. 150 on July 1, 2003, DJL reclassified its $4 million mandatorily redeemable preferred members' interest from the mezzanine section of the consolidated balance sheet to long-term debt. Further, preferred member distributions paid or accrued subsequent to adoption of SFAS No. 150 are required to be presented as interest expense separately from interest due to other creditors. DJL was not required to record a cumulative effect of change in an accounting principle as the redeemable preferred members' interest was recorded at fair value prior to July 1, 2003. We are precluded from reclassifying prior period amounts pursuant to this standard. 3. PROPERTY AND EQUIPMENT Property and equipment at December 31 is summarized as follows:
2003 2002 -------------- -------------- Land and land improvements ......................... $ 13,686,570 $ 1,110,000 Building and improvements .......................... 51,991,698 8,387,134 Riverboats and improvements ........................ 8,305,022 8,300,776 Furniture, fixtures and equipment .................. 28,472,602 7,942,095 Computer equipment ................................. 5,196,966 962,700 Vehicles ........................................... 176,235 130,753 Equipment held under capital lease obligations ..... 704,527 Construction in progress ........................... 6,034,867 7,455,885 -------------- -------------- Subtotal ........................................... 113,863,960 34,993,870 Accumulated depreciation ........................... (11,386,615) (9,291,128) -------------- -------------- Property and equipment, net ........................ $ 102,477,345 $ 25,702,742 ============== ==============
F-12 4. DEBT The debt of the Company's and its subsidiaries consists of the following at December 31:
2003 2002 ------------- ------------- 12 1/4% Senior Secured Notes of DJL due July 1, 2006, net of discount of $383,779 and $506,845, respectively, secured by assets of the Diamond Jo .......................... $ 70,616,221 $ 70,493,155 13% Senior Secured Notes of OED due March 1, 2010 with Contingent Interest, net of discount of $2,276,564, secured by certain assets of OED ................................. 120,923,436 Line of Credit of DJL with Wells Fargo Foothill, Inc., interest rate at greater of LIBOR + 3% or Prime + .75%, however, at no time shall the interest rate be lower than 8.5%, (current rate of 8.5%) principal payments of $50,000 due monthly beginning October 2002 through February 2005, maturing March 12, 2005, secured by assets of the Diamond Jo ................................................................. 11,250,000 11,850,000 $15.0 million Loan and Security Agreement of OED with Wells Fargo Foothill, Inc., interest rate at Prime + 2.50% (current rate of 6.5%), maturing June 24, 2006, secured by certain assets of OED ......................................................... 5,104,301 $16.0 million Loan and Security Agreement of OED with Wells Fargo Foothill, Inc., interest rate at Prime + 2.50% (current rate of 6.5%), due in 48 equal monthly principal payments beginning on March 1, 2004, secured by certain assets of OED .......... 12,532,493 Promissory note payable to third party, interest at 4.75% payable monthly in arrears, annual principal payments of $550,000 due each October beginning in 2004, secured by mortgage on certain real property of OED .............................................. 3,850,000 Note payable to IGT, interest rate at 9.5%, monthly payments of principal and interest of $31,250, with final payment due July 1, 2005, secured by certain assets of OED ........ 548,940 Preferred membership interests--redeemable, interest at 9%, due October 13, 2006 ............ 4,000,000 Term loan with Foothill Capital Corporation, interest at Prime + 3.75%, however, at no time shall the interest rate be lower than 7.5% (current rate of 8.0%), maturing the earlier of (a) June 30, 2003 or (b) the date on which OED consummates its financing of the racino project, secured by substantially all the assets of OED ............................................................................ 8,300,000 Note payable to PGP, issued by OEDA, interest rate of 7% until January 31, 2003, thereafter 8% until February 28, 2003, thereafter 9% until March 31, 2003, thereafter the greater of 12% or the fixed rate on the notes expected to be issued to finance the racino project, maturing on June 30, 2003 .......................... 7,325,000 Note payable to WET2, interest rate of 7% until March 31, 2003, thereafter the greater of 12% or the fixed rate on the notes expected to be issued to finance the racino project, maturing on June 30, 2003 ............................................ 4,500,000 ------------- ------------- Total debt .................................................................................. 228,825,391 102,468,155 Less current portion ........................................................................ (4,098,222) (20,725,000) ------------- ------------- Total long term debt ........................................................................ $ 224,727,169 $ 81,743,155 ============= =============
On July 15, 1999, DJL completed a private placement of $71 million aggregate principal amount of DJL Notes. The DJL Notes bear interest at a rate of 12 1/4% per year which is payable semi-annually on January 1 and July 1 of each year. The DJL Notes are secured by all of our current and future tangible and intangible assets (with the exception of certain excluded assets). OEDA is an unrestricted subsidiary of the Company under the DJL Notes pursuant to the indenture governing the DJL Notes, and therefore is not an obligor with respect to the DJL Notes and does not otherwise provide credit support with respect to DJL's payment obligations under such notes. The DJL Notes, which mature on July 1, 2006, are redeemable at DJL's option, in whole or in part at any time or from time to time, on and after July 1, 2003 at certain specified redemption prices set forth in the indenture governing the DJL Notes. The indenture governing the DJL Notes contains a number of restrictive covenants and agreements, including covenants that limit DJL's ability to, among other things: (1) incur more debt; (2) pay dividends, redeem stock or make other distributions; (3) issue stock of subsidiaries; (4) make investments; (5) create liens; (6) enter into transactions with affiliates; (7) merge or consolidate; and (8) transfer or sell assets. At December 31, 2003, DJL was in compliance with all such covenants. The events of default under the indenture include provisions that are typical of senior debt financings. Upon the occurrence and continuance of certain events of default, the trustee or the holders of not less than 25% in aggregate principal amount of outstanding DJL Notes may declare all unpaid F-13 principal and accrued interest on all of the DJL Notes to be immediately due and payable. Upon the occurrence of a change of control (as defined in the indenture governing the DJL Notes), each holder of DJL Notes will have the right to require DJL to purchase all or a portion of such holder's DJL Notes pursuant to the offer described in the indenture at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. On February 25, 2003, OED completed the private placement of $123.2 million aggregate principal amount of OED Notes. The OED Notes bear interest at a rate of 13% per year which is payable semi-annually on March 1 and September 1 of each year, beginning September 1, 2003. Contingent interest will accrue on the OED Notes beginning in the first full fiscal year after the casino begins operations. The amount of contingent interest will be equal to 5.0% of OED's cash flow for the applicable period, subject to certain limitations. OED may defer paying a portion of contingent interest under certain circumstances set forth in the indenture governing the OED Notes. Neither the Company nor any of its direct subsidiaries is an obligor under the OED Notes or is required to provide credit support with respect to OED's payment obligations thereunder. At the end of each six-month period after the casino portion of the racino begins operations, OED is required under the indenture governing the OED Notes to offer to purchase the maximum principal amount of OED Notes that may be purchased, with an amount equal to the sum of (i) 50% of OED's excess cash flow for such period (if any) and (ii) the then available balance in an excess cash flow account, which account at any time shall not exceed $10.0 million. For 45 days following the expiration of each initial excess cash flow offer to purchase, the holders of the OED Notes have the right to request that OED make an offer to purchase OED Notes with the funds in the excess cash flow account subject to certain limitations, including that OED shall not be required to make more than one offer at any one time. All such offers to purchase OED Notes shall be made at 101% of the principal amount, plus accrued and unpaid interest. The OED Notes are secured by all of OED's current and future assets (with the exception of certain excluded assets), including the remaining unused proceeds from the offering of the OED Notes which have been deposited into OED's construction disbursement, interest reserve and completion reserve accounts. The OED Notes, which mature on March 1, 2010, are redeemable at OED's option, in whole or in part at any time or from time to time, on and after March 1, 2007 at certain specified redemption prices set forth in the indenture governing the OED Notes. The indenture governing the OED Notes contains a number of restrictive covenants and agreements, including covenants that limit the ability of OED and its subsidiaries to, among other things: (1) pay dividends, redeem stock or make other distributions or restricted payments; (2) incur indebtedness or issue preferred shares; (3) make certain investments; (4) create liens; (5) agree to payment restrictions affecting the subsidiary guarantors; (6) consolidate or merge; (7) sell or otherwise transfer or dispose of assets, including equity interests of subsidiaries; (8) enter into transactions with affiliates; (9) designate subsidiaries as unrestricted subsidiaries; (10) use proceeds of permitted asset sales and (11) change its line of business. At December 31, 2003, OED was in compliance with all such covenants. The events of default under the indenture include provisions that are typical of senior debt financings. Upon the occurrence and continuance of certain events of default, the trustee or the holders of not less than 25% in aggregate principal amount of outstanding OED Notes may declare all unpaid principal and accrued interest on all of the OED Notes to be immediately due and payable. Upon the occurrence of a change of control (as defined in the indenture governing the OED Notes), each holder of OED Notes will have the right to require OED to purchase all or a portion of such holder's OED Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. The obligations of DJL under it's senior secured credit facility dated February 23, 2001 (the "DJL Credit Facility") are senior to DJL's obligations under the DJL Notes. The DJL Credit Facility contains, among other things, covenants, representations and warranties and events of default customary for loans of this type. The most significant covenants include a minimum EBITDA requirement and the maintenance of certain financial ratios that limit our ability to make distributions and incur debt. At December 31, 2003 and 2002, DJL was in compliance with all such covenants. At December 31, 2003, DJL had outstanding borrowings of $11.3 million and outstanding letters of credit of $0.5 million under the DJL Credit Facility. On June 24, 2003, OED entered into a new $15.0 million senior secured credit facility with Wells Fargo Foothill, Inc. as lender (the "OED Credit Facility"). The OED Credit Facility was amended by the parties thereto on September 22, 2003, December 10, 2003 and December 24, 2003 (the "OED Credit Facility Amendments"). OED's F-14 obligations under the OED Credit Facility are secured by a lien on substantially all of its and its subsidiaries' current and future assets, other than the construction disbursement, interest reserve, completion reserve and excess cash flow accounts and certain other excluded assets as well as a pledge by OEDA of the capital stock of OED. Pursuant to the intercreditor agreement described below, the lien on the collateral securing the OED Credit Facility is senior to the lien on such collateral securing the OED Notes. The OED Credit Facility consists of a revolving credit facility which permits OED to request advances and letters of credit to finance working capital and other general corporate needs. Pursuant to the OED Credit Facility Amendments, OED had the ability to borrow up to $8.5 million (less amounts outstanding under letters of credit) at any one time outstanding during the period before the date that the casino portion of the racino has been completed and, among other things, is open for business to the general public and construction costs for the casino have been paid in full or, if such payments are not yet due on such date, that sufficient funds remain in the construction disbursement account to satisfy such payments in full (the "Phase I Completion Date"). All requirements under the definition of the Phase I Completion Date were met on January 9, 2004. For the period after the Phase I Completion Date but before the second anniversary of the Phase I Completion Date (the "Second Anniversary"), the total amount of credit that will be available to OED will be the lesser of $15.0 million and a specified borrowing base (the "Borrowing Base"). For the purposes of the OED Credit Facility, the Borrowing Base is the lesser of 30% of the amount of certain costs incurred by OED in connection with the construction of the racino project and 20% of the amount of the distressed-sale valuation of its and its subsidiaries' operations and assets. After the Second Anniversary, the total amount of credit that will be available to OED will be the greater of (i) the lesser of $10.0 million and the Borrowing Base or (ii) the aggregate principal amount of all advances outstanding as of the Second Anniversary. At December 31, 2003, OED had outstanding borrowings of $5.1 million and outstanding letters of credit of $3.2 million under the OED Credit Facility. All revolving loans and letters of credit issued under the OED Credit Facility will mature on June 24, 2006. Prior to the maturity date, funds borrowed under the OED Credit Facility may be borrowed, repaid and reborrowed, without premium or penalty. OED's borrowings under the OED Credit Facility will bear interest at a base rate (a Wells Fargo prime rate) plus a margin of 2.50%. The interest rate payable under the OED Credit Facility will increase by 2% per annum during the continuance of an event of default. Under the OED Credit Facility, OED is also required to pay to the lender a letter of credit fee equal to 2% per annum on the daily balance of the undrawn amount of all outstanding letters of credit and to the institution issuing a letter of credit a fronting fee, in each case payable in arrears on a monthly basis. The OED Credit Facility contains, among other things, covenants, representations and warranties and events of default customary for loans of this type. The most significant covenants include a minimum EBITDA requirement and a maximum capital expenditure requirement. At December 31, 2003, OED was in compliance with all such covenants. Concurrently with the closing of the OED Credit Facility, the trustee under the indenture for the OED Notes (as secured party) entered into an intercreditor agreement with Wells Fargo Foothill, Inc. as the lender under such credit facility, providing, among other things, that the lien securing the indebtedness under the OED Credit Facility is senior to the lien securing the indebtedness under the OED Notes (except that the construction disbursement, interest reserve, completion reserve and excess cash flow accounts are security only for the OED Notes). On September 22, 2003, OED entered into a new $16.0 million senior secured credit facility with Wells Fargo Foothill, Inc. as lender (the "OED FF&E Facility"). Under the OED FF&E Facility, the lender agrees to make a series of term loans, up to a maximum amount of $16.0 million, to finance the purchase of gaming equipment and other furniture, fixtures and equipment. OED's obligations under the OED FF&E Facility are, subject to certain limitations, secured by a first priority lien on all of the furniture, fixtures and equipment, and all proceeds and products thereof. At December 31, 2003, OED had outstanding borrowings of $12.5 million under the OED FF&E Facility. Loans under the OED FF&E Facility shall be repayable in 48 equal monthly installments of principal, commencing on March 1, 2004, and continuing on the first day of each month thereafter until the unpaid balance of all loans are paid in full. The outstanding principal balance and all accrued and unpaid interest under all loans shall F-15 also be due and payable in full on March 1, 2008. Once borrowed, all loans may be prepaid in whole or in part without penalty or premium at any time during the term of this agreement. Amounts borrowed and repaid may not be reborrowed. OED's borrowings under the OED FF&E Facility will bear interest at a base rate (a Wells Fargo prime rate) plus a margin of 2.50%, but at no time shall the interest rate be less than 6%. The interest rate payable under the OED FF&E Facility will increase by 2% per annum during the continuance of an event of default. The OED FF&E Facility contains, among other things, covenants, representations and warranties and events of default customary for loans of this type. The most significant covenants include a minimum EBITDA requirement and a maximum capital expenditure requirement. At December 31, 2003 OED was in compliance with all such covenants. In October 2003, OED entered into a purchase agreement to acquire 93 acres of land, divided into seven approximately equal parcels, for a total purchase price of $3,850,000. The purchase price under this purchase agreement was financed by the seller with OED issuing a $3,850,000 note payable to the seller. The note is payable in seven equal annual installments of $550,000 beginning October 24, 2004 and bears interest at a rate of 4.75% of the unpaid balance due monthly in arrears on the fifth day of each month beginning on December 5, 2003. The note is collateralized by a mortgage on the property. Simultaneously with the payment of each $550,000 annual installment discussed above, seller agrees to release one of the remaining parcels from the mortgage. In March 2003, OED entered into a participation agreement with a third party operator to own and operate 100 video poker machines at OED's OTB in Port Allen, Louisiana. In December 2003, OED obtained its license to own and operate video poker machines. In accordance with the participation agreement, OED assumed the remaining balance of an original $663,700 promissory note payable in exchange for ownership of the 100 video poker machines. The note bears interest at 9.5% and is payable in monthly installments of principal and interest of $31,250 with the last payment due July 1, 2005. The note is collateralized by a security interest in the machines. On July 15, 1999, DJL authorized and issued $7.0 million of preferred membership units. The holders of all of DJL's preferred membership interests are entitled to receive, subject to certain restrictions contained in the indenture governing the DJL Notes, out of funds legally available therefor, cumulative preferred distributions payable semiannually at an annual rate of 9% of the original face amount thereof. Other than certain limited consent rights and as required by law, holders of DJL's preferred membership interests have no voting rights. DJL redeemed $3.0 million in original face amount of its preferred membership interests on January 19, 2001 at a redemption price of $3.0 million, plus a portion of accrued and unpaid interest thereon of $170,000, the balance of which, in an amount equal to $145,000 plus accrued interest on such amount (the "Accrued Preferred Distribution"), was agreed to be paid by DJL at such time that such payment is permitted to be made pursuant to DJL's existing financing arrangements, but in no event later than January 15, 2003. The Accrued Preferred Distribution totaling $171,100 was paid on January 15, 2003. The balance of preferred membership interests not redeemed by DJL must be redeemed by DJL 90 days after the seventh anniversary of the closing date of the acquisition at a redemption price of $4.0 million, plus any accrued and unpaid preferred interest through the date of redemption. Interest for the years ended December 31, 2003, 2002 and 2001 (other than the Accrued Preferred Distribution) was $360,544, $373,050 and $386,174, respectively. At December 31, 2003 and 2002, accrued interest related to the preferred membership interests was approximately $1.1 million and $0.9 million respectively. In accordance with the adoption of SFAS 150 on July 1, 2003, interest associated with preferred membership interests after July 1, 2003 has been recorded as "Interest expense related to preferred members' interest, redeemable" on the Consolidated Statement of Operations. Concurrently with the issuance of the OED Notes, our obligations under the Term Loan, the PGP Note and the WET2 Note were repaid in February 2003. F-16 5. CAPITAL LEASE OBLIGATION Capital lease obligations at December 31 are as follows: 2003 2002 ---- ---- Liability under capital leases............... $ 0 $475,781 Less current portion......................... ---- -------- $ 0 $475,781 ==== ======== On September 6, 2002, DJL entered into a purchase and license agreement (the "CDS Agreement") with Casino Data Systems ("CDS"). The CDS Agreement contains various requirements including upgrades to Diamond Jo's current slot information system, installation of the CDS slot information system as part of the racino project and equipment purchases. If and when such requirements are met, CDS agreed to waive any claimed liability or responsibility of DJL for payment of the outstanding capital lease liability of $475,781. As DJL substantially met all of the requirements included in the CDS Agreement as of December 31, 2003, DJL no longer has any obligation to CDS related to this capital lease. The capital lease liability was primarily offset against the capital assets acquired under the original capital lease as well as assets acquired under the CDS Agreement. Amortization of the capital lease asset was included in depreciation expense for the years ended December 31, 2003, 2002 and 2001. 6. LITIGATION SETTLEMENT On November 8, 1994, the Louisiana Horsemen's Benevolent and Protective Association 1993, Inc. ("LHBPA") filed a lawsuit against all licensed horse racetracks in the State of Louisiana. The lawsuit alleged that LHBPA did not receive the appropriate share of net revenues from video poker devices located at licensed horse racetracks. In February 2003, OED entered into a settlement agreement with LHBPA for $1.6 million. The terms of the settlement agreement requires OED to make payments of $400,000 annually beginning in March 2003, with additional $400,000 payments due in March 2004 through 2006. In accordance with Statement of Financial Accounting Standards No. 5 "Accounting for Contingencies," the Company recorded an expense and related accrual of $1.6 million in the financial statements as of December 31, 2002. Of the total $1.6 million accrual, $0.4 million has been included in "Other accrued expenses" in the "Current Liabilities" section with the remaining $1.2 million recorded under "Other accrued expenses" in the "Long-term liabilities" section of the Consolidated Balance Sheet. 7. EMPLOYEE BENEFIT PLAN Each of DJL and OED has a qualified defined contribution plan under section 401(k) of the Internal Revenue Code for employees of the Diamond Jo and Evangeline Downs, respectively. Under the plans, eligible employees may elect to defer up to 60% of their salary, subject to Internal Revenue Service limits. The Company may make a matching contribution to each participant based upon a percentage set by the Company, prior to the end of each plan year. Company matching contributions to the plans at the Diamond Jo and Evangeline Downs were $234,002, $227,351 and $227,596 in 2003, 2002 and 2001, respectively. 8. LEASING ARRANGEMENTS Ground Lease--Lafayette--OED currently leases the land on which the OED racetrack is located. The ground lease annual rental is $0 per year and the lease term expires on the earlier of December 31, 2004 or the first day the Company opens a new racetrack facility for business in St. Landry Parish, Louisiana. New Iberia--OED is under a twelve-month lease which runs from September 1, 2002 through August 31, 2003 with lease payments of $5,000 due each month, after which the lease will revert to a month-to-month contract for $5,000 per month to lease the New Iberia off-track betting parlor. The lease requires payment of property taxes, maintenance and insurance on the property. During the year ended December 31, 2003 and the period February 15, 2002 (date of acquisition) to December 31, 2002, OED paid $60,000 and $52,321, respectively, in rent for the New Iberia off-track betting parlor. F-17 PARI-MUTUEL PROCESSING EQUIPMENT--OED entered into a five-year lease agreement commencing on February 15, 2001 for computerized pari-mutuel central processing equipment, terminals and certain associated equipment at OED. Additionally, the lease agreement provides the Company with pari-mutuel services whereby the leased equipment automatically registers and totals the amounts wagered on the races held at the race track or simulcast to it and to its respective off-track wagering parlors, and displays the win pool odds, payoffs, and other pertinent horse racing information needed to operate live meet horse racing and off-track betting. The Company pays 0.43% of the handle for the services provided during both live meet racing days and off-track betting racing days. The charges are subject to a minimum of $1,950 per live meet race day and $1,150 per off-track betting race day. Additionally, if a race day is not completed, the Company must pay 50% of the minimum if less than four races are declared official and 100% of the minimum if four or more races are declared official. In 2003, OED had 87 live meet racing days and 223 off-track betting days. OED paid $466,923 and $378,204 during the year ended December 31, 2003 and the period February 15, 2002 (date of acquisition) to December 31, 2002, respectively, related to the pari-mutuel processing equipment lease. In 2004, OED is scheduled to run 116 live meet racing days and 249 off-track betting days. The total minimum rental payments for the lease mentioned in the preceding paragraph assuming 116 live meet racing days and 249 off-track betting days for each of the years ended December 31 are summarized as follows: 2004...................................................... $512,550 2005...................................................... 512,550 2006...................................................... 51,750 ---------- $1,076,850 ========== The Company leases various other equipment under noncancelable operating leases. The leases require fixed monthly payments to be made ranging from $60 to $2,553 and certain other gaming machines and tables require contingent monthly rental payments based on usage of the equipment. The leases expire on various dates through 2008. Rent expense in 2003, 2002 and 2001 was $1,123,459, $1,236,088 and $1,348,670, respectively. The future minimum rental payments required under these leases for the years ended December 31 are summarized as follows: 2004..................................................... $ 63,561 2005..................................................... 30,630 2006..................................................... 30,630 2007..................................................... 12,763 ---------- $137,584 ========== 9. COMMITMENTS AND CONTINGENCIES Under the Company's and PGP's operating agreements, the Company and PGP have agreed, subject to few exceptions, to indemnify and hold harmless the Company's members, PGP and PGP's members, as the case may be, from liabilities incurred as a result of their positions as sole manager of the Company and as members of the Company or PGP, as the case may be. On June 25, 2002, PGP entered into an agreement with William E. Trotter, II ("Trotter") and William E. Trotter, II Family L.L.C., a Louisiana limited liability company ("WET2LLC") to acquire (i) all of Trotter's interests in two promissory notes issued by OED in connection with DJL's acquisition of OED, and (ii) all of Trotter's membership interests owned by WET2LLC (together, the "Trotter Purchase"). On August 30, 2002, OEDA consummated the Trotter Purchase for a purchase price consisting of cash of $15,546,000, plus a contingent fee of one half of one percent (0.5%) of the net slot revenues generated by OED's racino located in St. Landry Parish, Louisiana, for a period of ten years commencing on December 19, 2003, the date the racino's casino opened to the general public. DJL is involved in a lawsuit with a former employee. Management believes that such lawsuit is without merit and that the ultimate disposition of this action should not have a material adverse effect on the financial condition of the Company; however, no assurance can be given as to the ultimate disposition of such action. F-18 Other than as noted above, the Company is not a party to, and none of its property is the subject of, any other pending legal proceedings other than litigation arising in the normal course of business. Management does not believe that adverse determinations in any or all such other litigation would have a material adverse effect on DJL's financial condition, results of operations or cash flows. 10. MEMBERS' EQUITY On July 15, 1999, DJL authorized and issued $9.0 million of common membership units. PGP, as the holder of all of the Company's issued and outstanding common membership interests, is entitled to vote on all matters to be voted on by holders of common membership interests of the Company and, subject to certain limitations contained in the Company's operating agreement and the indenture governing the DJL Notes, is entitled to dividends and other distributions if, as and when declared by the Company's managers out of funds legally available therefor. 11. DUBUQUE RACING ASSOCIATION, LTD. CONTRACT Dubuque Racing Association, Ltd. (the "Association"), a qualified sponsoring organization, presently holds a license to conduct gambling games under Chapter 99F and other Iowa statutes. The Association owns Dubuque Greyhound Park, a traditional greyhound racetrack with 600 slot machines and amenities including a gift shop, restaurant and clubhouse. DJL entered into a contract (the "Operating Agreement") with the Association relating to the operation of an excursion gambling riverboat for excursion seasons through December 31, 2008, under gambling licenses held jointly. Under the terms of the Operating Agreement, subject to certain conditions, the Association shall receive the greater of the Association's gaming revenues from the greyhound park for the period, or a percentage of the total combined gaming revenues of the Association from the greyhound park and DJL as follows: o 32% of the first $30,000,000 of total combined gaming revenues, plus o 8% of the total combined gaming revenues over $30,000,000, but less than $42,000,000, plus o 8% of total combined gaming revenues between $42,000,000 and $46,000,000 during any period for which no excursion boat gambling or land based gambling operation is carried on from a Wisconsin or Illinois gambling operation in Grant County, Wisconsin, or Joe Davies County, Illinois. Gaming revenues under this contract means adjusted gross receipts, less gaming taxes. The Association's gaming revenues from the greyhound park in 2003, 2002 and 2001 were $34,688,572, $30,041,841, and $27,108,884, respectively, which are higher than the previously described thresholds, therefore, no payments have been made to the Association in 2003, 2002 and 2001 under the Operating Agreement. Commencing April 1, 2000, DJL had been obligated to pay, and has paid, the Association the sum of $.50 for each patron admitted on the boat, which, based upon recent annual attendance, approximates $500,000 annually. During 2003, 2002 and 2001, these payments approximated $527,000, $495,000 and $503,000, respectively. In the event DJL elects to sell or lease the excursion gambling boat, its furnishings and gambling equipment and/or its interest in any ticket sale facility or other buildings located in the Dubuque Ice Harbor used in connection with the operation of an excursion gambling boat to a third party that does not agree to operate these assets subject to the terms and conditions of the Operating Agreement, and obtains an acceptable offer from such third party for the purchase or lease thereof, the Association shall have the option to purchase or lease these assets on the same terms as those offered by such third party. 12. TRANSACTIONS WITH RELATED PARTIES During 2003, 2002 and 2001, DJL paid $1,557,143, $1,260,012 and $1,760,908, respectively, to PGP primarily in respect of (i) certain consulting and financial advisory services, (ii) board fees and expenses paid to the F-19 members of the board of managers of PGP and (iii) tax, accounting, legal and administrative costs and expenses of PGP. During 2003, OEDA accrued board fees payable to a member of the board of managers of the Company of $175,000. This amount was paid in January 2004. During the period February 15, 2002 through December 31, 2002, OED paid principal of $18,379 and interest of $297,536 to WET2 related to WET2's 50% interest in the Old OED Notes. WET2, through its affiliate WET2LLC, owned 50% of the membership interests of OED until August 30, 2002. 13. SEGMENT INFORMATION Pursuant to the provisions of SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information," the Company has determined that, in connection with the acquisition of OED, the Company currently operates two reportable segments: (1) Iowa operations, which comprise the Diamond Jo riverboat casino in Iowa and (2) Louisiana operations, which comprise the casino, racetrack and OTB's operated by OED in Louisiana. Prior to the acquisition of OED, during 2002, the Company operated under one reportable segment. The accounting policies for each segment are the same as those described in Note 2 above. The Company and the gaming industry use earnings before interest, taxes, depreciation and amortization ("EBITDA") as a means to evaluate performance. EBITDA should not be considered as an alternative to, or more meaningful than, net income (as determined in accordance with accounting principles generally accepted in the United States of America). The table below presents information about reported segments as of and for the years ended (in thousands): NET REVENUES ------------------------ 2003 2002 ---------- ---------- Diamond Jo(1) ............................. $ 54,004 $ 48,598 OED(2) .................................... 22,498 16,590 ---------- ---------- Total ..................................... $ 76,502 $ 65,188 ========== ========== ADJUSTED EBITDA(3) ------------------------ 2003 2002 ---------- ---------- Diamond Jo(1) ............................. $ 18,353 $ 15,558 OED(2) .................................... 930 1,486 ---------- ---------- Total Adjusted EBITDA(3) .................. 19,283 17,044 Diamond Jo: Development costs ...................... (103) Charitable giving agreement ............ (350) Referendum expense ..................... (771) Depreciation and amortization .......... (2,500) (2,767) Interest expense, net .................. (11,050) (10,466) Loss on sale of assets ................. (50) (8) Preferred member distributions ......... (181) (373) OED: Pre-opening expense .................... (3,257) Litigation settlement .................. (1,600) Depreciation and amortization .......... (824) (184) Interest expense, net .................. (13,710) (1,375) Minority interests ..................... (232) ---------- ---------- Net loss to common members' interest ...... $ (12,742) $ (732) ========== ========== Net Cash flow from operating activity ..... 769 11,784 Net Cash flow from investing activity ..... (94,695) (37,790) Net Cash flow from financing activity ..... 104,575 28,993 F-20 TOTAL ASSETS ------------------------ 2003 2002 ---------- ---------- Diamond Jo ................................ $ 84,704 $ 83,706 OED ....................................... 176,815 42,742 ---------- ---------- Total ..................................... $ 261,519 $ 126,448 ========== ========== - ---------- (1) Reflects results of operations of the Diamond Jo for the years ended December 31, 2003 and 2002. (2) Reflects results of operations of OED for the year ended December 31, 2003 and the period February 15, 2002 (date of acquisition) to December 31, 2002. (3) Adjusted EBITDA is defined as net loss to common members' interest plus depreciation and amortization, pre-opening expense, expenses associated with the charitable giving agreement, development expense, referendum expense, minority interests and litigation settlement (see Note 2 for discussion on development costs and expenses associated with the charitable giving agreement and referendum expense and Note 6 for discussion on litigation settlement). 14. SUBSEQUENT EVENTS (UNAUDITED) On March 11, 2004, DJL and OED announced that they intend to refinance the DJL and the OED Notes with a proposed offering of $230 million (which subsequently has been increased to $233 million) of senior secured notes due 2012 and a new credit facility. As part of this note offering, they are also seeking requisite regulatory approvals to effect a series of corporate transactions, including the creation of a new holding company to be the new direct parent of DJL and OED and a co-issuer of the new senior secured notes. In the event regulatory approval of the corporate transactions is not obtained, DJL and OED will still consummate the note offering and use the proceeds of the offering to repurchase and redeem the OED Notes and DJL Notes, respectively. In such event, however, they will not at such time effect the corporate transactions or enter into the new credit facility. On March 9, 2004, OED commenced a tender offer and consent solicitation to repurchase all of its outstanding OED Notes and to solicit consents to certain proposed amendments to the indenture governing the OED Notes as set forth in the Company's Offer to Purchase and Consent Solicitation Statement, dated March 9, 2004 (the "Statement"). As of March 19, 2004, the expiration date of the consent solicitation, OED had received the requisite consents and tenders from holders of a majority of the aggregate principal amount of the outstanding OED Notes, which consents and tenders are irrevocable subject to certain limited exceptions set forth in the Statement. The tender offer is scheduled to expire on April 5, 2004, unless extended or earlier terminated. In March 2004, DJL amended the DJL Credit Facility (the "DJL Credit Facility Amendment"). Under the terms of the DJL Credit Facility Amendment, the minimum interest rate on all outstanding borrowings under the DJL Credit Facility less than $10.0 million is reduced to 5.5% and the term of the DJL Credit Facility was extended by one year to March 12, 2006. 15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
2003 QUARTERS ENDED (DOLLARS IN THOUSANDS) ---------------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ---------- ---------- ---------- ---------- Net revenues ................................................. $15,670 $19,559 $20,993 $20,280 Income from Operations ....................................... 3,165 3,679 4,479 927 Net income (loss) before preferred member distributions ............................................. (1,874) (2,923) (2,170) (5,595) Net income (loss) ............................................ $(1,965) $(3,013) $(2,170) $(5,594)
F-21
2002 QUARTERS ENDED (DOLLARS IN THOUSANDS) ---------------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ---------- ---------- ---------- ---------- Net revenues ................................................. $13,308 $18,474 $18,180 $15,226 Income from Operations ....................................... 2,949 3,923 4,201 650 Net income (loss) before preferred member distributions ...... 322 1,049 1,159 (2,657) Net income (loss) ............................................ $194 $795 $969 $(2,690)
F-22 PENINSULA GAMING, LLC CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, DECEMBER 31, 2004 2003 ------------- ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents ...................................................... $ 20,826,308 $ 21,158,295 Restricted cash - purse settlements ............................................ 4,390,971 1,589,125 Restricted investments ......................................................... 7,859,532 15,778,883 Accounts receivable, less allowance for doubtful accounts of $55,268 and $61,922, respectively ....................................................... 233,811 309,188 Interest receivable ............................................................ 104,608 173,034 Inventory ...................................................................... 386,695 403,376 Prepaid expenses ............................................................... 1,308,712 815,009 ------------- ------------- Total current assets .................................................... 35,110,637 40,226,910 ------------- ------------- RESTRICTED CASH - RACINO PROJECT .................................................. 7,002,118 20,013,291 ------------- ------------- PROPERTY AND EQUIPMENT, NET ....................................................... 104,871,255 102,477,345 ------------- ------------- OTHER ASSETS: Deferred financing costs, net of amortization of $6,001,462 and $5,288,572, respectively ................................................................ 25,370,354 12,702,387 Goodwill ....................................................................... 53,083,429 53,083,429 Other intangibles .............................................................. 32,338,689 32,257,963 Deposits and other assets ...................................................... 767,652 757,789 ------------- ------------- Total other assets ...................................................... 111,560,124 98,801,568 ------------- ------------- TOTAL ............................................................................. $ 258,544,134 $ 261,519,114 ============= ============= LIABILITIES AND MEMBERS' DEFICIT CURRENT LIABILITIES: Accounts payable ............................................................... $ 2,739,309 $ 2,972,608 Construction payable - St. Landry Parish ....................................... 8,222,318 20,156,591 Purse settlement payable ....................................................... 5,484,725 1,589,125 Accrued payroll and payroll taxes .............................................. 2,070,381 2,788,224 Accrued interest ............................................................... 3,920,748 9,904,778 Other accrued expenses ......................................................... 18,916,108 4,811,106 Current maturity of long-term debt ............................................. 5,467,810 4,098,222 ------------- ------------- Total current liabilities ............................................... 46,821,399 46,320,654 ------------- ------------- LONG-TERM LIABILITIES: 12 1/4% Senior secured notes, net of discount .................................. 70,649,455 70,616,221 13% Senior secured notes, net of discount ...................................... 120,983,861 120,923,436 Senior secured credit facilities ............................................... 14,754,301 15,754,301 FF&E credit facility ........................................................... 11,666,667 9,921,557 Notes payable .................................................................. 3,422,437 3,511,654 Other accrued expenses ......................................................... 650,000 1,100,000 Preferred members' interest, redeemable ........................................ 4,000,000 4,000,000 ------------- ------------- Total long-term liabilities ............................................. 226,126,721 225,827,169 ------------- ------------- Total liabilities ....................................................... 272,948,120 272,147,823 COMMITMENTS AND CONTINGENCIES MEMBERS' DEFICIT .................................................................. (14,403,986) (10,628,709) ------------- ------------- TOTAL ............................................................................. $ 258,544,134 $ 261,519,114 ============= =============
See notes to condensed consolidated financial statements (unaudited). F-23 PENINSULA GAMING, LLC CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, 2004 MARCH 31, 2003 -------------- -------------- REVENUES: Casino ................................................................... $ 30,193,349 $ 11,782,204 Racing ................................................................... 4,365,603 3,644,330 Food and beverage ........................................................ 2,817,800 839,278 Other .................................................................... 201,117 57,977 Less promotional allowances .............................................. (2,012,473) (654,226) -------------- -------------- Total net revenues ................................................ 35,565,396 15,669,563 -------------- -------------- EXPENSES: Casino ................................................................... 15,053,740 5,013,716 Racing ................................................................... 3,504,387 2,846,747 Food and beverage ........................................................ 2,281,365 731,039 Boat operations .......................................................... 573,061 567,348 Other .................................................................... 124,993 8,674 Selling, general and administrative ...................................... 5,528,047 2,517,919 Depreciation and amortization ............................................ 2,896,063 819,015 Pre-opening expense ...................................................... 221,283 Development costs ........................................................ 21,270 Management fee ........................................................... 256,375 -------------- -------------- Total expenses .................................................... 30,460,584 12,504,458 -------------- -------------- INCOME FROM OPERATIONS ...................................................... 5,104,812 3,165,105 -------------- -------------- OTHER INCOME (EXPENSE): Interest income .......................................................... 57,085 80,008 Interest expense, net of amounts capitalized ............................. (7,692,728) (5,031,903) Interest expense related to preferred members' interest, redeemable ...... (90,000) Loss on disposal of assets ............................................... (87,263) -------------- -------------- Total other expense ............................................... (7,725,643) (5,039,158) -------------- -------------- NET LOSS BEFORE PREFERRED MEMBER DISTRIBUTIONS .............................. (2,620,831) (1,874,053) LESS PREFERRED MEMBER DISTRIBUTIONS ......................................... (90,544) -------------- -------------- NET LOSS TO COMMON MEMBERS' INTEREST ........................................ $ (2,620,831) $ (1,964,597) ============== ==============
See notes to condensed consolidated financial statements (unaudited). F-24 PENINSULA GAMING, LLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, 2004 MARCH 31, 2003 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ................................................................... $ (2,620,831) $ (1,964,597) Adjustments to reconcile net loss to net cash flows from operating activities: Depreciation and amortization .......................................... 2,896,063 819,015 Provision for doubtful accounts ........................................ 31,481 30,251 Amortization and write-off of deferred financing costs and discount on notes ............................................................ 806,549 884,020 Loss on disposal of assets ............................................. 87,263 Changes in operating assets and liabilities: Restricted cash - purse settlements .................................... (2,801,846) (926,970) Receivables ............................................................ 112,322 (782,756) Inventory .............................................................. 16,681 14,394 Prepaid expenses and other assets ...................................... (503,566) (375,397) Accounts payable ....................................................... 3,356,344 1,843,247 Accrued expenses ....................................................... (5,687,987) (1,523,398) ------------- ------------- Net cash flows from operating activities ........................... (4,394,790) (1,894,928) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Business acquisition and licensing costs ............................... (68,504) (1,173,847) Racino project development costs ....................................... (16,888,572) (2,341,650) Restricted cash - racino project, net .................................. 13,011,173 (63,799,585) Maturity of restricted investments ..................................... 7,919,351 Purchase of restricted investments ..................................... (23,922,971) Purchase of property and equipment ..................................... (781,680) (511,332) Proceeds from sale of property and equipment ........................... 380,156 ------------- ------------- Net cash flows from investing activities ........................... 3,191,768 (91,369,229) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Deferred financing costs ............................................... (9,140,404) Principal payments on debt ............................................. (1,442,026) (20,275,000) Proceeds from FF&E credit facility ..................................... 3,467,507 Proceeds from senior secured notes ..................................... 120,736,000 Member distributions ................................................... (1,154,446) (268,719) ------------- ------------- Net cash flows from financing activities ........................... 871,035 91,051,877 ------------- ------------- NET DECREASE IN CASH AND CASH EQUIVALENTS ..................................... (331,987) (2,212,280) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .............................. 21,158,295 10,510,205 ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD .................................... $ 20,826,308 $ 8,297,925 ============= ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for interest ...................................... $ 13,068,734 $ 5,270,100 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Property additions acquired on construction payable which were accrued, but not paid ............................................................... $ 2,594,332 $ 3,342,721 Deferred financing costs which were accrued, but not paid ..................... $ 13,380,855 $ 707,377
See notes to condensed consolidated financial statements (unaudited). F-25 PENINSULA GAMING, LLC NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION AND BASIS OF PRESENTATION Diamond Jo, LLC, a Delaware limited liability company ("DJL"), owns and operates the Diamond Jo riverboat casino in Dubuque, Iowa, and was a wholly owned subsidiary of Peninsula Gaming Partners, LLC, a Delaware limited liability company ("PGP"). DJL had two direct wholly owned subsidiaries, (i) Penninsula Gaming Corp., which had no assets or operations and was formed solely to facilitate the offering of DJL's 12 1/4% Senior Secured Notes due 2006 (the "DJL Notes"), and (ii) OED Acquisition, LLC, a Delaware limited liability company "OEDA"), and the parent company of The Old Evangeline Downs, L.L.C., a Louisiana limited liability company ("OED"), that currently owns and operates a horse track in Lafayette, Louisiana and is constructing a new casino and racetrack facility in St. Landry Parish, Louisiana (the "racino project"). The Old Evangeline Downs Capital Corp. was a wholly owned subsidiary of OED which has no assets or operations and was formed solely to facilitate the offering by OED of its 13% Senior Secured Notes due 2010 with Contingent Interest (the "OED Notes"). On June 16, 2004, a corporate restructuring occurred, which is reflected in these financial statements, pursuant to which Peninsula Gaming, LLC, a Delaware limited liability company (the "Company"), became a new direct parent company of DJL, OED and Peninsula Gaming Corp. (formerly known as The Old Evangeline Downs Capital Corp.), a Delaware limited liability company ("PGC"). The Company is a wholly owned subsidiary of PGP. In connection with the corporate restructuring, OEDA became a sister company to the Company and a wholly owned subsidiary of PGP in a corporate spin-off which was recorded as a distribution on June 16, 2004. OED's results of operations and cash flows for the year ended December 31, 2003 and the period February 15, 2002 (date of acquisition) to December 31, 2002 have been consolidated into the Company's consolidated financial statements. During the period February 15, 2002 to August 30, 2002, the Company had substantive control of OED and recorded a minority interest related to the portion not owned. On August 31, 2002, OED became a wholly owned subsidiary of the Company. All intercompany transactions have been eliminated. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring entries unless otherwise disclosed, necessary to present fairly the financial information of the Company for the interim periods presented and have been prepared in accordance with accounting principles generally accepted in the United States of America. The interim results reflected in the financial statements are not necessarily indicative of results expected for the full year or other periods. The financial statements contained herein should be read in conjunction with the audited financial statements and accompanying notes to the financial statements included in the Company's Annual Report on Form 10-K for the period ended December 31, 2003. Accordingly, footnote disclosure which would substantially duplicate the disclosure in the audited financial statements has been omitted in the accompanying unaudited financial statements. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Deferred Financing Costs--As of March 31, 2004, the Company incurred approximately $13.4 million of fees and expenses related to the refinancing of the senior secured notes of its subsidiaries, which was subsequently consummated in April 2004 (see Note 8 for further discussion on the refinancing). The amount was recorded as "Deferred financing costs" within the "Other Assets" section of the condensed consolidated balance sheet with a corresponding accrual included in "Other accrued expenses" within the "Current Liabilities" section of the condensed consolidated balance sheet. GOODWILL AND OTHER INTANGIBLE ASSETS--At March 31, 2004 and December 31, 2003, "Goodwill" and "Other intangibles" consists of goodwill, licensing costs and the acquired trade name associated with the purchase of the Diamond Jo and OED. To the extent the purchase price exceeded the fair value of the net identifiable assets acquired, such excess has been recorded as goodwill. SFAS No. 142 "Goodwill and Other Intangible Assets" provides that goodwill and indefinite lived intangible assets will no longer be amortized but will be reviewed at least F-26 annually for impairment and written down and charged to income when their recorded value exceeds their estimated fair value. During the first quarter of 2004 and 2003, the Company performed its annual impairment test on goodwill in accordance with SFAS No. 142 and determined that the estimated fair value of the Diamond Jo exceeded its carrying value as of that date. Based on that review, management determined that there was no impairment of goodwill. As of March 31, 2004 and December 31, 2003, the Company had approximately $32.3 million of "Other intangibles" on its balance sheet summarized as follows (in millions):
MARCH 31, 2004 DECEMBER 31, 2003 -------------- ----------------- Slot Machine and Electronic Video Game Licenses........... $ 28.5 $ 28.5 Trade name................................................ 2.5 2.5 Horse Racing Licenses..................................... 1.3 1.3 --------- --------- Total..................................................... $ 32.3 $ 32.3 ========= =========
Each of the identified intangible assets were treated as having indefinite lives and valued separately. The methodology employed by an independent valuation specialist to arrive at the initial valuations required evaluating the fair market value of the existing horse racing business on a stand-alone basis without taking into account any right to obtain slot machine and electronic video game licenses. Such valuation was based in part upon other transactions in the industry and OED's historical results of operations. A value was also derived for the trade name using market based royalty rates. A significant portion of the purchase price is attributable to the slot machine and electronic video game license rights, which were valued based upon the market value paid by other operators and upon projected cash flows from operations. The valuations were updated by management in the first quarter indicating no impairment. These valuations and related intangible assets are subject to impairment by, among other things, significant changes in the gaming tax rates in Louisiana, significant new competition which could substantially reduce profitability, non-renewal of OED's racing or gaming licenses due to regulatory matters, changes to OED's trade name or the way OED's trade name is used in connection with its business and regulatory changes that could adversely affect OED's business by, for example, limiting or reducing the number of slot machines or video poker machines that they are permitted to operate. On June 25, 2002, PGP entered into an agreement with William E. Trotter, II ("Trotter") and William E. Trotter, II Family L.L.C., a Louisiana limited liability company ("WET2LLC") to acquire (i) all of Trotter's interests in two promissory notes issued by OED in connection with DJL's acquisition of OED, and (ii) all of Trotter's membership interests owned by WET2LLC (together, the "Trotter Purchase"). On August 30, 2002, OEDA consummated the Trotter Purchase for a purchase price consisting of cash of $15,546,000, plus a contingent fee of one half of one percent (0.5%) of the net slot revenues generated by OED's racino located in St. Landry Parish, Louisiana, for a period of ten years commencing on December 19, 2003, the date the racino's casino opened to the general public. This contingent fee is payable monthly in arrears and is recorded as an adjustment to "Other intangibles" on the Condensed Consolidated Balance Sheet. USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. We periodically evaluate our policies and the estimates and assumptions related to these policies. We also periodically evaluate the carrying value of our assets in accordance with generally accepted accounting principles. We operate in a highly regulated industry and are subject to regulations that describe and regulate operating and internal control procedures. The majority of our revenues are in the form of cash, which by its nature, does not require complex estimates. In addition, we made certain estimates surrounding our application of purchase accounting related to the acquisition and the related assignment of costs to goodwill and other intangible assets. CONCENTRATIONS OF RISK--The Company and its subsidiaries maintain deposit accounts at three banks. At March 31, 2004 and December 31, 2003, and various times during the periods then ended, the balance at the banks F-27 exceeded the maximum amount insured by the Federal Deposit Insurance Corporation. Credit risk is managed by monitoring the credit quality of the banks. The Company's customer base consists of eastern Iowa and southwest Louisiana. RECLASSIFICATIONS--Certain prior year amounts have been reclassified to conform with current period presentation. 3. PROPERTY AND EQUIPMENT Property and equipment of the Company and its subsidiaries at March 31, 2004 and December 31, 2003 is summarized as follows: MARCH 31, DECEMBER 31, 2004 2003 -------------- -------------- Land and land improvements ............... $ 13,841,117 $ 13,686,570 Buildings and improvements ............... 51,013,360 51,991,698 Riverboats and improvements .............. 8,305,022 8,305,022 Furniture, fixtures and equipment ........ 29,123,820 28,472,602 Computer equipment ....................... 5,507,135 5,196,966 Vehicles ................................. 176,235 176,235 Construction in progress ................. 11,187,245 6,034,867 -------------- -------------- Subtotal ................................. 119,153,934 113,863,960 Accumulated depreciation ................. (14,282,679) (11,386,615) -------------- -------------- Property and equipment, net .............. $ 104,871,255 $ 102,477,345 ============== ============== 4. DEBT The debt of the Company and its subsidiaries consists of the following:
MARCH 31, DECEMBER 31, 2004 2003 ------------- ------------- 12 1/4% Senior Secured Notes of DJL due July 1, 2006, net of discount of $350,545 and $383,779, respectively, secured by assets of the Diamond Jo ...................... $ 70,649,455 $ 70,616,221 13% Senior Secured Notes of OED due March 1, 2010 with Contingent Interest, net of discount of $2,216,139 and $2,276,564, secured by certain assets of OED ........... 120,983,861 120,923,436 Line of Credit of DJL with Wells Fargo Foothill, Inc., interest rate at greater of LIBOR + 3% or Prime + .75%, however, at no time shall the interest rate be lower than 5.5% on outstanding balances of $10.0 million or less and 8.5% on outstanding balances greater than $10.0 million (current rate at above mentioned interest rate floors), principal payments of $50,000 due monthly through February 2005, maturing March 12, 2006, secured by assets of the Diamond Jo ........................................................................... 11,100,000 11,250,000 $15.0 million Loan and Security Agreement of OED with Wells Fargo Foothill, Inc., interest rate at Prime + 2.50% (current rate of 6.5%), maturing June 24, 2006, secured by certain assets of OED ...................................... 4,254,301 5,104,301
F-28 $16.0 million Loan and Security Agreement of OED with Wells Fargo Foothill, Inc. ("FF&E Credit Facility"), interest rate at Prime + 2.50% (current rate of 6.5%), due in 48 equal monthly principal payments beginning on March 1, 2004, secured by certain assets of OED ..................................................... 15,666,667 12,532,493 Promissory note payable to third party, interest at 4.75% payable monthly in arrears, annual principal payments of $550,000 due each October beginning in 2004, secured by mortgage on certain real property of OED ............................ 3,850,000 3,850,000 Note payable to IGT, interest rate at 9.5%, monthly payments of principal and interest of $31,250, with final payment due July 1, 2005, secured by certain assets of OED ........................................................................ 440,247 548,940 Preferred membership interests-redeemable, interest at 9%, due October 13, 2006 ......... 4,000,000 4,000,000 ------------- ------------- Total debt .............................................................................. 230,944,531 228,825,391 Less current portion .................................................................... (5,467,810) (4,098,222) ------------- ------------- Total long term debt .................................................................... $ 225,476,721 $ 224,727,169 ============= =============
In March 2004, DJL amended it's senior secured credit facility dated February 23, 2001 (the "DJL Credit Facility Amendment"). Under the terms of the DJL Credit Facility Amendment, the minimum interest rate on all outstanding borrowings under the DJL Credit Facility less than $10.0 million was reduced to 5.5% and the term of the DJL Credit Facility was extended by one year to March 12, 2006. In April 2004, DJL exercised its rights to redeem all of the outstanding DJL Notes, and OED redeemed a portion of the OED Notes (see Note 8). 5. COMMITMENTS AND CONTINGENCIES Under the Company's and PGP's operating agreements, the Company and PGP have agreed, subject to few exceptions, to indemnify and hold harmless the Company's members, PGP and PGP's members, as the case may be, from liabilities incurred as a result of their positions as sole manager of the Company and as members of the Company or PGP, as the case may be. As discussed in Note 2, in connection with the Trotter Purchase, OED is obligated to pay a contingent fee of one half of one percent (0.5%) of the net slot revenues generated by OED's racino located in St. Landry Parish, Louisiana, for a period of ten years commencing on December 19, 2003, the date the racino's casino opened to the general public. DJL is involved in a lawsuit with a former employee. Management believes that such lawsuit is without merit and that the ultimate disposition of this action should not have a material adverse effect on the financial condition, results of operations or cash flows of the Company; however, no assurance can be given as to the ultimate disposition of such action. Other than as noted above, the Company is not a party to, and none of its property is the subject of, any other pending legal proceedings other than litigation arising in the normal course of business. Management does not believe that adverse determinations in any or all such other litigation would have a material adverse effect on our financial condition, results of operations or cash flows. 6. RELATED PARTY TRANSACTIONS OED is a party to a consulting agreement with a board member of PGP. Under the consulting agreement, OED must pay to the board member a fee equal to 2.5% of OED's earnings before interest, taxes, depreciation, amortization and other non-recurring charges during the preceding calendar year commencing on January 1, 2004. Under the consulting agreement, the board member is also entitled to reimbursement of reasonable business expenses as approved by the board of managers of PGP. During the three months ended March 31, 2004, the board F-29 member received $212,626 under his consulting agreement. Such amount has been included in "Management fees" in the "Condensed Consolidated Statement of Operations". A board member of PGP is entitled to receive from OEDA board fees of $175,000 per year for services performed in his capacity as a board member. For the three months ended March 31, 2004, OEDA expensed $43,749 related to these board fees which has been included in "Management fees" in the "Condensed Consolidated Statement of Operations". At March 31, 2004, the Company had accrued approximately $11.2 million in fees payable to the initial purchaser in connection with the Company's offering of its 8 3/4% Senior Secured Notes due 2012 (see Note 8 for a discussion of this offering). Two of the Company's board members serve as Vice Chairman and Executive Vice President, respectively, of the initial purchaser. 7. SEGMENT INFORMATION Pursuant to the provisions of SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information," the Company has determined that it currently operates two reportable segments: (1) Iowa operations, which comprise the Diamond Jo riverboat casino in Iowa and (2) Louisiana operations, which comprise the casino, racetrack and off-track betting facilities operated by OED in Louisiana. Adjusted EBITDA is defined as operating income plus depreciation and amortization, pre-opening expense, development expense and management fees. Adjusted EBITDA is presented to enhance the understanding of the Company's financial performance and its ability to service its indebtedness. Although Adjusted EBITDA is not necessarily a measure of the Company's ability to fund its cash needs, the Company understands that Adjusted EBITDA is used by certain investors as a measure of financial performance and to compare the Company's performance with the performance of other companies that report EBITDA or Adjusted EBITDA. Adjusted EBITDA is not a measurement determined in accordance with accounting principles generally accepted in the Unites States of America ("GAAP") and should not be considered as an alternative to, or more meaningful than, the Company's net loss or income from operations, as indicators of its operating performance, or its cash flows from operating activities, as a measure of its liquidity or any other measure determined in accordance with GAAP. This definition of Adjusted EBITDA may not be the same as that of similarly named measures used by other companies and is not the same as the definition used in the indenture governing the Notes or any of the Company's other debt agreements. The table below presents information about reported segments as of and for the periods ended (in thousands): NET REVENUES THREE MONTHS ENDED MARCH 31, ---------------------------- 2004 2003 ------------ ------------ Diamond Jo .................................. $ 12,178 $ 11,852 OED ......................................... 23,387 3,818 ------------ ------------ Total ............................... $ 35,565 $ 15,670 ============ ============ THREE MONTHS ENDED MARCH 31, ---------------------------- 2004 2003 ------------ ------------ Diamond Jo .................................. $ 3,705 $ 3,629 OED ......................................... 4,795 355 ------------ ------------ Total Adjusted EBITDA(1) .................... 8,500 3,984 Diamond Jo: Development costs ........................ (21) Depreciation and amortization ............ (577) (752) Interest expense, net .................... (2,808) (2,731) Loss on sale of assets ................... (87) Preferred member distributions ........... (91) F-30 OED: Depreciation and amortization ............ (2,319) (67) Pre-opening expense ...................... (221) Management fee ........................... (257) Interest expense, net .................... (4,918) (2,221) ------------ ------------ Net loss to common members' interest ........ $ (2,621) $ (1,965) ============ ============ (1) Adjusted EBITDA is defined as net loss to common members' interest plus depreciation and amortization, pre-opening expense, interest expense, development expense, loss on sale of assets and management fees. 8. SUBSEQUENT EVENTS On March 9, 2004, OED commenced a tender offer and consent solicitation to repurchase all of its outstanding OED Notes and to solicit consents to certain proposed amendments to the indenture governing the OED Notes as set forth in OED's Offer to Purchase and Consent Solicitation Statement, dated March 9, 2004. On March 19, 2004, the expiration date of the consent solicitation, OED received the requisite consents and tenders from holders of a majority of the aggregate principal amount of the outstanding OED Notes. The tender offer expired on April 5, 2004, and OED redeemed approximately $116.3 million principal amount of OED Notes. On April 16, 2004, DJL and PGC completed a Rule 144A private placement of $233 million principal amount of 8 3/4% Senior Secured Notes due 2012 (the "Peninsula Gaming Notes"). The Peninsula Gaming Notes were issued at a discount of approximately $3.3 million. Interest on the Peninsula Gaming Notes is payable semi-annually on April 15 and October 15 of each year, beginning on October 15, 2004. DJL and PGC used the net proceeds from the sale of the Peninsula Gaming Notes as follows (all payments based on outstanding balances as of April 16, 2004): (1) to irrevocably deposit funds into an escrow account to redeem all of the DJL Notes in an amount (including call premium and accrued interest) of approximately $79.9 million; (2) to repurchase approximately $116.3 million principal amount of OED Notes for an aggregate amount (including tender premium, accrued interest and contingent interest) of approximately $134.6 million; (3) to pay accrued distributions on DJL's outstanding preferred membership interests-redeemable of approximately $1.1 million; (4) to pay related fees and expenses of approximately $13.4 million; and (5) for general corporate purposes. As a result of the issuance of the Peninsula Gaming Notes, DJL incurred a loss of approximately $8.9 million consisting of the write-off of deferred financing fees of approximately $2.1 million, the payment of a call premium on the DJL Notes of approximately $5.7 million, interest on the DJL Notes of approximately $0.7 million and write-off of bond discount of approximately $0.4 million. In connection therewith, OED also incurred a loss of approximately $26.8 million consisting of the write-off of deferred financing fees of approximately $8.4 million, the payment of a tender premium on the OED Notes of approximately $16.3 million and write-off of bond discount of approximately $2.1 million. The indenture governing the Peninsula Gaming Notes limits the Company's ability and the ability of its restricted subsidiaries to, among other things: o incur more debt; o pay dividends, redeem stock, or make other distributions; o issue stock of restricted subsidiaries; o make investments; o create liens; o enter into transactions with affiliates; o merge or consolidate; and F-31 o transfer or sell assets. The Peninsula Gaming Notes are full and unconditional obligations of DJL as a co-issuer. The Company and PGC, also co-issuers, have no independent assets or operations. The Peninsula Gaming Notes are also guaranteed, subject to the prior lien of the Company's credit facility discussed below, by OED and OED has pledged its equity interests as collateral. The PGL Credit Facility and the Peninsula Gaming Notes do not limit OED's ability to transfer net assets to the Company, however, any transfer is subject to standard regulatory approval. See the separate financial statements of OED included in this prospectus. OEDA, which was spun-off on June 16, 2004, comprises less than 2% of the consolidated assets, members' deficit, net revenues, and net loss for 2003. F-32 The following unaudited pro forma condensed consolidated financial information of the Company has been derived from the application of pro forma adjustments to the combined historical financial statements after giving effect to the offering of the Peninsula Gaming Notes. The unaudited pro forma condensed consolidated financial information gives effect to the offering of the Peninsula Gaming Notes as if such event had occurred on March 31, 2004 for purposes of the unaudited pro forma condensed consolidated balance sheet at March 31, 2004 and on December 31, 2003 for purposes of the unaudited pro forma condensed consolidated statement of operations for the three month period ended March 31, 2004. The pro forma adjustments are described in the accompanying notes. PENINSULA GAMING, LLC UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT MARCH 31, 2004 ------------------------------------------------------ PRO FORMA HISTORICAL (1) ADJUSTMENTS PRO FORMA ------------- ------------- ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents ......................... $ 20,826,308 $ 16,535,643(2) $ 37,361,951 Restricted cash ................................... 4,390,971 4,390,971 Restricted investments ............................ 7,859,532 (7,859,532)(3) Other current assets .............................. 2,033,826 2,033,826 ------------- ------------- ------------- Total current assets ........................... 35,110,637 8,676,111 43,786,748 ------------- ------------- ------------- RESTRICTED CASH - RACINO PROJECT ..................... 7,002,118 (7,002,118)(3) ------------- ------------- PROPERTY AND EQUIPMENT, NET .......................... 104,871,255 104,871,255 ------------- ------------- ------------- OTHER ASSETS ......................................... 111,560,124 (10,495,696)(4) 101,064,428 ------------- ------------- ------------- TOTAL ................................................ $ 258,544,134 $ (8,821,703) $ 249,722,431 ============= ============= ============= LIABILITIES AND MEMBERS' DEFICIT CURRENT LIABILITIES: Accounts payable .................................. $ 2,739,309 $ 2,739,309 Construction payable .............................. 8,222,318 8,222,318 Purse settlement payable .......................... 5,484,725 5,484,725 Accrued payroll and payroll taxes ................. 2,070,381 2,070,381 Accrued interest .................................. 3,920,748 $ (3,616,299)(5) 304,449 Other accrued expenses ............................ 18,916,108 (14,462,996)(6) 4,453,112 Current maturity of long-term debt ................ 5,467,810 5,467,810 ------------- ------------- ------------- Total current liabilities ...................... 46,821,399 (18,079,295) 28,742,104 ------------- ------------- ------------- LONG TERM LIABILITIES: 8 3/4% senior secured notes, net of discount ...... 229,728,680(7) 229,728,680 12 1/4% senior secured notes, net of discount ..... 70,649,455 (70,649,455)(8) 13% senior secured notes, net of discount ......... 120,983,861 (114,198,159)(9) 6,785,702 Other long-term liabilities ....................... 34,493,405 34,493,405 ------------- ------------- ------------- Total long-term liabilities .................... 226,126,721 44,881,066 271,007,787 ------------- ------------- ------------- Total liabilities .............................. 272,948,120 26,801,771 299,749,891 ------------- ------------- ------------- MEMBERS' DEFICIT ..................................... (14,403,986) (35,623,474)(10) (50,027,460) ------------- ------------- ------------- TOTAL ................................................ $ 258,544,134 $ (8,821,703) $ 249,722,431 ============= ============= =============
F-33 (1) Represents the historical unaudited condensed consolidated balance sheet of the Company. (2) Represents net proceeds from new notes of $229.7 million issued at a discount of 1.404% less (i) $79.6 million to redeem the DJL Notes (including a call premium of approximately $5.7 million, accrued interest of $2.2 million and interest due on the DJL Notes during the 30 day call period of $0.7 million), (ii) $134.0 million to repurchase approximately $116.3 million principal amount of OED Notes (including a tender premium of approximately $16.3 million and accrued interest of approximately $1.4 million), (iii) repayment of accrued interest related to redeemable preferred member interests of approximately $1.1 million and (iv) capitalizable fees and expenses associated with the offering of the new notes of approximately $13.4 million, plus release of restricted investments of $7.9 million and restricted cash of $7.0 million. (3) Represents release of restricted cash and restricted investments held by the trustee of the OED Notes whose use was restricted to paying construction costs and semi-annual interest payments under the indenture governing the OED Notes. (4) Represents write-off of deferred financing costs associated with the DJL Notes and OED Notes redeemed of $2.1 million and $8.4 million, respectively. (5) Represents payment of accrued interest associated with the DJL Notes and OED Notes of approximately $2.2 million and $1.4 million, respectively. (6) Represents payment of (i) accrued interest associated with the redeemable preferred member interests of approximately $1.1 million and (ii) accrued deferred financing costs of approximately $13.4 million. (7) Represents net proceeds from issuance of new notes. (8) Represents payment of principal obligations under the DJL Notes of $71.0 million offset by write-off of remaining unamortized discount of approximately $0.4 million. (9) Represents payment of principal obligations under the OED Notes of $116.3 million offset by write-off of remaining unamortized discount of approximately $2.1 million. (10) Represents (i) the call premium on the DJL Notes of approximately $5.7 million, (ii) the tender premium on the OED Notes of approximately $16.3 million (iii) write-off of deferred financing costs associated with the DJL Notes and the OED Notes of approximately $10.5 million (iv) write-off of remaining unamortized discount of the Existing Peninsula Notes and the OED Notes of approximately $2.4 million and (v) interest on the DJL Notes during the 30 day call period of $0.7 million. F-34 PENINSULA GAMING, LLC UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004 ------------------------------------------------ PRO FORMA HISTORICAL (1) ADJUSTMENTS PRO FORMA ------------ ------------ ------------ NET REVENUES ................................................... $ 35,565,396 $ 35,565,396 EXPENSES ....................................................... 30,460,584 30,460,584 ------------ ------------ ------------ INCOME FROM OPERATIONS ......................................... 5,104,812 5,104,812 ------------ ------------ ------------ OTHER INCOME (EXPENSE): Interest income ............................................. 57,085 57,085 Interest expense, net of amounts capitalized ................ (7,692,728) $ 1,028,034(1) (6,664,694) Interest expense related to preferred members' interest, redeemable ............................................... (90,000) (90,000) ------------ ------------ ------------ Total other expense ......................................... (7,725,643) 1,028,034 (6,697,609) ------------ ------------ ------------ NET LOSS TO COMMON MEMBERS' INTEREST ........................... (2,620,831) $ 1,028,034 (1,592,797) ============ ============ ============
(1) Represents elimination of interest expense (including contingent interest and amortization of deferred financing costs and bond discount) related to the DJL Notes and OED Notes of approximately $2.5 million and $4.1 million, respectively, plus interest expense (including amortization of deferred financing costs and bond discount) on the Peninsula Gaming Notes of approximately $5.6 million. In May 2004, PGP repurchased 147,553 of its convertible preferred membership interests from an unrelated third party for approximately $4.5 million. The repurchase was funded by a distribution of cash to PGP from DJL, its wholly-owned subsidiary. On June 16, 2004, DJL and OED jointly entered into a Loan and Security Agreement with Wells Fargo Foothill, Inc. as the Arranger and Agent (the "PGL Credit Facility"). The PGL Credit Facility consists of a revolving credit facility which permits DJL and OED to request advances and letters of credit up to the lesser of the maximum revolver amount of $35 million (less amounts outstanding under letters of credit) and a specified borrowing base (the "Borrowing Base"). For the purposes of the PGL Credit Facility, the Borrowing Base is the lesser of the Combined EBITDA (as defined in the PGL Credit Facility) of OED and DJL for the twelve months immediately preceding the current month end multiplied by 150% and the Combined EBITDA of OED and DJL for the most recent quarterly period annualized multiplied by 150%. Immediately upon the closing of the PGL Credit Facility, DJL borrowed approximately $11.1 million to refinance outstanding obligations under the DJL Credit Facility and pay financing related fees and expenses and OED borrowed approximately $4.8 million to refinance outstanding obligations under the OED Credit Facility and pay financing related fees and expenses. Advances under the PGL Credit Facility bear an interest rate based on the borrower's option of LIBOR plus a margin of 3% - -3.5% or Wells Fargo prime rate plus a margin of .5% -1% (current rate of 5.0%); provided that at no time shall the interest rate be lower than 4%. Interest payments under the prime rate option are due monthly and interest payments under the LIBOR option are due the last month of the respective LIBOR period. The respective margins are determined by the Combined EBITDA of OED and DJL as of the end of each fiscal quarter. The PGL Credit Facility also contains a term loan in the amount of $14,666,667 (the "Term Loan"). The proceeds from the Term Loan were used to repay outstanding obligations under the FF&E Credit Facility. The Term Loan is secured by certain assets of OED and requires monthly payments of $333,333 starting July 1, 2004 until the full balance is paid, with a maturity no later than June 15, 2008. The Term Loan has an interest rate equal to the Wells Fargo prime rate plus 2.5% (current rate of 6.5%); provided that at no time shall the interest rate be lower than 6%. Under the terms of the PGL Credit Facility, at closing OED was required to issue a letter of credit in the amount of $3.2 million in favor of Wells Fargo related to the Term Loan. F-35 DJL and OED are jointly and severally liable under the PGL Credit Facility, other than borrowings under the Term Loan. Borrowings under the PGL Credit Facility, other than borrowings under the Term Loan, are collateralized by substantially all assets of OED and DJL. Borrowings under the Term Loan will be secured by a separate lien on the furniture, fixtures and equipment of OED financed pursuant to the terms of the OED FF&E Facility. Borrowings under the PGL Credit Facility are guaranteed by Peninsula Gaming, LLC and Peninsula Gaming Corp. (formerly known as OED Capital Corp.). The PGL Credit Facility contains a number of restrictive covenants and agreements, including covenants that limit DJL's and OED's ability to, among other things: (1) incur more debt; (2) create liens; (3) enter into any merger, consolidation, reorganization, or recapitalization, or reclassify its capital stock; (4) dispose of certain assets; (5) guarantee debt of others; (6) pay dividends or make other distributions; (7) make investments; (8) enter into transactions with affiliates. The PGL Credit Facility also contains financial covenants including a minimum Combined EBITDA of OED and DJL, limitations to capital expenditure amounts at OED and DJL and minimum OED EBITDA plus the premium paid in connection with the April 2004 repurchase of a portion of the OED Notes. The PGL Credit Facility also contains, among other things, representations and warranties and events of default customary for loans of this type. F-36 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Members of The Old Evangeline Downs, L.L.C. Opelousas, Louisiana We have audited the accompanying balance sheets of The Old Evangeline Downs, L.L.C. (the "Successor Company"), a wholly owned subsidiary of Peninsula Gaming, LLC as of December 31, 2003 and 2002, and the related statements of operations, changes in members' equity (deficit), and cash flows for the year ended December 31, 2003 and the period August 31, 2002 through December 31, 2002. These financial statements are the responsibility of the Successor Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of The Old Evangeline Downs, L.L.C. as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the year ended December 31, 2003 and the period August 31, 2002 through December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. /s/DELOITTE & TOUCHE LLP Cedar Rapids, Iowa March 10, 2004 (June 16, 2004 as to Note 1) F-37 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Members of The Old Evangeline Downs, L.C. Lafayette, Louisiana We have audited the accompanying statements of operations, changes in members' equity (deficit), and cash flows for the period January 1, 2002 through August 30, 2002 and the year ended December 31, 2001 of The Old Evangeline Downs, L.C. (the "Predecessor Company"). These financial statements are the responsibility of the Predecessor Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of the Predecessor Company operations and its cash flows for the period January 1, 2002 through August 30, 2002 and the year ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. As described in Note 2 to the financial statements, in 2002 the Predecessor Company changed its method of accounting for goodwill and intangible assets to conform to Statement of Accounting Standard No. 142 Goodwill and Other Intangible Assets. /s/DELOITTE & TOUCHE LLP Cedar Rapids, Iowa March 10, 2004 (June 16, 2004 as to Note 1) F-38 THE OLD EVANGELINE DOWNS, L.L.C. BALANCE SHEETS DECEMBER 31, 2003 AND 2002
DECEMBER 31, 2003 2002 -------------- -------------- CURRENT ASSETS: Cash and cash equivalents ........................................... $ 8,502,654 $ 962,652 Restricted cash-purse settlements ................................... 1,589,125 840,366 Restricted investments .............................................. 15,778,883 Accounts receivable ................................................. 229,099 176,120 Interest receivable ................................................. 173,034 Inventory ........................................................... 290,107 29,736 Prepaid expenses .................................................... 244,446 48,885 -------------- -------------- Total current assets ................................................ 26,807,348 2,057,759 -------------- -------------- RESTRICTED CASH-RACINO PROJECT ...................................... 20,013,291 -------------- -------------- PROPERTY AND EQUIPMENT, NET ......................................... 87,463,052 8,796,268 -------------- -------------- OTHER ASSETS: Deferred financing costs, net of amortization of $1,335,172 and $339,937, respectively .............................................. 10,185,806 484,851 Other intangibles ................................................... 32,257,963 31,329,834 Deposits and other assets ........................................... 87,767 73,131 -------------- -------------- Total other assets .................................................. 42,531,536 31,887,816 -------------- -------------- TOTAL ............................................................... $ 176,815,227 $ 42,741,843 ============== ============== LIABILITIES AND MEMBERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable .................................................... $ 2,168,027 $ 1,237,603 Construction payable-St. Landry Parish .............................. 20,156,591 2,376,494 Purse settlement payable ............................................ 1,589,125 846,778 Accrued payroll and payroll taxes ................................... 1,219,000 131,170 Accrued interest .................................................... 5,472,306 327,953 Other accrued expenses .............................................. 2,067,312 187,253 Current maturity of long-term debt .................................. 3,498,222 Accounts payable to DJL and OEDA .................................... 4,855,204 3,038,992 Notes payable ....................................................... 4,500,000 Term loan payable ................................................... 8,300,000 Note payable to parent .............................................. 7,325,000 -------------- -------------- Total current liabilities ........................................... 41,025,787 28,271,243 -------------- -------------- LONG-TERM LIABILITIES: 13% Senior secured notes, net of discount ........................... 120,923,436 Senior secured facility ............................................. 5,104,301 FF&E credit facility ................................................ 9,921,557 Notes payable ....................................................... 3,511,654 Other accrued expenses .............................................. 800,000 -------------- -------------- Total long-term liabilities ......................................... 140,260,948 -------------- -------------- Total liabilities ................................................... 181,286,735 28,271,243 ============== ============== COMMITMENTS AND CONTINGENCIES MEMBERS' EQUITY (DEFICIT) Common members' interest ............................................ 15,232,056 15,232,056 Accumulated deficit ................................................. (19,703,564) (761,456)
See notes to financial statements. F-39 Total members' equity (deficit) ..................................... (4,471,508) 14,470,600 -------------- -------------- TOTAL ............................................................... $ 176,815,227 $ 42,741,843 ============== ==============
See notes to financial statements. F-40 THE OLD EVANGELINE DOWNS, L.L.C. STATEMENTS OF OPERATIONS THE YEAR ENDED DECEMBER 31, 2003 AND THE PERIOD AUGUST 31 TO DECEMBER 31, 2002 (SUCCESSOR COMPANY) THE PERIOD JANUARY 1 TO AUGUST 30, 2002 AND THE YEAR ENDED DECEMBER 31, 2001 (PREDECESSOR COMPANY)
SUCCESSOR PREDECESSOR ---------------------------- ---------------------------- PERIOD FROM PERIOD FROM AUGUST 31 JANUARY 1 THROUGH THROUGH DECEMBER 31, AUGUST 30, 2003 2002 2002 2001 ------------ ------------ ------------ ------------ REVENUES: Casino ................................................ $ 3,227,477 Racing ................................................ 17,773,481 $ 3,947,568 $ 13,349,589 $ 18,211,237 Food and beverage ..................................... 1,538,374 185,215 971,238 1,113,044 Other ................................................. 167,361 Less promotional allowances ........................... (209,147) ------------ ------------ ------------ ------------ Total net revenues .................................... 22,497,546 4,132,783 14,320,827 19,324,281 ------------ ------------ ------------ ------------ EXPENSES: Casino ................................................ 1,908,730 Racing ................................................ 14,646,351 3,224,763 10,725,678 14,364,494 Food and beverage ..................................... 1,500,065 187,438 886,708 1,131,499 Other ................................................. 59,934 Selling, general and administrative ................... 3,277,507 490,466 1,169,074 1,714,532 Depreciation and amortization ......................... 823,944 77,806 138,166 655,194 Pre-opening expense ................................... 3,256,963 Management fee ........................................ 480,000 160,000 64,644 Litigation settlement ................................. 1,600,000 Relocation expense .................................... 404,738 Impairment charges on long-lived assets ............... 4,361,134 ------------ ------------ ------------ ------------ Total expenses ........................................ 27,553,494 4,140,473 12,984,270 22,631,591 ------------ ------------ ------------ ------------ INCOME (LOSS) FROM OPERATIONS ......................... (5,055,948) (7,690) 1,336,557 (3,307,310) OTHER INCOME (EXPENSE): Earnings from equity affiliate ........................ 58,862 Interest income ....................................... 440,003 (4,979) 9,243 10,720 Interest expense, net of amounts capitalized .......... (14,151,163) (748,787) (769,163) (1,121,835) ------------ ------------ ------------ ------------ Total other expense ................................... (13,711,160) (753,766) (759,920) (1,052,253) ------------ ------------ ------------ ------------ NET INCOME (LOSS) TO COMMON MEMBERS' INTEREST ......... $(18,767,108) $ (761,456) $ 576,637 $ (4,359,563) ------------ ------------ ------------ ------------
See notes to financial statements. F-41 THE OLD EVANGELINE DOWNS, L.L.C. STATEMENTS OF CHANGES IN MEMBERS' EQUITY (DEFICIT) THE YEAR ENDED DECEMBER 31, 2003 AND THE PERIOD AUGUST 31 TO DECEMBER 31, 2002 (SUCCESSOR COMPANY) THE PERIOD JANUARY 1 TO AUGUST 30, 2002 AND THE YEAR ENDED DECEMBER 31, 2001 (PREDECESSOR COMPANY)
PREDECESSOR TOTAL MEMBERS' EQUITY (DEFICIT) ------------- BALANCE, DECEMBER 31, 2000.................................................... $ (1,541,083) Net loss to common members' interest.......................................... (4,359,563) ------------- BALANCE, DECEMBER 31, 2001.................................................... (5,900,646) Net income to common members' interest........................................ 576,637 ------------- BALANCE, AUGUST 30, 2002...................................................... $ (5,324,009) =============
SUCCESSOR SUCCESSOR COMMON SUCCESSOR TOTAL MEMBERS' ACCUMULATED MEMBERS' INTEREST DEFICIT EQUITY ------------- ------------- ------------- BALANCE, AUGUST 31, 2002 ................... $ 15,232,056 $ 15,232,056 Net loss to common members' interest ....... $ (761,456) (761,456) ------------- ------------- ------------- BALANCE DECEMBER 31, 2002 .................. 15,232,056 (761,456) 14,470,600) ------------- ------------- ------------- Net loss to common members' interest ....... (18,767,108) (18,767,108) Member distributions ....................... (175,000) (175,000) ------------- ------------- ------------- BALANCE DECEMBER 31, 2003 .................. $ 15,232,056 $ (19,703,564) $ (4,471,508) ============= ============= =============
See notes to financial statements. F-42 THE OLD EVANGELINE DOWNS, L.L.C. STATEMENTS OF CASH FLOWS THE YEAR ENDED DECEMBER 31, 2003 AND THE PERIOD AUGUST 31 TO DECEMBER 31, 2002 (SUCCESSOR COMPANY) THE PERIOD JANUARY 1 TO AUGUST 30, 2002 AND THE YEAR ENDED DECEMBER 31, 2001 (PREDECESSOR COMPANY)
SUCCESSOR PREDECESSOR ------------------------------ ------------------------------ PERIOD FROM PERIOD FROM AUGUST 31 JANUARY 1 THROUGH THROUGH DECEMBER 31, AUGUST 30, 2003 2002 2002 2001 ------------- ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) .............................................. $ (18,767,108) (761,456) $ 576,637 $ (4,359,563) Adjustments to reconcile net income (loss) to net cash flows provided by operating activities: Depreciation and amortization ............................ 823,944 77,806 138,166 655,194 Amortization of deferred financing costs and bond discount .............................................. 1,974,401 339,937 Loss on sale of assets ................................... 12,801 Impairment charge on long-lived assets ................... 4,361,134 Changes in operating assets and liabilities: Restricted cash .......................................... (748,759) (832,297) 1,093,687 (24,426) Receivables .............................................. (226,013) 1,305,897 (1,394,560) 33,489 Inventory ................................................ (260,371) 11,105 5,439 (2,782) Prepaid expenses and other assets ........................ (210,197) 87,334 (97,903) (62,339) Accounts payable ......................................... 2,124,402 580,388 (255,764) (27,414) Accrued expenses ......................................... 6,844,704 260,949 390,424 (154,141) Accounts payable to DJL and OEDA ......................... 1,641,211 Litigation settlement .................................... 1,200,000 ------------- ------------- ------------- ------------- Net cash flows from operating activities .............. (5,603,786) 1,069,663 456,126 431,953 ------------- ------------- ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Business acquisition and licensing costs ................. (1,781,746) (438,932) (269,680) Racino project development costs ......................... (55,303,006) (4,280,112) (382,159) Restricted cash-racino project ........................... (20,013,291) Purchase of restricted investments ....................... (23,922,971) Maturity of restricted investments ....................... 8,144,088 Purchase of property and equipment ....................... (710,981) (75,602) (54,289) (68,621) ------------- ------------- ------------- ------------- Net cash flows from investing activities ........ (93,587,907) (4,794,646) (706,128) (68,621) ------------- ------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Deferred financing costs ................................. (11,516,099) (316,206) Principal payments on debt ............................... (20,125,000) (150,000) Principal payments on debt to related party .............. (90,987) (411,230) Proceeds from senior secured notes ....................... 120,736,000 Proceeds from senior credit facility ..................... 5,104,301 Proceeds from FF&E credit facility ....................... 12,532,493 Proceeds from notes payable .............................. 4,500,000 ------------- ------------- ------------- ------------- Net cash flows from financing activities ........ 106,731,695 4,033,794 (90,987) (411,230) ------------- ------------- ------------- ------------- NET INCREASE (DECREASE) IN CASH ................................ 7,540,002 308,811 (340,989) (47,898) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............... 962,652 653,841 994,830 1,042,728 ------------- ------------- ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ..................... $ 8,502,654 $ 962,652 $ 653,841 $ 994,830 ============= ============= ============= ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for interest ......................... $ 8,594,283 $ 267,995 $ 432,812 $ 1,125,262 Cash paid during the year for income taxes ..................... $ 123,043
F-43
SUCCESSOR PREDECESSOR ------------------------------ ------------------------------ PERIOD FROM PERIOD FROM AUGUST 31 JANUARY 1 THROUGH THROUGH DECEMBER 31, AUGUST 30, 2003 2002 2002 2001 ------------- ------------- ------------- ------------- SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Property additions acquired on construction payable which were accrued, but not paid ....................................... $ 19,681,300 $ 2,376,494 Property and equipment purchased in exchange for indebtedness .. $ 4,398,940 Exchange of Private OED Notes for Registered OED Notes ......... $ 123,200,000 Push down of OEDA note payable to PGP .......................... $ 7,325,000 Assignment from OEDA of term loan payable to Wells Fargo Foothill, Inc. (formerly known as Foothill Capital Corporation) ................................................ $ 8,450,000 Push down of OEDA intercompany accounts payable to DJL ......... $ 2,484,140 Push down of deferred financing costs, Racino Project development costs, and business acquisition and licensing costs paid by OEDA .......................................... $ 2,934,140
See notes to financial statements. F-44 THE OLD EVANGELINE DOWNS, L.L.C. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION, BUSINESS PURPOSE AND BASIS OF PRESENTATION In 2002, The Old Evangeline Downs, L.C. was purchased by OED Acquisition, LLC ("OEDA"), a wholly owned subsidiary of Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC) ("DJL") and was renamed The Old Evangeline Downs, L.L.C. (the "LLC"), a Louisiana limited liability company (the "Company"). Unless the context requires otherwise, references to the "Company," "we," "us" or "our" refer to The Old Evangeline Downs, LLC. Peninsula Gaming LLC, a Delaware limited liability company ("PGL"), was formed on June 16, 2004 and a corporate restructuring occurred on the same date and is reflected in these financial statements. As a result of the corporate restructuring, PGL was formed as a new direct parent company of DJL, the Company and Peninsula Gaming Corp. (formerly known as the Old Evangeline Downs Capital Corp.), a Delaware limited liability company ("PGC"). Prior to June 16, 2004, PGC, which has no assets or operations and was formed solely to facilitate the offering by the Company of its 13% Senior Secured Notes due 2010 with Contingent Interest, was a direct wholly owned subsidiary of the Company. PGL is a wholly owned subsidiary of Peninsula Gaming Partners, LLC, a Delaware limited liability company ("PGP"). In addition, upon the corporate restructuring, OEDA became a sister company to PGL and a wholly owned subsidiary of PGP in a corporate spin-off which was recorded as a distribution by PGL on June 16, 2004. OED currently owns and operates the Evangeline Downs Racetrack and Casino, or racino. OED's new racino in Opelousas has a Southern Louisiana Cajun roadhouse theme on the exterior, with a complementary regional Acadian atmosphere on the interior. The racino currently includes a casino with 1,627 slot machines, parking spaces for approximately 2,229 cars, 60 semis, and 5 buses, and several dining options. OED's dining options include a 312-seat Cajun Buffet, an 82-seat fine dining Evangeline restaurant, a 192-seat Lagniappe food court and a 202-seat Mojos sports bar with an additional 98-seat screened patio, in addition to a raised bar and lounge area with 120 seats, known as Zydeco's, occupying the center of OED's casino floor. In accordance with its regulatory requirements for the racino, OED expects to complete construction of a one-mile dirt track, stables for 980 horses, a grandstand and clubhouse with seating for 1,295 patrons, and apron and patio space for an additional 3,000 patrons by the end of fiscal 2004 with related additional capital expenditures of approximately $17.5 million as of December 31, 2003. Consistent with its regulatory requirements, OED also expects to continue construction on its turf track during fiscal 2005. Pending completion of OED's new horse racetrack, horse racing operations are conducted at OED's nearby pari-mutuel wagering complex in Lafayette, Louisiana, whose operations will be transferred to OED's new horse racetrack upon completion. OED's operations also include two off-track betting parlors ("OTB"), one in New Iberia, and one in Port Allen, Louisiana. OED's OTB in Port Allen, located on Interstate 10 across the Mississippi River from Baton Rouge, Louisiana, also operates 100 video poker machines. Predecessor Company for the period January 1 to August 30, 2002 and the year ended 2001--The accompanying financial statements include the accounts of The Old Evangeline Downs, L.C. (the "L.C."). The L.C. was organized as a limited liability company under the provisions of the laws of the State of Louisiana in October 1994 for the purpose of both acquiring through the Bankruptcy Plan of Reorganization, and operating the Evangeline Downs Racetrack. RACINO DEVELOPMENT In order to provide funding for the racino project and to repay certain then existing indebtedness, on February 25, 2003, OED completed a private placement of $123.2 million 13% Senior Secured Notes due 2010 with Contingent Interest (the "Private OED Notes"). On September 10, 2003, OED exchanged the Private OED Notes for notes registered with the Securities and Exchange Commission otherwise identical in all respects to the Private OED Notes (the "Registered OED Notes," and together with the Private OED Notes, the "OED Notes"). The construction and development of the racino project is expected to be completed in two phases. The first phase involves the construction of the casino and related casino amenities which was substantially completed and F-45 opened to the public on December 19, 2003. Construction of the second phase, which involves the construction of the horse racetrack and related facilities, is currently underway. OED expects to begin scheduling live racing meets at the racino in December 2004, at which time it expects to cease operations at OED's existing horse racetrack. The total remaining capital expenditures expected to complete the racino project as of December 31, 2003 is approximately $17.5 million. The source of funds to complete construction and development of the racino will be (i) a portion of the proceeds from the offering of the OED Notes, (ii) available borrowings under OED's $15.0 million senior secured credit facility, (iii) available borrowings under OED's $16.0 million furniture, fixtures and equipment financing facility and (iv) cash flows from existing racetrack operations and future cash flows from future racino operations. See Note 4 for further information about the OED Notes, the senior credit facility and the furniture, fixtures and equipment financing facility. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents--OED considers all cash on hand and in banks, certificates of deposit and other highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents. RESTRICTED CASH--Restricted cash represents amounts for purses to be paid during the live meet racing season. Additionally, restricted cash includes entrance fees for a special futurity race during the racing season, plus any interest earnings. These funds will be used to pay the purse for the race. A separate interest bearing bank account is required for these funds. RESTRICTED INVESTMENTS--As of December 31, 2003, we had approximately $15.8 million invested in government securities with original maturities of greater than 90 days from the date of initial investment. These investments have been classified as held-to-maturity and have contractual maturities of $8.0 million on both February 15, 2004 and August 15, 2004. Proceeds from the maturity of these investments will be used to help make payments of fixed interest on the OED Notes due March 1, 2004 and September 1, 2004 in accordance with the terms of the Cash Collateral and Disbursement Agreement, dated February 25, 2003, among us, U.S. Bank National Association (as trustee and disbursement agent) and an independent construction consultant (the "Cash Collateral and Disbursement Agreement"). INVENTORIES--Inventories consisting principally of food, beverage, retail items, and operating supplies are stated at the lower of first-in, first-out cost or market. RESTRICTED CASH-RACINO PROJECT--"Restricted cash-racino project" represents unused proceeds from the sale of the OED Notes, the use and disbursement of which are restricted to the design, development, construction, equipping and opening of the racino in accordance with the Cash Collateral and Disbursement Agreement. As of December 31, 2003, we had $14.4 million in cash equivalents deposited in a construction disbursement account, $0.2 million in cash equivalents deposited in an interest reserve account that will be used toward payment of fixed interest on the OED Notes, $5.0 million in cash equivalents deposited in a completion reserve account that will be used to fund potential cost overruns and contingency amounts with respect to the design, development, construction, equipping and opening of the racino and $0.4 million in cash in a local financial institution. The funds deposited in these accounts are invested in cash or securities that are readily convertible to cash. PROPERTY AND EQUIPMENT--Property and equipment are recorded at cost and capitalized lease assets are recorded at their fair market value at the inception of the lease. Major renewals and improvements are capitalized, while maintenance and repairs are expensed as incurred. Depreciation and amortization are computed on a straight-line basis over the following estimated useful lives: Land improvements........................................... 20-40 years Building and building improvements.......................... 9-40 years Furniture, fixtures and equipment........................... 3-10 years Computer equipment.......................................... 3-5 years Vehicles.................................................... 5 years F-46 * OED currently leases the land on which the building and leasehold improvements associated with the old racetrack are located. The ground lease annual rental is $0 per year and the lease term expires on the earlier of December 31, 2004 or the first day we open a new racetrack facility for business in St. Landry Parish, Louisiana. LONG-LIVED ASSETS--Effective January 1, 2002, OED assessed the impairment of long-lived assets, excluding goodwill and indefinite-lived intangible assets, in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." This new pronouncement also amends ARB No. 51 "Consolidated Financials Statements," to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. SFAS No. 144 requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired and also broadens the presentation of discontinued operations to include more disposal transactions. OED evaluates the carrying value of long-lived assets when events and circumstances warrant such a review. If the carrying value of the long-lived asset is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the asset. The adoption of SFAS No. 144 did not have an impact on OED's financial position or results of operations for the years ended December 31, 2003 and 2002. CAPITALIZED INTEREST--OED capitalizes interest costs associated with debt incurred in connection with the racino project. When debt is specifically identified as being incurred in connection with the development of the racino project, OED capitalizes interest on amounts expended on the racino project at OED's average cost of borrowed money. Capitalization of interest will cease when the project is substantially complete. The amount capitalized during 2003 was $2.2 million and during the period August 31, 2002 through December 31, 2002 was $0.1 million. DEFERRED FINANCING COSTS--Costs associated with the issuance of debt (see Note 4) have been deferred and are being amortized over the life of the related indenture/agreement using the effective interest method. GOODWILL AND OTHER INTANGIBLE ASSETS--Prior to the purchase of the predecessor company by the successor company during 2002, the predecessor company had goodwill associated with the predecessor company's adoption of "fresh-start" reporting in 1994. The goodwill was being amortized on a straight line basis over a period of 15 years. Upon the predecessor company's adoption of SFAS No. 142 "Goodwill and Other Intangible Assets" on January 1, 2002, amortization of the goodwill ceased. Assuming the non-amortization provision of SFAS No. 142 had been adopted at the beginning of 2001, the predecessor company's net loss to common members interest would have been $(3,933,736). At December 31, 2003 and 2002, Other Intangible Assets consists of licensing costs and the acquired tradename associated with the purchase of OED. As of December 31, 2003, OED had recorded approximately $3.8 million on OED's balance sheet for directly related legal and other incremental costs associated with the acquisition of OED and obtaining the relevant gaming licenses to conduct gaming operations associated with the racino project in Louisiana. These costs are included as a cost of the acquisition and have been evaluated under SFAS No. 141 "Business Combinations" and SFAS No. 142. Intangible assets of $28.4 million acquired as part of the acquisition were identified and valued as follows (in millions): Slot Machine and Electronic Video Game Licenses............. $24.6 Tradename................................................... $2.5 Horse Racing Licenses....................................... $1.3 ----- Total....................................................... $28.4 ===== For purposes of the valuations set forth above, each of the identified intangible assets were treated as having indefinite lives and valued separately. The methodology employed by an independent valuation specialist to arrive at such valuations required evaluating the fair market value of the existing horse racing business on a stand- F-47 alone basis without taking into account any right to obtain slot machine and electronic video game licenses. Such valuation was based in part upon other transactions in the industry and OED's historical results of operations. A value was also derived for the tradename using market based royalty rates. A significant portion of the purchase price is attributable to the slot machine and electronic video game license rights, which were valued based upon the market value paid by other operators and upon projected cash flows from operations. These valuations and related intangible assets are subject to impairment by, among other things, significant changes in the gaming tax rates in Louisiana, significant new competition which could substantially reduce profitability, non-renewal of OED's racing or gaming licenses due to regulatory matters, changes to OED's tradename or the way OED's tradename is used in connection with OED's business and regulatory changes that could adversely affect OED's business by, for example, limiting or reducing the number of slot machines or video poker machines that we are permitted to operate. CONSTRUCTION PAYABLE-ST. LANDRY PARISH--At December 31, 2003 and 2002, OED had $20.2 million and $2.4 million, respectively, in payables and accruals related to construction and development costs associated with the racino project. FINANCIAL INSTRUMENTS--The carrying amount for financial instruments included among cash and cash equivalents, accounts receivable, restricted cash, accounts payable and security deposits approximates their fair value based on the short maturity of those instruments. REVENUE RECOGNITION--In accordance with common industry practice, OED's casino revenue is the net win from gaming activities, which is the difference between gaming wins and losses. Racing revenues include OED's share of pari-mutuel wagering on live races after payment of amounts returned as winning wagers, and OED's share of wagering from import and export simulcasting as well as OED's share of wagering from OED's off-track betting parlors. PROMOTIONAL ALLOWANCES--Food, beverage, and other items furnished without charge to customers are included in gross revenues at a value which approximates retail and then deducted as promotional allowances to arrive at net revenues. The cost of such complimentary services have been included as casino expenses on the accompanying statements of operations. Such estimated costs of providing complimentary services allocated from the food and beverage and other operating departments to the casino department were $71,222 and $792 for food and beverage and other, respectively, in 2003. INCOME TAXES--OED is a limited liability company. In lieu of corporate income taxes, the members of a limited liability company are taxed on their proportionate share of OED's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. OED periodically evaluates its policies and the estimates and assumptions related to these policies. OED also periodically evaluates the carrying value of its assets in accordance with generally accepted accounting principles. OED operates in a highly regulated industry and is subject to regulations that describe and regulate operating and internal control procedures. The majority of OED's revenues are in the form of cash, which by its nature, does not require complex estimates. In addition, OED made certain estimates surrounding its application of purchase accounting related to the acquisition and the related assignment of costs to goodwill and other intangible assets. In addition, contingencies are accounted for in accordance with SFAS No. 5, "Accounting for Contingencies." SFAS No. 5 requires that OED records an estimated loss from a loss contingency when information available prior to issuance of OED's financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Accounting for contingencies such as legal matters requires us to use judgment. Many of these legal contingencies can take years to be resolved. Generally, as the time period increases over which the uncertainties are resolved, the likelihood of changes to the estimate of the ultimate outcome increases. However, an adverse outcome could have a material impact on OED's financial condition and operating results. F-48 CONCENTRATIONS OF RISK--OED's customer base consists of southwest Louisiana. Although OED is directly affected by the economic viability of the area, management does not believe significant risk exists at December 31, 2003. OED maintains deposit accounts at two banks. At December 31, 2003 and 2002, and various times during the years then ended, the balance at the banks exceeded the maximum amount insured by the FDIC. Management believes any credit risk related to the uninsured balance is minimal. RECLASSIFICATIONS--Certain prior year amounts have been reclassified to conform with current year presentation. RECENTLY ISSUED ACCOUNTING STANDARDS--In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies the previous guidance on the subject. This statement requires, among other things, that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The provisions for this statement are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material effect on OED's results of operations or financial position for the year ended December 31, 2003. In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45). FIN 45 expands the disclosure requirements related to certain guarantees, including product warranties, and requires OED to recognize a liability for the fair value of all guarantees issued or modified after December 31, 2002. FIN 45 did not impact OED's financial position or net income. In 2003, the FASB issued Interpretation (FIN) No. 46, Consolidation of Variable Interest Entities, which addresses the consolidation and related disclosures of these entities by business enterprises. These are entities in which either the equity investment at risk is not sufficient to absorb the probable loss without additional subordinated financial support from other parties, or the investors with equity at risk lack certain essential characteristics of a controlling interest. Under the Interpretation, OED must consolidate any variable interest entities (VIEs) in which OED holds variable interests and OED is deemed the primary beneficiary. The effective date for the adoption of FIN 46 for interests in VIEs created prior to February 1, 2003 was July 1, 2003 and applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which OED obtains an interest after that date. The adoption of FIN 46 did not impact OED's financial position or net loss available to common members' interest. In May 2003, the FASB issued Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires the issuer to classify a financial instrument that is within the scope of the standard as a liability if such financial instrument embodies an obligation of the issuer. The adoption of SFAS No. 150 did not impact OED's financial position or net loss available to common members' interest. 3. PROPERTY AND EQUIPMENT Property and equipment at December 31 is summarized as follows: 2003 2002 ------------ ------------ Land and land improvements ............... $ 12,886,570 $ 310,000 Building and improvements ................ 45,611,018 1,822,508 Furniture, fixtures and equipment ........ 21,212,716 1,169,935 Computer equipment ....................... 4,603,839 Vehicles ................................. 70,571 Construction in progress ................. 5,864,340 7,455,885 Subtotal ................................. 90,249,054 10,758,328 Accumulated depreciation ................. (2,786,002) (1,962,060) F-49 Property and equipment, net .............. $ 87,463,052 $ 8,796,268 * In December 2001, OED recorded property impairment charges of $4,361,134 related to OED's horse racing facility, see Note 10. 4. DEBT Debt at December 31 is summarized as follows:
2003 2002 ------------- ------------- 13% Senior Secured Notes due March 1, 2010 with Contingent Interest, net of discount of $2,276,564, secured by certain assets of OED ............................... 120,923,436 $15.0 million Loan and Security Agreement with Wells Fargo Foothill, Inc., interest rate at Prime + 2.50% (current rate of 6.5%), maturing June 24, 2006, secured by certain assets of OED ....................................................... 5,104,301 $16.0 million Loan and Security Agreement with Wells Fargo Foothill, Inc., interest rate at Prime + 2.50% (current rate of 6.5%), due in 48 equal monthly principal payments beginning on March 1, 2004, secured by certain assets of OED ........ 12,532,493 Promissory note payable to third party, interest at 4.75% payable monthly in arrears, annual principal payments of $550,000 due each October beginning in 2004, secured by mortgage on certain real property of OED .............................. 3,850,000 Note payable to IGT, interest rate at 9.5%, monthly payments of principal and interest of $31,250, with final payment due July 1, 2005, secured by certain assets of OED .......................................................................... 548,940 Term loan with Foothill Capital Corporation, interest at Prime + 3.75%, however, at no time shall the interest rate be lower than 7.5% (current rate of 8.0%), maturing the earlier of (a) June 30, 2003 or (b) the date on which we consummate OED's financing of the racino project, secured by substantially all the assets of OED ................................................................................. 8,300,000 Note payable to PGP, issued by OEDA, interest rate of 7% until January 31, 2003, thereafter 8% until February 28, 2003, thereafter 9% until March 31, 2003, thereafter the greater of 12% or the fixed rate on the notes expected to be issued to finance the racino project, maturing on June 30, 2003 ........................ 7,325,000 ------------- ------------- Note payable to WET2, interest rate of 7% until March 31, 2003, thereafter the greater of 12% or the fixed rate on the notes expected to be issued to finance the racino project, maturing on June 30, 2003 .......................................... 4,500,000 ------------- ------------- Total debt ............................................................................. 142,959,170 20,125,000 Less current portion ................................................................... (3,498,222) (20,125,000) ------------- ------------- Total long term debt ................................................................... $ 139,460,948 $ 0 ============= =============
On February 25, 2003, OED completed the private placement of $123.2 million aggregate principal amount of OED Notes. The OED Notes bear interest at a rate of 13% per year which is payable semi-annually on March 1 and September 1 of each year, beginning September 1, 2003. Contingent interest will accrue on the OED Notes F-50 beginning in the first full fiscal year after the casino begins operations. The amount of contingent interest will be equal to 5.0% of OED's cash flow for the applicable period, subject to certain limitations. OED may defer paying a portion of contingent interest under certain circumstances set forth in the indenture governing the OED Notes. At the end of each six-month period after the casino portion of the racino begins operations, OED is required under the indenture governing the OED Notes to offer to purchase the maximum principal amount of OED Notes that may be purchased, with an amount equal to the sum of (i) 50% of OED's excess cash flow for such period (if any) and (ii) the then available balance in an excess cash flow account, which account at any time shall not exceed $10.0 million. For 45 days following the expiration of each initial excess cash flow offer to purchase, the holders of the OED Notes have the right to request that OED make an offer to purchase OED Notes with the funds in the excess cash flow account subject to certain limitations, including that OED shall not be required to make more than one offer at any one time. All such offers to purchase OED Notes shall be made at 101% of the principal amount, plus accrued and unpaid interest. The OED Notes are secured by all of OED's current and future assets (with the exception of certain excluded assets), including the remaining unused proceeds from the offering of the OED Notes which have been deposited into OED's construction disbursement, interest reserve and completion reserve accounts. The OED Notes, which mature on March 1, 2010, are redeemable at OED's option, in whole or in part at any time or from time to time, on and after March 1, 2007 at certain specified redemption prices set forth in the indenture governing the OED Notes. The indenture governing the OED Notes contains a number of restrictive covenants and agreements, including covenants that limit the ability of us and OED's subsidiaries to, among other things: (1) pay dividends, redeem stock or make other distributions or restricted payments; (2) incur indebtedness or issue preferred shares; (3) make certain investments; (4) create liens; (5) agree to payment restrictions affecting the subsidiary guarantors; (6) consolidate or merge; (7) sell or otherwise transfer or dispose of assets, including equity interests of subsidiaries; (8) enter into transactions with affiliates; (9) designate subsidiaries as unrestricted subsidiaries; (10) use proceeds of permitted asset sales and (11) change its line of business. At December 31, 2003, OED was in compliance with all such covenants. The events of default under the indenture include provisions that are typical of senior debt financings. Upon the occurrence and continuance of certain events of default, the trustee or the holders of not less than 25% in aggregate principal amount of outstanding OED Notes may declare all unpaid principal and accrued interest on all of the OED Notes to be immediately due and payable. Upon the occurrence of a change of control (as defined in the indenture governing the OED Notes), each holder of OED Notes will have the right to require OED to purchase all or a portion of such holder's OED Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. On June 24, 2003, OED entered into a new $15.0 million senior secured credit facility with Wells Fargo Foothill, Inc. as lender (the "Credit Facility"). The Credit Facility was amended by the parties thereto on September 22, 2003, December 10, 2003 and December 24, 2003 (the "Credit Facility Amendments"). OED's obligations under the Credit Facility are secured by a lien on substantially all of OED's and OED's subsidiaries' current and future assets, other than the construction disbursement, interest reserve, completion reserve and excess cash flow accounts and certain other excluded assets as well as a pledge by OEDA of OED's capital stock. Pursuant to the intercreditor agreement described below, the lien on the collateral securing the Credit Facility is senior to the lien on such collateral securing the OED Notes. The Credit Facility consists of a revolving credit facility which Ipermits us to request advances and letters of credit to finance working capital and other general corporate needs. Pursuant to the Credit Facility Amendments, OED had the ability to borrow up to $8.5 million (less amounts outstanding under letters of credit) at any one time outstanding during the period before the date that the casino portion of the racino was completed and, among other things, is open for business to the general public and construction costs for the casino have been paid in full or, if such payments are not yet due on such date, that sufficient funds remain in the construction disbursement account to satisfy such payments in full (the "Phase I Completion Date"). All requirements under the definition of the Phase I Completion Date were met on January 9, 2004. For the period after the Phase I Completion Date but before the second anniversary of the Phase I Completion Date (the "Second Anniversary"), the total amount of credit that will be available to OED will be the lesser of $15.0 million and a specified borrowing base (the "Borrowing Base"). For the purposes of the Credit Facility, the Borrowing Base is the lesser of 30% of the amount of certain costs incurred by us in connection with the construction of the racino project and 20% of the amount of the distressed-sale valuation of OED's and OED's subsidiaries' operations and assets. After the Second Anniversary, the total amount F-51 of credit that will be available to OED will be the greater of (i) the lesser of $10.0 million and the Borrowing Base or (ii) the aggregate principal amount of all advances outstanding as of the Second Anniversary. At December 31, 2003, OED had outstanding borrowings of $5.1 million and outstanding letters of credit of $3.2 million under the Credit Facility. All revolving loans and letters of credit issued under the Credit Facility will mature on June 24, 2006. Prior to the maturity date, funds borrowed under the Credit Facility may be borrowed, repaid and reborrowed, without premium or penalty. OED's borrowings under the Credit Facility will bear interest at a base rate (a Wells Fargo prime rate) plus a margin of 2.50%. The interest rate payable under the Credit Facility will increase by 2% per annum during the continuance of an event of default. Under the Credit Facility, OED is also required to pay to the lender a letter of credit fee equal to 2% per annum on the daily balance of the undrawn amount of all outstanding letters of credit and to the institution issuing a letter of credit a fronting fee, in each case payable in arrears on a monthly basis. The Credit Facility contains, among other things, covenants, representations and warranties and events of default customary for loans of this type. The most significant covenants include a minimum EBITDA requirement and a maximum capital expenditure requirement. At December 31, 2003, OED was in compliance with all such covenants. Concurrently with the closing of the Credit Facility, the trustee under the indenture for the OED Notes (as secured party) entered into an intercreditor agreement with Wells Fargo Foothill, Inc. as the lender under such credit facility, providing, among other things, that the lien securing the indebtedness under the Credit Facility is senior to the lien securing the indebtedness under the OED Notes (except that the construction disbursement, interest reserve, completion reserve and excess cash flow accounts are security only for the OED Notes). On September 22, 2003, OED entered into a new $16.0 million senior secured credit facility with Wells Fargo Foothill, Inc. as lender (the "FF&E Facility"). Under the FF&E Facility, the lender agrees to make a series of term loans, up to a maximum amount of $16.0 million, to finance the purchase of gaming equipment and other furniture, fixtures and equipment. OED's obligations under the FF&E Facility are, subject to certain limitations, secured by a first priority lien on all of the furniture, fixtures and equipment, and all proceeds and products thereof. At December 31, 2003, OED had outstanding borrowings of $12.5 million under the FF&E Facility. Loans under the FF&E Facility shall be repayable in 48 equal monthly installments of principal, commencing on March 1, 2004, and continuing on the first day of each month thereafter until the unpaid balance of all loans are paid in full. The outstanding principal balance and all accrued and unpaid interest under all loans shall also be due and payable in full on March 1, 2008. Once borrowed, all loans may be prepaid in whole or in part without penalty or premium at any time during the term of this agreement. Amounts borrowed and repaid may not be reborrowed. OED's borrowings under the FF&E Facility will bear interest at a base rate (a Wells Fargo prime rate) plus a margin of 2.50%, but at no time shall the interest rate be less than 6%. The interest rate payable under the FF&E Facility will increase by 2% per annum during the continuance of an event of default. The FF&E Facility contains, among other things, covenants, representations and warranties and events of default customary for loans of this type. The most significant covenants include a minimum EBITDA requirement and a maximum capital expenditure requirement. At December 31, 2003 OED was in compliance with all such covenants. In October 2003, OED entered into a purchase agreement to acquire 93 acres of land, divided into seven approximately equal parcels, for a total purchase price of $3,850,000. The purchase price under this purchase agreement was financed by the seller with us issuing a $3,850,000 note payable to the seller. The note is payable in seven equal annual installments of $550,000 beginning October 24, 2004 and bears interest at a rate of 4.75% of the unpaid balance due monthly in arrears on the fifth day of each month beginning on December 5, 2003. The note is collateralized by a mortgage on the property. Simultaneously with the payment of each $550,000 annual installment discussed above, seller agrees to release one of the remaining parcels from the mortgage. In March 2003, OED entered into a participation agreement with a third party operator to own and operate 100 video poker machines at OED's OTB in Port Allen, Louisiana. In December 2003, OED obtained its license to F-53 own and operate video poker machines. In accordance with the participation agreement, OED assumed the remaining balance of an original $663,700 promissory note payable in exchange for ownership of the 100 video poker machines. The note bears interest at 9.5% and is payable in monthly installments of principal and interest of $31,250 with the last payment due July 1, 2005. The note is collateralized by a security interest in the machines. Concurrently with the issuance of the OED Notes, OED's obligations under the Term Loan, the PGP Note and the WET2 Note were repaid in February 2003. 5. LITIGATION SETTLEMENT On November 8, 1994, the Louisiana Horsemen's Benevolent and Protective Association 1993, Inc. ("LHBPA") filed a lawsuit against all licensed horse racetracks in the State of Louisiana. The lawsuit alleged that LHBPA did not receive the appropriate share of net revenues from video poker devices located at licensed horse racetracks. In February 2003, OED entered into a settlement agreement with LHBPA for $1.6 million. The terms of the settlement agreement requires OED to make payments of $400,000 annually beginning in March 2003, with additional $400,000 payments due in March 2004 through 2006. In accordance with Statement of Financial Accounting Standards No. 5 "Accounting for Contingencies," OED recorded an expense and related accrual of $1.6 million in the financial statements as of December 31, 2003. Of the total $1.6 million accrual, $0.4 million was paid in March 2003, $0.4 million has been included in "Other accrued expenses" in the "Current Liabilities" section with the remaining $0.8 million recorded under "Other accrued expenses" in the "Long-term liabilities" section of the Balance Sheet. 6. EMPLOYEE BENEFIT PLAN On June 1, 2002, OED implemented a new 401(k) Plan that covers any employee who wishes to participate, who was over age 21 and has given one year of service to OED. Contributions to the plan made by the employees are limited to 60% of their compensation and are partially matched by OED based on a formula providing for 50% matching on the first 4% of compensation contributed. OED's contributions to the plan for the year ended December 31, 2003, the period August 31, 2002 to December 31, 2002 the period June 1, 2002 (date of plan implementation) to August 30, 2002 were $21,673, $5,954 and $3,635, respectively. During 2001 and through February 2002, OED participated in a profit sharing 401(k) Plan sponsored by the Moody Company which was implemented during 1996 that covered any employee who wished to participate, who was over age 21 and had given one year of service to OED. Contributions to the plan made by the employees were limited to 15% of their compensation and were partially matched by OED based on a formula providing for 1) 50% matching on the first 4% of compensation, and 2) an optional contribution of up to 15% of compensation, based on an annual decision of OED's managers. OED's contributions to the plan were $2,995 and $18,895 for the period January 1 through the end of OED's participation in the plan in February 2002 and the year ended December 31, 2001, respectively. 7. LEASING ARRANGEMENTS GROUND LEASE-LAFAYETTE--OED currently leases the land on which the current racetrack is located. The ground lease annual rental is $0 per year and the lease term expires on the earlier of December 31, 2004 or the first day OED opens a new racetrack facility for business in St. Landry Parish, Louisiana. NEW IBERIA--OED is under a month-to-month contract for $5,000 per month to lease the New Iberia off-track betting parlor. The lease requires payment of property taxes, maintenance and insurance on the property. During the year ended December 31, 2003, the period August 31 through December 31, 2002, the period January 1 through August 30, 2002 and the year ended December 31, 2001, OED paid $60,000, $20,000, $40,000 and $60,000, respectively, in rent for the New Iberia off-track betting parlor. PARI-MUTUEL PROCESSING EQUIPMENT--OED entered into a five-year lease agreement commencing on February 15, 2001 for computerized pari-mutuel central processing equipment, terminals and certain associated F-53 equipment. Additionally, the lease agreement provides us with pari-mutuel services whereby the leased equipment automatically registers and totals the amounts wagered on the races held at the race track or simulcast to it and to its respective off-track wagering parlors, and displays the win pool odds, payoffs, and other pertinent horse racing information needed to operate live meet horse racing and off-track betting. OED pays 0.43% of the handle for the services provided during both live meet racing days and off-track betting racing days. The charges are subject to a minimum of $1,950 per live meet race day and $1,150 per off-track betting race day. Additionally, if a race day is not completed, OED must pay 50% of the minimum if less than four races are declared official and 100% of the minimum if four or more races are declared official. In 2003, OED had 87 live meet racing days and 223 off-track betting days. OED paid $466,923, $116,308, $308,972 and $429,357 during the year ended December 31, 2003, the period August 31 through December 31, 2002, the period January 1 through August 30, 2002 and the year ended December 31, 2001, respectively, related to the pari-mutuel processing equipment lease. In 2004, OED is scheduled to run 116 live meet racing days and 249 off-track betting days. The total minimum rental payments for the lease mentioned in the preceding paragraph assuming 116 live meet racing days and 249 off-track betting days for each of the years ended December 31 are summarized as follows: 2004....................................... $ 512,550 2005....................................... 512,550 2006....................................... 51,750 ------------ $ 1,076,850 ============ OED leases various other equipment under noncancelable operating leases. The leases require fixed monthly payments to be made ranging from $1,600 to $2,553 and certain other gaming machines require contingent monthly rental payments based on usage of the equipment. The leases expire on various dates through 2007. Rent expense was $211,721, $8,208, $9,718 and $32,091 during the year ended December 31, 2003, the period August 31 through December 31, 2002, the period January 1 through August 30, 2002 and the year ended December 31, 2001, respectively. The future minimum rental payments required under these leases for the years ended December 31 are summarized as follows: 2004....................................... $ 47,110 2005....................................... 30,630 2006....................................... 30,630 2007....................................... 12,763 ------------ $ 121,133 ============ 8. COMMITMENTS AND CONTINGENCIES On June 25, 2002, Peninsula Gaming Partners, LLC, a Delaware limited liability company which holds all of the membership interests of DJL ("PGP") entered into an agreement with William E. Trotter, II ("Trotter") and William E. Trotter, II Family L.L.C., a Louisiana limited liability company ("WET2LLC") to acquire (i) all of Trotter's interests in two promissory notes issued by us in connection with DJL's acquisition of us, and (ii) all of Trotter's membership interests owned by WET2LLC (together, the "Trotter Purchase"). On August 30, 2002, OEDA consummated the Trotter Purchase for a purchase price consisting of cash of $15,546,000, plus a contingent fee of one half of one percent (0.5%) of the net slot revenues generated by OED's racino located in St. Landry Parish, Louisiana, for a period of ten years commencing on December 19, 2003, the date the racino's casino opened to the general public. OED is not a party to, and none of OED's property is the subject of, any other pending legal proceedings other than litigation arising in the normal course of business. Management does not believe that adverse determinations in any or all such other litigation would have a material adverse effect on OED's financial condition, results of operations or cash flows. F-54 9. TRANSACTIONS WITH RELATED PARTIES During 2003, OED had accrued member distributions of $175,000 payable to OEDA. This amount was paid in January 2004. At December 31, 2003 and 2002, OED had accrued interest recorded of $330,209 payable to OEDA primarily related to OEDA's purchase of a 50% interest in OED's long-term notes payable on February 15, 2002. Interest was accrued from the date of purchase of the notes until August 30, 2002, at which time the interest in the notes was converted to members' equity of OED. At December 31, 2003 and 2002, OED had intercompany accounts payable to DJL of $3,645,351 and $2,484,140 related to Racino Project development costs paid by DJL on behalf of us. Management Services Agreement - In 2002, OED entered into a management services agreement ("MSA") with DJL and OEDA (together the "Operator"). Pursuant to the terms of that agreement, the Operator will manage and operate OED's existing horse racetrack and design, develop, construct, manage and operate the new racino and provide certain pre-opening services in connection therewith. Under the management services agreement, the Operator is entitled to receive a pre-opening service fee equal to $40,000 per month, retroactive to June 27, 2001 which is not required to be paid until the earlier to occur of commencement of the operations of the casino or the Operating Deadline (as defined in the MSA and applicable to the casino). The Operator is also entitled to be reimbursed for all reasonable and documented out-of-pocket expenses permitted to be incurred under the management services agreement, including, but not limited to tax preparation, accounting, legal and administrative fees and expenses incurred in connection with the Operator's ownership of us. The Operator will also receive a basic management fee equal to 1.75% of net revenue (less net food and beverage revenue) and an incentive fee equal to: o 3.0% of the first $25.0 million of EBITDA (as defined below); o 4.0% of EBITDA in excess of $25.0 million but less than $30.0 million of EBITDA; and o 5.0% of EBITDA in excess of $30.0 million. "EBITDA" is defined in the management services agreement as earnings before interest, income taxes, depreciation and amortization; provided, however, that in calculating earnings, the basic management fee, the incentive fee and reimbursables payable under the management services agreement shall not be deducted. The management services agreement will terminate on the later of (i) the date that is eight years after the first date a revenue paying customer is admitted to the new racino and (ii) the date of sale by DJL of its beneficial ownership of OED's membership interests. During the year ended December 31, 2003, the period August 31 to December 31, 2002 and the period January 1 to August 30, 2002, we accrued management fee expenses of $480,000, $160,000 and $64,644, respectively. Certain members of OED are also managers of PGP. Due to these relationships, those individuals may indirectly receive money from us for management fees and other amounts paid by us to DJL. During the period August 31 through December 31, 2002, the period January 1 through August 30, 2002 and the year ended December 31, 2001, interest was paid to Moody-Trotter Investments and William E. Trotter in the amount of $96,156, $432,812 and $1,125,262, respectively. 10. IMPAIRMENT CHARGE In connection with OED's assessment of the events enumerated in Note 1 surrounding the Racino Project, a review was performed of the carrying values of long-lived assets, including the recorded balance of the line item "Other intangibles". We determined that the sale of a 50% interest of OED to OEDA, which was consummated on F-55 February 15, 2002, significantly changed the time period over which the horse racing facility in Lafayette, Louisiana would be used. This review was performed pursuant to the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets to Be Disposed Of. As a result of this review, we recorded a charge of $4,361,134 in 2001 to record the related assets at fair value based on the present value of estimated expected future cash flows using a discount rate commensurate with the risks involved. 11. SUBSEQUENT EVENTS (UNAUDITED) On March 11, 2004, OED and DJL announced that they intend to refinance the OED Notes and DJL's 12 1/4 % Senior Secured Notes due 2006 (the "DJL Notes") with a proposed offering of $230 million (which subsequently has been increased to $233 million) of senior secured notes due 2012 and a new credit facility. As part of this note offering, they are also seeking requisite regulatory approvals to effect a series of corporate transactions, including the creation of a new holding company to be the new direct parent of OED and DJL and a co-issuer of the new senior secured notes. In the event regulatory approval of the corporate transactions is not obtained, OED and DJL will still consummate the note offering and use the proceeds of the offering to repurchase and redeem the OED Notes and DJL Notes, respectively. In such event, however, they will not at such time effect the corporate transactions or enter into the new credit facility. On March 9, 2004, OED commenced a tender offer and consent solicitation to repurchase all of its outstanding OED Notes and to solicit consents to certain proposed amendments to the indenture governing the OED Notes as set forth in OED's Offer to Purchase and Consent Solicitation Statement, dated March 9, 2004 (the "Statement"). As of March 19, 2004, the expiration date of the consent solicitation, OED had received the requisite consents and tenders from holders of a majority of the aggregate principal amount of the outstanding OED Notes, which consents and tenders are irrevocable subject to certain limited exceptions set forth in the Statement. The tender offer is scheduled to expire on April 5, 2004, unless extended or earlier terminated. 12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
2003 QUARTERS ENDED -------------------------------------------------------- (DOLLARS IN THOUSANDS) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ----------- ----------- ------------ ----------- Net revenues $ 3,817 $ 6,333 $ 5,542 $ 6,806 Income from Operations (1,432) 4 (640) (2,988) Net income (loss) $ (3,653) $ (3,858) $ (4,489) $ (6,767)
2002 QUARTERS ENDED -------------------------------------------------------- (DOLLARS IN THOUSANDS) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ----------- ----------- ------------ ----------- Net revenues $ 3,710 $ 6,222 $ 5,348 $ 3,174 Income from Operations 447 582 271 29 Net income (loss) $ 182 $ 323 $ (156) $ (534)
F-56 SCHEDULE II PENINSULA GAMING, LLC VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS)
BALANCE AT CHARGED TO BEGINNING COSTS AND BALANCE AT DESCRIPTION OF YEAR EXPENSES DEDUCTIONS(1) END OF YEAR ----------- ----------- ----------- ------------- ----------- Year ended December 31, 2003: Allowance for doubtful accounts $ 46 $ 184 $ (168) $ 62 Year ended December 31, 2002: Allowance for doubtful accounts $ 57 $ 139 $ (150) $ 46 Year ended December 31, 2001: Allowance for doubtful accounts $ 43 $ 152 $ (138) $ 57
- ---------- (1) Amounts written off. F-57 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN OUR AFFAIRS SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. DIAMOND JO, LLC PENINSULA GAMING CORP. PENINSULA GAMING, LLC OFFER TO EXCHANGE $233,00,000 8 3/4% Senior Secured Notes Due 2010 , 2004 UNTIL , 2004, ALL DEALERS EFFECTING TRANSACTIONS IN THE OLD NOTES OR THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. A-1 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF MEMBERS AND MANAGERS (a) Peninsula Gaming Corp. ("PGC") is a corporation organized under the laws of the State of Delaware pursuant to the Delaware General Corporation Law. PGC is empowered under Section 145 of the Delaware General Corporation Law (the "DGCL"), subject to the procedures and limitations set forth in its Certificate of Incorporation (the "Certificate of Incorporation") and its By-Laws (the "By-Laws"), to indemnify directors, officers, employees and other individuals against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than a derivative action) if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of PGC and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard of care is applicable in the case of a derivative action, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with the defense or settlement of such an action, and the DGCL requires court approval before there can be any indemnification of expenses where the person seeking indemnification has been found liable to PGC. Article Eighth of PGC's Certificate of Incorporation provides that, to the fullest extent permitted by the DGCL as the same exists or may hereafter be amended, a director of PGC shall not be liable to PGC or its stockholders for monetary damages for a breach of fiduciary duty as a director. Any repeal or modification of Article Eighth of the Certificate of Incorporation shall not adversely affect any right or protection of a director of PGC existing at the time of such repeal or modification. Section 9.1 of PGC's By-Laws provides that every person who was or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or a person of whom he is the legal representative is or was a director or officer of PGC or is or was serving at the request of PGC or for its benefit as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible under and pursuant to any procedure specified in the Delaware Code, against all expenses, liabilities and losses (including attorneys' fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by him in connection therewith. Such right of indemnification shall be a contract right which may be enforced in any manner desired by such person. Such right of indemnification shall not be exclusive of any other right which such directors, officers or representatives may have or hereafter acquire and, without limiting the generality of such statement, they shall be entitled to their respective rights of indemnification under any by-law, agreement, vote of stockholders, provision of law or otherwise, as well as their rights under Article 9 of the By-Laws. Section 9.2 of PGC's By-Laws provides that its Board may cause PGC to purchase and maintain insurance on behalf of any person who is or was a director or officer of PGC, or is or was serving at the request of PGC as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred in any such capacity or arising out of such status, whether or not PGC would have the power to indemnify such person. Section 9.3 of PGC's By-Laws provides that its Board may from time to time adopt further by-laws with respect to indemnification and may amend the current By-Laws and such by-laws to provide at all times the fullest indemnification permitted by the Delaware Code. Section 9.4 of PGC's By-Laws provides that expenses incurred in defending a civil or criminal action or proceeding of the type described in Section 9.1 of the By-Laws shall be paid by PGC in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the person requesting such advance to repay such amount in the event that such person is ultimately found not to be entitled to indemnification or, where indemnification is granted, to the extent the expenses so advanced by PGC or allowed by a court exceed the indemnification to which such person is entitled. (b) Peninsula Gaming, LLC ("PGL") is a limited liability company formed under the laws of the State of Delaware under the Delaware Limited Liability Company Act, 6 Del. C. Sections 18-101, et. seq., (as amended from time to time, the "Delaware Act"). PGL is empowered by Section 18-108 Delaware Act, subject to the II-1 standards and restrictions set forth in PGL's Amended and Restated Operating Agreement (the "PGL Operating Agreement"), to indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever. Section 8(c) of the PGL Operating Agreement provides that, to the fullest extent permitted under applicable law, neither the sole member nor any officer of PGL shall be deemed to violate the PGL Operating Agreement or be liable, responsible or accountable in damages or otherwise to any other member or officer or PGL for any action or failure to act, including but not limited to, under any theory of fiduciary duty or obligation, unless such violation or liability is attributable to the sole member or such officer's gross negligence, willful misconduct, bad faith or a continuing material breach of the PGL Operating Agreement. Without limiting the generality of the foregoing, the sole member and each such officer shall, in the performance of his or its duties, be fully protected in relying in good faith upon the records of PGL and upon information, opinions, reports or statements presented to the sole member of such officer by any other person or entity as to matters the sole member or such officer reasonably believes are within the other person's or entity's professional or expert competence and that has been selected with reasonable care by or on behalf of PGL. The sole member shall be deemed by the execution of the PGL Operating Agreement to acknowledge and agree that each officer, in accepting its duties thereunder, disclaims, to the maximum extent permitted under applicable law, any fiduciary duty or obligation it may have to PGL and the sole member as a result of its acceptance of its duties, responsibilities and obligations thereunder. Section 8(d) of the PGL Operating Agreement provides that, to the fullest extent permitted under applicable law, PGL shall severally indemnify and hold harmless any person or entity who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including any action by or in the right of PGL) by reason of or arising from any acts or omissions (or alleged acts or omissions) on behalf of PGL or in furtherance of the interests of PGL arising out of the indemnified party's activities as a member, officer, employee, trustee or agent of PGL against losses, damages or expenses (including attorney's fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by such indemnified party in connection with such action, suit or proceeding and for which such indemnified party has not otherwise been reimbursed, so long as such indemnified party did not act in bad faith or in a manner constituting gross negligence or willful misconduct or materially breach the PGL Operating Agreement. The termination of any action, suit or proceeding by judgment, order, settlement or upon a plea of nolo contendere or its equivalent shall not of itself (except insofar as judgment, order, settlement or plea shall itself specifically provide) create a presumption that the indemnified party acted in bad faith or in a manner constituting gross negligence or willful misconduct or materially breached the PGC Operating Agreement. Section 14 of the PGL Operating Agreement provides that, except as otherwise expressly provided in the applicable law, the debts, obligations and liabilities of PGL, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of PGL, and the sole member shall not be obligated personally for any such debt, obligation or liability of PGL solely by reason of being the sole member. Except as otherwise expressly provided in applicable law, the liability of the sole member shall be limited to the amount of capital contributions, if any, required to be made by the sole member in accordance with the provisions of the PGL Operating Agreement, but only when and to the extent the same shall become due pursuant to the provisions of the PGL Operating Agreement. (c) Diamond Jo, LLC. ("DJL") is a limited liability company formed under the laws of the State of Delaware under the Delaware Act. DJL is empowered by Section 18-108 Delaware Act, subject to the standards and restrictions set forth in DJL's Amended and Restated Limited Liability Company Agreement (the "DJL LLC Agreement"), to indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever. Section 2.2 of the DJL LLC Agreement provides that members shall not be liable under a judgment, decree or order of any court, or in any other manner, for a debt, obligation or liability of DJL, except as provided under applicable law. No member shall be required to make any contribution to DJL by reason of any negative balance in the member's capital account nor shall any negative balance in a member's capital account create any liability on the party of the member to any third party. Section 4.2 of the DJL LLC Agreement provides that, to the fullest extent permitted under applicable law, no member or managing member shall be deemed to violate the DJL LLC Agreement or be liable, responsible or accountable in damages or otherwise to any other member or managing member or DJL for any action or failure to act, unless such violation or liability is attributable to such member's or managing member's gross negligence, II-2 willful misconduct, bad faith or a continuing material breach of the DJL LLC Agreement. Without limiting the generality of the foregoing, each such member or managing member shall, in the performance of its duties, be fully protected in relying in good faith upon the records of DJL and upon information, opinions, reports or statements presented to such member or managing member by any other person or entity as to matters such member or managing member reasonably believes are within the other person's or entity's professional or expert competence and that has been selected with reasonable care by or on behalf of DJL. The sole member shall be deemed by the execution of the DJL Operating Agreement to acknowledge and agree that each officer, in accepting its duties thereunder, disclaims, to the maximum extent permitted under applicable law, any fiduciary duty or obligation it may have to DJL and the sole member as a result of its acceptance of its duties, responsibilities and obligations thereunder. Section 4.4 of the DJL LLC Agreement provides that, to the fullest extent permitted under applicable law, DJL shall severally indemnify and hold harmless any person or entity who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including any action by or in the right of DJL) by reason of or arising from any acts or omissions (or alleged acts or omissions) on behalf of DJL or in furtherance of the interests of DJL arising out of the indemnified party's activities as a member, managing member, officer, employee, trustee or agent of DJL against losses, damages or expenses (including attorney's fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by such indemnified party in connection with such action, suit or proceeding and for which such indemnified party has not otherwise been reimbursed, so long as such indemnified party did not act in bad faith or in a manner constituting gross negligence or willful misconduct. The termination of any action, suit or proceeding by judgment, order, settlement or upon a plea of nolo contendere or its equivalent shall not of itself (except insofar as judgment, order, settlement or plea shall itself specifically provide) create a presumption that the indemnified party acted in bad faith or in a manner constituting gross negligence or willful misconduct. Section 5.4(a) of the DJL LLC Agreement provides that no officer of DJL shall be liable to DJL or to the members for acts or omissions of such officer of DJL in connection with the business or affairs of DJL, including, without limitation, any breach of fiduciary duty of such officer as an officer of DJL, any mistake of judgment of such officer as an officer of DJL and any business decision of such officer as an officer of DJL, except for acts or omissions of such officer of DJL that a final adjudication establishes involved breach of such officer's duty of loyalty to DJL or its members, intentional misconduct, fraud or a knowing violation of the law that was material to the cause of action subject to such final adjudication. Section 5.5(b) of the DJL LLC Agreement provides that DJL and/or its successor, trustee or receiver may indemnify, defend and hold harmless every officer of DJL and every individual who at any time was but ceased to be an officer of DJL, and the heirs and personal representative of every officer of DJL and of every such individual, against all claims, demands, actions, losses, liabilities, damages, costs and expenses, which after the date of the DJL LLC Agreement arise out of DJL or its business or affairs, including reasonable attorneys' fees incurred in defending such matters. Section 5.5(c) of the DJL LLC Agreement provides that the satisfaction of the indemnification obligations of DJL shall be from and limited to the assets of DJL, and no member shall have any personal liability for the satisfaction of any such indemnification obligation. Section 5.5(d) of the DJL LLC Agreement provides that no amendment or repeal of any term or provision of the indemnification provisions in the DJL LLC Agreement that otherwise would restrict or limit any right or protection of an officer of DJL or other indemnified individuals shall apply to or have any effect on any such right or protection of any officer of DJL existing at the time of such amendment or repeal or of any individual who at any time before such amendment or repeal was but ceased to be an officer of DJL, or of the heirs and personal representative of any such officer of DJL or other individual. Section 15 of DJL's Operating Agreement provides that except as otherwise expressly provided in the Delaware Act, the debts, obligations and liabilities of DJL, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of DJL, and no member shall be obligated personally for any such debt, obligation or liability of DJL solely by reason of being a member. And, except as otherwise expressly provided in the Delaware Act, the liability of each member shall be limited to the amount of capital contributions, if any, required to be made by such member in accordance with the provisions of DJL's Operating Agreement, but only when and to the extent the same shall become due pursuant to the provisions of that agreement. II-3 ITEM 21. Exhibits and Financial Statement Schedules See Index to Exhibits, which is incorporated by reference. ITEM 22. Undertakings Each of the undersigned registrants hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement, or the most recent post-effective amendment thereof, which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered, if the total dollar value of securities offered would not exceed that which was registered, and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering. (4) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 20 or otherwise, the registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities, other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding, is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. (5) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form within one business day of receipt of such request and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of this registration statement through the date of responding to the request. (6) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this registration statement when it became effective. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Diamond Jo, LLC has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Lafayette, State of Louisiana, on July 30, 2004. DIAMOND JO, LLC By: /S/ NATALIE A. SCHRAMM -------------------------------- Natalie A. Schramm Chief Financial Officer Each person whose signature appears below constitutes and appoints M. Brent Stevens and Natalie A. Schramm, the true and lawful attorneys-in-fact and agents of the undersigned, with full power of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and to file the same, with all exhibits thereto, and any and all documents in connection therewith, with the Securities and Exchange Commission, and hereby grants unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on July 30, 2004. By: /S/ M. BRENT STEVENS -------------------------------- M. Brent Stevens Chief Executive Officer and Manager By: /S/ MICHAEL LUZICH -------------------------------- Michael Luzich President and Secretary By: /S/ TERRANCE W. OLIVER -------------------------------- Terrance W. Oliver Manager By: /S/ ANDREW R. WHITAKER -------------------------------- Andrew R. Whitaker Manager By: /S/ NATALIE A. SCHRAMM -------------------------------- Natalie A. Schramm Chief Financial Officer (Principal Accounting Officer) S-1 Pursuant to the requirements of the Securities Act of 1933, Peninsula Gaming Corp. has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in City of Lafayette, State of Louisiana, on July 30, 2004. PENINSULA GAMING CORP. By: /S/ NATALIE A. SCHRAMM -------------------------------- Natalie A. Schramm Chief Financial Officer Each person whose signature appears below constitutes and appoints M. Brent Stevens and Natalie A. Schramm, the true and lawful attorneys-in-fact and agents of the undersigned, with full power of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and to file the same, with all exhibits thereto, and any and all documents in connection therewith, with the Securities and Exchange Commission, and hereby grants unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on July 30, 2004. By: /S/ M. BRENT STEVENS -------------------------------- M. Brent Stevens Chief Executive Officer and Manager By: /S/ MICHAEL LUZICH -------------------------------- Michael Luzich President and Secretary By: /S/ NATALIE A. SCHRAMM -------------------------------- Natalie A. Schramm Chief Financial Officer (Principal Accounting Officer) S-2 Pursuant to the requirements of the Securities Act of 1933, Peninsula Gaming LLC has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in City of Lafayette, State of Louisiana, on July 30, 2004. PENINSULA GAMING, LLC By: /S/ NATALIE A. SCHRAMM -------------------------------- Natalie A. Schramm Chief Financial Officer Each person whose signature appears below constitutes and appoints M. Brent Stevens and Natalie A. Schramm, the true and lawful attorneys-in-fact and agents of the undersigned, with full power of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and to file the same, with all exhibits thereto, and any and all documents in connection therewith, with the Securities and Exchange Commission, and hereby grants unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on July 30, 2004. By: /S/ M. BRENT STEVENS -------------------------------- M. Brent Stevens Chief Executive Officer and Manager By: /S/ MICHAEL LUZICH -------------------------------- Michael Luzich President and Secretary By: /S/ NATALIE A. SCHRAMM -------------------------------- Natalie A. Schramm Chief Financial Officer (Principal Accounting Officer) S-3 Pursuant to the requirements of the Securities Act of 1933, Peninsula Gaming LLC has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in City of Lafayette, State of Louisiana, on July 30, 2004. THE OLD EVANGELINE DOWNS, L.L.C. By: /S/ NATALIE A. SCHRAMM -------------------------------- Natalie A. Schramm Chief Financial Officer Each person whose signature appears below constitutes and appoints M. Brent Stevens and Natalie A. Schramm, the true and lawful attorneys-in-fact and agents of the undersigned, with full power of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and to file the same, with all exhibits thereto, and any and all documents in connection therewith, with the Securities and Exchange Commission, and hereby grants unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on July 30, 2004. By: /S/ M. BRENT STEVENS -------------------------------- M. Brent Stevens Chief Executive Officer and Manager By: /S/ MICHAEL LUZICH -------------------------------- Michael Luzich President and Secretary By: /S/ NATALIE A. SCHRAMM -------------------------------- Natalie A. Schramm Chief Financial Officer (Principal Accounting Officer) S-4 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - -------- ---------------------- 1.1 Purchase Agreement, dated March 25, 2004, between Diamond Jo, LLC, The Old Evangeline Downs Capital Corp. and Jefferies & Company, Inc. 1.2 Joinder of Peninsula Gaming, LLC, dated June 16, 2004, to the Purchase Agreement, dated March 25, 2004, between Diamond Jo, LLC, The Old Evangeline Downs Capital Corp. and Jefferies & Company, Inc. 2.1 Certificate of Dissolution of Peninsula Gaming Corporation, dated June 17, 2004. 3.1A Certificate of Formation of Peninsula Gaming Company, LLC - incorporated herein by reference to Exhibit 3.1A of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. (With regard to applicable cross-references in this registration statement, Peninsula Gaming Company, LLC's Form S-4, Current, Quarterly and Annual Reports were filed with the SEC under File No. 333-88829). 3.1B Amendment to Certificate of Formation of Peninsula Gaming Company, LLC - incorporated by reference to Exhibit 3.1B of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 3.1C Certificate of Amendment to the Certificate of Formation of Peninsula Gaming Company, LLC, dated March 10, 2004 - incorporated herein by reference to Peninsula Gaming Company, LLC's Quarterly Report on Form 10-Q filed May 14, 2004. 3.2 Amended and Restated Operating Agreement of Peninsula Gaming Company, LLC - incorporated herein by reference to Exhibit 3.2 of Peninsula Gaming Company, LLC's Form S-4 filed on October 12, 1999. 3.3A Certificate of Formation of Peninsula Casinos, LLC, dated February 27, 2004. 3.3B Certificate of Amendment to the Certificate of Formation of Peninsula Casinos, LLC, dated March 10, 2004. 3.4 Operating Agreement of Peninsula Gaming, LLC (formerly known as Peninsula Casinos, LLC), dated June 14, 2004. 3.5A Certificate of Incorporation of The Old Evangeline Downs Capital Corp., dated January 20, 2003- incorporated herein by reference to Exhibit 3.4 of The Old Evangeline Downs Capital Corp.'s Form S-4 filed May 28, 2003. (With regard to applicable cross-references in this registration statement, The Old Evangeline Downs Capital Corp.'s Form S-4, Current, Quarterly and Annual Reports were filed with the SEC under File No. 333-105587). 3.5B Certificate of Amendment to the Certificate of Incorporation of The Old Evangeline Downs Capital Corp., dated June 17, 2004. 3.6 By-laws of The Old Evangeline Downs Capital Corp. - incorporated herein by reference to Exhibit 3.5 of The Old Evangeline Downs Capital Corp.'s Form S-4 filed May 28, 2003. 3.7 Amended and Restated Articles of Organization of The Old Evangeline Downs, L.L.C. (formerly The Old Evangeline Downs, L.C.), dated February 19, 2003- incorporated herein by reference to Exhibit 3.1 of The Old Evangeline Downs, L.L.C.'s Form S-4 filed May 28, 2003. EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - -------- ---------------------- (With regard to applicable cross-references in this registration statement, The Old Evangeline Downs, L.L.C.'s Form S-4 was filed with the SEC under File No. 333-105587). 3.8A Amended and Restated Operating Agreement of The Old Evangeline Downs, L.L.C., dated as of January 30, 2003- incorporated herein by reference to Exhibit 3.2 of The Old Evangeline Downs, L.L.C.'s Form S-4 filed May 28, 2003. 3.8B First Amendment to Amended and Restated Operating Agreement of The Old Evangeline Downs, L.L.C., dated as of May 21, 2003- incorporated herein by reference to Exhibit 3.3 of The Old Evangeline Downs, L.L.C.'s Form S-4 filed May 28, 2003. 4.1 Specimen Certificate of Common Stock of Peninsula Gaming Corp. (formerly known as The Old Evangeline Downs Capital Corp.). 4.2A Indenture, dated July 15, 1999, by and among Peninsula Gaming Company, LLC, Peninsula Gaming Corporation and Firstar Bank of Minnesota, N.A., as trustee - incorporated herein by reference to Exhibit 4.2 of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 4.2B First Supplemental Indenture, dated January 14, 2002, by and among Peninsula Gaming Company, LLC and Peninsula Gaming Corporation, as Issuers, the Subsidiary Guarantors referred to therein and U.S. Bank National Association, as trustee - incorporated herein by reference to Exhibit 4.3 of Peninsula Gaming Company, LLC's Form S-4 filed October 21, 1999. 4.3A Indenture, dated February 25, 2003, by and among The Old Evangeline Downs, L.L.C., The Old Evangeline Downs Capital Corp. and U.S. Bank National Association- incorporated herein by reference to Exhibit 4.1 of The Old Evangeline Downs, L.L.C.'s Form S-4 filed May 28, 2003. 4.3B Supplemental Indenture, dated as of March 25, 2004, by and among The Old Evangeline Downs, L.L.C., The Old Evangeline Downs Capital Corp. and U.S. Bank National Association. 4.4A Indenture, dated as of April 16, 2004, by and among Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC), The Old Evangeline Downs Capital Corp., the Subsidiary Guarantors named therein and U.S. Bank National Association. 4.4B Supplemental Indenture among Peninsula Gaming, LLC, Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC), The Old Evangeline Downs Capital Corp. and U.S. Bank National Association, dated as of June 16, 2004. 4.5A Registration Rights Agreement, dated April 16, 2004, by and among Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC), The Old Evangeline Downs Capital Corp., the Guarantors named therein and Jefferies & Company, Inc. 4.5B Joinder of Peninsula Gaming, LLC, dated June 16, 2004, to the Registration Rights Agreement, dated April 16, 2004, by and among Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC), The Old Evangeline Downs Capital Corp., the Guarantors named therein and Jefferies & Company, Inc. 4.6A Pledge and Security Agreement, dated as of April 16, 2004, among Diamond Jo, LLC 2 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - -------- ---------------------- (formerly known as Peninsula Gaming Company, LLC), The Old Evangeline Downs Capital Corp., OED Acquisition, LLC, Peninsula Gaming Corporation, The Old Evangeline Downs, L.L.C. and U.S. Bank National Association. 4.6B Supplement to Security Agreement by Peninsula Gaming, LLC, dated June 16, 2004. 4.7 Trademark Security Agreement, dated April 16, 2004, by Diamond Jo, LLC in favor of U.S. Bank National Association. 4.8 Form of 8 3/4% Senior Secured Notes due 2012. 4.9A Intercreditor Agreement between U.S. Bank National Association and Wells Fargo Foothill, Inc., dated April 16, 2004. 4.9B Acknowledgement of Peninsula Gaming, LLC, dated June 16, 2004, to the Intercreditor Agreement between U.S. Bank National Association and Wells Fargo Foothill, Inc., dated April 16, 2004. 5.1 Opinion of Mayer, Brown, Rowe & Maw LLP. 10.1A Employment Agreement, dated July 29, 2004, by and between Natalie Schramm and Peninsula Gaming, LLC. 10.1B Employment Agreement, dated July 14, 2004, by and between Jonathan Swain and Peninsula Gaming, LLC. 10.2 Indemnification Agreement, dated June 7, 1999, by and among Natalie Schramm and AB Capital, L.L.C. and Peninsula Gaming Company, LLC - incorporated herein by reference to Exhibit 10.2 of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.3A Operating Agreement, dated February 22, 1993, by and among Dubuque Racing Association, Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C. - incorporated herein by reference to Exhibit 10.9A of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.3B Amendment to Operating Agreement, dated February 22, 1993, by and among Dubuque Racing Association, Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C. - incorporated herein by reference to Exhibit 10.9B of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.3C Amendment to Operating Agreement, dated March 4, 1993, by and among Dubuque Racing Association, Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C. - incorporated herein by reference to Exhibit 10.9C of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.3D Third Amendment to Operating Agreement, dated March 11, 1993, by and among Dubuque Racing Association, Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C. - incorporated herein by reference to Exhibit 10.9D of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.3E Fourth Amendment to Operating Agreement, dated March 11, 1993, by and among Dubuque 3 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - -------- ---------------------- Racing Association, Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C. - incorporated herein by reference to Exhibit 10.9E of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.3F Fifth Amendment to Operating Agreement, dated April 9, 1993, by and among Dubuque Racing Association, Ltd. and Greater Dubuque Riverboat Entertain- ment Company, L.C. - incorporated herein by reference to Exhibit 10.9F of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.3G Sixth Amendment to Operating Agreement, dated November 29, 1993, by and among Dubuque Racing Association, Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C. - incorporated herein by reference to Exhibit 10.9G of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 4 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - -------- ---------------------- 10.3H Seventh Amendment to Operating Agreement, dated April 6, 1994, by and among Dubuque Racing Association, Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C. - incorporated herein by reference to Exhibit 10.9H of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.3I Eighth Amendment to Operating Agreement, dated April 29, 1994, by and among Dubuque Racing Association, Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C. - incorporated herein by reference to Exhibit 10.9I of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.3J Ninth Amendment to Operating Agreement, dated July 11, 1995, by and among Dubuque Racing Association, Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C. - incorporated herein by reference to Exhibit 10.9J of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.3K Tenth Amendment to Operating Agreement, dated July 15, 1999, by and among Dubuque Racing Association, Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C. - incorporated herein by reference to Exhibit 10.9K of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.4 Operating Agreement Assignment, dated July 15, 1999, by and among Greater Dubuque Riverboat Entertainment Company, L.C. and Peninsula Gaming Company, LLC - incorporated herein by reference to Exhibit 10.10 of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.5 First Preferred Ship Mortgage, dated July 15, 1999, by Peninsula Gaming Company, LLC in favor of Firstar Bank of Minnesota, N.A., as trustee--incorporated herein by reference to Exhibit 10/11 of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.6 Mortgage, Leasehold Mortgage, Assignment of Rents, Security Agreement and Fixture Financing Statement dated July 15, 1999, by Peninsula Gaming Company, LLC in favor of Firstar Bank of Minnesota, N.A., as trustee--incorporated herein by reference to Exhibit 10.12 of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.7 Ice Harbor Parking Agreement Assignment dated July 15, 1999, by and among Greater Dubuque Riverboat Entertainment Company, L.C. and Peninsula Gaming Company, LLC--incorporated herein by reference to Exhibit 10.13 of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.8 First Amendment to Sublease Agreement, dated July 15, 1999, by and among Dubuque Racing Association, Ltd. and Greater Dubuque Riverboat Entertainment Company, L.C.--incorporated herein by reference to Exhibit 10.14 of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.9 Sublease Assignment, dated July 15, 1999, by and among Greater Dubuque Entertainment Company, L.C. and Peninsula Gaming Company, LLC--incorporated herein by reference to Exhibit 10.15 of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.10 Iowa Racing and Gaming Commission Gaming License, dated July 15, 1999 -- incorporated herein by reference to Exhibit 10.16 of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 5 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - -------- ---------------------- 10.11 Assignment of Iowa IGT Declaration and Agreement of Trust, dated July 15, 1999 by and among Greater Dubuque Riverboat Entertainment Company, L.C. and Peninsula Gaming Company, LLC--incorporated herein by reference to Exhibit 10.17 of Peninsula Gaming Company, LLC's Form S-4 filed October 12, 1999. 10.12 Agreement of Sale, dated August 30, 2002, by and among Peninsula Gaming Partners, LLC, OED Acquisition, LLC, William E. Trotter II and William E. Trotter II Family, LLC--incorporated herein by reference to Exhibit 10.3 of Peninsula Gaming Company, LLC's Form 10-Q Quarterly Report for the quarter ended September 30, 2002. 10.13A Loan and Security Agreement, dated February 23, 2001, by and between Foothill Capital Corporation and Peninsula Gaming Company, LLC--incorporated herein by reference to Exhibit 10.13 of Peninsula Gaming Company, LLC's Form 10-K Annual Report for the year ended December 31, 2002. 10.13B Amendment Number One to Loan and Security Agreement, dated February 15, 2002, by and between Foothill Capital Corporation and Peninsula Gaming Company, LLC--incorporated herein by reference to Exhibit 10.1 of Peninsula Gaming Company, LLC's Form 10-Q Quarterly Report for the quarter ended September 30, 2002. 10.13C Amendment Number Two to Loan and Security Agreement, dated October 16, 2002, by and between Foothill Capital Corporation and Peninsula Gaming Company, LLC--incorporated herein by reference to Exhibit 10.2 of Peninsula Gaming Company, LLC's Form 10-Q Quarterly Report for the quarter ended September 30, 2002. 10.13D Amendment Number Three to Loan and Security Agreement, dated February 14, 2003, by and between Foothill Capital Corporation and Peninsula Gaming Company, LLC--incorporated herein by reference to Exhibit 10.14 of Peninsula Gaming Company, LLC's Form 10-Q Quarterly Report for the quarter ended September 30, 2003. 10.13E Amendment Number Four to Loan and Security Agreement dated November 6, 2003, by and between Peninsula Gaming Company, LLC and Wells Fargo Foothill, Inc.--incorporated herein by reference to Exhibit 10.19 of Peninsula Gaming Company, LLC's Form 10-Q Quarterly Report for the quarter ended September 30, 2003. 10.14 Purchase Agreement, dated June 27, 2002, by and among Peninsula Gaming Partners, LLC, a Delaware limited liability company, The Old Evangeline Downs, L.C., a Louisiana limited company and BIM3 Investments, a Louisiana partnership--incorporated herein by reference to Exhibit 1.1 of Peninsula Gaming Company, LLC's Form 8-K Current Report filed March 4, 2002. 10.15 First Amendment to Purchase Agreement, dated January 1, 2002, by and among BIM3 Investments, a Louisiana partnership, The Old Evangeline Downs, L.C., a Louisiana limited company and OED Acquisition, LLC, a Delaware limited liability company--incorporated herein by reference to Exhibit 1.3 of Peninsula Gaming Company, LLC's Form 8-K Current Report filed March 4, 2002. 10.16 Assignment Agreement, dated October 23, 2001, by and between Peninsula Gaming Partners and OED Acquisition, LLC--incorporated herein by reference to Exhibit 1.2 of Peninsula Gaming Company, LLC's Form 8-K Current Report filed March 4, 2002. 10.17A Loan and Security Agreement, dated June 24, 2003, by and among The Old Evangeline Downs, 6 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - -------- ---------------------- L.L.C., The Old Evangeline Downs Capital Corp., and Wells Fargo Foothill, Inc.--incorporated herein by reference to Exhibit 10.16 of Peninsula Gaming Company, LLC's Form 10-Q Quarterly Report for the quarter ended September 30, 2003. 10.17B First Amendment, dated September 22, 2003, to Loan and Security Agreement, dated June 24, 2003, by and among The Old Evangeline Downs, L.L.C., The Old Evangeline Downs Capital Corp., and Wells Fargo Foothill, Inc.--incorporated herein by reference to Exhibit 10.18 of Peninsula Gaming Company, LLC's Form 10-Q Quarterly Report for the quarter ended September 30, 2003. 10.18 Loan and Security Agreement, dated September 22, 2003, by and among The Old Evangeline Downs, L.L.C., The Old Evangeline Downs Capital Corp., and Wells Fargo Foothill, Inc.-- incorporated herein by reference to Exhibit 10.17 of Peninsula Gaming Company, LLC's Form 10-Q Quarterly Report for the quarter ended September 30, 2003. 10.19 Loan and Security Agreement, dated as of June 16, 2004, by and among Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC), The Old Evangeline Downs, L.L.C. and Wells Fargo Foothill, Inc. 10.20 Guarantor Security Agreement, dated as of June 16, 2004, by and among Peninsula Gaming, LLC, The Old Evangeline Downs Capital Corp. and Wells Fargo Foothill, Inc. 10.21 Intercompany Subordination Agreement, dated as of June 16, 2004, by and among The Old Evangeline Downs, L.L.C., Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC), The Old Evangeline Downs Capital Corp., Peninsula Gaming, LLC and Wells Fargo Foothill, Inc. 10.22 Management Fees Subordination Agreement, dated as of June 16, 2004, by and among The Old Evangeline Downs, L.L.C., The Old Evangeline Downs Capital Corp., Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC), OED Acquisition, LLC and Wells Fargo Foothill, Inc. 10.23 Post Closing Letter, dated June 16, 2004, from Wells Fargo Foothill, Inc. to The Old Evangeline Downs, L.L.C. and Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC). 10.24 Amended and Restated Management Services Agreement, dated as of February 25, 2003, by and among The Old Evangeline Downs, L.L.C., OED Acquisition, LLC and Peninsula Gaming Company, LLC--incorporated herein by reference to Exhibit 10.15 of Peninsula Gaming Company, LLC's Form 10-Q Quarterly Report for the quarter ended September 30, 2003. 10.25 Guaranty by The Old Evangeline Downs Capital Corp. in favor of Wells Fargo Foothill, Inc., dated June 16, 2004. 12.1 Computation of ratio of earnings to fixed charges. 7 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - -------- ---------------------- 21.1 Subsidiaries of the Registrants. 23.1 Consents of Deloitte & Touche LLP dated July 27, 2004. 23.2 Consent of Mayer, Brown, Rowe & Maw LLP (included in Exhibit 5.1). 24.1 Power of Attorney (included as part of signature page hereto). 25.1 Form T-1 of U.S. National Bank Association, Trustee. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Letter to Clients. 99.4 Form of Letter to DTC Participants. 8 EX-1.1 2 forms4_ex1-1wfb071404.txt EX. 1.1 - PURCHASE AGREEMENT OF 3-25-04 Exhibit 1.1 DIAMOND JO, LLC THE OLD EVANGELINE DOWNS CAPITAL CORP. $233,000,000 8 3/4 % SENIOR SECURED NOTES DUE 2012 PURCHASE AGREEMENT March 25, 2004 JEFFERIES & COMPANY, INC. 11100 Santa Monica Boulevard 10th Floor Los Angeles, California 90025 Ladies and Gentlemen: Each of Diamond Jo, LLC, a Delaware limited liability company (the "COMPANY"), The Old Evangeline Downs Capital Corp., a Delaware corporation ("CAPITAL" and, together with the Company, the "ISSUERS"), and each of the entities listed on the signature pages hereto under the heading "Guarantors" (the "GUARANTORS") hereby agrees with you as follows: 1. ISSUANCE OF SECURITIES. The Issuers propose to issue and sell to Jefferies & Company, Inc. (the "INITIAL PURCHASER"), and the Initial Purchaser proposes to purchase, $233,000,000 aggregate principal amount of the Issuers' 8 3/4% Senior Secured Notes due 2012, Series A (together with the Guarantees (as defined below) endorsed thereon, the "SERIES A NOTES"). The Series A Notes will be issued pursuant to an indenture (the "INDENTURE"), to be dated as of the Closing Date (as defined below), by and among the Issuers, the Guarantors and U.S. Bank National Association, as trustee (the "TRUSTEE"). The Series A Notes and the Series B Notes (as defined below), each with the Guarantees endorsed thereon, are collectively referred to herein as the "NOTES." Pursuant to the Indenture, each of the Guarantors and any future guarantor which becomes a party to the Indenture, will jointly and severally, fully and unconditionally guarantee, on a senior secured basis, to each holder of Notes and the Trustee, the payment and performance of the Issuers' obligations under the Indenture, the Notes and the Security Documents (as defined below), including the payment of principal, interest, premium, if any, and Liquidated Damages (as defined in the Indenture), if any, on the Notes (the "GUARANTEES"). Pursuant to the terms of the Security Documents, all of the respective obligations of the Issuers and the Guarantors under the Indenture, the Notes and the Guarantees will be secured by security interests in, or pledges of (the "SECURITY INTERESTS") substantially all of the assets (other than certain excluded assets) of, and all of the shares of capital stock of and membership interests in (the "COLLATERAL"), the Issuers, the Guarantors and the Issuers' future domestic restricted subsidiaries who become parties thereto, as set forth in the Offering Circular (as defined below). The Series A Notes will be offered and sold to the Initial Purchaser pursuant to an exemption from the registration requirements under the Securities Act of 1933, as amended (the "ACT"). The Issuers have prepared a preliminary offering circular, dated March 15, 2004 (the "PRELIMINARY OFFERING CIRCULAR"), and a final offering circular, dated March 31, 2004 (the "OFFERING CIRCULAR"), relating to the offer and sale of the Series A Notes (the "OFFERING"). Upon original issuance thereof, and until such time as the same is no longer required under the Indenture or the applicable requirements of the Act, the Series A Notes shall bear the following legend: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH OTHER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(k) UNDER THE SECURITIES ACT AS PERMITTING RESALES OF RESTRICTED SECURITIES BY NON-AFFILIATES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PURCHASERS THAT OCCUR OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY 2 DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE AND IN EACH CASE IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS OF ANY U.S. STATE OR ANY OTHER APPLICABLE JURISDICTION. 2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the representations, warranties and agreements contained herein, and subject to the terms and conditions hereof, the Issuers shall issue and sell to the Initial Purchaser (and, in order to induce the Initial Purchaser to purchase the Series A Notes, the Guarantors shall enter into the Guarantees and the Issuers and the Guarantors shall grant the Security Interests), and the Initial Purchaser agrees to purchase from the Issuers, $233,000,000 aggregate principal amount of Series A Notes. The purchase price for the Series A Notes shall be 95.346% of the principal amount thereof. 3. TERMS OF OFFERING. The Initial Purchaser has advised the Issuers that the Initial Purchaser will make offers to sell (the "EXEMPT RESALES") the Series A Notes purchased by the Initial Purchaser hereunder on the terms set forth in the Offering Circular, as amended or supplemented, solely to (a) persons whom the Initial Purchaser reasonably believes to be "qualified institutional buyers," as defined in Rule 144A under the Act ("QIBS"), (b) non-U.S. persons in reliance upon Regulation S under the Act ("REGULATION S PURCHASERS"), and (c) a limited number of institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3) or (7) under the Act that make certain representations and warranties to the Initial Purchaser and the Issuers ("ACCREDITED INVESTORS" and, collectively with QIBs and Regulation S Purchasers, "ELIGIBLE PURCHASERS), which representations and warranties are set forth in the form of Accredited Investor Letter attached as Annex A to the Offering Circular (the "ACCREDITED INVESTOR LETTER"). Holders of the Series A Notes (including subsequent transferees) will have the registration rights set forth in the registration rights agreement (the "REGISTRATION RIGHTS AGREEMENT"), to be executed on and dated as of the Closing Date. Pursuant to the Registration Rights Agreement, the Issuers and the Guarantors will agree, among other things, (a) to file with the Securities and Exchange Commission (the "COMMISSION") under the circumstances set forth therein (i) a registration statement under the Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating to, among other things, the 8 3/4% Senior Secured Notes due 2012, Series B, of the Issuers (the "SERIES B NOTES"), identical in all material respects to the Series A Notes, including with respect to the Guarantees thereof (except that the Series B Notes shall have been registered pursuant to such registration statement), to be offered in exchange for the Series A Notes (such offer to exchange being referred to as the 3 "REGISTERED EXCHANGE OFFER"), and (ii) under certain circumstances, a shelf registration statement pursuant to Rule 415 under the Act (the "SHELF REGISTRATION STATEMENT" and, together with the Exchange Offer Registration Statement, the "REGISTRATION STATEMENTS") relating to the resale by certain holders of the Series A Notes, and (b) to cause such Registration Statements to be declared effective, as applicable, as provided in the Registration Rights Agreement. On the Closing Date, the Issuers and the Guarantors will enter into certain security and pledge agreements, mortgages and certain other collateral documents (collectively, the "SECURITY DOCUMENTS"), that will provide for the grant of the Security Interests in the Collateral to U.S. Bank National Association, as collateral agent for the Trustee and the holders of the Notes (in such capacity, the "SECURED PARTY"). The Security Interests will secure the payment and performance when due of all of the respective obligations of the Issuers and the Guarantors under the Indenture, the Notes and the Guarantees. REFINANCING PLAN. As described in the Offering Circular, in connection with the Offering, the Issuers and the Guarantors are conducting the following transactions: Repurchase of OED Notes. The Old Evangeline Downs, L.L.C., a Delaware limited liability company ("OED"), and Capital (together, the "OED NOTE ISSUERS") are offering to purchase (the "TENDER OFFER") any and all of their outstanding 13% Senior Secured Notes due 2010 with Contingent Interest (the "OED NOTES") and are soliciting consents (the "CONSENT SOLICITATION") from the holders of the OED Notes to (i) the adoption of proposed amendments to the indenture governing the OED Notes (the "OED INDENTURE"), which would, inter alia, eliminate substantially all of the restrictive covenants and events of default under the OED Indenture (the "PROPOSED AMENDMENTS"), and (ii) the release of the liens on the collateral securing the OED Notes and the termination of the related security documents (the "COLLATERAL RELEASE" and, together with the Proposed Amendments, the "PROPOSALS"; the agreements to effect the Collateral Release, the "COLLATERAL RELEASE AGREEMENTS"), each as more fully described in the Offer to Purchase and Consent Solicitation Statement and the related Consent and Letter of Transmittal, each dated March 9, 2004, as each may be amended or supplemented from time to time (together, the "OFFER TO PURCHASE"), and the other documents related to the Tender Offer and the Consent Solicitation (such other documents, collectively with the Offer to Purchase, the "TENDER OFFER DOCUMENTS"). On March 25, 2004, the OED Note Issuers entered into a supplemental indenture with U.S. Bank National Association, the trustee for the OED Notes, to effectuate the Proposals (the "SUPPLEMENTAL INDENTURE"). The Tender Offer is scheduled to expire at 5:00 p.m., New York time, on April 5, 2004, unless earlier terminated or extended by the OED Note Issuers. A portion of the net proceeds of the Offering will be used to pay the Tender Offer Consideration and related Consent Payments (as such terms are defined in the Offer to Purchase) in the Tender Offer and the Consent Solicitation. The Tender Offer, the Consent Solicitation, the Proposals, and the transactions contemplated by the Tender Offer Documents, the Supplemental Indenture and the Collateral Release Agreements (including, without limitation, the payment of the 4 Tender Offer Consideration and the related Consent Payments, the repurchase of tendered OED Notes and the Proposals becoming operative), together with any and all other actions required to be taken, and transactions required to be entered into, by the Issuers and the Guarantors to consummate the Tender Offer and the Consent Solicitation and make operative the Proposals on the Closing Date, are referred to herein as the "OED NOTE REPURCHASE TRANSACTIONS." Repurchase of Company Notes. On or before the Closing Date, the Company and Peninsula Gaming Corp. (together, the "COMPANY NOTE ISSUERS") will take all actions necessary under the indenture (the "COMPANY INDENTURE") governing their 12 1/4% Senior Secured Notes due 2006 (the "COMPANY NOTES") to, on the Closing Date, covenant defease, pursuant to Section 8.3 of the Company Indenture, the Company Notes to the redemption date (the "REDEMPTION DATE") specified in the Redemption Notice (as defined below), have released the collateral securing the Company Notes and have terminated the related security documents (the "COMPANY SECURITY DOCUMENTS") and the Company's obligations thereunder, including, without limitation, on the Closing Date, (i) calling for redemption all of the Company Notes by mailing a notice of redemption (the "REDEMPTION NOTICE") to all holders of the Company Notes in accordance with Article III of the Company Indenture, (ii) depositing with U.S. Bank National Association, as trustee for the Company Notes (the "COMPANY TRUSTEE"), a portion of the net proceeds of the Offering in an amount sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Company Notes to the Redemption Date, (iii) delivering to the Company Trustee the other documents required by Article VIII of the Company Indenture and (iv) redeeming the Company Notes on the Redemption Date (the "COMPANY NOTE REDEMPTION"). The transactions described in this paragraph, together with any and all other actions required to be taken, and transactions required to be entered into, by the Issuers and the Guarantors to effect the transactions described in this paragraph, are referred to herein as the "COMPANY NOTE REPURCHASE TRANSACTIONS." The Offering, the OED Note Repurchase Transactions and the Company Note Repurchase Transactions collectively are referred to herein as the "REFINANCING PLAN." Waivers Under Existing Credit Facilities. The Company and OED are seeking from the lenders under their existing senior secured credit facilities (the "EXISTING SENIOR SECURED CREDIT FACILITIES"), and OED is seeking from the lenders under its existing FF&E facility (the "OED FF&E FACILITY" and, together with the Existing Senior Secured Credit Facilities, the "EXISTING CREDIT FACILITIES"), consents to the Refinancing Plan and waivers of any defaults that would be triggered under such Existing Credit Facilities upon consummation of the Refinancing Plan (the consents and waivers with respect to the Existing Senior Secured Credit Facilities, the "EXISTING SENIOR SECURED CREDIT FACILITY WAIVERS," and the consents and waivers with respect to the OED FF&E Facility, the "FF&E WAIVER" and, together with the Existing Senior Secured Credit Facility Waivers, the "EXISTING CREDIT FACILITY WAIVERS"). The Existing Credit Facility Waivers becoming operative are referred to herein as the "CREDIT FACILITY TRANSACTIONS." 5 Intercreditor Agreements. On the Closing Date, the lenders under each of the Existing Credit Facilities, the Trustee, the Issuers and the Guarantors shall enter into an Intercreditor Agreement, in a form reasonably satisfactory to the Initial Purchaser, which form shall be attached as an exhibit to the Indenture (the "INTERCREDITOR AGREEMENT"), setting forth their respective rights and obligations with respect to the Collateral. CORPORATE TRANSACTIONS. In addition, as described in the Offering Circular, the Issuers and the Guarantors are seeking requisite approvals from applicable Iowa and Louisiana regulatory authorities (the "REQUISITE REGULATORY APPROVALS") to effect the Reorganization Transactions (as defined in the Offering Circular). If the Requisite Regulatory Approvals are received, the Issuers, the Guarantors and the Initial Purchaser shall take the applicable actions set forth in Section 12 hereof. This Agreement, the Indenture, the Registration Rights Agreement, the Notes, the Guarantees, the Security Documents and the Intercreditor Agreement collectively are referred to herein as the "NOTE DOCUMENTS" and, collectively with the Supplemental Indenture, the Collateral Release Agreements, the Tender Offer Documents, the Redemption Notice and the Existing Credit Facility Waivers, the "OPERATIVE DOCUMENTS." The transactions contemplated by the Operative Documents (including, without limitation, (i) the Offering and the application of the net proceeds therefrom as described in the Offering Circular, as amended or supplemented, (ii) the issuance and sale of the Notes and the Guarantees in accordance with this Agreement, (iii) the creation, grant, recording and perfection of the Security Interests, (iv) the OED Note Repurchase Transactions, (v) the Company Note Repurchase Transactions and (vi) the Credit Facility Transactions), collectively are referred to herein as the "TRANSACTIONS." 4. DELIVERY AND PAYMENT. Delivery to the Initial Purchaser of and payment for the Series A Notes shall be made at a Closing (the "CLOSING") to begin at 9:00 a.m., New York City time, on April 16, 2004, (such time and date, the "CLOSING DATE") at the offices of Mayer, Brown, Rowe & Maw, LLP, 1675 Broadway, New York, New York 10019. The Closing Date and the location of delivery of and the form of payment for the Series A Notes may be varied by agreement between the Initial Purchaser and the Issuers. The Issuers shall deliver to the Initial Purchaser one or more certificates representing the Series A Notes (the "GLOBAL SECURITIES"), each in definitive form, registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), or such other names as the Initial Purchaser may request upon at least one Business Day's notice to the Issuers, in an amount corresponding to the aggregate principal amount of the Series A Notes sold pursuant to Exempt Resales to QIBs, to Regulation S Purchasers and to Accredited Investors, respectively, in each case against payment by the Initial Purchaser of the purchase price therefore by immediately available Federal funds bank wire transfer to such bank account as the Issuers shall designate to the Initial Purchaser at least two Business Days prior to the Closing. "BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on which banking institutions in The City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. 6 The Global Securities in definitive form shall be made available to the Initial Purchaser for inspection at the offices of Mayer, Brown, Rowe & Maw, LLP, 1675 Broadway, New York, New York 10019 (or such other place as shall be acceptable to the Initial Purchaser) not later than the close of business, New York City time, one Business Day immediately preceding the Closing Date. 5. AGREEMENTS OF THE ISSUERS AND THE GUARANTORS. Each of the Issuers and the Guarantors, jointly and severally, hereby agrees: (a) Certain Events. To (i) advise the Initial Purchaser promptly after obtaining knowledge (and, if requested by the Initial Purchaser, confirm such advice in writing) of (A) the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of any of the Series A Notes for offer or sale in any jurisdiction, or the initiation of any proceeding for such purpose by any state securities commission or other regulatory authority, and (B) the happening of any event that makes any statement of a material fact made in the Offering Circular untrue or that requires the making of any additions to or changes in the Offering Circular in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, (ii) use its reasonable best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption from qualification of any of the Notes under any state securities or Blue Sky laws, and (iii) if at any time any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of any of the Series A Notes under any such laws, use its reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest practicable time. (b) Offering Circular. To (i) furnish the Initial Purchaser and those persons identified by the Initial Purchaser to the Issuers, without charge, as many copies of the Preliminary Offering Circular and the Offering Circular, and any amendments or supplements thereto, as the Initial Purchaser may reasonably request, and (ii) promptly prepare, upon the Initial Purchaser's reasonable request, any amendment or supplement to the Offering Circular that the Initial Purchaser, upon the advice of legal counsel, deems may be necessary in connection with Exempt Resales (and the Issuers and the Guarantors hereby consent to the use of the Preliminary Offering Circular and the Offering Circular, and any amendments and supplements thereto, by the Initial Purchaser in connection with Exempt Resales). (c) Notice of Amendment or Supplement. Except as set forth in Section 5(d), not to amend or supplement the Offering Circular prior to the Closing Date, or at any time prior to the completion of the resale by the Initial Purchaser of all of the Series A Notes, unless the Initial Purchaser shall previously have been advised thereof and shall not have objected thereto within two Business Days after being furnished a copy thereof. 7 (d) Preparation of Amendments and Supplements. At any time prior to the completion of the resale by the Initial Purchaser of all of the Series A Notes, (i) if any event shall occur as a result of which, in the reasonable judgment of the Issuers or the Initial Purchaser or their respective counsel, it becomes necessary or advisable to amend or supplement the Offering Circular in order to make the statements therein, in the light of the circumstances under which they were made and when such Offering Circular is delivered to an Eligible Purchaser, not misleading, or if it is necessary to amend or supplement the Offering Circular to comply with Applicable Law (as defined below), forthwith to prepare an appropriate amendment or supplement to the Offering Circular (in form and substance reasonably satisfactory to the Initial Purchaser) so that as so amended or supplemented, (A) the Offering Circular will not include an untrue statement of material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made and when such Offering Circular is so delivered, not misleading, and (B) the Offering Circular will comply with Applicable Law, and (ii) if it becomes necessary or advisable to amend or supplement the Offering Circular so that the Offering Circular will contain all of the information specified in, and meet the requirements of, Rule 144A(d)(4) under the Act, forthwith to prepare an appropriate amendment or supplement to the Offering Circular (in form and substance satisfactory to the Initial Purchaser) so that the Offering Circular, as so amended or supplemented, will contain the information specified in, and meet the requirements of, such Rule. (e) Qualification of Securities. To cooperate with the Initial Purchaser and the Initial Purchaser's counsel in connection with the qualification of the Notes under the securities or Blue Sky laws of such jurisdictions as the Initial Purchaser may request and continue such qualification in effect so long as reasonably required for Exempt Resales, and to file such consents to service of process or other documents as may be necessary in order to effect such qualification; provided, that none of the Issuers or the Guarantors shall be required in connection therewith (i) to file any general consent to service of process or take any action that would subject it to service of process in suits other than those arising out of the offer and sale of the Notes in any jurisdiction in which it is not otherwise so subject, (ii) to register or qualify as a foreign corporation in any jurisdiction where it is not now so qualified or (iii) to subject itself to general taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. (f) Costs and Expenses. Whether or not any of the Transactions are consummated or this Agreement is terminated, to pay (i) all costs, expenses, fees and taxes incident to and in connection with the performance of the obligations of the Issuers and the Guarantors under this Agreement, including: (A) the preparation, printing and distribution of the Preliminary Offering Circular and the Offering Circular and all amendments and supplements thereto (including, without limitation, financial statements and exhibits), and all preliminary and final Blue Sky memoranda and all other agreements, memoranda, correspondence and other documents prepared and delivered in connection herewith (including the 8 furnishing of copies of the foregoing to the Initial Purchaser and such other persons as the Initial Purchaser may designate), (B) the printing, processing and distribution (including, without limitation, word processing and duplication costs) and delivery of each of the Operative Documents and any other agreements or documents in connection with the Transactions, (C) the preparation, issuance and delivery of the Notes, including the fees and expenses of the Trustee and the Secured Party (including fees and expenses of their respective counsel) and the cost of their respective personnel, and all costs and expenses related to the delivery of the Notes to the Initial Purchaser and pursuant to Exempt Resales, including any transfer or other taxes payable thereon, and (D) the qualification of the Notes for offer and sale under the securities or Blue Sky laws of the several states (including, without limitation, filing fees and fees and disbursements of the Initial Purchaser's counsel relating to such registration or qualification and the preparation of memoranda related thereto); (ii) all fees and expenses of the counsel and accountants of the Issuers and the Guarantors and their respective direct and indirect parents and subsidiaries; (iii) all expenses and listing fees in connection with the application for quotation of the Series A Notes in The PORTAL(SM) Market ("PORTAL") of the National Association of Securities Dealers, Inc. ("NASD"); (iv) all fees and expenses (including fees and expenses of counsel) of the Issuers in connection with approval of the Notes by DTC for "book-entry" transfer; (v) all fees charged by rating agencies in connection with the rating of the Notes; (vi) the costs and charges of any transfer agent, registrar and/or depositary (including DTC); (vii) all costs and expenses of the Registered Exchange Offer, the Exchange Offer Registration Statement and any Shelf Registration Statement, as set forth in the Registration Rights Agreement; (viii) all costs and expenses in connection with the creation and perfection of the Security Interests (including, without limitation, filing and recording fees, search fees, taxes and costs of title policies); (ix) all costs and expenses of the Transactions (including, without limitation, filing and recording fees); and (x) all fees and expenses (including reasonable fees and expenses of counsel) incurred by the Initial Purchaser in connection with the preparation, negotiation and execution, as applicable, of the Operative Documents and any other agreements or documents in connection with the Transactions and the consummation of the Transactions. (g) Use of Proceeds. To use the proceeds from the sale of the Series A Notes in the manner described in the Offering Circular under the caption "Use of Proceeds." (h) Waiver of Certain Laws. To the extent it may lawfully do so, not to insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension usury or other law, wherever enacted, now or at any time hereafter in force, that would prohibit or forgive the payment of all or any portion of the principal of or interest on the Notes, or that may affect the covenants or the performance of the Indenture or any of the Security Documents (and, to the extent it may lawfully do so, each Issuer and each Guarantor hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by 9 resort to any such law, hinder, delay or impede the execution of any power granted to the Trustee in the Indenture or to the Secured Party in the Security Documents but shall suffer and permit the execution of every such power as though no such law had been enacted). (i) Security Interests. (A) To do and perform all things required to be done and performed under the Security Documents prior to, on and after the Closing Date, including, without limitation, all things that are required to be done and performed under the Security Documents that are necessary or reasonably advisable to obtain on or prior to the Closing Date (i) all Permits (as defined below), other than any gaming or racing approvals required to be obtained by a purchaser in a foreclosure sale, necessary for the granting, perfection and enforcement of the Security Interests and for the foreclosure by the Secured Party thereon following an Event of Default (as defined in the Indenture), (ii) all termination statements, mortgage releases and other documents necessary to terminate any Liens (as defined in the Indenture) on the Collateral (other than Liens created by the Indenture, Liens created by the Security Documents and Permitted Liens (as defined in the Indenture)), and (iii) subject to the terms of the Intercreditor Agreement and any Permitted Liens, a valid and perfected, first priority Security Interest with respect to each of the assets, shares of capital stock and membership interests which are to constitute, as of the Closing Date, the Collateral. (B) To provide an updated A.L.T.A. survey, certified to all parties designated by the Initial Purchaser in a manner satisfactory to the Initial Purchaser, by a land surveyor duly registered and licensed in the State in which the property described in such survey is located and reasonably acceptable to the Initial Purchaser, within thirty (30) days of Closing with respect to (i) the property located in St. Landry Parish, Louisiana, and (ii) if Issuer fails to satisfy the condition to Closing set forth in Section 9(a)(xv)(I), the property located in Dubuque, Iowa. Additional title insurance shall be provided or additional action shall be taken within thirty (30) days of Closing to cure defects as may be disclosed on any such survey as reasonably required by the Initial Purchaser or the Trustee, provided that such defect be susceptible to cure, and further provided that failure to so cure or insure over, whether the defect be susceptible to cure or not, shall constitute an Event of Default. (j) Integration. Not to, and to ensure that no affiliate (as defined in Rule 501(b) under the Act) of any of the Issuers or the Guarantors will, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any "security" (as defined in the Act) that would be integrated with the sale of the Series A Notes in a manner that would require the registration under the Act of the sale to the Initial Purchaser or of the offers or sales of Series A Notes pursuant to Exempt Resales. (k) Rule 144A Information. For so long as any of the Series A Notes remain outstanding, during any period in which either of the Issuers is not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended 10 (the "EXCHANGE ACT"), to make available, upon request, to any holder of the Notes in connection with any sale thereof and any prospective Eligible Purchaser of such Notes from such holder, the information required by Rule 144A(d)(4) under the Act. (l) DTC. To comply with the representation letter of the Issuers and the Guarantors to DTC relating to the approval of the Notes by DTC for "book entry" transfer. (m) PORTAL. To use its reasonable best efforts to effect the inclusion of the Series A Notes in PORTAL and to use its reasonable best efforts to maintain the listing of the Series A Notes on PORTAL for so long as the Series A Notes are outstanding. (n) Reporting Requirements. For so long as any of the Notes remain outstanding, to furnish to the Initial Purchaser copies of all reports and other communications (financial or otherwise) furnished to the Trustee or to the holders of the Notes and, as soon as available, copies of any reports or financial statements furnished to or filed by the Issuers with the Commission or any national securities exchange on which any class of securities of the Issuers may be listed. (o) No Selling Efforts or General Solicitation. Except in connection with the Registered Exchange Offer or the filing of the Shelf Registration Statement, not to, and not to authorize or permit any person acting on its behalf to, (i) distribute any offering material in connection with the offer and sale of the Series A Notes other than the Preliminary Offering Circular and the Offering Circular and any amendments and supplements to the Offering Circular prepared in compliance with Section 5(d), or (ii) solicit any offer to buy or offer to sell the Series A Notes by means of any form of general solicitation or general advertising (including, without limitation, as such terms are used in Regulation D under the Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Act. (p) No Similar Offerings. Not to, directly or indirectly, without the prior consent of the Initial Purchaser, offer, sell, contract to sell, grant any option to purchase or otherwise dispose of (or announce any offer or sale of, contract to sell, grant of any option to purchase or other disposition of) any securities of any of the Issuers or the Guarantors substantially similar to the Notes or the Guarantees for a period of six months after the date of the Offering Circular, except as contemplated by the Registration Rights Agreement; provided, that the foregoing will not apply to (i) the Notes or the Guarantees or (ii) borrowings (not constituting the issuance of securities) from financial institutions to the extent not prohibited by the Indenture. (q) ERISA. At any time prior to the completion of the resale by the Initial Purchaser of the Series A Notes, to notify the Initial Purchaser promptly in writing if any of the Issuers or the Guarantors or any of their Affiliates becomes a party in interest or a disqualified person with respect to any employee benefit plan, 11 and to identify such plans. The terms "ERISA," "Affiliates," "party in interest," "disqualified person" and "employee benefit plan" shall have the meanings as set forth in Section 6(ll). (r) Performance of this Agreement. To do and perform in all material respects all things required or necessary to be done and performed on its part under this Agreement on or prior to the Closing Date and to satisfy in all material respects all conditions precedent to the delivery of the Series A Notes and the granting, perfection and enforcement of the Security Interests in the Collateral as of the Closing Date. (s) Performance of Other Transactions. To do and perform in all material respects all things required or necessary to be done and performed on its part (i) to consummate the OED Note Repurchase Transactions, the Company Note Repurchase Transactions (other than the consummation of the Company Note Redemption) and the Credit Facility Transactions, in each case, in all material respects, on or prior to the Closing Date, and (ii) to permit the Company Note Redemption to be consummated on the Redemption Date. 6. REPRESENTATIONS AND WARRANTIES OF THE ISSUERS AND THE GUARANTORS. Each of the Issuers and the Guarantors, jointly and severally, represents and warrants to the Initial Purchaser that: (a) Offering Circular. The Preliminary Offering Circular as of its date did not, and the Offering Circular, as of its date does not and as of the Closing Date will not, and each supplement or amendment thereto (if any) as of its date will not, contain any untrue statement of a material fact or omit to state any material fact (except with respect to offers and sales of Series A Notes by the Initial Purchaser to Accredited Investors, as to which the Issuers and the Guarantors make no representation, and except, in the case of the Preliminary Offering Circular, for pricing terms and other financial or similar terms intentionally left blank) necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The foregoing representation and warranty made in this Section 6(a) shall not apply to any statements or omissions made in reliance on and in conformity with information relating to the Initial Purchaser furnished to the Issuers by the Initial Purchaser specifically for inclusion in the Preliminary Offering Circular or the Offering Circular. The parties hereto acknowledge that for purposes of this Agreement (including this Section 6(a) and Section 8) the only information furnished to the Issuers by the Initial Purchaser specifically for inclusion in Preliminary Offering Circular or the Offering Circular is the information set forth (i) on the cover page of the Offering Circular with respect to the price of the Notes, (ii) in the third paragraph on page 133 of the Offering Circular concerning the offering the Notes for resale by the Initial Purchaser, (iii) in the fourth paragraph on page 133 of the Offering Circular concerning market-making by the Initial Purchaser, (iv) in the sixth paragraph on page 133 of the Offering Circular concerning settlement of the Notes on the sixteenth business day 12 following pricing, (v) in the first full paragraph on page 134 of the Offering Circular concerning stabilization by the Initial Purchaser and (vi) in the second full paragraph on page 134 of the Offering Circular concerning the affiliation of the Initial Purchaser and its affiliates with the Issuers and their affiliates (such information described in the immediately preceding clauses (i) through (vi) of this Section 6(a), the "FURNISHED INFORMATION"). Each of the Preliminary Offering Circular and the Offering Circular, as of their respective dates contained, and the Offering Circular, as of the Closing Date and as amended or supplemented, will contain, all of the information specified in, and meet the requirements of, Rule 144A(d)(4) under the Act. The Offer to Purchase, as of its date does not and as of the Closing Date will not, and each supplement or amendment thereto (if any) as of its date will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (b) 144A Eligibility. Other than the OED Notes and the Company Notes, there are no securities of the same class (within the meaning of Rule 144A) as the Notes of either of the Issuers or any of the Guarantors registered under the Exchange Act or listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a United States automated inter-dealer quotation system. The Series A Notes are eligible for resale pursuant to Rule 144A under the Act. (c) Due Organization; Good Standing. Each of the Issuers and the Guarantors (i) has been duly organized, is validly existing and is in good standing under the laws of its jurisdiction of organization, (ii) has all requisite power and authority to conduct and carry on its business and to own, lease, use and operate its properties and assets as described in the Offering Circular, and (iii) is duly qualified or licensed to do business and is in good standing as a foreign limited liability company or corporation, as the case may be, authorized to do business in each jurisdiction in which the nature of its business or the ownership, leasing, use or operation of its properties and assets requires such qualification or licensing, except where the failure to be so qualified or licensed would not, singly or in the aggregate, have a material adverse effect on (A) the properties, business, prospects, operations, earnings, assets, liabilities or condition (financial or otherwise) of the Issuers and the Guarantors, taken as a whole, (B) the ability of any of the Issuers or the Guarantors to perform its obligations in all material respects under any of the Operative Documents or to consummate in all material respects the Transactions, (C) the enforceability of any of the Security Documents or the attachment, perfection or priority of any of the Security Interests intended to be created thereby in any portion of the Collateral or (D) the validity of any of the Operative Documents or the consummation of any of the Transactions (each, a "MATERIAL ADVERSE EFFECT"). (d) Subsidiaries. Immediately following the Closing, (i) the corporate structure of the Issuers and the Guarantors shall be as set forth on Schedule 6(d) hereto, (ii) Capital will have no subsidiaries, (iii) the only direct or 13 indirect subsidiaries of the Company (other than Capital) will be the Guarantors, (iv) the Company will directly own 100% of the outstanding shares of capital stock or membership interests of Capital and of each Guarantor, free and clear of all Liens, except for Liens created by the Indenture, Liens created by the Security Documents and Permitted Liens, and (v) Peninsula Gaming Partners, LLP, a Delaware limited liability partnership, will directly own 100% of the outstanding membership interests in the Company (except for the Seller Preferred (as defined in the Indenture)), free and clear of all Liens, except for Liens created by the Indenture and the Security Documents. Except as disclosed in the Offering Circular, there are no outstanding (i) securities convertible into or exchangeable for any capital stock of or any membership interests in, as the case may be, any of the Issuers or the Guarantors, (ii) options, warrants or other rights to purchase or subscribe for any capital stock of or any membership interests in, or any securities convertible into or exchangeable for any capital stock of or any membership interests in, as the case may be, any of the Issuers or the Guarantors or (iii) contracts, commitments, agreements, understandings, arrangements, undertakings, rights, calls or claims of any kind relating to the issuance of any capital stock of or any membership interests in, as the case may be, any of the Issuers or the Guarantors, any such convertible or exchangeable securities or any such options, warrants or rights. Except as set forth above, immediately following the Closing, none of the Issuers or the Guarantors will directly or indirectly own any capital stock of or other equity interest in any person. (e) Capitalization. All of the outstanding shares of capital stock of or membership interests in, as the case may be, each of the Issuers and the Guarantors have been duly authorized, are validly issued, fully paid and nonassessable, and were not issued in violation of, and are not subject to, any preemptive or similar rights. The table under the caption "Capitalization" in the Offering Circular (including the footnotes thereto) sets forth, as of December 31, 2003, (i) the actual capitalization of the Company and its subsidiaries, on a consolidated basis, and (ii) the as adjusted capitalization of the Company and its subsidiaries, on a consolidated basis, after giving effect to the Offering and the application of the net proceeds therefrom and the consummation of the other Transactions (as such term is defined in the Offering Circular). Immediately following the Closing, except as set forth in such table or as described in the footnotes thereto, none of the Issuers or the Guarantors will have any liabilities, absolute, accrued, contingent or otherwise other than: (i) liabilities that are reflected in the Company Financial Statements (as defined below) or (ii) liabilities incurred subsequent to December 31, 2003, in the ordinary course of business, that would not, singly or in the aggregate, have a Material Adverse Effect. (f) No Other Registration Rights. Except for this Agreement and the Registration Rights Agreement, there are no contracts, commitments, agreements, arrangements, understandings or undertakings of any kind to which any of the Issuers or Guarantors is a party, or by which either of them is bound, granting to any person the right (i) to require any of the Issuers or the Guarantors to file a registration statement under the Act with respect to any securities of any of the 14 Issuers or the Guarantors or requiring any of the Issuers or the Guarantors to include such securities with the Notes registered pursuant to any registration statement, or (ii) to purchase or offer to purchase any securities of any of the Issuers or the Guarantors or any of their respective affiliates. (g) Power and Authority. Each of the Issuers and the Guarantors has all requisite power and authority to execute and deliver, and to perform its obligations under, the Operative Documents to which it is a party and to consummate the Transactions to which it is a party. (h) Authorization of this Agreement. This Agreement and the Transactions contemplated hereby (including, without limitation, the Offering and the issuance and sale of the Notes in accordance with this Agreement) have been duly authorized by each of the Issuers and the Guarantors, and this Agreement has been validly executed and delivered by, and is the legal, valid and binding obligation of, each of the Issuers and the Guarantors, enforceable against each of the Issuers and the Guarantors in accordance with its terms, except that such enforceability may be limited by (i) applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally, (ii) any rights of acceleration and the availability of equitable remedies and general principles of equity (whether considered in a proceeding in equity or at law) and (iii) with respect to rights to indemnity or contribution thereunder, by Federal and state securities laws and public policy considerations. (i) Authorization of Indenture. The Indenture and the Transactions contemplated thereby have been duly authorized by each of the Issuers and the Guarantors and, on the Closing Date, the Indenture will have been validly executed and delivered by, and will be the legal, valid and binding obligation of, each of the Issuers and the Guarantors, enforceable against each of the Issuers and the Guarantors in accordance with its terms, except that (i) such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) any rights of acceleration and the availability of equitable remedies may be subject to general principles of equity (whether considered in a proceeding in equity or at law). On the Closing Date, the Indenture will conform to the requirements of the Trust Indenture Act of 1939, as amended (the "TIA"), applicable to an indenture that is required to be qualified under the TIA. (j) Authorization of Registration Rights Agreement. The Registration Rights Agreement and the Transactions contemplated thereby have been duly authorized by each of the Issuers and the Guarantors and, on the Closing Date, the Registration Rights Agreement will have been validly executed and delivered by, and will be the legal, valid and binding obligation of, each of the Issuers and the Guarantors, enforceable against each of the Issuers and the Guarantors in accordance with its terms, except that such enforceability may be limited by (i) applicable bankruptcy, insolvency or similar laws, (ii) any rights of acceleration and the availability of equitable remedies and general principles of 15 equity (whether considered in a proceeding in equity or at law) and (iii) with respect to rights to indemnity or contribution thereunder, by Federal and state securities laws and public policy considerations. (k) Authorization of Series A Notes. The Series A Notes have been duly authorized by each of the Issuers for issuance and sale to the Initial Purchaser pursuant to this Agreement and, on the Closing Date, will have been validly executed, authenticated, issued and delivered by the Issuers in accordance with the terms of this Agreement and the Indenture. When the Series A Notes have been issued and executed by the Issuers and authenticated by the Trustee in accordance with the terms of the Indenture and delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement, the Series A Notes will be legal, valid and binding obligations of each of the Issuers, entitled to the benefits of the Indenture and enforceable against each of the Issuers in accordance with their terms, except to the extent that (i) such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) any rights of acceleration and the availability of equitable remedies may be subject to general principles of equity (whether considered in a proceeding in equity or at law). Upon and following delivery to the Initial Purchaser, the Notes will rank on a parity with all senior Indebtedness (as defined in the Indenture) of each of the Issuers that is outstanding on the date hereof or that may be incurred hereafter and senior to all other Indebtedness of each of the Issuers that is outstanding on the date hereof or that may be incurred hereafter; provided, that pursuant to the Intercreditor Agreement, the Lien on the Collateral securing the Existing Credit Facilities will be senior to the Lien on the Collateral securing the Notes and the Guarantees. (l) Authorization of Series B Notes. The Series B Notes have been duly authorized by each of the Issuers and, when issued in the Registered Exchange Offer, (A) will have been validly executed, authenticated, issued and delivered in accordance with the terms of the Indenture, the Registration Rights Agreement and the Registered Exchange Offer and (B) will be legal, valid and binding obligations of each of the Issuers, entitled to the benefits of the Indenture and enforceable against each of the Issuers in accordance with their terms, except to the extent that (i) such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) any rights of acceleration and the availability of equitable remedies may be subject to general principles of equity (whether considered in a proceeding in equity or at law). (m) Authorization of Guarantees of Series A Notes and Series B Notes. The Guarantee to be endorsed on the Series A Notes by each Guarantor has been duly authorized by each such Guarantor and, on the Closing Date, will have been validly executed and delivered by each such Guarantor in accordance with the terms of the Indenture. When the Series A Notes have been issued, executed and authenticated in accordance with the terms of the Indenture and delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement, the 16 Guarantee of each Guarantor endorsed on the Series A Notes will be the legal, valid and binding obligation of each such Guarantor, enforceable against each such Guarantor in accordance with its terms, except to the extent that (i) such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) any rights of acceleration and the availability of equitable remedies may be subject to general principles of equity (whether considered in a proceeding in equity or at law). The Guarantee to be endorsed on the Series B Notes by each Guarantor has been duly authorized by each such Guarantor and, when the Series B Notes are issued, will have been validly executed and delivered by each such Guarantor in accordance with the terms of the Indenture, the Registration Rights Agreement and the Registered Exchange Offer. When the Series B Notes have been issued, executed and authenticated in accordance with the terms of the Registered Exchange Offer and the Indenture, the Guarantee of each Guarantor endorsed on the Series B Notes will be the legal, valid and binding obligation of each such Guarantor, enforceable against each such Guarantor in accordance with its terms, except to the extent that (i) such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) any rights of acceleration and the availability of equitable remedies may be subject to general principles of equity (whether considered in a proceeding in equity or at law). The Guarantees to be endorsed on the Notes rank and will rank on a parity with all senior Indebtedness of the Guarantors that is outstanding on the date hereof or that may be incurred hereafter and senior to all subordinated Indebtedness of the Guarantors that is outstanding on the date hereof or that may be incurred hereafter; provided, that pursuant to the Intercreditor Agreement, the Lien on the Collateral securing the Existing Credit Facilities will be senior to the Lien on the Collateral securing the Notes and the Guarantees. (n) Authorization of Security Documents. Each of the Security Documents and the Transactions contemplated thereby (including, without limitation, the creation, grant, recording and perfection of the Security Interests, the execution and filing of financing statements and the payment of any fees and taxes in connection therewith) have been duly authorized by each of the Issuers and each of the Guarantors which is a party thereto and, on the Closing Date, each of the Security Documents will have been validly executed and delivered by, and will be the legal, valid and binding obligation of, each of the Issuers and each of the Guarantors which is a party thereto, enforceable against each of the Issuers and each of the Guarantors which is a party thereto in accordance with its terms, except that (i) such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) any rights of acceleration and the availability of equitable remedies may be subject to general principles of equity (whether considered in a proceeding in equity or at law). (o) Authorization of Other Operative Documents and Other Transactions. 17 (i) OED Note Repurchase Transactions. The Supplemental Indenture has been duly authorized, and as of the second Business Day after the date hereof, executed and delivered by the OED Note Issuers, each of the Collateral Release Agreements has been duly authorized, and as of Closing, executed and delivered by the OED Note Issuers, and the Proposals and the other OED Note Repurchase Transactions (including the use of net proceeds from the Offering in connection therewith) have been duly authorized by the Issuers and the Guarantors, as applicable, and assuming the due authorization, execution and delivery of the Supplemental Indenture and each of the Collateral Release Agreements by parties thereto other than the OED Note Issuers, the Supplemental Indenture and each of the Collateral Release Agreements constitutes the legal, valid and binding obligation of, the OED Note Issuers, enforceable against the OED Note Issuers in accordance with its terms, except that (i) such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) any rights of acceleration and the availability of equitable remedies may be subject to general principles of equity (whether considered in a proceeding in equity or at law). (ii) Company Note Repurchase Transactions. Each of the Company Note Repurchase Transactions (including the use of net proceeds from the Offering in connection therewith) has been duly authorized by the Issuers and the Guarantors, as applicable. (iii) Credit Facility Documents. Each of the Intercreditor Agreement and the transactions contemplated by the Intercreditor Agreement and the Credit Facility Waivers have been duly authorized by the Issuers and each Guarantor which is a party thereto, and, on the Closing Date, each of the Intercreditor Agreement will have been validly executed and delivered by the Issuers and each Guarantor which is a party thereto, and assuming the due authorization, execution and delivery of the Intercreditor Agreement by parties thereto other than the Issuers and each of the Guarantors which is a party thereto, the Intercreditor Agreement will be the legal, valid and binding obligation of, the Issuers and each Guarantor which is a party thereto, enforceable against the Issuers and each Guarantor which is a party thereto in accordance with its terms, except that (i) such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) any rights of acceleration and the availability of equitable remedies may be subject to general principles of equity (whether considered in a proceeding in equity or at law). (p) Actions in Connection with the Transactions. Each of the Note Documents, as executed and delivered, and each of the Transactions described in the Offering Circular, conforms in all material respects to the description thereof in the Offering Circular. The Supplemental Indenture and each of the Collateral 18 Release Agreements, as executed and delivered, and each of the OED Note Repurchase Transactions, conforms in all material respects to the description thereof in the Offer to Purchase. (q) No Violation. The Company is not in violation of its certificate of formation or operating agreement (the "COMPANY CHARTER DOCUMENTS"), Capital is not in violation of its charter or bylaws (the "CAPITAL CHARTER DOCUMENTS"), and none of the Guarantors is in violation of its certificate of formation, operating agreement, charter or bylaws, as applicable (the "GUARANTOR CHARTER DOCUMENTS" and, collectively with the Company Charter Documents and the Capital Charter Documents, the "CHARTER DOCUMENTS"). None of the Issuers or the Guarantors is (i) in violation of any Federal, state, municipal, county, parish, local or foreign statute, law, ordinance or standard applicable to it, or any judgment, decree, rule, regulation or order applicable to it (including, without limitation, common law and Chapter 99F of the Code of Iowa (1999), the Iowa Racing and Gaming Commission, the Louisiana Pari-Mutuel Live Racing Facility Economic Redevelopment and Gaming Control Act, the Louisiana Gaming Control Law and the Video Draw Poker Device Control Law) in each case including the rules and regulations promulgated thereunder (collectively, "APPLICABLE LAW"), of any government, governmental or regulatory agency or body (including, without limitation, the Iowa Racing and Gaming Commission, the Louisiana Gaming Control Board, the Louisiana State Racing Commission or other applicable gaming or racing authority) (each, a "GAMING AUTHORITY"), court, arbitrator or self-regulatory organization, domestic or foreign (each, a "GOVERNMENTAL AUTHORITY") or (ii) in breach of or default under any bond, debenture, note or other evidence of indebtedness, indenture, mortgage, deed of trust, lease or any other agreement or instrument to which any such person is a party or by which any of them or any of their respective property is bound (collectively, "APPLICABLE AGREEMENTS"), other than, in the case of each of the immediately preceding clauses (i) and (ii), violations, breaches or defaults that would not, singly or in the aggregate, have a Material Adverse Effect. There exists no condition that, with the passage of time or otherwise, would reasonably be expected to (x) constitute a violation of (A) the Charter Documents or (B) Applicable Laws or (y) constitute a breach of or default under any Applicable Agreement or (z) result in the imposition of any penalty or the acceleration of any indebtedness, other than, in the case of the immediately preceding clauses (x)(B),(y) and (z), such violations, breaches, penalties or defaults that would not, singly or in the aggregate, have a Material Adverse Effect. All Applicable Agreements are in full force and effect with respect to the Issuers and the Guarantors, and are legal, valid and binding obligations of the Issuers and the Guarantors. (r) No Conflict. None of the execution, delivery or performance of any of the Operative Documents, nor the compliance with the terms and provisions thereof, nor the consummation of any of the Transactions, shall conflict with, violate, constitute a breach of or a default (with the passage of time or otherwise) under, result in the imposition of a Lien on any assets of or any capital 19 stock of or membership interests in any of the Issuers or the Guarantors (except for Liens created by the Indenture, Liens created by the Security Documents and Permitted Liens), or result in an acceleration of indebtedness under or pursuant to, (i) the Charter Documents, (ii) any Applicable Agreement, or (iii) (assuming the accuracy of the representations and warranties of the Initial Purchaser in Section 7 of this Agreement and, if any Exempt Resales are made to Accredited Investors, the accuracy of the representations and warranties of such Accredited Investors contained in the Accredited Investor Letters executed by such Accredited Investors) any Applicable Law, other than, in the case of the immediately preceding clauses (ii) and (iii), such violations, breaches or defaults that would not, singly or in the aggregate, have a Material Adverse Effect. After giving effect to the Transactions, no Default or Event of Default (each, as defined in the Indenture) will exist. (s) Permits. Except as disclosed in the Offering Circular and assuming the accuracy of the representations and warranties of the Initial Purchaser in Section 7 of this Agreement and, if any Exempt Resales are made to Accredited Investors, the accuracy of the representations and warranties of such Accredited Investors contained in the Accredited Investor Letters executed by such Accredited Investors, no permit, certificate, authorization, approval, consent, license or order of, or filing, registration, declaration or qualification with, any Governmental Authority or any other person (collectively, "PERMITS") is required to own, lease, use and operate the properties and assets and to conduct and carry on the businesses described in the Offering Circular, or in connection with, or as a condition to, the execution, delivery or performance of any of the Operative Documents, the compliance with the terms and provisions thereof or the consummation of any of the Transactions, other than (i) such Permits as have been made or obtained on or prior to the Closing Date, which Permits are in full force and effect on the Closing Date, (ii) as may be required for Exempt Resales under the securities or blue sky laws of the various jurisdictions in which the Notes are being offered by the Initial Purchaser, (iii) an order declaring effective a registration statement filed by the Issuers with the Commission pursuant to the Act pursuant to the Registration Rights Agreement, and (iv) such Permits, the failure of which to make or obtain would not, singly or in the aggregate, have a Material Adverse Effect. (t) No Proceedings. Except as disclosed in the Offering Circular and other than ongoing general licensing investigations conducted in the ordinary course of business, there is no action, claim, suit, demand, hearing, notice of violation or deficiency, or proceeding (including, without limitation, any investigation or partial proceeding, such as a deposition), domestic or foreign (collectively, "PROCEEDINGS"), pending or, to the knowledge of the Issuers and the Guarantors, threatened, either (i) in connection with, or that seeks to restrain, enjoin or prevent the consummation of, or that otherwise objects to, any of the Operative Documents or any of the Transactions, or (ii) that could, singly or in the aggregate, have a Material Adverse Effect. None of the Issuers or the Guarantors is subject to any judgment, order, decree, rule or regulation of any Governmental Authority that could, singly or in the aggregate, have a Material Adverse Effect. No injunction or 20 order has been issued and no Proceeding is pending or, to the knowledge of the Issuers and the Guarantors, threatened that (i) asserts that the offer, sale and delivery of the Series A Notes to the Initial Purchaser pursuant to this Agreement or the initial resale of the Series A Notes by the Initial Purchaser in the manner contemplated by this Agreement is subject to the registration requirements of the Act, or (ii) would prevent or suspend the issuance or sale of the Notes, including the Exempt Resales, or the use of the Preliminary Offering Circular, the Offering Circular, or any amendment or supplement thereto, in any jurisdiction. (u) Regulated Persons. Except as set froth on Schedule 6(u) hereto, each of the Issuers' and the Guarantors', respective directors, officers, key personnel, partners, members and persons holding a five percent or greater equity or economic interest in the Issuers (each of such persons, a "REGULATED PERSON" and, collectively, the "REGULATED PERSONS") has all Permits (including, without limitation, Permits with respect to engaging in gaming or racing operations) necessary or advisable to own, lease, use and operate the properties and assets and to conduct and carry on the businesses described in the Offering Circular, other than such Permits the failure of which to have would not, singly or in the aggregate, have a Material Adverse Effect (a "MATERIAL PERMIT"). All Material Permits are valid and in full force and effect. Each of the Regulated Persons is in compliance with the terms and conditions of all Permits (including, without limitation, Permits with respect to engaging in gaming or racing operations) necessary or advisable to own, lease, use and operate the properties and assets and to conduct and carry on the businesses described in the Offering Circular, other than where such failure to be in compliance would not, singly or in the aggregate, have a Material Adverse Effect. None of the execution, delivery or performance of any of the Operative Documents, nor the compliance with the terms and provisions thereof, nor the consummation of any of the Transactions, will allow or result in, and no event has occurred which allows or results in, or after notice or lapse of time would allow or result in, the imposition of any material penalty under, or the revocation or termination of, any Material Permit or any material impairment of the rights of the holder of any Material Permit. None of the Issuers or the Guarantors has received any notice from any issuer, and the Issuers and the Guarantors have no actual knowledge, that any issuer is considering limiting, conditioning, suspending, modifying, revoking or not renewing any Material Permit. (v) No Investigations of Regulated Persons. To the knowledge of the Issuers and the Guarantors, except as disclosed in the Offering Circular, no Gaming Authority is investigating any Regulated Person, other than ongoing general licensing investigations conducted in the ordinary course of business. (w) Title to Assets. Immediately following the Closing, each of the Issuers and the Guarantors (i) will have good and marketable title, free and clear of all Liens (other than Liens created by the Indenture, Liens created by the Security Documents and Permitted Liens), to all property and assets described in the Offering Circular as being or to be owned by it and (ii) will hold a valid leasehold interest 21 with respect to each such lease and will remain in possession of the real property leased pursuant to those leases until the date the lease expires in accordance with its terms. Capital has no assets, other than assets received in payment for its capital stock. (x) Sufficiency and Condition of Assets. The assets of each of the Issuers and the Guarantors include all of the assets and properties necessary or required in, or otherwise material to, the conduct of the businesses of each of them as currently conducted and as proposed to be conducted (as described in the Offering Circular), and such assets are in working condition, except where the failure of such assets to be in working condition would not, singly or in the aggregate, have a Material Adverse Effect. Without limiting the foregoing, each of the properties of the Issuers and the Guarantors (including, without limitation, all buildings, structures, improvements and fixtures located thereon, thereunder, thereover or therein, and all appurtenances thereto and other aspects thereof) is otherwise suitable, sufficient, adequate and appropriate in all respects (including physical, structural, operational, legal, practical and otherwise) for its current and proposed use, operation and occupancy, except, in each such case, for such failures to meet such standards as would not, singly or in the aggregate, have a Material Adverse Effect. (y) Insurance. Each of the Issuers and the Guarantors maintains reasonably adequate insurance covering its properties, operations, personnel and businesses against losses and risks in accordance with customary industry practice. All such insurance is outstanding and duly in force. (z) Real Property. No condemnation, eminent domain, or similar proceeding exists, is pending or, to the knowledge of the Issuers and the Guarantors, is threatened, with respect to or that could affect any real properties owned by any of the Issuers or the Guarantors, except for such proceedings as would not, singly or in the aggregate, have a Material Adverse Effect. No real property owned by any of the Issuers or the Guarantors is subject to any sales contract, option, right of first refusal or similar agreement or arrangement with any third party. There is no real property currently under contract or subject to an option in favor of any of the Issuers or the Guarantors, except for real property which the failure of the Issuers or the Guarantors to acquire, would not, singly or in the aggregate, have a Material Adverse Effect. (aa) Related Party Transactions. Except as disclosed in the Offering Circular, there are no related party transactions that would be required to be disclosed in the Offering Circular if the Offering Circular were a prospectus included in a registration statement on Form S-1 filed under the Act. (bb) Security Interests. Upon execution and delivery of the Security Documents and the issuance of the Notes, the Security Documents will create, in favor of the Secured Party for the benefit of the holders of the Notes, a 22 legal, valid and enforceable security interest in (subject to Permitted Liens) all of the right, title and interest of the Issuers and the Guarantors in the Collateral covered by the Security Documents and the proceeds thereof. Upon: (i) the filing or recording of applicable Security Documents or appropriate Uniform Commercial Code financing statements with the appropriate filing, records, registry, and/or other public office (with respect to filings to be made in the U.S. Patent and Trademark Office, within three (3) months of the date of the applicable Security Document, and with respect to filings in the U.S. Copyright Office within one (1) month of the date of the applicable Security Document), together with the payment of the requisite filing or recordation fees related thereto, (ii) in the case of each Securities Account and the Investment Related Property therein (as each such term is defined in the Security Agreement) with respect to which a control agreement, in the form of Exhibit B to the Security Agreement, has been executed and delivered, and (iii) in the case of each Deposit Account (as defined in the Security Agreement) and the cash and other funds on deposit therein with respect to which a control agreement, in the form of Exhibit C to the Security Agreement, has been executed and delivered, the Security Interests will constitute first priority security interests in (subject to Permitted Liens), such Collateral (other than insurance policies). As of the Closing Date, the Collateral will be subject to no Liens other than Permitted Liens. (cc) Taxes. All material tax returns required to be filed by any of the Issuers or the Guarantors in any jurisdiction (including foreign jurisdictions) have been filed and, when filed, all such returns were accurate in all material respects, and all taxes, assessments, fees and other charges (including, without limitation, withholding taxes, penalties and interest) due or claimed to be due from any of the Issuers or the Guarantors have been paid, other than those being contested in good faith by appropriate proceedings, or those that are currently payable without penalty or interest and, in each case, for which an adequate reserve or accrual has been established on the books and records of the Issuers or the Guarantors, as applicable, in accordance with generally accepted accounting principles of the United States, consistently applied ("GAAP"). There are no actual or proposed additional tax assessments for any tax period against any of the Issuers or the Guarantors that would, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books and records of the Issuers or the Guarantors, as applicable, in respect of any tax liability for any tax periods not finally determined are adequate to meet any assessments of tax or re-assessments of additional tax for any such period. (dd) Intellectual Property. The Issuers and the Guarantors own, possess or are licensed under, and have the right to use, all trademarks, service marks, trade names and other intellectual property (collectively, "INTELLECTUAL PROPERTY") currently used in and material to the conduct of their business, free and clear of all Liens, other than Permitted Liens. To the knowledge of the Issuers and the Guarantors, no claims have been asserted by any person challenging the use of any such Intellectual Property by any of the Issuers and there is no valid basis for 23 any such claim, and the use of such Intellectual Property by the Issuers or the Guarantors will not infringe on the Intellectual Property rights of any other person. (ee) Accounting Controls. Each of the Issuers and the Guarantors maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) material transactions are executed in accordance with management's general or specific authorization, (ii) material transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP, and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any material differences. (ff) Financial Statements. The audited historical consolidated financial statements and related notes of Company and its subsidiaries contained in the Offering Circular (the "COMPANY FINANCIAL STATEMENTS") present fairly the consolidated financial position, results of operations and cash flows of Company and its subsidiaries as of the respective dates and for the respective periods to which they apply, and have been prepared in accordance with GAAP consistently applied throughout the periods involved and the requirements of Regulation S-X that would be applicable if the Offering Circular were a prospectus included in a registration statement on Form S-1 filed under the Act (the "S-X REQUIREMENTS"). The selected historical consolidated financial data included in the Offering Circular for Company and its subsidiaries has been prepared on a basis consistent with that of the Company Financial Statements and present fairly the consolidated financial position and results of operations of Company and its subsidiaries, as of the respective dates and for the respective periods indicated. Deloitte & Touche, LLP are independent public accountants with respect to Company and its subsidiaries. (gg) No Material Adverse Change. Subsequent to the respective dates as of which information is given in the Offering Circular, except as disclosed in the Offering Circular, (i) none of the Issuers or the Guarantors has incurred any liabilities, direct or contingent, that are material, singly or in the aggregate, to any of them, or has entered into any material transactions not in the ordinary course of business, (ii) there has not been any material decrease in the capital stock or membership interests, as the case may be, or any material increase in long-term indebtedness or any material increase in short-term indebtedness of any of the Issuers or the Guarantors, or any payment of or declaration to pay any dividends or any other distribution with respect to any of the Issuers or the Guarantors, and (iii) there has not been any material adverse change in the properties, business, prospects, operations, earnings, assets, liabilities or condition (financial or otherwise) of the Issuers and the Guarantors taken as a whole (each of clauses (i) and (iii), a "MATERIAL ADVERSE CHANGE"). To the actual knowledge of the Issuers after reasonable inquiry, there is no event that is reasonably likely to occur, which if it were to occur, could, singly or in the aggregate, reasonably be expected to have a 24 Material Adverse Effect, except such events that have been disclosed in the Offering Circular. (hh) Ratings. No "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the Act (i) has imposed (or has informed any of the Issuers or the Guarantors that it is considering imposing) any condition (financial or otherwise) on the Issuers' or the Guarantors' retaining any rating assigned to any securities of any of the Issuers or the Guarantors, or (ii) has indicated to any of the Issuers or the Guarantors that it is considering (A) the downgrading, suspension, or withdrawal of, or any review for a possible change that does not indicate the direction of the possible change in, any rating so assigned, or (B) any change in the outlook for any rating of any securities of any of the Issuers or the Guarantors. (ii) Solvency. Each of the Issuers and the Guarantors is incurring its respective indebtedness under the Series A Notes for proper purposes and in good faith. Immediately before and after giving effect to the issuance of the Series A Notes, for the Issuer (on a consolidated basis with the Guarantors) and for each of the Guarantors, in all cases considered as going concerns, (i) its assets at a fair valuation, exceeds the sum of its debts; (ii) the present fair salable value of its assets is not less than the amount that will be required to pay its probably liability on its existing debts as they become absolute and matured, (iii) it has and will have adequate capital with which to conduct the business it is presently conducting and presently anticipates conducting; and (iv) it does not intend to incur, and does not believe and reasonably should not believe that it will incur, debts beyond its ability to pay as those debts become due. Neither the Issuers or any Guarantor is aware of any reason why it would be inappropriate to consider the Issuer or the Guarantors as a going concern. For purposes of this paragraph, "debts" includes contingent and unliquidated debts, at a fair valuation. (jj) No Solicitation. None of the Issuers or the Guarantors nor any of their affiliates nor anyone acting on their behalf has (i) taken, directly or indirectly, any action designed to cause or to result in, or that has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the Notes or to facilitate the sale or resale of any of the Notes, (ii) sold, bid for, purchased, or paid anyone any compensation for soliciting purchases of, any of the Notes, or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of either of the Issuers. (kk) No Registration. Without limiting Sections 6(r) and 6(s), no registration under the Act, and no qualification of the Indenture under the TIA is required for the sale of the Series A Notes to the Initial Purchaser as contemplated hereby or for the Exempt Resales, assuming (i) that the purchasers in the Exempt Resales are Eligible Purchasers, (ii) the accuracy of the Initial Purchaser's representations contained in Section 7 of this Agreement and (iii) if any Exempt Resales are made to Accredited Investors, the accuracy of the representations and 25 warranties of such Accredited Investors contained in the Accredited Investor Letters executed by such Accredited Investors. No form of general solicitation or general advertising (including, without limitation, as such terms are defined in Regulation D under the Act) was used by either of the Issuers, any of the Guarantors or any of their respective affiliates or any of their respective representatives in connection with the offer and sale of any of the Series A Notes or in connection with Exempt Resales. No securities of the same class as the Series A Notes have been offered, issued or sold by either of the Issuers, any of the Guarantors or any of their respective affiliates within the six-month period immediately prior to the date hereof. Without limiting Sections 6(r) and 6(s), no registration under the Act, or filing under the Exchange Act, or qualification under the TIA is required in connection with the OED Note Repurchase Transactions. (ll) ERISA. Neither of the Issuers or any of the Guarantors nor any of their respective "Affiliates" maintains a plan that is intended to qualify under Section 401(a) of the Code, or is a "party in interest" or a "disqualified person" with respect to any employee benefit plans. No condition exists or event or transaction has occurred in connection with any employee benefit plan that could result in either of the Issuers or any such "Affiliate" incurring any liability, fine or penalty that could, singly or in the aggregate, have a Material Adverse Effect. Neither of the Issuers or any of the Guarantors nor any trade or business under common control with the Issuers or the Guarantors (for purposes of Section 414(c) of the Code) maintains any employee pension benefit plan that is subject to Title IV of the Employee Retirement Income Act of 1974, as amended, or the rules and regulations promulgated thereunder ("ERISA"). The terms "employee benefit plan," "employee pension benefit plan," and "party in interest" shall have the meanings assigned to such terms in Section 3 of ERISA. The term "Affiliate" shall have the meaning assigned to such term in Section 407(d)(7) of ERISA, and the term "disqualified person" shall have the meaning assigned to such term in section 4975 of the Internal Revenue Code of 1986, as amended, or the rules, regulations and published interpretations promulgated thereunder (collectively the "CODE"). (mm) Investment Company Act and Other Federal Regulations. None of the Issuers or the Guarantors has taken, and none of them will take, any action that may cause this Agreement or the issuance of the Series A Notes to violate or result in a violation of Section 7 of the Exchange Act (including, without limitation, Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve System). None of the Issuers or the Guarantors is subject to regulation, or shall become subject to regulation upon the consummation of the Offering and sale of the Series A Notes and the application of the net proceeds thereof as described in the Offering Circular, under the Investment Company Act of 1940, as amended, and the rules and regulations and interpretations promulgated thereunder. 26 (nn) No Brokers. None of the Issuers or the Guarantors has dealt with any broker, finder, commission agent or other person (other than the Initial Purchaser) in connection with the Offering and none of the Issuers or the Guarantors is under any obligation to pay any broker's fee or commission in connection with the Offering (other than commissions and fees to the Initial Purchaser). (oo) No Labor Disputes. Except as would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect, none of the Issuers or the Guarantors is engaged in any unfair labor practice. There is (i) no unfair labor practice complaint or other proceeding pending or, to the knowledge of the Issuers and the Guarantors, threatened against any of the Issuers or the Guarantors before the National Labor Relations Board or any state, local or foreign labor relations board or any industrial tribunal, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending or, to the knowledge of the Issuers and the Guarantors, threatened, (ii) no strike, labor dispute, slowdown or stoppage pending or, to the knowledge of the Issuers and the Guarantors, threatened against any of the Issuers or the Guarantors, and (iii) no union representation question existing with respect to the employees of any of the Issuers or the Guarantors, and, to the knowledge of the Issuers and the Guarantors, no union organizing activities are taking place except, in the case of each of clauses (i), (ii) and (iii) above, as would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. (pp) Environmental Laws. Except as disclosed in the Offering Circular or as otherwise would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect or otherwise require disclosure in the Offering Circular, (i) none of the Issuers or the Guarantors has been or is in violation of any Federal, state or local laws and regulations relating to pollution or protection of human health or the environment, including, without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of toxic or hazardous substances, materials or wastes, or petroleum and petroleum products ("MATERIALS OF ENVIRONMENTAL CONCERN"), or otherwise relating to the protection of human health and safety, or the use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (collectively, "ENVIRONMENTAL LAWS"), which violation includes, but is not limited to, noncompliance with, or lack of, any permits or other environmental authorizations; (ii) to the knowledge of the Issuers and the Guarantors, there are no circumstances, either past, present or that are reasonably foreseeable, that may lead to any such violation in the future; (iii) none of the Issuers or the Guarantors has received any communication (written or oral), whether from a Governmental Authority or otherwise, alleging any such violation; (iv) there is no pending or, to the knowledge of the Issuers and the Guarantors, threatened claim, action, investigation, notice (written or oral) or other Proceeding by any person or entity alleging potential liability of any of the Issuers or the Guarantors (or against any person or entity for whose acts or omissions any of the Issuers or the Guarantors is or may reasonably be expected to be liable, either contractually or by operation of law) for investigatory, cleanup, or other response 27 costs, or natural resources or property damages, or personal injuries, attorney's fees or penalties relating to (A) the presence, or release into the environment, of any Materials of Environmental Concern at any location, or (B) circumstances forming the basis of any violation or potential violation, of any Environmental Law (collectively, "ENVIRONMENTAL CLAIMS"); and (v) to the knowledge of the Issuers and the Guarantors, there are no past or present actions, activities, circumstances, conditions, events or incidents that could reasonably be expected to form the basis of any Environmental Claim. Each of the Issuers and the Guarantors, as appropriate, has conducted environmental investigations of, and have reviewed reasonably available information regarding, the business, properties and operations of each of the Issuers and the Guarantors, and of other properties within the vicinity of their business, properties and operations, as appropriate for the circumstances of each such property and operation; on the basis of such reviews, investigations and inquiries, the Issuers and the Guarantors have reasonably concluded that any costs and liabilities associated with such matters would not have, singularly or in the aggregate, a Material Adverse Effect or otherwise require disclosure in the Offering Circular. (qq) Market Data. All statistical and market and industry related data included in the Offering Circular are based on or derived from sources which the Issuers and the Guarantors believe to be reliable and accurate. (rr) Directed Selling Efforts. None of the Issuers or the Guarantors nor any of their respective affiliates or any person acting on its or their behalf (other than the Initial Purchaser, as to whom the Issuers and the Guarantors make no representation) has engaged or will engage in any directed selling efforts within the meaning of Regulation S under the Act ("REGULATION S") with respect to the Series A Notes. (ss) Offshore Transactions. The Series A Notes offered and sold in reliance on Regulation S have been and will be offered and sold only in offshore transactions, as such term is defined in Regulation S ("OFFSHORE TRANSACTIONS"). (tt) No Plan or Scheme. The sale of the Series A Notes pursuant to Regulation S is not part of a plan or scheme to evade the registration provisions of the Act. (uu) Regulation S Offering Restrictions. The Issuers and the Guarantors, their respective affiliates and all persons acting on their behalf (other than the Initial Purchaser, as to whom the Issuers and the Guarantors make no representation) have complied with and will comply with the offering restrictions requirements of Regulation S in connection with the offering of the Series A Notes outside the United States. 28 (vv) Restricted Period. The Series A Notes sold in reliance on Regulation S will be represented upon issuance by a temporary global security that may not be exchanged for definitive securities until the expiration of the 40-day restricted period referred to in Rule 903(b)(3) of the Act and only upon certification of beneficial ownership of such Series A Notes by non-U.S. persons or U.S. persons who purchased such Series A Notes in transactions that were exempt from the registration requirements of the Act. (ww) Representations and Warranties. Each certificate signed pursuant to Section 9(a)(viii) by any officer of any of the Issuers or the Guarantors and delivered to the Initial Purchaser or counsel for the Initial Purchaser pursuant to this Agreement shall be deemed to be a representation and warranty by such Issuer or Guarantor to the Initial Purchaser as to the matters covered thereby. 7. REPRESENTATIONS AND WARRANTIES OF THE INITIAL PURCHASER. The Initial Purchaser represents and warrants to the Issuers that: (a) QIB. It is a QIB with such knowledge and experience in financial and business matters as is necessary in order to evaluate the merits and risks of an investment in the Series A Notes. (b) Eligible Purchasers. It (i) is not acquiring the Series A Notes with a view to any distribution thereof that would violate the Act or the securities laws of any state of the United States or any other applicable jurisdiction, and (ii) will be soliciting offers for the Series A Notes only from, and will be offering and selling the Series A Notes only to, (A) persons in the United States whom it reasonably believes to be QIBs in reliance on the exemption from the registration requirements of the Act provided by Rule 144A under the Act, (B) Accredited Investors that execute and deliver to the Issuers and the Initial Purchaser an Accredited Investor Letter and (C) Regulation S Purchasers in Offshore Transactions in reliance upon Regulation S under the Act. (c) No General Solicitation. No form of general solicitation or general advertising within the meaning of Rule 502(c) under the Act or in any manner involving a public offering within the meaning of Section 4(2) of the Act has been or will be used by the Initial Purchaser or any of its representatives in connection with the offer and sale of any of the Series A Notes. (d) Representations of Eligible Purchasers. In connection with the Exempt Resales, it will solicit offers to buy the Series A Notes only from, and will offer and sell the Series A Notes only to, persons whom it reasonably believes to be Eligible Purchasers in accordance with this Agreement and on the terms contemplated by the Offering Circular. (e) Power and Authority. It has all requisite power and authority to enter into, deliver and perform its obligations under this Agreement and 29 the Registration Rights Agreement and each of this Agreement and the Registration Rights Agreement has been duly authorized by it. (f) Directed Selling Efforts. The Initial Purchaser and its affiliates or any person acting on its or their behalf have not engaged and will not engage in any directed selling efforts within the meaning of Regulation S with respect to the Series A Notes. (g) Offshore Transactions. The Series A Notes offered and sold by the Initial Purchaser pursuant hereto in reliance on Regulation S have been and will be offered and sold only in Offshore Transactions. (h) No Plan or Scheme. The sale of the Series A Notes offered and sold by the Initial Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or scheme to evade the registration provisions of the Act. (i) Regulation S Offering Restrictions. The Initial Purchaser agrees that it has not offered or sold and will not offer or sell the Series A Notes in the United States or to, or for the benefit or account of, a U.S. Person (other than a distributor), in each case, as defined in Rule 902 under the Act (i) as part of its distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering of the Series A Notes pursuant hereto and the Closing Date, other than in accordance with Regulation S of the Act or another exemption from the registration requirements of the Act. The Initial Purchaser agrees that, during such 40-day restricted period, it will not cause any advertisement with respect to the Series A Notes (including any "tombstone" advertisement) to be published in any newspaper or periodical or posted in any public place and will not issue any circular relating to the Series A Notes, except such advertisements as permitted by and include the statements required by Regulation S. (j) Notice Required. The Initial Purchaser agrees that, at or prior to confirmation of a sale of Series A Notes by it to any distributor, dealer or person receiving a selling concession, fee or other remuneration during the 40-day restricted period referred to in Rule 903(b)(3) under the Act, it will send to such distributor, dealer or person receiving a selling concession, fee or other remuneration a confirmation or notice to substantially the following effect: "The Series A Notes covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of your distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the Offering and the Closing Date, except in either case in accordance with Regulation S under the Securities Act (or Rule 144A under the Securities Act or to institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3) or (7) 30 under the Securities Act) in transactions that are exempt from the registration requirements of the Securities Act, and in connection with any subsequent sale by you of the Series A Notes covered hereby in reliance on Regulation S during the period referred to above to any distributor, dealer or person receiving a selling concession, fee or other remuneration, you must deliver a notice to substantially the foregoing effect. Terms used above have the meanings assigned to them in Regulation S." (k) Regulation S Security. The Initial Purchaser agrees that the Series A Notes offered and sold in reliance on Regulation S will be represented upon issuance by a global security that may not be exchanged for definitive securities until the expiration of the 40-day restricted period referred to in Rule 903(b)(3) of the Act and only upon certification of beneficial ownership of such Series A Notes by non-U.S. persons or U.S. persons who purchased such Series A Notes in transactions that were exempt from the registration requirements of the Act. 8. INDEMNIFICATION. (a) Indemnification of Initial Purchaser. Each of the Issuers and the Guarantors shall, jointly and severally, without limitation as to time, indemnify and hold harmless the Initial Purchaser and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act) the Initial Purchaser (any of such persons being hereinafter referred to as a "CONTROLLING PERSON"), and the respective officers, directors, partners, employees, representatives and agents of the Initial Purchaser and any such controlling person (collectively with the Initial Purchaser, the "PURCHASER INDEMNIFIED PARTIES"), to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and reasonable attorneys' fees) and expenses (including, without limitation, costs and expenses incurred in connection with investigating, preparing, pursuing or defending against any of the foregoing) (collectively, "LOSSES"), as incurred, directly or indirectly caused by, related to, based upon, arising out of or in connection with (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Circular or the Offering Circular (or any amendment or supplement thereto) or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, that neither of the Issuers nor any Guarantor shall be liable under the indemnity provided in this Section 8(a) to any Purchaser Indemnified Party for any Losses that (A) result solely from an untrue statement of a material fact contained in, or the omission of a material fact from, any Preliminary Offering Circular, which untrue statement or omission was completely corrected in the Offering Circular (as then amended or supplemented) if it shall have been determined by a court of competent jurisdiction by final and nonappealable judgment that (1) such Purchaser Indemnified Party sold the Notes to the person 31 alleging such Loss and failed to send or give, at or prior to the written confirmation of such sale, a copy of the Offering Circular (as then amended or supplemented), if required by law to have so delivered it, and (2) the Issuers had previously furnished copies of the corrected Offering Circular to such Purchaser Indemnified Party within a reasonable amount of time prior to such sale or such confirmation, and (3) the corrected Offering Circular, if delivered, would have been a complete defense against the person asserting such Loss; or (B) are based on an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with the Furnished Information. None of the Issuers and the Guarantors shall be liable under this Section 8 for any settlement of any claim or action (other than settlements permitted by Section 8(b)(3)) effected without its prior written consent, which consent shall not be unreasonably withheld. The Issuers shall notify the Initial Purchaser promptly of the institution, threat or assertion of any Proceeding of which either of the Issuers is aware in connection with the matters addressed by this Agreement which involves either of the Issuers, any of the Guarantors or any of the Purchaser Indemnified Parties. (b) Actions Against Parties; Notification. (1) If any Proceeding shall be brought or asserted against any person entitled to indemnification hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party shall give prompt written notice to the party or parties from which such indemnification is sought (the "INDEMNIFYING PARTIES" and each, an "INDEMNIFYING PARTY"); provided, that the failure to so notify the Indemnifying Parties shall not relieve any of the Indemnifying Parties from any obligation or liability except to the extent (but only to the extent) that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal) that such Indemnifying Party has been prejudiced materially by such failure. (2) The Indemnifying Parties shall have the right, exercisable by giving written notice to an Indemnified Party, within 20 Business Days after receipt of written notice from such Indemnified Party of such Proceeding, to assume, at their expense, the defense of any such Proceeding; provided, that an Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or parties unless: (i) the Indemnifying Parties have agreed to pay such fees and expenses; (ii) the Indemnifying Parties shall have failed promptly to assume the defense of such Proceeding or shall have failed to employ counsel reasonably satisfactory to such Indemnified Party; or (iii) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and one or more Indemnifying Parties (or any affiliates or controlling persons of any of the Indemnifying Parties), and such Indemnified Party shall have been advised by counsel that there may be one or more defenses available to such Indemnified Party that are in addition to, or in conflict with, those defenses available to the indemnifying party or such affiliate or controlling person (in which case, if such Indemnified Party notifies the Indemnifying Parties in writing that it elects to employ separate counsel at the expense of the Indemnifying Parties, 32 the Indemnifying Parties shall not have the right to assume the defense thereof and the reasonable fees and expenses of such counsel shall be at the expense of the Indemnifying Parties; it being understood, however, that, the Indemnifying Parties shall not, in connection with any one such Proceeding or separate but substantially similar or related Proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for such Indemnified Party). (3) None of the Issuers, the Guarantors, the Initial Purchaser, their respective controlling persons nor any of their respective officers, directors, partners, employees, representatives and agents shall consent to entry of any judgment in or enter into any settlement of any pending or threatened Proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not any Indemnified Party is a party thereto) unless such judgment or settlement includes, as an unconditional term thereof, the giving by the claimant or plaintiff to each Indemnified Party of a release, in form and substance satisfactory to the Indemnified Party, from all Losses that may arise from such Proceeding or the subject matter thereof (whether or not any Indemnified Party is a party thereto). (c) Indemnification of Issuers and Guarantors. The Initial Purchaser agrees to indemnify and hold harmless each of the Issuers and the Guarantors and each of their controlling persons and the respective members, managers, officers, directors, partners, employees, representatives and agents of the Issuers and any such controlling person to the same extent as the foregoing indemnity from the Issuers and the Guarantors to each of the Purchaser Indemnified Parties stated in Section 8(a), but only with respect to Losses that are caused by an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with the Furnished Information. The Initial Purchaser shall not be liable under this Section 8(c) for any settlement of any claim or action (other than settlements permitted by Section 8(b)(3)) effected without its prior written consent, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, any liability of the Initial Purchaser hereunder shall be limited to an amount not to exceed the excess (such excess, the "AGGREGATE AMOUNT") of (i) the aggregate gross proceeds received by the Initial Purchaser from the sale of the Series A Notes over (ii) the sum of (A) the aggregate price at which the Initial Purchaser purchased the Series A Notes from the Issuers and (B) the amount of any Losses that the Purchaser Indemnified Parties otherwise have been required to pay by reason of such untrue or alleged untrue statement of such omission or alleged omission. (d) Contribution. If the indemnification provided for in this Section 8 is unavailable to an Indemnified Party or is insufficient to hold such Indemnified Party harmless for any Losses in respect of which this Section 8 would otherwise apply by its terms (other than by reason of exceptions provided in this Section 8), then each indemnifying party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses (i) in such proportion as is appropriate to reflect the relative 33 benefits received by the Issuers and the Guarantors, on the one hand, and the Initial Purchaser, on the other hand, from the Offering or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Issuers and the Guarantors, on the one hand, and the Initial Purchaser, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. The relative benefits received by the Issuers and the Guarantors, on the one hand, and the Initial Purchaser, on the other hand, shall be deemed to be in the same proportion as the total net proceeds from the Offering (before deducting expenses) received by the Issuers and the Guarantors, on the one hand, and the total discounts and commissions received by the Initial Purchaser, on the other hand, bear to the total price of the Series A Notes in Exempt Resales as set forth on the cover page of the Offering Circular. The relative fault of the Issuers and the Guarantors, on the one hand, and the Initial Purchaser, on the other hand, shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Issuers and the Guarantors, on the one hand, or the Initial Purchaser, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by an Indemnified Party as a result of any Losses shall be deemed to include any legal or other fees or expenses incurred by such party in connection with any Proceeding, to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section 8 was available to such party. Each party hereto agrees that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 8(d), the Initial Purchaser shall not be required to contribute, in the aggregate, any amount in excess of the Aggregate Amount. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) Nonexclusive Remedy. The indemnity and contribution agreements contained in this Section 8 are in addition to any liability that any of the Indemnifying Parties may otherwise have to the Indemnified Parties, and do not limit in any way rights or remedies which may otherwise be available at law or in equity. 9. CONDITIONS. (a) Conditions to Obligations of Initial Purchaser. The obligations of the Initial Purchaser to purchase the Series A Notes under this 34 Agreement are subject to the satisfaction or waiver of each of the following conditions: (i) Representations and Warranties of the Issuers and Guarantors. All the representations and warranties of each of the Issuers and the Guarantors in this Agreement and in each of the other Operative Documents to which it is a party shall be true and correct in all material respects (other than representations and warranties with a Material Adverse Effect qualifier or other materiality qualifier, which shall be true and correct as written) at and as of the Closing Date after giving effect to the Transactions consummated on or prior to the Closing Date with the same force and effect as if made on and as of such date. On or prior to the Closing Date, each of the Issuers and the Guarantors and, to the knowledge of the Issuers and the Guarantors, each other party to the Operative Documents (other than the Initial Purchaser) shall have performed or complied in all material respects with all of the agreements and satisfied in all material respects all conditions on their respective parts required to be performed, complied with or satisfied as of or prior to the Closing Date pursuant to the Operative Documents. (ii) Availability of Offering Circular. The Offering Circular shall have been printed and copies made available to the Initial Purchaser not later than 12:00 noon, New York City time, on the third Business Day following the date of this Agreement or at such later date and time as the Initial Purchaser may approve. (iii) No Injunction. No injunction, restraining order or order of any nature by a Governmental Authority shall have been issued as of the Closing Date that would prevent or materially interfere with the issuance and sale of the Series A Notes or the consummation of any of the other Transactions; and no stop order suspending the qualification or exemption from qualification of any of the Series A Notes in any jurisdiction shall have been issued and no Proceeding for that purpose shall have been commenced or, to the knowledge of the Issuers and the Guarantors, be pending or contemplated as of the Closing Date. (iv) No Proceedings. No action shall have been taken and no Applicable Law shall have been enacted, adopted or issued that would, as of the Closing Date, prevent the consummation of any of the Transactions. Except as disclosed in the Offering Circular, no Proceeding shall be pending or, to the knowledge of the Issuers and the Guarantors, threatened, other than Proceedings that (A) if adversely determined would not, singly or in the aggregate, adversely affect the issuance or marketability of the Series A Notes, and (B) could not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. (v) No Material Adverse Change. Since the date as of which information is given in the Offering Circular (without giving effect to any amendment thereto or supplement thereto), there shall not have been any Material Adverse Change. 35 (vi) PORTAL. The Notes shall have (A) been designated PORTAL securities in accordance with the rules and regulations adopted by the NASD relating to trading in the PORTAL market, and (B) received a rating of "B+" and "B2" from Standard & Poor's Corporation and Moody's Investors Services, Inc., respectively. (vii) Maintenance of Rating. As of the Closing Date, (i) there shall not have occurred any downgrading, suspension or withdrawal of, nor shall any notice have been given of any potential or intended downgrading, suspension or withdrawal of, or of any review (or of any potential or intended review) for a possible change that does not indicate the direction of the possible change in, any rating of any securities of any of the Issuers and the Guarantors (including, without limitation, the placing of any of the foregoing ratings on credit watch with negative or developing implications or under review with an uncertain direction) by any "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the Act, (ii) there shall not have occurred any change, nor shall any notice have been given of any potential or intended change, in the outlook for any rating of any securities of any of the Issuers and the Guarantors by any such rating organization and (iii) no such rating organization shall have given notice that it has assigned (or is considering assigning) a lower rating to the Notes than that on which the Notes were marketed. (viii) Officers', Secretary's and Solvency Certificates. The Initial Purchaser shall have received on the Closing Date: (A) certificates dated the Closing Date, signed by (1) the Chief Executive Officer, and (2) the principal financial or accounting officer of each of the Issuers and the Guarantors, on behalf of the Issuers and the Guarantors, confirming the matters set forth in paragraphs (i), (iii), (iv), (v), (vii), (xii) and (xiii) of this Section 9(a), (B) a certificate, dated the Closing Date, signed by the (1) Chief Executive Officer and (2) the principal financial or accounting officer of each of the Issuers and the Guarantors, on behalf of the Issuers and the Guarantors, stating that the industry, statistical and market-related data included in the Offering Circular has been reviewed by such persons and, to the knowledge of such persons, subject to the risks and limitations described in the Preliminary Offering Circular and the Offering Circular, is true and accurate in all material respects and is based on or derived from sources which the Issuers and the Guarantors believe to be reliable and accurate, which certificate shall be in form and substance reasonably satisfactory to counsel for the Initial Purchaser and may specifically reference certain industry, statistical and market-related data contained in the Offering Circular, (C) a certificate, dated the Closing Date, signed by the Secretary or Secretaries of each of the Issuers and the Guarantors, certifying 36 such matters as the Initial Purchaser may reasonably request, and (D) a certificate of solvency, dated the Closing Date, signed by the principal financial or accounting officer of the Issuers and the Guarantors substantially in the form previously approved by the Initial Purchaser. (ix) Opinions of Counsel. The Initial Purchaser shall have received, a favorable opinion (in form and substance satisfactory to the Initial Purchaser and counsel to the Initial Purchaser), dated the Closing Date, of each of the following: (A) Mayer, Brown, Rowe & Maw LLP, special counsel to the Issuers and the Guarantors, containing opinions substantially to the effect of the opinions set forth in Exhibit 9(a)(x)(A) hereto; (B) Lane & Waterman, special Iowa counsel and special Iowa gaming counsel to the Issuers and the Guarantors, containing opinions substantially to the effect of the opinions set forth in Exhibit 9(a)(x)(B) hereto; (C) McGlinchey Stafford PLLC, special Louisiana counsel and Special Louisiana gaming counsel to the Issuers and the Guarantors, containing opinions substantially to the effect of the opinions set forth in Exhibit 9(a)(x)(C) hereto; and (D) Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Initial Purchaser. (x) Accountants' Comfort Letters. The Initial Purchaser shall have received from Deloitte & Touche, LLP, independent public accountants with respect to the Company: (A) a customary comfort letter, dated as of the date of the Offering Circular, in form and substance satisfactory to the Initial Purchaser, containing the information and statements of the type ordinarily included in accountants' "comfort letters," with respect to the consolidated financial statements of Company and its subsidiaries and certain financial information with respect to the Issuers and the Guarantors contained in the Offering Circular, and (B) a customary "bring down" comfort letter, dated the Closing Date, in form and substance satisfactory to the Initial Purchaser, to the effect that Deloitte & Touche, LLP reaffirms the statements made in its letter furnished pursuant to clause (A) above, except that the specified date referred to shall be a date not more than five days prior to the Closing Date. 37 (xi) Permits. All Permits required to be obtained from, and all notices or declarations required to be made with, any Gaming Authority or other Governmental Authority to permit the issuance and sale of the Series A Notes in accordance with the terms of, and in the aggregate principal amount set forth in, this Agreement and to permit the consummation of the other Transactions shall have been obtained and made, in each case free of any conditions other than those set forth in this Agreement. (xii) Execution and Delivery of Note Documents and Consummation of Transactions. The Note Documents shall have been executed and delivered by all parties thereto, and the Initial Purchaser shall have received a fully executed original of each Note Document. The terms of each of the Note Documents shall conform in all material respects to the description thereof in the Offering Circular, and the transactions contemplated by the Note Documents shall have been consummated on terms that conform in all material respects to the description thereof in the Offering Circular. (xiii)Execution and Delivery of Other Operative Documents and Consummation of Other Transactions. (A) The Supplemental Indenture and each of the Collateral Release Agreements shall have been executed and delivered by all parties thereto, and the Initial Purchaser shall have received a fully executed original of the Supplemental Indenture, a copy of each of the Collateral Release Agreements and a copy of the Tender Offer Documents. The terms of the Supplemental Indenture and each of the Collateral Release Agreements shall conform in all material respects to the description thereof, and the Supplemental Indenture and the Proposals shall have become operative and the OED Note Repurchase Transactions shall have been consummated on terms that conform in all material respects to the description thereof, in the Offer to Purchase and the Offering Circular. (B) The Company Note Transactions (other than the Company Note Redemption but including the mailing of the Redemption Notice) shall have been consummated in accordance with the Company Indenture, and the Initial Purchaser shall have received a copy of the Redemption Notice. (C) The Credit Facility Waivers shall have been executed and delivered by all parties thereto, and shall have become operative, and the Initial Purchaser shall have received a copy of the executed Credit Facility Waivers. (xiv) Additional Documents. The Initial Purchaser or its counsel shall have received copies of all opinions, certificates, letters and other documents delivered under or in connection with the Transactions consummated on 38 or prior to the Closing Date, including without limitation, copies of duly executed payoff letters, UCC-3 termination statements, mortgage releases and other collateral releases and terminations, each in form and substance satisfactory to the Initial Purchaser evidencing, as the case may be, the OED Note Repurchase Transactions and the Company Note Repurchase Transactions, including, without limitation, the release of the related Liens and termination of the related security documents, and each such payoff letter, release and termination shall be in full force and effect. (xv) Security Documents. The Issuers and the Guarantors shall have furnished to the Initial Purchaser the Security Documents duly executed by the respective Issuers and the Guarantors party thereto, together with: (A) proper financing statements, each in the form to be filed on the Closing Date under the Uniform Commercial Code of all jurisdictions that may be necessary in order to perfect the Liens created by the Security Documents, covering the Collateral and naming the Secured Party as secured party, which financing statements shall be so filed on or about the Closing Date; (B) proper instruments to be filed in the U.S. Patent and Trademark Office that may be necessary in order to perfect the liens granted on trademarks, which liens have been created by the Security Documents; (C) contemplated requests for information and lien search results, listing as of a recent date all effective financing statements filed in Louisiana, Iowa and Delaware that name any of the Issuers, the Guarantors or the Issuers and the Guarantors as debtor, together with copies of such financing statements; (D) copies of duly executed payoff letters, UCC-3 termination statements, mortgage releases, intellectual property releases and other collateral releases and terminations, each in form and substance reasonably satisfactory to the Initial Purchaser evidencing the release of any Liens on any of the Collateral (other than Liens created by the Indenture and the Security Documents or Permitted Liens), and each such payoff letter, release and termination shall be in full force and effect. (E) the original membership interest certificates and stock certificates pledged to the Secured Party pursuant to the Security Documents, together with undated stock powers or endorsements duly executed in blank in connection therewith; (F) mortgages and fixture filings in form and substance approved by the Initial Purchaser, to be recorded on or about the Closing Date in all jurisdictions that may be deemed necessary or desirable in order to perfect the liens created by the Security Documents, covering the Collateral, which mortgages and fixture filings shall be so recorded on or 39 about the Closing Date; (G) irrevocable commitment by one or more title insurance companies approved by the Initial Purchaser in the Initial Purchaser's reasonable discretion to issue one or more lender's policies of title insurance insuring the liens created by the Security Documents, subject only to those title matters and exceptions approved by the Initial Purchaser, together with fully executed reinsurance agreements in form and substance reasonably approved by the Initial Purchaser, providing for reinsurance in the amounts required by the Initial Purchaser with title insurance companies approved by the Initial Purchaser in its reasonable discretion; (H) Such consents and agreements of lessors and other third parties, as the Trustee may deem reasonably necessary or desirable; (I) a lender's title insurance policy for the property located in Dubuque, Iowa that does not take exception for items that would be displayed by an updated A.L.T.A. survey, and an affidavit and indemnification in favor of the Initial Purchaser and the Trustee, in a form acceptable to the Initial Purchaser and the Trustee: (a) deposing and stating that (I) the lines of the property, buildings, fences, driveways and other improvements shown on the most recent existing survey provided to them by Issuers have not changed; (II) no additional easements or changes to any easements located on the property and shown on the most recent existing survey exist; (III) no buildings, fences, driveways or other improvements constructed on adjoining premises since the date of the most recent existing survey encroach on the property; and (IV) the property conforms in all particulars with the state of facts shown on the most recent existing survey; and (b) indemnifying the Initial Purchaser and the Trustee from and against all loss, liability, damages and attorney's fees and costs incurred in the event the affidavit proves inaccurate; provided, however, if Issuer is unable to satisfy the Closing requirement set forth in this Section 9(a)(xv)(I), then such requirement shall be deemed waived on the condition that Issuer shall comply with the covenant set forth in Section 5(i)(B) with respect to the property located in Dubuque, Iowa; and (J) any other documents required to be delivered to the Secured Party pursuant to the Security Documents and reasonable evidence that all other actions necessary to perfect and protect the Liens created by the Security Documents have been taken. (xvi) Additional Documents. Counsel to the Initial Purchaser shall have been furnished with such documents as they may reasonably require for the purpose of enabling them to review or pass upon the matters referred to in this Section 9 and in order to evidence the accuracy, completeness and satisfaction of the representations, warranties and conditions contained in this Agreement. 40 (b) Conditions to the Issuers' and the Guarantors' Obligations. The obligations of the Issuers to sell, and the Guarantors to guarantee, the Series A Notes under this Agreement are subject to the satisfaction or waiver of each of the following conditions: (i) Payment. The Initial Purchaser shall have delivered payment to the Issuers for the Series A Notes pursuant to Sections 2 and 4 of this Agreement. (ii) Representations and Warranties. All of the representations and warranties of the Initial Purchaser in this Agreement shall be true and correct in all material respects at and as of the Closing Date, with the same force and effect as if made on and as of such date. (iii) No Injunctions. No injunction, restraining order or order of any nature by a Governmental Authority shall have been issued as of the Closing Date that would prevent or interfere with the issuance and sale of the Series A Notes; and no stop order suspending the qualification or exemption from qualification of any of the Series A Notes in any jurisdiction shall have been issued and no Proceeding for that purpose shall have been commenced or be pending or contemplated as of the Closing Date. (iv) Execution and Delivery of Note Documents. The Note Documents shall have been executed and delivered by all parties thereto (other than the Issuers and the Guarantors), and the Issuers and the Guarantors shall have received a fully executed original of each Note Document. On or prior to the Closing Date, the Initial Purchaser and each other party to the Note Documents (other than the Issuers and the Guarantors) shall have performed or complied in all material respects with all of the agreements and satisfied in all material respects all conditions on their respective parts to be performed, complied with or satisfied pursuant to the Note Documents. (v) Execution and Delivery of Other Operative Documents and Consummation of Other Operative Transactions. (A) The conditions listed under the section captioned "Conditions of the Tender Offer and the Consent Solicitation" in the Offer to Purchase, with the exception of the Financing Condition, as defined in the Offer to Purchase, shall have been satisfied. (B) The Credit Facility Waivers shall have been executed and delivered by all parties thereto (other than the Issuers and the Guarantors) and shall have become operative, and the Issuers and the Guarantors shall have received a fully executed original of each of the Credit Facility Waivers. 41 (vii) Accredited Investor Side Letter. The Initial Purchaser shall have delivered to the Issuers a letter, dated as of the Closing Date, listing as of such date any and all Accredited Investors to whom the Initial Purchaser will make Exempt Resales of the Notes and the aggregate principal amount of Notes to be sold by the Initial Purchaser to each such Accredited Investor in such Exempt Resales. 10. TERMINATION. This Agreement shall become effective upon the execution and delivery of this Agreement by the parties hereto. The Initial Purchaser may terminate this Agreement at any time prior to the Closing Date by written notice to the Issuers if any of the following has occurred: (a) Material Adverse Effect. Since the date as of which information is given in the Offering Circular, any Material Adverse Effect or any Material Adverse Change that could, in the Initial Purchaser's judgment, be reasonably expected to (i) make it impracticable or inadvisable to proceed with the Offering or delivery of the Series A Notes, including the Exempt Resales, on the terms and in the manner contemplated in the Offering Circular or (ii) materially impair the investment quality of the Notes. (b) Failure to Satisfy Conditions. The failure of any of the Issuers or the Guarantors to satisfy the conditions contained in Section 9(a) on or prior to the Closing Date. (c) Outbreak of Hostilities. Any outbreak or escalation of hostilities, any declaration of war by the United States, any other calamity, emergency or crisis, any material adverse change in economic conditions in or the financial markets of the United States or elsewhere or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which could make it, in the Initial Purchaser's judgment, impracticable or inadvisable to market or proceed with the offering or delivery of the Series A Notes on the terms and in the manner contemplated in the Offering Circular or to enforce contracts for the sale of any of the Series A Notes. (d) Suspension of Trading. The suspension or limitation of trading generally in securities on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market or any setting of limitations on prices for securities on any such exchange or on the Nasdaq National Market. (e) Enactment of Adverse Law. The enactment, publication, decree or other promulgation after the date hereof of any Applicable Law that in the Initial Purchaser's opinion materially and adversely affects, or could materially and adversely affect, the properties, business, prospects, operations, earnings, assets, liabilities or condition (financial or otherwise) of any of the Issuers or the Guarantors. 42 (f) Downgrade of Securities. On or after the date hereof, (i) there shall not have occurred any downgrading, suspension or withdrawal of, nor shall any notice have been given of any potential or intended downgrading, suspension or withdrawal of, or of any review (or of any potential or intended review) for a possible change that does not indicate the direction of the possible change in, any rating of any of the Issuers or Guarantors or any securities of any of the Issuers or Guarantors (including, without limitation, the placing of any of the foregoing ratings on credit watch with negative or developing implications or under review with an uncertain direction) by any "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the Act, (ii) there shall not have occurred any adverse change, nor shall any notice have been given of any potential or intended adverse change, in the outlook for any rating of any of the Issuers or Guarantors or any securities of any of Issuers or Guarantors (by any such rating organization and (iii) no such rating organization shall have given notice that it has assigned (or is considering assigning) a lower rating to the Notes than that on which the Notes were marketed. (g) Banking Moratorium. The declaration of a banking moratorium by any Governmental Authority; or the taking of any action by any Governmental Authority after the date hereof in respect of its monetary or fiscal affairs that in the Initial Purchaser's opinion could reasonably be expected to have a material adverse effect on the financial markets in the United States or elsewhere. The respective indemnities, contribution and expense reimbursement provisions and agreements, and representations, warranties and other statements of the Issuers and the Guarantors and the Initial Purchaser set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, and will survive, regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of the Initial Purchaser or any of the Issuers or the Guarantors, or any of their respective officers, directors, members or managers or any of their respective controlling persons, (ii) acceptance of the Notes, and payment for them hereunder, and (iii) any termination of this Agreement (including, without limitation, any termination pursuant to this Section 10). Without limiting the foregoing, notwithstanding any termination of this Agreement, (i) the Issuers and the Guarantors shall be and shall remain jointly and severally liable (x) for all expenses that they have agreed to pay pursuant to Section 5(f), and (y) for their obligations pursuant to Section 8, and (ii) Initial Purchaser shall be and shall remain liable for its obligations pursuant to Section 8. 11. MISCELLANEOUS. (a) Notices. Notices given pursuant to any provision of this Agreement shall be delivered or sent by mail or facsimile transmission as follows: (i) if to any of the Issuers and the Guarantors, to Diamond Jo, LLC, 400 East Third Street, P.O. Box 1750, Dubuque, Iowa 52004, facsimile number (563) 557-0549, Attention: Chief Financial Officer, with a copy 43 to Peninsula Gaming Partners, LLC, 7137 Mission Hills Drive, Las Vegas, Nevada 89113, facsimile number (702) 247-6822, Attention: Michael S. Luzich, and another copy to Mayer, Brown, Rowe & Maw, 1675 Broadway, New York, New York 10019, facsimile number (212) 262-1910, Attention: Nazim Zilkha, Esq., and (ii) if to the Initial Purchaser, to Jefferies & Company, Inc., 11100 Santa Monica Boulevard, 10th Floor, Los Angeles, California 90025, Attention: Lloyd Feller, Esq., with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand Avenue, Suite 3400, Los Angeles, California 90071, facsimile number (213) 687-5600, Attention: Nicholas P. Saggese, Esq. (provided, that any notice pursuant to Section 8 hereof will be mailed, delivered, telegraphed or sent by facsimile and confirmed to the party to be notified and its counsel), or in any case to such other address as the person to be notified may have requested in writing. (b) Successors and Assigns. This Agreement has been and is made solely for the benefit of and shall be binding upon each of the Issuers and the Guarantors, the Initial Purchaser and, to the extent provided in Section 8, the controlling persons, officers, directors, partners, employees, representatives and agents referred to in Section 8, and, to the extent provided in Section 12, the Parent Issuer (as defined below) and their respective heirs, executors, administrators, successors and assigns, all as and to the extent provided in this Agreement, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include a purchaser of any of the Series A Notes from the Initial Purchaser merely because of such purchase. Notwithstanding the foregoing, it is expressly understood and agreed that each purchaser who purchases Series A Notes from the Initial Purchaser is intended to be a beneficiary of the Issuers' covenants contained in the Registration Rights Agreement to the same extent as if the Notes were sold and those covenants were made directly to such purchaser by each of the Issuers, and each such purchaser shall have the right to take action against each of the Issuers to enforce, and obtain damages for any breach of, those covenants. (c) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED, AND THE RIGHTS OF THE PARTIES SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAWS AND RULE 327(b) OF THE NEW YORK CIVIL PRACTICE LAWS AND RULES. EACH OF THE ISSUERS AND THE GUARANTORS HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN 44 RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF THE ISSUERS AND THE GUARANTORS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDINGS BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE ISSUERS AND THE GUARANTORS IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH ISSUER OR SUCH GUARANTOR, AS THE CASE MAY BE, AT THE ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE INITIAL PURCHASER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY OF THE ISSUERS OR THE GUARANTORS IN ANY OTHER JURISDICTION. (d) Counterparts. This Agreement may be signed in various counterparts which together shall constitute one and the same instrument. (e) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. When a reference is made in this Agreement to a Section, paragraph, subparagraph, Schedule or Exhibit, such reference shall mean a Section, paragraph, subparagraph, Schedule or Exhibit to this Agreement unless otherwise indicated. (f) Interpretation. The words "INCLUDE," "INCLUDES," and "INCLUDING" when used in this Agreement shall be deemed in each case to be followed by the words "WITHOUT LIMITATION." The phrases "THE DATE OF THIS AGREEMENT," "THE DATE HEREOF," and terms of similar import, unless the context otherwise requires, shall be deemed to refer to March 25, 2004. The words "HEREOF," "HEREIN," "HEREWITH," "HEREBY" and "HEREUNDER" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement. The phrase "TO THE KNOWLEDGE OF THE ISSUERS AND THE GUARANTORS" means the actual knowledge, after due inquiry, of any of the members, managers, directors or officers of any of the Issuers or the Guarantors, respectively, or any of their respective controlling persons. For purposes of this Agreement and the representations, warranties, covenants and agreements herein, the Initial Purchaser shall not be deemed to be an affiliate of the Issuers or the Guarantors. Unless the context otherwise requires, 45 defined terms shall include the singular and plural and the conjunctive and disjunctive forms of the terms defined. (g) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (h) Amendment. This Agreement may be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may be given, provided that the same are in writing and signed by each of the signatories hereto. 12. RECEIPT OF REQUISITE REGULATORY APPROVALS. (a) If the Requisite Regulatory Approvals are received prior to Closing, then concurrently with the consummation of the Reorganization Transactions, this Agreement will cease to be effective and the purchase agreement by and among Peninsula Gaming, LLC, a Delaware limited liability company (the "PARENT ISSUER"), The Old Evangeline Downs Capital Corp., a Delaware corporation, each of the entities listed on the signature pages thereto under the heading "Guarantors" and the Initial Purchaser, attached as Exhibit A hereto shall automatically become effective. (b) If the Requisite Regulatory Approvals are received following the Closing, then concurrently with the consummation of the Reorganization Transactions, the Parent Issuer shall execute and deliver a joinder to this Agreement substantially in the form of Exhibit B attached hereto (the "JOINDER") and become a party to all other provisions of this Agreement. Effective upon execution of the Joinder, all references in this Agreement to the "Issuers" shall include the Parent Issuer. [signature pages follow] 46 Please confirm that the foregoing correctly sets forth the agreement among the Issuers, the Guarantors and the Initial Purchaser. Very truly yours, "Issuers" DIAMOND JO, LLC By: /S/ M. BRENT STEVENS ---------------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer THE OLD EVANGELINE DOWNS CAPITAL CORP. By: /S/ M. BRENT STEVENS ---------------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer "Guarantors" PENINSULA GAMING CORP. By: /S/ M. BRENT STEVENS --------------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer THE OLD EVANGELINE DOWNS, L.L.C. By: /S/ M. BRENT STEVENS --------------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer OED ACQUISITION, LLC By: /s/ M. BRENT STEVENS --------------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer With respect to Section 12 PENINSULA GAMING, LLC By: /S/ M. BRENT STEVENS --------------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer Accepted and Agreed to: JEFFERIES & COMPANY, INC. By: /s/ STEVE CROXTON ------------------------------ Name: Steve Croxton Title: Managing Director SCHEDULE 6(d) DJL Diamond Jo Issuer of DJL Notes | ___________|____________ | | | | OEDA PGC Corp. Unrestricted Co-Issuer of Subsidiary DJL Notes | | OED Racino OTBs Issuer of OED Notes | | OED Corp. Co-Issuer of OED Notes S-1 SCHEDULE 6(u) The following individual is still being investigated by the Louisiana Gaming Commission as to suitability: Natalie Schramm S-2 EXHIBIT A PENINSULA GAMING, LLC PURCHASE AGREEMENT A-1 EXHIBIT B DIAMOND JO, LLC THE OLD EVANGELINE DOWNS CAPITAL CORP. $233,000,000 8 3/4% SENIOR SECURED NOTES DUE 2012 JOINDER TO THE PURCHASE AGREEMENT __________________, 2004 JEFFERIES & COMPANY, INC. 11100 Santa Monica Boulevard 10th Floor Los Angeles, California 90025 Ladies and Gentlemen: Reference is made to (a) the Purchase Agreement, dated March 25, 2004 (the "PURCHASE AGREEMENT"), by and among Diamond Jo, LLC, a Delaware limited liability company (the "COMPANY"), The Old Evangeline Downs Capital Corp., a Delaware corporation ("CAPITAL" and, together with the Company, the "ISSUERS"), the Guarantors listed on the signature pages thereto under the heading "Guarantors," and, with respect to Section 12 thereto only, Peninsula Gaming, LLC, a Delaware limited liability company (the "PARENT ISSUER") on the one hand, and Jefferies & Company, Inc. (the "INITIAL PURCHASER"), on the other hand, and (b) the Indenture, dated as of the Closing Date (the "INDENTURE"), by and among the Issuers and U.S. Bank National Association, as Trustee. Capitalized terms used herein but not defined herein shall have the respective meanings assigned to such terms in the Purchase Agreement. The Issuers have received the Requisite Regulatory Approvals for the Reorganization Transactions. The Purchase Agreement and the Indenture require that this Joinder to the Purchase Agreement (this "JOINDER") be executed and delivered as part of, and concurrently with the consummation of, the Reorganization Transactions. 1. Joinder. The Parent Issuer hereby agrees to become bound by the terms, conditions and other provisions of the Purchase Agreement with all attendant rights, duties and obligations stated therein, with the same force and effect as if originally named as an "Issuer" therein and as if the Parent Issuer had executed the Purchase Agreement on the date thereof. 2. GOVERNING LAW. THIS JOINDER SHALL BE CONSTRUED AND INTERPRETED, AND THE RIGHTS OF THE PARTIES SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING WITHOUT LIMITATION, SECTIONS 5 1401 AND 5 1402 OF B-1 THE NEW YORK GENERAL OBLIGATIONS LAW AND RULE 327(b) OF NEW YORK CIVIL PRACTICE LAWS AND RULES. EACH ISSUER AND EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS JOINDER, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH ISSUER AND EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH ISSUER AND EACH GUARANTOR IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH ISSUER OR SUCH GUARANTOR, AS THE CASE MAY BE, AT ITS ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO THIS JOINDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY OTHER PARTY TO THIS JOINDER IN ANY OTHER JURISDICTION. 3. Counterparts. This Joinder may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 4. Amendments. No amendment or waiver of any provision of this Joinder, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto. 5. Headings. The headings in this Joinder are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. [signature pages follow] B-2 If the foregoing is in accordance with your understanding of this Joinder, kindly sign and return to us a counterpart thereof, whereupon this instrument will become a binding agreement between the Parent Issuer and the Initial Purchaser in accordance with its terms. Very truly yours, PENINSULA GAMING, LLC By:___________________________________ Name: Title: B-3 Accepted and Agreed to: JEFFERIES & COMPANY, INC. By:_____________________________ Name: Title: B-4 EXHIBIT 9(a)(x)(A) FORM OF OPINION OF MAYER, BROWN, ROWE & MAW If the Requisite Regulatory approvals are received and the Reorganization Transactions are consummated prior to Closing, "Delaware Guarantors" will refer to DJL and PGC. If the Requisite Regulatory approvals are not received and the Reorganization Transactions are not consummated prior to Closing, "Delaware Guarantors" will refer to OEDA and PGC. 1. Due Organization; Good Standing. Each of the Issuers and the Delaware Guarantors is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware or is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, as applicable. 2. No Other Registration Rights. To our knowledge, except for the Purchase Agreement and the Registration Rights Agreement, there are no contracts, commitments, agreements, arrangements, understandings or undertakings of any kind to which any of the Issuers or the Guarantors is a party, or by which any of the Issuers or the Guarantors is bound, granting to any person the right (i) to require any of the Issuers or the Guarantors to file a registration statement under the Act with respect to any securities of any of the Issuers or the Guarantors or requiring any of the Issuers or the Guarantors to include such securities with the Notes registered pursuant to any registration statement, or (ii) to purchase or offer to purchase any securities of any of the Issuers or the Guarantors or any of their respective affiliates. 3. Power. Each of the Issuers and the Delaware Guarantors has all requisite corporate power and authority or limited liability company power and authority, as applicable, to execute and deliver, and to perform its obligations under, each of the Opinion Documents to which it is a party and to consummate the transactions contemplated thereby. 4. Authorization and Enforceability. (a) Purchase Agreement. The Purchase Agreement has been duly authorized, validly executed and delivered by each of the Issuers and the Delaware Guarantors. The issuance and sale of the Series A Notes in accordance with the Purchase Agreement have been duly authorized by the Issuers. (b) Indenture. The Indenture has been duly authorized, validly executed and delivered by each of the Issuers and the Delaware Guarantors. The Indenture is the legal, valid and binding obligation of each of the Issuers and the Guarantors, enforceable against each of the Issuers and the Guarantors in accordance with its terms. The Indenture conforms to the requirements of the TIA applicable to an indenture that is required to be qualified under the TIA. Exhibit 9A-1 (c) Registration Rights Agreement. The Registration Rights Agreement has been duly authorized by each of the Issuers and the Delaware Guarantors, and the Registration Rights Agreement has been validly executed and delivered by each of the Issuers and the Delaware Guarantors. The Registration Rights Agreement is the legal, valid and binding obligation of each of the Issuers and the Guarantors, enforceable against each of the Issuers and the Guarantors in accordance with its terms. (d) Series A Notes. The Series A Notes are in the form contemplated by the Indenture, have been duly authorized by each of the Issuers for issuance and sale to the Initial Purchaser pursuant to the Purchase Agreement and have been validly executed and delivered by each of the Issuers. The Series A Notes, when authenticated by the Trustee in the manner provided in the Indenture and delivered by the Issuers against payment therefor, will be legal, valid and binding obligations of each of the Issuers, entitled to the benefits of the Indenture and enforceable against each of the Issuers in accordance with their terms. (e) Series B Notes. The Series B Notes and the issuance thereof have been duly authorized by each of the Issuers. The Series B Notes, when validly executed by the Issuers, authenticated by the Trustee in the manner provided in the Indenture, issued by the Issuers and delivered in exchange for the Series A Notes in accordance with the terms of the Indenture, the Registration Rights Agreement and the Registered Exchange Offer, will be legal, valid and binding obligations of each of the Issuers, entitled to the benefits of the Indenture and enforceable against each of the Issuers in accordance with their terms. (f) The Guarantee to be endorsed on the Series A Notes by each of the Delaware Guarantors has been duly authorized, executed and delivered by each of the Delaware Guarantors. When the Series A Notes have been issued and authenticated in accordance with the terms of the Indenture and delivered to and paid for by the Initial Purchaser in accordance with the terms of the Indenture, the Guarantee endorsed on the Series A Notes by each of the Guarantors will constitute the valid and legally binding obligation of each such Guarantor, enforceable against each such Guarantor in accordance with its terms. (g) The Guarantee to be endorsed on the Series B Notes by each of the Delaware Guarantors has been duly authorized by each of the Delaware Guarantors. When the Series B Notes have been executed, authenticated and delivered in the manner provided for in the Indenture and issued upon consummation of the Registered Exchange Offer in the manner of provided in the Registration Rights Agreement and the Indenture and the Guarantees endorsed thereon executed and delivered by the Guarantors, the Guarantee endorsed on the Series B Notes by each of the Guarantors will constitute the valid and legally binding obligation of each such Guarantor, enforceable against each such Guarantor in accordance with its terms. Exhibit 9A-2 (h) Security Documents. Each of the security documents (other then the Iowa Security Documents)(the "Security Documents") to which the Issuers or the Delaware Guarantors is a party and the transactions contemplated thereby (including, without limitation the creation, grant, recording and perfection of the Security Interests, the execution and filing of financing statements and the payment of any fees and taxes in connection therewith) have been duly authorized by the Issuers or the Delaware Guarantors, as applicable, and each of the Security Documents to which the Issuers or the Delaware Guarantors is a party has been duly executed and delivered by the Issuers or the Delaware Guarantors, as applicable. Each of the Security Documents (other than the Mortgage) which is governed by New York Law and the Mortgage (solely with respect to those specific provisions thereof governed by New York law) is the legal, valid and binding obligation of each of the Issuers and the Guarantors party thereto, enforceable against each of the Issuers and the Guarantors party thereto in accordance with its terms. (i) OED Note Repurchase Transactions. The Supplemental Indenture and each of the OED Note Repurchase Transactions has been duly authorized by each of the Issuers and the Delaware Guarantors to the extent it is a party thereto, and the Supplemental Indenture has been validly executed and delivered by Capital. The Supplemental Indenture is the legal, valid and binding obligation of each of the OED Note Issuers, enforceable against each of the OED Note Issuers in accordance with its terms. (j) Company [DJL] Note Repurchase Transactions. Each of the Company [DJL] Note Repurchase Transactions has been duly authorized by each of the Issuers and the Delaware Guarantors to the extent it is a party thereto. (k) Credit Facility Documents. The Intercreditor Agreement has been duly authorized by each of the Issuers and the Delaware Guarantors party thereto, and the Intercreditor Agreement has been validly executed and delivered by each of the Issuers and the Delaware Guarantors. The Intercreditor Agreement is the legal, valid and binding obligation of the Issuers and the Delaware Guarantors party thereto, enforceable against each of the Issuers and the Delaware Guarantors party thereto in accordance with its terms. 5. No Conflict. Neither the execution, delivery or performance of any of the Opinion Documents will conflict with, violate, constitute a breach of or a default (with the passage of time or otherwise) under, (i) the Charter Documents; (ii) any Applicable Agreements (as defined on Schedule I hereto) or (iii) any Applicable Laws (excluding the federal securities laws); or require any consents, approvals, authorizations or registrations by the Issuers or the Delaware Guarantors under any Applicable Laws except such as may be required under federal securities laws (which we address exclusively in paragraph 10 hereof) and state securities laws (as to which we express no opinion) in connection with the purchase and sale of the Notes or as may be required for the perfection of any security interests (which we address exclusively in paragraphs 12). Exhibit 9A-3 6. No Registration. Assuming (i) the accuracy of the representations, warranties and agreements of the Issuers and the Guarantors and of the Initial Purchaser contained in the Purchase Agreement, (ii) the due performance by the Issuers and the Guarantors and the Initial Purchaser of their respective covenants and agreements under the Purchase Agreement, (iii) the accuracy of the representations and warranties made by each Accredited Investor that purchases the Series A Notes pursuant to Exempt Resales, as set forth in the letters of representation executed by each of such Accredited Investors in the form of Annex A to the Offering Circular, (iv) your compliance with the offering and transfer procedures and restrictions described in the Offering Circular and (v) the purchasers to whom you initially resell the Notes receive a copy of the Offering Circular prior to such sale, it is not necessary in connection with the offer, sale and delivery of the Series A Notes to the Initial Purchaser as contemplated in the Offering Memorandum and the Purchase Agreement or the initial resale of the Series A Notes by the Initial Purchaser in the manner contemplated by the Purchase Agreement and described in the Offering Circular, to register such sales or resales of the Series A Notes under the Act, and it is not necessary, prior to the Registered Exchange Offer or the effectiveness of the Shelf Registration Statement, to qualify the Indenture under the TIA. We express no opinion, however, as to when or under what circumstances any Notes initially sold by you may be reoffered or resold. 7. Rule 144A(d)(4) Information. The Offering Circular as of its date (except for the financial statements, including the notes thereto, and other financial and statistical data included therein or omitted therefrom, as to which we express no opinion), contains the information specified in, and meets the requirements of, Rule 144A(d)(4) under the Act. 8. Investment Company Act. None of the Issuers or the Guarantors is, and after giving effect to the sale of the Series A Notes in accordance with the Purchase Agreement and the application of the proceeds as described in the Offering Circular under the caption "Use of Proceeds," none will be, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 9. Offering Circular. (a) Each of the Opinion Documents and the terms of the Notes conform in all material respects to the descriptions thereof contained in the Offering Circular. (b) The statements in the Offering Circular under each of the headings (i) "Risk Factors--Risks Related to this Offering--Value of Collateral," (ii) "Risk Factors--Risks Related to this Offering--Subordination," (iii) the second paragraph of "Risk Factors--Risks Related to this Offering--Ability to Realize on Collateral," (iv) "Risk Factors--Risks Related to this Offering--Fraudulent Transfer," (v) "The Transactions" and (vi) "Notice to Investors" has been reviewed by us and, solely to the extent that such statements constitute matters of law, summaries of legal matters, summaries of proceedings, or legal conclusions Exhibit 9A-4 (exclusive of the laws of any jurisdiction other than Applicable Laws), such information is correct in all material respects. 10. UCC Opinions. (a) The Security Agreement creates a valid security interest in favor of the Trustee in the Collateral (as that term is defined in the Security Agreement) in which a security interest may be created under the Uniform Commercial Code as now in effect in the State of New York (the "NEW YORK UCC") or, to the extent such a security interest may not be created under the New York UCC, under the applicable laws of the United States of America with respect to any copyrights, patents or trademarks that are part of such Collateral in which a security interest may be created under such laws (that portion of the Collateral constituting the assets and properties of the Issuers and the Delaware Guarantors (together, the "UCC COLLATERAL"). (b) Pursuant to the provisions of the Security Agreement, each of the Issuers and the Delaware Guarantors has authorized the filing of a financing statement in the form attached hereto as Annex 14(c) naming each of the Issuers and the Delaware Guarantors as debtors for purposes of Section 9-509 of the Uniform Commercial Code as now in effect in the State of Delaware (the "DELAWARE UCC"). (c) Each of the Financing Statements includes not only all of the types of information required by Section 9-502(a) of the Delaware UCC but also the types of information without which the Office of the Secretary of State of the State of Delaware may refuse to accept such financing statement pursuant to Section 9-516 of the Delaware UCC. Each of the Financing Statements is in appropriate form for filing in the Office of the Secretary of State of the State of Delaware. Upon the later of the attachment of the security interest and the proper filing of the Financing Statement with respect to each of the Issuers and the Delaware Guarantors in the Office of the Secretary of State of the State of Delaware, the security interest in favor of the Trustee in the UCC Collateral described in each said financing statement will be perfected to the extent a security interest in such UCC Collateral can be perfected under the Delaware UCC by the filing of a financing statement in that office. (d) The provisions of the [Account Control Agreement(s)] are effective to perfect the security interest of the Trustee in the Company's rights in the Securities Accounts (as defined in the Securities Account Control Agreement). (e) Assuming (i) the delivery to, and the continued possession by, [Foothill], as representative (as defined in Section 1-201(35) of the New York UCC) for the Trustee, the Holders and [Foothill and the other lenders under the Credit Agreement] (in such capacity, the "Collateral Sub-Agent"), in the State of New York of the stock certificates and membership interest certificates specified Exhibit 9A-5 on Schedule II hereto (the "Pledged Shares"), together with stock powers or other instruments of transfer executed in blank, and (ii) none of the Collateral Sub-Agent, the Trustee, any Holder or [Foothill or any other lender under the Credit Agreement] has notice of any adverse claim to the Pledged Shares, the Collateral Sub-Agent will have the status of a "protected purchaser" for the benefit of the Trustee, the Holders and [Foothill and the other lenders under the Credit Agreement] with respect to the Pledged Shares under (and as defined in) Section 8-303(a) of the New York UCC. 11. We confirm that the statements made in the Offering Circular under the heading "Certain Federal Income Tax Considerations," to the extent that they describe matters of law or legal conclusions, are correct in all material respects. In addition, we have participated in conferences with officers and other representatives of the Issuers and the Guarantors, representatives of the independent public accountants of the Issuers, representatives of the Initial Purchaser and counsel for the Initial Purchaser, at which the contents of the Offering Circular and related matters were discussed and, although we are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Offering Circular and have not made any independent check or verification thereof, during the course of such participation, no facts came to our attention which lead us to believe that the Offering Circular, as of its date and as of the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading, it being understood that we express no belief with respect to the pro forma financial statements, including the notes thereto, the financial statements, including the notes thereto, or other financial and statistical data included in, or omitted from, the Offering Circular. For purposes of the foregoing, we note that the Offering Circular was prepared in the context of a Rule 144A transaction and not as part of a registration statement under the Securities Act and does not contain all of the information that would be required in a registration statement under the Securities Act. Opinion Documents is defined as the Purchase Agreement, the Registration Rights Agreement, the Indenture, the Notes, the Guarantees, the Security Documents, the Supplemental Indenture, the Collateral Release Agreements and the Intercreditor Agreement. Exhibit 9A-6 SCHEDULE 1 Loan and Security Agreement, dated September 22, 2003, by and among The Old Evangeline Downs, L.L.C., The Old Evangeline Downs Capital Corp. and Wells Fargo Foothill, Inc., as amended. [Only if the Corporate Transactions are not effected] FF&E Loan and Security Agreement, by and among The Old Evangeline Downs, L.L.C., The Old Evangeline Downs Capital Corp. and Wells Fargo Foothill, Inc., as amended. Loan and Security Agreement, dated February 23, 2001, by and between Foothill Capital Corporation and Peninsula Gaming Company, LLC, as amended. [Only if the Corporate Transactions are not effected] Amended and Restated Management Services Agreement, dated February 25, 2003, by and among Diamond Jo, LLC, OED Acquisition LLC and The Old Evangeline Downs, L.L.C. Indenture, dated February 25, 2003, by and among The Old Evangeline Downs, L.L.C., The Old Evangeline Downs Capital Corp., as Issuers, and U.S. Bank National Association, as trustee, as amended by the Supplemental Indenture. [Loan and Security Agreement, dated [April 16, 2004], by and among Peninsula Gaming, LLC, The Old Evangeline Downs Capital Corp. and Wells Fargo Foothill, Inc., as amended. [Only if the Corporate Transactions are effected]. Exhibit 9A-7 EXHIBIT 9(a)(x)(B) FORM OF OPINION OF LANE & WATERMAN, SPECIAL IOWA COUNSEL AND SPECIAL IOWA REGULATORY COUNSEL Our opinions expressed below are limited to the laws of the State of Iowa, and to the extent applicable, the Federal Law of the United States, and only to the Iowa operations and activities of DJL. 1. Assuming the due authorization, execution and delivery of each of Ship Mortgage, the Shore Mortgage and any other Security Document governed by Iowa Law (the "Iowa Security Documents") by the Issuers and the Guarantors, each of the Iowa Security Documents constitutes a valid and binding agreement of the Issuers and the Guarantors, enforceable against the Issuers and the Guarantors in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, fraudulent conveyance, equitable subordination, reorganization, readjustment of debt, moratorium or other similar laws affecting creditor's rights generally, (ii) the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity); or (iii) limitations on the availability or enforceability of the remedies of specific performance or injunctive relief contained in the Operative Documents, all of which may be limited by equitable principles or applicable laws, rules, regulations, court decisions and constitutional requirements. 2. Except as disclosed in the Offering Circular, there is no Proceeding before or by any Governmental Authority now pending or to the best of our knowledge, without special inquiry beyond that stated in the opinion, threatened either (a) that seeks to restrain, enjoin, prevent the consummation of or otherwise challenge any of the Operative Documents or any of the Transactions or (b) that could, singly or in the aggregate, have a Material Adverse Effect. 3. The terms of the Security Documents conform in all material respects to the descriptions thereof contained in the Offering Circular. The information in the Offering Circular under "Offering Circular Summary- The Company- Limited Competition," "Risk Factors--Risks Relating to Our Business--Competition," "Risk Factors--Risks Relating to Our Business--Requirement of a Certificate of Inspection," "Risk Factors--Risks Relating to Our Business--Governmental Regulation," "Risk Factors--Risks Relating to the Offering--Required Regulatory Redemption," "Risk Factors--Risks Relating to Our Business--Reauthorization of Gaming in Dubuque County, Iowa," "Risk Factors--Risks Relating to Our Business--Liquor Regulation," "Risk Factors--Risks Relating to Our Business--Environmental Matters," "Risk Factors--Risks Relating to Our Business--Taxation," "Risk Factors--Risks Relating to the Offering--Ability to Realize on Collateral," "The Transactions," "Business--Competition--Diamond Jo," "Business-- Properties," "Regulatory Matters" and "Certain Relationships and Related Transactions- Relationship with Dubuque Racing Association" to the extent that it constitutes matters of law, summaries of legal matters, summaries of securities, instruments, agreements or other documents, summaries of proceedings or legal conclusions, is complete and correct in all material respects. Exhibit 9B-1 4. None of the Issuers or the Guarantors is in violation of or is in default under, to the best of our knowledge, any Applicable Law, except for such violations or defaults that could not, singly or in the aggregate, have a Material Adverse Effect. 5. No authorization, approval, consent, license or order of, or filing, registration or qualification with, any Governmental Authority (including, without limitation, any Iowa gaming authority or regulatory body), other than have been obtained on or before the Closing Date, is required in connection with, or as a condition to, the execution, delivery or performance of the Operative Documents or for the consummation of the Transactions. 6. Neither the execution or delivery of any of the Operative Documents nor the consummation of any of the Transactions will conflict with, violate, constitute a breach of or a default under (with the passage of time or otherwise), require the consent of any person under (other than consents already obtained), or result in the imposition of a Lien on any properties of any of the Issuers or the Guarantors (other than as contemplated by the Offering Circular or the Security Documents) or an acceleration of indebtedness pursuant to, any Applicable Law (including, without limitation any applicable provision of law or regulation of the State of Iowa and Title 46 of the United States Code or the regulations thereunder (the "SHIP ACT")). 7. Each of the Issuers and the Guarantors possesses all Permits required or necessary to own or lease, as appropriate, and to operate its properties and to carry on its business as now or proposed to be conducted as set forth in the Offering Circular, except where the failure to obtain such Permits would not, individually or in the aggregate, have a Material Adverse Effect. Each of the Issuers and the Guarantors has fulfilled and performed all of its obligations with respect to such Permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such Permit. To the best of our knowledge, none of the Issuers or the Guarantors has received any notice of any proceeding relating to revocation or modification of any such Permit, except where such revocation or modification would not, individually or in the aggregate, have a Material Adverse Effect. The execution, delivery and performance by each of the Issuers and the Guarantors of the Operative Documents, to the extent they are a party thereto, and the consummation by each of the Issuers and the Guarantors of the Operative Transactions will not result in the condition, termination, suspension or revocation of any Permit of any of the Issuers and the Guarantors or result in any other impairment of the rights of the holder of any such Permit. 8. Each of DJL and the DRA possesses a validly authorized and issued riverboat gaming license from the State of Iowa and is in good standing with Iowa gaming regulators. 9. Neither the Trustee nor any present or future owner of a Note is or will be required to qualify to do business as a foreign corporation in the State of Iowa or to comply with the requirements of any foreign lender statute, or is or will become Exhibit 9B-2 subject to any income, franchise or similar tax imposed by the State of Iowa or any subdivision thereof, solely by reason of the execution, delivery and performance of the Operative Documents and the acquisition and retention of the Liens created and perfected under the Security Documents. 10. The Shore Mortgage creates in favor of the Trustee a valid and enforceable mortgage lien on, and security interest in, the right, title and interest of DJL in the Mortgaged Property (as defined in the Shore Mortgage), all as security for the payment of the Obligations (as such term is defined in the Shore Mortgage). The Shore Mortgage is in appropriate form for recording in the office of the County Recorder of Dubuque County, Iowa (the county in which the Land (as such term is defined in the Shore Mortgage) is located), both as a mortgage and as a "fixture filing" within the meaning of the Iowa UCC (as defined below). Upon such recordation, the mortgage Lien of the Shore Mortgage will be perfected with respect to DJL's right, title and interest in and to the Land and Improvements (as such terms is defined in the Shore Mortgage) and Proceeds (as such terms is defined in the Shore Mortgage), and no other filing or recording of the Shore Mortgage or any other instrument will be necessary to continue the perfection of the mortgage Lien of the Shore Mortgage. Upon such recordation, the security interest in Fixtures (as such term is defined in the Shore Mortgage), and Proceeds of Fixtures (as such term is defined in the Shore Mortgage) will be perfected, and no other filing or recording of the Shore Mortgage or any other instrument will be necessary to continue the perfection of such security interest of the Shore Mortgage in Fixtures and Proceeds of Fixtures. 11. The Security Agreement creates a valid security interest in favor of the Trustee in all right, title and interest of DJL in the Collateral under Article 9 of the Iowa Uniform Commercial Code (the "IOWA UCC"), all as security for the payment of the Secured Obligations (as such term is defined in the Security Agreement). The Financing Statement (as such term in defined in the Shore Mortgage), is in appropriate form for filing with the Iowa Secretary of State pursuant to the Iowa UCC. Upon the filing of the Financing Statement in the office of the Iowa Secretary of State, the security interest created by the Security Agreement in those items and types of such Collateral in which a security interest may be perfected by filing Iowa UCC financing statements with the Iowa Secretary of State will be perfected. 12. DJL is a citizen of the United States within the meaning of Section 2 of the Shipping Act of 1916, as amended, and is qualified to engage in operating its Vessel (as defined in the Ship Mortgage) in the coastwise trade of the United States. 13. DJL is the sole owner of the whole of the Vessel and has good and marketable title to the Vessel; DJL is eligible under the relevant laws of the United States to own and document the Vessel under the laws and flag of the United States of America, and to operate the Vessel in the trade in which it is authorized to engage; the Vessel is free and clear of any Lien except the Ship Mortgage and such Liens of the character permitted under the Ship Mortgage; the Vessel is documented in the name set forth opposite its official number specified in the Ship Mortgage. Exhibit 9B-3 14. Upon due filing of the Ship Mortgage with the United States Coast Guard National Vessel Document Center, the Ship Mortgage will constitute a valid first "preferred mortgage" on the Vessel within the meaning of the Ship Act in favor of the Trustee. No other filing, recordings, re-filing (periodic or otherwise) or other action will be necessary under the Ship Act to create, perfect or maintain the Ship Mortgage as a "preferred mortgage" within the meaning of the Ship Act. 15. No documentary, stamp or intangible tax, transfer tax or similar charge is payable under Iowa law in connection with the execution, delivery, filing, recordation or performance of the Security Documents in the State of Iowa. However, such counsel advises you that statutory filing fees are payable, calculated on a per document or per page basis, or a combination thereof. 16. The Security Documents contain terms and provisions necessary to permit the Trustee, following the occurrence of an Event of Default (as such term is defined in the Indenture), to exercise the rights and remedies commonly and customarily available to secured lenders in the State of Iowa holding mortgages and security interests in properties similar to the Mortgaged Property and Collateral under the laws of the State of Iowa in transactions involving substantial amounts of credit. 17. Certain of the Operative Documents provide that they are governed by the laws of the State of New York. An Iowa court or a federal court in Iowa applying Iowa principles of choice of law, in a properly presented case, would uphold the aforesaid choice-of-law provision. Moreover, in the event that the laws of the State of Iowa were applied to govern such Operative Documents, such Operative Documents will not violate any applicable laws (including usury laws) of the State of Iowa. 18. In our capacity as special counsel to the Issuers and the Guarantors, we have participated in conferences with representatives of the Issuers and the Guarantors, representatives of the Issuers' and the Guarantors' accountants, the Initial Purchaser's representatives and counsel for the Initial Purchaser, at which conferences the contents of the Preliminary Offering Circular and the Offering Circular and related matters were discussed, and, although we have not independently verified and are not passing upon and assume no responsibility for the accuracy, completeness or fairness of the statements contained in the Offering Circular (except as set forth above), nothing has come to our attention which causes us to believe that the Offering Circular, as of its date or on the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading (it being understood that we express no view with respect to the financial statements and notes thereto or other financial data included in the Offering Circular). Exhibit 9B-4 EXHIBIT 9(A)(X)(C) FORM OF OPINION OF MCGLINCHEY STAFFORD PLLC, LOUISIANA REGULATORY COUNSEL Corporate Opinions 1. Based on the Certificate of Status, OED is a limited liability company under the Louisiana Limited Liability Company Law. 2. Based upon our review of OED's stock record book, all of the outstanding membership interests in OED have been duly authorized and are validly issued. 3. OED has all requisite limited liability company power and authority to conduct and carry on its business and to own, lease, use and operate its properties and assets. 4. OED has all requisite limited liability company power and authority to execute, deliver and perform its obligations under each of the Documents to which it is a party and to consummate the transactions contemplated thereby. 5. (a) The Purchase Agreement has been duly authorized, validly executed and delivered by OED. (b) The Indenture has been duly authorized, validly executed and delivered by OED. (c) The Registration Rights Agreement and the transactions contemplated thereby have been duly authorized by OED, and the Registration Rights Agreement has been validly executed and delivered by OED. (d) The Guarantee to be endorsed on the Series A Notes by OED has been duly authorized, executed and delivered by OED. (e) The Guarantee to be endorsed on the Series B Notes by OED has been duly authorized by OED. (f) Each of the Security Documents to which OED is a party (including without limitation the creation, grant, recording and perfection of the Security Interests, the execution and filing of financing statements and the payment of any fees and taxes in connection therewith) and the transactions contemplated thereby (including, without limitation the creation, grant, recording and perfection of the Security Interests, the execution and filing of financing statements and the payment of any fees and taxes in connection therewith) have been duly authorized by OED, and each of the Security Documents to which OED is a party has been duly executed and delivered by OED. Although the Security Documents (excluding the Mortgage) to which OED is a party provide that each is governed by the laws of the State of Exhibit 9C-1 New York, and although the Mortgage provides that it shall be governed by the laws of the State of New York applicable to contracts made and performed in the State of New York but that the provisions of the Mortgage relating to the creation, perfection and enforcement of the Liens and Security Interests created by the Mortgage with respect to the Mortgaged Property (as defined in the Mortgage) shall be governed by the laws of the State of Louisiana to the extent necessary for the validity and enforcement thereof, in the event that Louisiana law were applied to govern such Security Documents (including the Mortgage in its entirety), each such Security Document is the legal, valid and binding obligation of OED, enforceable against OED in accordance with its terms. No opinion is expressed herein as to the effectiveness under Louisiana law of the choice of New York law in the Mortgage. (g) The Supplemental Indenture and each of the OED Note Repurchase Transactions has been duly authorized by OED, and the Supplemental Indenture has been validly executed and delivered by OED. (h) Each of [the Intercreditor Agreement] [the Applicable Intercreditor Agreements] and the transactions contemplated thereby and the Credit Facility Waivers] have been duly authorized by OED, and [the Intercreditor Agreement] [the Applicable Intercreditor Agreements] has been validly executed and delivered by OED. To our knowledge, OED is not in violation of its Organizational Documents. 6. If a court were to disregard the choice of law provisions of the Notes, the Indebtedness represented by the Notes, as the case may be, would not be found usurious under Louisiana law; provided, however, we point out that under the usury laws of the State of Louisiana it would be unlawful for any obligee under the Notes or the other Documents (assuming the usury laws of the State of Louisiana are applied to the Notes and the other Documents) to increase prospectively the fixed simple interest rate provided thereunder, following a default under any of said obligations, to a rate greater than (a) twenty-one percent (21%) per annum or (b) three (3) percentage points over the original rate fixed in any such obligation prior to default, whichever is greater, absent a written agreement by the obligor or obligors under such obligation entered into following such default. 7. None of the execution, delivery or performance of any of the Documents, nor the compliance with the terms and provisions thereof, nor the consummation of any of the transactions contemplated thereby will conflict with, violate, constitute a breach of or a default (with the passage of time or otherwise) under, result in the imposition of a Lien on any membership interests in or assets of OED (including the capital stock of Capital owned by OED) (except for Liens created by the Indenture, Liens created by the Security Documents and Permitted Liens) or result in an acceleration of indebtedness pursuant to, (i) the Organizational Documents, or (ii) any laws of the State of Louisiana. Exhibit 9C-2 8. To the best of our knowledge, no Permits from a Governmental Authority for OED are required under Louisiana law in connection with, or as a condition to, the execution, delivery or performance of any of the Documents or the consummation of any of the Transactions other than (i) such Permits as have been made or obtained on or prior to the Closing Date, which Permits are, to the best of our knowledge, in full force and effect on the Closing Date, (ii) such Permits, the failure of which to make or obtain would not, singly or in the aggregate have a Material Adverse Effect, and (iii) Permits from a Governmental Authority that may be required by any Gaming Laws (as defined under the Indenture). 9. To our knowledge, based solely upon a review of our litigation docket and without further inquiry, there is no Proceedings pending or, to our knowledge, threatened against OED either (i) in connection with, or that seeks to restrain, enjoin, prevent the consummation of or otherwise challenge any of the Documents or any of the Transactions, or (ii) that could, singly or in the aggregate, have a Material Adverse Effect. 10. The information in the Offering Circular under "Risk Factors--Risks Relating to this Offering--Lien Subordination," has been reviewed by us and, to the extent that it constitutes statements or matters of Louisiana law, it is correct in all material respects. 11. Although the Security Agreement provides that it is governed by the laws of the State of New York, in the event that the laws of the State of Louisiana were applied to govern the Security Agreement, the Security Agreement creates a valid security interest in favor of the Secured Party in that portion of the Collateral (as defined in the Security Agreement) constituting "accounts," "chattel paper," "documents", "investment property", "general intangibles," "instruments," "inventory" and "equipment" (as such terms are defined under Chapter 9 of the UCC), and any identifiable proceeds thereof. 12. If the laws of the State of Louisiana are applied, the provisions of the Security Agreement are sufficient to constitute authorization by OED of the filing of the financing statements for purposes of Chapter 9 of the UCC. 13. The provisions of the Mortgage in favor of U.S. Bank National Association, as Mortgagee, are sufficient to constitute authorization by OED of the filing of the fixture financing statement for purposes of Section 9-509 of the UCC. 14. The Financing Statement includes not only all of the types of information required by Section 9-502(a) of the UCC but also the types of information without which a Louisiana filing office may refuse to accept such financing statements pursuant to Section 9-516 of the UCC. 15. The Fixture Filing includes not only all of the types of information required by Section 9-502(a) and (b) of the Louisiana UCC but also the types of information without which a Louisiana filing office may refuse to accept such fixture Exhibit 9C-3 financing statements pursuant to Section 9-516 of the UCC. 16. Each of the Financing Statement and the Fixture Filing is in appropriate form for filing in the Filing Office. 17. Filing the Financing Statement in the Filing Office will perfect the security interest in the Filing Collateral in favor of the secured party described therein. 18. Filing of the Fixture Filing in the Filing Office will perfect the security interests in the fixtures as defined in the UCC in favor of the secured party described therein. 19. You have asked whether OED is a "registered organization" for purposes of Section 9-307 of the UCC. Section 9-102(a)(70) of the UCC states that a Louisiana limited liability company that is registered with the Louisiana Secretary of State is a registered organization for purposes of the UCC. Under Section 1304 (La. R.S. 12:1304) of the Louisiana Limited Liability Company Law, the Secretary of State of the State of Louisiana is required to maintain a public record showing OED to have been organized. Based on our review of the Certificate of Statute, we are of the opinion that under the Louisiana UCC and the Louisiana Limited Liability Company Law, OED is a registered organization. 20. The Mortgage creates (i) a valid mortgage lien on the portions of the Real Property, (ii) a valid pledge lien of the right to receive proceeds attributable to the insurance loss of such Mortgaged Property and (iii) a valid collateral assignment lien on the presently existing and anticipated future leases of such Real Property and the rents therefrom (collectively, the "Louisiana Mortgage Lien"), all in favor of the Trustee for the ratable benefit of the holders of the Notes, as security for the payment of the obligations of OED under the Indenture and the Notes up to the maximum amount of $[246,400,000.00]. The Mortgage is in appropriate form for recording in the immovable property records of a Louisiana parish. The Mortgage should be filed in the mortgage records of the Real Property Filing Office(s). Such recordation is the only action, recording or filing necessary to perfect the validity of the Louisiana Mortgage Lien described in clauses (i), (ii) and (iii) of this paragraph (j) and upon such recordation the Louisiana Mortgage Lien described in clauses (i), (ii) and (iii) of this paragraph (j) created by the Mortgage will be duly perfected. 21. There is no mortgage, mortgage recording, stamp, intangibles or other similar tax (other than normal filing and recording fees) required to be paid under the laws of the State of Louisiana or any political subdivision thereof in connection with the execution, delivery, recordation, filing or perfection, as applicable, of any of the Security Documents or the obligations evidenced or secured thereby. 22. The laws of the State of Louisiana do not require a lienholder to make an election of remedies where such lienholder holds security interests and liens in both the real estate and the personal property of the debtor or require a lienholder to take recourse first or solely against its collateral. Exhibit 9C-4 23. The Secured Party is not required to register as a foreign entity or qualify to do business in the State of Louisiana solely by reason of the Documents, the execution and delivery of the Documents and the acquisition and retention of the liens created and perfected under the Security Documents. The Secured Party will not become subject to any fees, charges or income, franchise or other tax imposed by the State of Louisiana solely by reason of the Operative Transactions. We have assumed for the purposes of the opinions expressed in this paragraph, that U.S. Bank National Association, in its capacity as Secured Party, (a)(i) is an entity of the type described in La. R.S. 12:302(K) and (ii) has limited (and will continue to limit) its activities in Louisiana to one or more of the activities enumerated in clauses (1) through (6) of La. R.S. 12:302(K) and (b) as a result enjoys the benefits of La. R.S. 12:302(L). 24. Except as provided in La. R.S. 30:2195.F(2), La. R.S. 30:2225.F(l), La. R.S. 30:2281 and La. Admin.Code 33:VI.305, with respect to the priority of the State of Louisiana or any political subdivision thereof upon remediation, neither the State of Louisiana nor any political subdivision thereof has any law pursuant to which a lien against any real property of OED superior to the lien created by the Mortgage could arise as a result of a violation of environmental laws or regulations of the State of Louisiana or any political subdivision thereof. No environmental law or regulation of the State of Louisiana or any political subdivision thereof would require any remedial or removal action or certification of nonapplicability as a condition to the granting of the Mortgage or the foreclosure or the sale of any property of OED located in the State of Louisiana. 25. In the event of a partial prepayment of the Obligations (as defined in the Mortgage) or of the Secured Obligations (as defined in the Security Agreement), such prepayment shall not affect the validity or enforceability of the Security Documents. 26. Although this opinion may be subject in all instances to the qualification that certain remedies (including without limitation, specific performance, injunction and certain indemnification or contribution provisions) provided for in the Security Documents may be qualified or limited by, or unavailable under, applicable law or public policy, the unavailability of such remedies will not prevent the Trustee, on behalf of the note holders, from realizing the practical benefits intended to be conferred by such documents, excluding the economic consequences of any delay that may result therefrom. 27. The Security Documents contain the terms and provisions necessary to enable the Secured Party, following a material default under the Security Documents, to foreclose judicially by ordinary process under the laws of the State of Louisiana, to the extent that the holder satisfies all procedural requirements applicable to such proceeding. Subject to customary qualifications. Exhibit 9C-5 Documents shall be defined as the Operative Documents in the Purchase Agreement and Transactions shall have the same meaning as in the Purchase Agreement. Exhibit 9C-6 Corporate Opinions - ------------------ 1. No Violation. To the best of our knowledge, and except as specified in Exhibit "1", after due inquiry, neither The Old Evangeline Downs, LLC nor Evangeline Downs Capital Corp is in violation of any Gaming Law. 2. Gaming and Racing Licenses. (a) OED has obtained and currently holds a valid license to conduct slot machine operations at the Racino (the "Racino Gaming License"). The Racino Gaming License was issued on January 21, 2003 and is for a term of five years, subject to the need to establish live racing at the new facility on or before January 21, 2005. Each of OED, its directors, officers, key personnel, partners, and persons holding a five percent or greater equity or economic interest in OED, the spouses of such directors, officers, key personnel, partners, and persons holding a five percent or greater equity or economic interest in OED has been found suitable by the Louisiana Gaming Control Board, except Natalie Schramm, CFO, whose application for suitability is pending. (b) OED has obtained and currently holds valid licenses to operate a pari-mutuel facility and to operate off-track wagering facilities, as defined in the Louisiana Horse Racing Act and pari-mutuel wagering laws, to conduct racing activities at the Racino and pari-mutuel wagering activities at its off-track betting parlors in Port Allen and New Iberia, Louisiana (each, a "Racing License"). The Racing License for the Racino was issued on August 18, 2002 and is for a term of ten years. The Racing Licenses for the off-track betting parlors in Port Allen and New Iberia were each issued on August 18, 2002, each for a term of ten years. (c) [Based on the March 24, 2004 letter of Hillary J. Crain, Chairman of the Louisiana Gaming Control Board (copies of which are attached hereto), the $230,000,000 bond offering contemplated by the Offering Circular has been exempted from the requirements of prior Gaming Control Board approval pursuant to the provisions of LAC 42:VII.2524 and LAC 42:VII.2523 and no further action of the Gaming Control Board is needed as of the Closing Date with respect to the approval of the bond offering.] To the extent we have participated in conferences with officers and other representatives of the Issuers and the Guarantors with respect to information provided to the Gaming Control Board upon which such letters were issued, and to the best of our knowledge, all information and documents provided to the Gaming Control Board by this firm and/or by the Issuers and the Guarantors were accurate and complete and contained no untrue statement of material fact nor omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading. 3. Permits. (a) No Permit is required from any Gaming Authority or under any Gaming Law or Racing Law (any such Permit, a "Gaming Permit" or a "Racing Permit," respectively) in connection with, or as a condition to, the execution, delivery or performance of any of the Operative Documents, the compliance with the terms and provisions thereof or the consummation of any of the Transactions, other than Gaming Permits and Racing Permits as have been made or obtained on or prior to the Closing Date, which Permits are in full force and effect on the Closing Date. (b) Each of the Regulated Persons has, and, to our knowledge after due inquiry, is in compliance with the terms and conditions of, all Gaming Permits and Racing Permits necessary Exhibit 9C-7 or advisable to own, lease, use and operate the properties and to conduct and carry on the businesses described in the Offering Circular. All currently issued Gaming Permits and Racing Permits are valid and in full force and effect. To our knowledge after due inquiry, no Regulated Person has received notice that any issuer is considering limiting, conditioning, suspending, modifying, revoking or not renewing any Gaming Permit or Racing Permit. Part A applications are currently pending for Peninsula Gaming, LLC and the Old Evangeline Downs, Corp. It is anticipated that PGP advisors and Cambridge Capital Corp will also be required to file Part A Suitability Applications. [Lets talk about what a Part A application is] (c) None of the execution, delivery or performance of any of the Operative Documents, nor the compliance with the terms and provisions thereof, nor the consummation of any of the Transactions will allow or result in, and, to our knowledge after due inquiry, no event has occurred which allows or results in, or after notice or lapse of time would allow or result in, the imposition of any material penalty under, or the revocation or termination of, any Gaming Permit or Racing Permit or any material impairment of the rights of the holder of any Gaming Permit or Racing Permit, except as noted on Exhibit "1" . 4. Proceedings. There is no Proceeding pending or, to our knowledge after due inquiry, threatened, before any Gaming Authority, under any Gaming Law or Racing Law or under any Gaming Permit or Racing Permit either (i) in connection with, or that seeks to restrain, enjoin, prevent the consummation of, or otherwise challenge, any of the Operative Documents or any of the Transactions, or (ii) that could, singly or in the aggregate, have a Material Adverse Effect. 5. Offering Circular. The information in the Offering Circular under the headings (i) "Risk Factors--Risks Relating to this Offering--Ability to Realize on Collateral," (ii) "Risk Factors--Risks Relating to Our Business--Licensing," (iii) "Risk Factors--Risks Relating to Our Business--Competition," (iv) "Risk Factors--Risks Relating to Our Business--Liquor Regulation," (v) "Risk Factors--Risks Relating to Our Business--Governmental Regulation," (vi) "Risk Factors--Risks Relating to this Offering-- Required Regulatory Redemption," (vii) Business--Properties--OTBs," and (viii) "Regulatory Matters" has been reviewed by us and, to the extent that it constitutes statements or matters of Gaming Law or Racing Law, summaries of legal matters relating to Gaming Law or Racing Law, summaries or descriptions of gaming documents or proceedings, or legal conclusions relating to Louisiana gaming or racing matters, it is correct in all material respects. We have participated in conferences with officers and other representatives of the Issuers and the Guarantors, counsel for the Issuers and the Guarantors, representatives of the Gaming Authorities, representatives of the Initial Purchaser and counsel for the Initial Purchaser, at which the contents of the Offering Circular and related matters were discussed. Although we are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Offering Circular and, except as set forth above, have made no independent check or verification thereof, nothing has come to our attention which lead us to believe that the Preliminary Offering Circular, as of its date, the Offering Circular, as of its date and as of the date hereof, and any amendment or supplement thereto, as of its date and as of the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact (except, in the case of the Preliminary Offering Circular, for pricing terms and other financial terms intentionally left blank) required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. Exhibit 9C-8 EXHIBIT "1" 1. On _________________, 2004 we received a SAR regarding the failure to notice the Board and failure to obtain appropriate approval of the second amendment of the $15,000,000 foothill facility. This matter is pending. 2. On ________________, 2004, we self disclosed failure to obtain approval for a credit purchase of the "Warner" track in the amount of $3.8,000,000 . This matter is subject to review by the Louisiana State Police. Exhibit 9C-9 EX-1.2 3 forms4_ex1-2wfb071404.txt EX. 1.2 - JOINDER OF PENINSULA GAMING 06-16-04 Exhibit 1.2 DIAMOND JO, LLC THE OLD EVANGELINE DOWNS CAPITAL CORP. $233,000,000 8 3/4% SENIOR SECURED NOTES DUE 2012 JOINDER TO THE PURCHASE AGREEMENT June 16, 2004 JEFFERIES & COMPANY, INC. 11100 Santa Monica Boulevard 10th Floor Los Angeles, California 90025 Ladies and Gentlemen: Reference is made to (a) the Purchase Agreement, dated March 25, 2004 (the "PURCHASE AGREEMENT"), by and among Diamond Jo, LLC, a Delaware limited liability company (the "COMPANY"), The Old Evangeline Downs Capital Corp., a Delaware corporation ("CAPITAL" and, together with the Company, the "ISSUERS"), the Guarantors listed on the signature pages thereto under the heading "Guarantors," and, with respect to Section 12 thereto only, Peninsula Gaming, LLC, a Delaware limited liability company (the "PARENT ISSUER") on the one hand, and Jefferies & Company, Inc. (the "INITIAL PURCHASER"), on the other hand, and (b) the Indenture, dated as of the Closing Date (the "INDENTURE"), by and among the Issuers and U.S. Bank National Association, as Trustee. Capitalized terms used herein but not defined herein shall have the respective meanings assigned to such terms in the Purchase Agreement. The Issuers have received the Requisite Regulatory Approvals for the Reorganization Transactions. The Purchase Agreement and the Indenture require that this Joinder to the Purchase Agreement (this "JOINDER") be executed and delivered as part of, and concurrently with the consummation of, the Reorganization Transactions. 1. Joinder. The Parent Issuer hereby agrees to become bound by the terms, conditions and other provisions of the Purchase Agreement with all attendant rights, duties and obligations stated therein, with the same force and effect as if originally named as an "Issuer" therein and as if the Parent Issuer had executed the Purchase Agreement on the date thereof. 2. GOVERNING LAW. THIS JOINDER SHALL BE CONSTRUED AND INTERPRETED, AND THE RIGHTS OF THE PARTIES SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING WITHOUT LIMITATION, SECTIONS 5 1401 AND 5 1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND RULE 327(b) OF NEW YORK CIVIL PRACTICE LAWS AND RULES. EACH ISSUER AND EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS JOINDER, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH ISSUER AND EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH ISSUER AND EACH GUARANTOR IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH ISSUER OR SUCH GUARANTOR, AS THE CASE MAY BE, AT ITS ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO THIS JOINDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY OTHER PARTY TO THIS JOINDER IN ANY OTHER JURISDICTION. 3. Counterparts. This Joinder may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 4. Amendments. No amendment or waiver of any provision of this Joinder, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto. 5. Headings. The headings in this Joinder are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. [signature pages follow] If the foregoing is in accordance with your understanding of this Joinder, kindly sign and return to us a counterpart thereof, whereupon this instrument will become a binding agreement between the Parent Issuer and the Initial Purchaser in accordance with its terms. Very truly yours, PENINSULA GAMING, LLC By:/s/M. BRENT STEVENS --------------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer Accepted and Agreed to: JEFFERIES & COMPANY, INC. By:/s/STEVE CROXTON --------------------- Name: Steve Croxton Title: Managing Director EX-2.1 4 forms4_ex2-1wfb071404.txt EX 2.1 - CERT OF DISSOLUTION - PGC Exhibit 2.1 CERTIFICATE OF DISSOLUTION OF PENINSULA GAMING CORPORATION PENINSULA GAMING CORPORATION, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY AS FOLLOWS: FIRST: The name of the Corporation is Peninsula Gaming Corporation. SECOND: The date the dissolution was authorized is April 16, 2004. THIRD: The dissolution of the Corporation has been duly authorized by its board of directors and stockholders in accordance with Sections 275(a) and (b) of the General Corporation Law of the State of Delaware. FOURTH: The following is a list of the names and addresses of the directors of the Corporation: NAME ADDRESS ---- ------- M. Brent Stevens c/o Peninsula Gaming Partners, LLC 400 East Third Street P.O. Box 1750 Dubuque, IA 52004-1750 Michael S. Luzich c/o Peninsula Gaming Partners, LLC 400 East Third Street P.O. Box 1750 Dubuque, IA 52004-1750 FIFTH: The following is a list of the names and addresses of the officers of the Corporation. NAME OFFICE ADDRESS ---- ------ ------- M. Brent Stevens President c/o Peninsula Gaming Partners, LLC 400 East Third Street P.O. Box 1750 Dubuque, IA 52004-1750 Michael S. Luzich Vice-President c/o Peninsula Gaming Partners, LLC 400 East Third Street P.O. Box 1750 Dubuque, IA 52004-1750 Natalie A. Schramm Treasurer c/o Peninsula Gaming Partners, LLC 400 East Third Street P.O. Box 1750 Dubuque, IA 52004-1750 IN WITNESS WHEREOF, the Corporation has caused this certificate of dissolution to be executed by its authorized directors this 17th day of June 2004. /s/ M. Brent Stevens -------------------------- Name: M. Brent Stevens Title: Director /s/ Michael S. Luzich -------------------------- Name: Michael S. Luzich Title: Director EX-3.3A 5 forms4_ex3-3awfb071404.txt EX. 3.3A - CERT OF FORM OF PEN CASIONS - 2-27-04 Exhibit 3.3A CERTIFICATE OF FORMATION OF PENINSULA CASINOS, LLC * * * * * * * 1. The name of the limited liability company is Peninsula Casinos, LLC. 2. The address of its registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801. The name of its registered agent at such address is The Corporation Trust Company, whose address is the same as in the immediately preceding sentence. IN WITNESS WHEREOF, the undersigned, being an authorized person (for the purposes of the Delaware Limited Liability Company Act) forming the limited liability company, has duly authorized, executed and delivered this Certificate of Formation on February 27, 2004. By: /s/SHARON N. PURCELL ---------------------------- Name: Sharon N. Purcell Title: Authorized Person EX-3.3B 6 forms4_ex3-3bwfb071404.txt EX 3.3B - CERT OF FORMATION - PEN CASINOS Exhibit 3.3B CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF FORMATION OF PENINSULA CASINOS, LLC This Certificate of Amendment is being duly executed and filed by the undersigned, as the authorized person for Peninsula Casinos, LLC, a Delaware limited liability company (the "Company"), in order to amend the Certificate of Formation of the Company, dated February 27, 2004, all as provided by Section 18-202 of the Delaware Limited Liability Company Act: 1. The name of the Company is Peninsula Casinos, LLC. 2. The Certificate of Formation of the Company is amended to delete the text of clause 1 in its entirety and insert the following text in lieu thereof: "1. The name of the limited liability company formed hereby is Peninsula Gaming, LLC." IN WITNESS WHEREOF, the undersigned has executed this certificate on behalf of the Company as of March 10, 2004. /s/ Sharon Purcell ---------------------------------- Sharon Purcell Authorized Person EX-3.4 7 forms4_ex3-4wfb071404.txt EX. 3.4 - OPERATING AGMT - PEN GAMING Exhibit 3.4 OPERATING AGREEMENT OF PENINSULA GAMING, LLC THIS OPERATING AGREEMENT (the "Agreement") of Peninsula Gaming, LLC ( the "Company") is made and entered into to be effective for all purposes as of June 14, 2004 by and between the Company and Peninsula Gaming Partners, LLC, as the sole Member of the Company (the "Sole Member"). R E C I T A L S: WHEREAS, the Company was formed on February 27, 2004, by filing a Certificate of Formation with the office of the Secretary of State of the State of Delaware, to fulfill the purposes and carry on the activities set forth herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, the undersigned hereby agrees that the operating agreement governing the Company shall be embodied by this Agreement as follows: 1. Formation. The Company was formed as a limited liability company under the Delaware Limited Liability Company Act, 6 Del. C. ss.ss.18-101, et. seq., (as amended from time to time, the "Delaware Act"). The Sole Member is hereby authorized to file and record any amendments to the Certificate of Formation of the Company and such other documents as may be required or appropriate under the Delaware Act or the laws of any other jurisdiction in which the Company may conduct business or own property. 2. Name and Principal Place of Business. (a) The name of the Company is Peninsula Gaming, LLC. The Sole Member may change the name of the Company or adopt such trade or fictitious names for use by the Company as the Sole Member may from time to time determine. All business of the Company shall be conducted under such name, and title to all assets or property owned by the Company shall be held in such name. (b) The Company shall maintain its principal business office at 400 East Third Street, P.O. Box 1750, Dubuque, Iowa 52004-1750, or at such other place or places as may be designated from time to time by the Sole Member. 3. Registered Agent and Registered Office. The registered agent of the Company (the "Registered Agent") shall be The Corporation Trust Company and the registered office of the Company (the "Registered Office") shall be located at 1209 Orange Street, Wilmington, Delaware 19801. The Registered Agent and the Registered Office of the Company may be changed from time to time by the Sole Member. 4. Term. The term of the Company is deemed to have commenced on the date the Certificate of Formation of the Company was filed with the Secretary of State of the State of Delaware and shall continue until terminated pursuant to the provisions of this Agreement. 5. Purpose. The principal purpose and business of the Company shall be to engage in any lawful act or activity for which a limited liability company may be organized under the Delaware Act, including, without limitation, either directly or indirectly by being a member, shareholder, partner or venturer of one or more entities, and to engage in one or more of the following activities: acquire, own, hold, service, manage, develop, operate, lease, finance, refinance, mortgage, market, promote, sell and otherwise deal real and personal property interests and conduct such other activities as may be necessary, advisable, convenient or appropriate to promote or conduct the business of the Company as set forth herein, including, but not limited to, entering into partnership agreements in the capacity of a general or a limited partner, becoming a member of a joint venture or a limited liability company, owning stock in corporations and the incurring of indebtedness and the granting of liens and security interests on the real and personal property of the Company; it being agreed that each of the foregoing is in the ordinary course of the Company's business. 6. Sole Member. The Sole Member, whose address is set forth in Section 18(a) of this Agreement, is the single and sole Member of the Company and shall be shown as such on the books and records of the Company. No transfer of a Membership Interest in the Company shall be effective, and no other Person shall be admitted as a Member of the Company, and no additional Interest in the Company shall be issued, and any purported transfer or issuance of a Membership Interest in the Company or admission as a Member of the Company shall be void ab initio and of no effect, unless (i) such transfer, issuance or admission is expressly permitted by this Agreement, (ii) the Sole Member approves such transfer, issuance or admission in its sole discretion, and (iii) prior to the effectiveness of such transfer, issuance or admission, the Company has received an opinion of counsel from a law firm nationally recognized in federal income tax matters to the effect that such transfer, issuance or admission will not cause the Company to be treated as an association or publicly traded partnership taxable as a corporation for federal income tax purposes. The restrictions on the transfer and issuance of Membership Interests in the Company in the immediately preceding sentence shall be equally applicable to any debt instrument or other Interest in the Company as to which an opinion of counsel from a law firm nationally recognized in federal income tax matters, which opinion is to the effect that such debt instrument or Interest will be treated as indebtedness for federal income tax purposes, was not rendered in connection with the issuance of such debt instrument or Interest. 7. Gaming Licenses. (a) The Company is required to notify the Iowa Racing and Gaming Commission ("IRGC") as to the identity of (and may be required to submit background information regarding) each director, corporate officer and owner, member, partner, joint venturer, trustee or any other Person, including any Member, who has a Beneficial Interest of five percent (5%) or more, direct or indirect, in Diamond Jo, LLC ("DJL") as long as DJL is a subsidiary of the Company. The IRGC may also request a list of Persons, including Members, holding a Beneficial Interest of less than five percent (5%) in DJL. (b) Members that are required to be licensed or found suitable by a Gaming Authority (including the IRGC) in order to own a Beneficial Interest in the Company or actively engage in the management of the Company shall timely submit all information and perform in a timely fashion any and all acts required to be submitted or performed in connection with obtaining a 2 Gaming License issued by such Gaming Authority (including the IRGC). All Members shall also timely submit all information and perform in a timely fashion any and all acts required to be submitted and performed in connection with the license required of the Company or any of its subsidiaries to operate an excursion gambling boat and of Members to hold Beneficial Interests in an Iowa gaming licensee. The Members acknowledge that this Agreement is subject to review by the IRGC and any other applicable Gaming Authority, and that the Company and/or any Member may be required to make available, upon written request by the IRGC or such Gaming Authority or any of their duly authorized representatives, information in respect of such Members, including background information of such Members and their respective directors, officers, owners, partners, joint venturers or trustees. To the extent that any Member receives such a request, such Member agrees to provide copies of such documents to the Company in order to respond to such request. If any Gaming Authority, including the IRGC, requires a record or beneficial owner of Membership Interests to be licensed, qualified or found suitable, such owner must apply for a Gaming License, qualification or finding of suitability within the time period specified by such Gaming Authority. Such owner shall pay all costs of obtaining such Gaming License, qualification or finding of suitability. In the event that any Member, or any of such Member's subcontractors, agents, or advisors, should fail to comply with the terms and provisions of this Agreement relating to the retention and production of documents or any requirement to be licensed, qualified or found suitable, such Member (1) agrees to indemnify and make whole the Company from any loss as the result of the refusal or non-compliance in maintaining or producing documents in accordance with the provisions herein and (2) acknowledges that the Membership Interests such Member holds will be subject to mandatory redemption by the Company as set forth in Section 16(d). 8. Management. (a) Generally. The business and affairs of the Company shall be managed by or under the authority of the Sole Member. The Sole Member shall have the power to do any and all acts necessary or convenient to or for the furtherance of the purposes described herein, including all powers, statutory or otherwise, possessed by members and managers under the Delaware Act or other applicable laws of the State of Delaware. The Sole Member shall cause the Company to comply with its obligations under this Agreement. (b) Officers. (i) Generally. The officers of the Company shall be appointed by the Sole Member and shall include a President, a Secretary, and a Chief Executive Officer. The Sole Member may also appoint such other officers and agents as the Sole Member shall deem appropriate. Any number of offices may be held by the same person. The officers of the Company shall only have the authority to bind the Company as the Sole Member from time to time shall prescribe. (ii) Election. Each officer of the Company shall be appointed annually by the Sole Member and shall serve at the pleasure of the Sole Member until the earlier of (A) such officer's death, retirement, resignation or removal, and (B) until such officer's successor has been duly elected and qualified. Any officer of the Company may be 3 removed by the Sole Member at any time, with or without cause, and a vacancy in any office shall be filled by the Sole Member. (iii) Standard of Care. Each officer of the Company shall perform his or her duties as an officer in good faith, in a manner he reasonably believes to be in the best interest of the Company, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. A person who so performs his or her duties shall not have any liability by reason or being or having been an officer of the Company. (iv) Chief Executive Officer. The Chief Executive Officer shall be the chief executive officer of the Company and shall have such functions, authority and duties as from time to time may be prescribed by the Sole Member. (v) President. The President shall be the president of the Company and shall have such functions, authority and duties as from time to time may be prescribed by the Sole Member. (vi) Secretary. The Secretary shall keep a record of all proceedings of the Sole Member. The Secretary shall have such other functions, authority and duties as from time to time may be prescribed by the Sole Member. The Secretary shall have custody of the seal of the Company and the Secretary (or in the absence of the Secretary, any Assistant Secretary) shall have authority to affix the same to any instrument requiring it, and when so affixed it may be attested by the signature of the Secretary or an Assistant Secretary. The Sole Member may give general authority to any other officer to affix the seal of the Company and to attest such affixing of the seal. (vii) Other Offices. Any officer who is elected or appointed from time to time by the Sole Member and whose duties are not specified in this Agreement shall perform such duties and have such powers as may be prescribed from time to time by the Sole Member. (c) Limited Liability. To the fullest extent permitted under applicable law, neither the Sole Member nor any officer of the Company shall be deemed to violate this Agreement or be liable, responsible or accountable in damages or otherwise to any other Member or officer or the Company for any action or failure to act, including but not limited to, under any theory of fiduciary duty or obligation, unless such violation or liability is attributable to the Sole Member or such officer's gross negligence, willful misconduct, bad faith or a continuing material breach of this Agreement. Without limiting the generality of the foregoing, the Sole Member and each such officer shall, in the performance of his or its duties, be fully protected in relying in good faith upon the records of the Company and upon information, opinions, reports or statements presented to the Sole Member or such officer by any other person or entity as to matters the Sole Member or such officer reasonably believes are within such other person's or entity's professional or expert competence and that has been selected with reasonable care by or on behalf of the Company. The Sole Member shall be deemed by the execution of this Agreement to acknowledge and agree that each officer, in accepting its duties hereunder, disclaims, to the 4 maximum extent permitted under applicable law, any fiduciary duty or obligation it may have to the Company and the Sole Member as a result of its acceptance of its duties, responsibilities and obligations hereunder. (d) Indemnification. To the fullest extent permitted under applicable law, the Company shall severally indemnify and hold harmless any person or entity (an "Indemnified Party") who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including any action by or in the right of the Company) by reason of or arising from any acts or omissions (or alleged acts or omissions) on behalf of the Company or in furtherance of the Interests of the Company arising out of the Indemnified Party's activities as a Member, officer, employee, trustee or agent of the Company against losses, damages or expenses (including attorneys' fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by such Indemnified Party in connection with such action, suit or proceeding and for which such Indemnified Party has not otherwise been reimbursed, so long as such Indemnified Party did not act in bad faith or in a manner constituting gross negligence or willful misconduct or materially breach this Agreement. The termination of any action, suit or proceeding by judgment, order, settlement or upon a plea of nolo contendere or its equivalent shall not of itself (except insofar as such judgment, order, settlement or plea shall itself specifically provide) create a presumption that the Indemnified Party acted in bad faith or in a manner constituting gross negligence or willful misconduct or materially breached this Agreement. 9. Capital Contributions and Percentage Interests. The Sole Member shall be admitted as the sole Member of the Company without making a contribution or being obligated to make a contribution to the Company. As the single and sole Member of the Company, the Sole Member shall be issued one-hundred (100) Membership Interests, and the initial Percentage Interest of the Sole Member shall be one-hundred percent (100%). 10. Additional Capital Contributions. If, at any time or from time to time, additional funds are required by the Company to meet the obligations or needs of the Company, including, without limitation, to satisfy any operating deficit, and there are not sufficient reserves held by the Company or available cash flow, the Sole Member may (but shall not be obligated to) make further capital contributions in the amount determined in the Sole Member's sole discretion. 11. Tax Matters. (a) The undersigned intends for the Company to be disregarded as an entity separate from its owner for federal income tax purposes, pursuant to Treasury Regulation Section 301.7701-3. However, if it is determined that the Company is a partnership for federal tax purposes, this Agreement shall be amended to provide for allocation provisions and other provisions necessary and consistent with partnership status. (b) To the extent applicable, the Sole Member shall act as the tax matters partner within the meaning of Section 6231(a)(7) of the Internal Revenue Code of 1986, as amended from time to time (the "Code"). 5 (c) Except as otherwise provided in this Agreement, all elections required or permitted to be made by the Company under any applicable tax law shall be made by the Sole Member in its sole discretion. Notwithstanding anything to the contrary in this Agreement, neither the Company, the Sole Member, any officer, employee or agent of the Company, nor any other person shall elect to treat the Company as an association taxable as a corporation for U.S. federal, state or local income tax purposes. 12. Distributions. (a) Tax Distributions. To the extent permitted by applicable law and the agreements or instruments governing any indebtedness of the Company, the Company shall for each fiscal year distribute to the Sole Member, cash in an amount equal to the portion of distributions the Sole Member is required to make to its members pursuant to Section 9.4(a) of the Sole Member's Amended and Restated Operating Agreement, dated as of July 15, 1999 (as amended from time to time), attributable to the Sole Member's interest in the Company. Each such distribution to the Sole Member shall be referred to in this Agreement as a "Tax Distribution". The Company shall make each Tax Distribution promptly upon demand from the Sole Member, such demand specifying the amount of such Tax Distribution. (b) Distributions. Distributions other than Tax Distributions shall be made to the Sole Member at the times and in the aggregate amounts determined by the Sole Member. 13. Dissolution and Termination. (a) The Company shall be dissolved and its business wound up upon the earlier to occur of any of the following events: (i) December 31, 2050, unless continued prior to such date by the written consent of the Sole Member and by amendment to the Certificate of Formation of the Company; (ii) at the election of the Sole Member; (iii) any event that makes it unlawful for the business of the Company to be carried on by the Sole Member; or (iv) any other event causing a dissolution of a limited liability company under the Delaware Act. (b) Except as otherwise provided in this Agreement, upon dissolution of the Company, the business and affairs of the Company shall be wound up as provided in this Section 13(b). The Sole Member shall wind up the Company's affairs. The liquidation shall take place without the appointment of a liquidator. Upon winding up the Company, the assets of the Company shall be distributed as follows: 6 (i) first, to creditors in satisfaction of liabilities of the Company (whether by payment or by establishment of reserves as determined by the Sole Member in its sole discretion); and (ii) thereafter, to the Sole Member. 14. Liability of the Sole Member. Except as provided by law or as specifically provided otherwise herein, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and the Sole Member shall not be obligated personally for any such debt, obligation or liability of the Company solely by reason of being the Sole Member. Except as provided by law or as specifically provided otherwise herein, the liability of the Sole Member shall be limited to the amount of capital contributions, if any, required to be made by the Sole Member in accordance with the provisions of this Agreement, but only when and to the extent the same shall become due pursuant to the provisions of this Agreement. 15. Books, Records, Accounting And Reports. (a) Books and Records. The Company shall maintain, or cause to be maintained, in a manner customary and consistent with good accounting principles, practices and procedures, a comprehensive system of office records, books and accounts (which records, books and accounts shall be and remain the property of the Company) in which shall be entered fully and accurately each and every financial transaction with respect to the ownership and operation of the property of the Company. Such books and records of account shall be prepared and maintained at the principal place of business of the Company or such other place or places as may from time to time be determined by the Sole Member. The Sole Member or its duly authorized representative shall have the right to inspect, examine and copy such books and records of account at the Company's office during reasonable business hours. A reasonable charge for copying books and records may be charged by the Company. (b) Accounting and Fiscal Year. The books of the Company shall be kept on the accrual basis and the Company shall report its operations for tax purposes on the accrual method. The fiscal year of the Company shall end on December 31 of each year, unless a different fiscal year shall be required by the Code. (c) Company Accountant. The Company shall retain as the regular accountant and auditor for the Company (the "Company Accountant") the accounting firm designated by the Sole Member. The fees and expenses of the Company Accountant shall be a Company expense. (d) Reserves. The Sole Member may, subject to such conditions as it shall determine, establish reserves for the purpose and requirements as they may deem appropriate. 7 16. Gaming Control. (a) Applicability. This Agreement and each of the terms and provisions contained herein are governed by and subject to all applicable Gaming Laws. (b) Licensing. Any Member of the Company (including their respective officers, directors, partners, managers, employees and equity interest holders) required by any Gaming Authority to hold a Gaming License required by any applicable Gaming Laws shall first procure and thereafter maintain in full force and effect a Gaming License before such Member shall exercise influence over the conduct of the gaming operations of the Company or DJL. (c) Sale, Assignment, Transfer, Pledge or Other Disposition. Notwithstanding any provision to the contrary in this Agreement, the transfer or issuance of Membership Interests or the transfer, grant or issuance of options or other securities of the Company convertible into or exchangeable for Membership Interests of the Company ("Convertible Securities") shall be ineffective unless the transferee or the holder of such Interests or securities obtains applicable Gaming License or it is determined by the applicable Gaming Authority, that no such applicable Gaming License need be obtained in connection with such transfer, grant or issuance. (d) Required Regulatory Redemptions or Repurchases. The Company's Membership Interests and Convertible Securities shall each be subject to redemption or repurchase as set forth below if: (i) the holder of such Interests or securities is required by any Gaming Authority to divest itself of such Interests, (ii) the holder's ownership of such Interests or securities, as determined by the Company in its reasonable good faith judgement, could reasonably be expected to result in the revocation of or imposition of burdensome terms or conditions on, interfere with, threaten, delay the issuance of or otherwise impair, in each case, in any material respect any Gaming License of the Company or DJL, (iii) the holder of such Interests or securities is licensed to hold Interests in the Company and such Gaming License is subsequently revoked, or such holder fails to have any Gaming License required for it to be a Member of the Company and such failure continues for thirty (30) consecutive days, (iv) the holder of such Interests or securities is found not to be suitable (or found to be unsuitable) or to otherwise qualify under any applicable Gaming Law and the Company determines, in its reasonable good faith judgement, that such unsuitability or inability to be qualified could be reasonably expected to prevent or materially impair the acquisition or retention by it or DJL of any Gaming License, or (v) the holder of such interest or security fails to comply with its obligations under Section 7 hereof. Upon the occurrence of any of the events described in clauses (i) through (v) above with respect to a Member (hereinafter, an "Unsuitable Member"), the Company shall have the right to 8 purchase (which right shall be assignable by the Company), upon five (5) days notice to such Unsuitable Member and for ten (10) days thereafter, the Membership Interests or Convertible Securities of such Unsuitable Member for an amount equal to the lesser of (a) such Unsuitable Member's capital contribution in respect of such Membership Interests or Convertible Securities or (b) the current fair market value of such Membership Interests or Convertible Securities. The purchase price to be paid by the Company to an Unsuitable Member may be paid, at the option of the Company, in cash or a promissory note with principal and interest payable annually and amortized over not more than seven (7) years and bearing interest at a rate per annum equal to the sum of the prime lending rate published by the Wall Street Journal at the date of redemption plus two percent (2%). No Unsuitable Member shall be entitled to any compensation from any Member of the Company, or any affiliate of any of them, by reason of the redemption or repurchase of such Membership Interests or Convertible Securities. (e) Revocability of License. The Sole Member and any future Members agree that any license, determination of suitability or other approval issued to any Member or other Person in connection with the operation of the business of the Company or any of its subsidiaries or this Agreement shall be deemed to be a revocable privilege and no holder thereof shall be deemed to have acquired any vested rights therein or thereunder. (f) Restrictive Legends. In addition to any other restrictive legend that may be imposed on any certificate evidencing ownership of Membership Interest or Convertible Securities, each such certificate shall bear the following legends substantially in the form set forth below: THE SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION OF ANY OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN REGULATORY RESTRICTIONS IMPOSED BY GAMING AUTHORITIES HAVING JURISDICTION OVER THE BUSINESS OPERATIONS OF THE COMPANY, INCLUDING, WITHOUT LIMITATION, THE IOWA RACING AND GAMING COMMISSION, THE LOUISIANA GAMING CONTROL BOARD AND THE LOUISIANA STATE RACING COMMISSION. AS SET FORTH IN THE COMPANY'S OPERATING AGREEMENT, ANY VIOLATION OF THESE RESTRICTIONS MAY RESULT IN, AMONG OTHER THINGS, A REDEMPTION OR REPURCHASE OF SUCH SECURITIES. IF AT ANY TIME SUCH GAMING AUTHORITIES FIND THAT AN OWNER OF SUCH SECURITIES IS UNSUITABLE TO CONTINUE TO HAVE AN INVOLVEMENT IN GAMING IN THE STATE OF IOWA OR LOUISIANA OR ANY OTHER JURISDICTION IN WHICH THE COMPANY OPERATES ITS BUSINESS, SUCH OWNER MUST DISPOSE OF SUCH SECURITIES AS PROVIDED BY THE LAWS OF THE STATE OF IOWA AND THE REGULATIONS OF THE IOWA RACING AND 9 GAMING COMMISSION THEREUNDER AND ALL OTHER APPLICABLE LAWS. THE PURPORTED SALE, ASSIGNMENT, TRANSFER, PLEDGE, OR OTHER DISPOSITION OF ANY SECURITY OR SECURITIES ISSUED BY A CORPORATION THAT HOLDS A LICENSE IS CONDITIONAL AND INEFFECTIVE UNTIL APPROVED BY THE LOUISIANA GAMING CONTROL BOARD. IF THE BOARD FINDS THAT THE OWNER OF THIS SECURITY DOES NOT MEET THE QUALIFICATION REQUIREMENTS OF THE ACT, THEN THE BOARD MAY SUSPEND OR REVOKE THE LICENSE OR THE BOARD MAY CONDITION THE LICENSE REQUIRING THAT THE DISQUALIFIED PERSON OR PERSONS MAY NOT: A. RECEIVE DIVIDENDS OR INTEREST ON THE SECURITIES OF THE CORPORATION; B. EXERCISE DIRECTLY OR THROUGH A TRUSTEE OR NOMINEE, A RIGHT CONFERRED BY THE SECURITIES OF THE CORPORATION; C. RECEIVE REMUNERATION FROM THE LICENSEE; D. RECEIVE ANY ECONOMIC BENEFIT FROM THE LICENSEE; E. CONTINUE IN AN OWNERSHIP OR ECONOMIC INTEREST IN THE LICENSEE. (g) Acceptance of Gaming Law Restrictions. The Members hereby acknowledge and agree to accept their respective Membership Interest or Convertible Securities subject to the restrictions contained in this Section 16 for so long as such restrictions are required by applicable Gaming Laws. (h) Gaming Taxes, Assessments, Privilege Fees, Etc. The Company shall pay all gaming taxes, assessments, privilege fees and similar charges required to be paid to any state, county, city, town, municipality or any other government entity thereof arising out of the gaming operations of the Company. 17. Definitions. (a) As used in this Agreement, the following terms shall have the meanings given to them below, unless the context requires otherwise. "Beneficial Interest" of any person means all of the direct or indirect forms of ownership or control, voting power or investment power of such person, whether held through a contract, lien, lease, partnership, stockholding, syndication, joint venture, understanding, relationship, present or reversionary right, title or interest or otherwise. 10 "Gaming Authority" means any agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of the United States or foreign government, any state, province or any city or other political subdivision or otherwise, whether now or hereafter in existence, or any officer or official thereof, and any other agency with authority to regulate any gaming operation (or proposed gaming operation) owned, managed or operated by the Company, the Sole Member or any of their respective subsidiaries. "Gaming Laws" means the gaming laws of any jurisdiction or jurisdictions to which the Company or any of its subsidiaries is, or may at any time become, subject. "Gaming License" means every material license, material franchise, material registration, material qualification, findings of suitability or other material approval or authorization required to own, lease, operate or otherwise conduct or manage riverboat, dockside or land-based gaming activities in any state or jurisdiction in which the Company or any of its subsidiaries conducts business, and all applicable liquor licenses. "Interest" means, with respect to any Person, the Beneficial Interest or other interest of such Person in the Company at any particular time under this Agreement, including the right of such Person to any and all benefits to which such Person may be entitled as provided in this Agreement, together with the obligations of such Person to comply with all the terms and provisions of this Agreement. "Member" means the Sole Member and any other Person who is admitted as a member of the Company in accordance with this Agreement and the Delaware Act. "Membership Interest" means, as to any Member, such Member's Interest. "Percentage Interest" of a Member of the Company shall mean (i) the number of Membership Interests owned by such Member divided by (ii) the aggregate number of outstanding Membership Interests. "Person" means any individual, partnership, corporation, limited liability company, trust, estate, association, unincorporated organization or other entity or association. 18. Miscellaneous. (a) Notices. All notices, demands, consents, approvals, requests or other communications which any party to this Agreement may desire or be required to give hereunder (collectively, "Notices") shall be in writing and shall be given by (i) personal delivery, (ii) facsimile transmission or (iii) a nationally recognized overnight courier service, fees prepaid, addressed to such party at the address set forth opposite its name of the signature page of this Agreement, with a copy to: 11 If to the Company, to: Peninsula Gaming, LLC c/o Peninsula Gaming Partners, LLC 400 East 3rd Street P.O. Box 1750 Dubuque, IA 52004-1750 Facsimile No.: (563) 690-2190 with a copy to: Mayer, Brown, Rowe & Maw LLP 1675 Broadway New York, NY 10019 Attention: Ronald S. Brody Facsimile No.: (212) 262-1910 If to the Sole Member, to: Peninsula Gaming Partners, LLC c/o Jefferies & Company, Inc. 11100 Santa Monica Blvd. 10th Floor Los Angeles, CA 90025 Attention: M. Brent Stevens Facsimile No.: (310) 515-5165 - and - Peninsula Gaming Partners, LLC c/o Cambridge Capital Advisors LLC 7173 Mission Hills Drive Las Vegas, NV 89113 Attention: Michael S. Luzich Facsimile No.: (702) 247-6822 with a copy to: Mayer, Brown, Rowe & Maw LLP 1675 Broadway New York, NY 10019 Attention: Ronald S. Brody Facsimile No.: (212) 262-1910 The Sole Member may designate another addressee (and/or change its address) for Notices hereunder by a Notice given pursuant to this Section 18(a). A Notice sent in compliance with the provisions of this Section 18(a) shall be deemed given on the date of receipt. (b) Successors and Assigns. This Agreement shall be binding upon the parties hereto and their respective executors, administrators, legal representatives, heirs, successors and assigns, and shall inure to the benefit of the parties hereto and, except as otherwise provided herein, their respective executors, administrators, legal representatives, heirs, successors and assigns. 12 (c) Severability. In case any one or more of the provisions contained in this Agreement or any application thereof shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and other application thereof shall not in any way be affected or impaired thereby. (d) Amendments. This Agreement may be amended or modified only by a written instrument executed by the Sole Member. (e) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed wholly within that State. (f) Captions. All titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit, extend, or describe the scope of this Agreement or the intent of any provision in this Agreement. (g) Creditors Not Benefited. Nothing contained in this Agreement is intended or shall be deemed to benefit any creditor of the Company or the Sole Member, and no creditor of the Company shall be entitled to require the Company or the Sole Member to solicit or accept any capital contribution for the Company or to enforce any right which the Company or the Sole Member may have under this Agreement. (h) Indemnification of Organizer. The Sole Member hereby agrees to indemnify and hold harmless the Person or Persons who signed the Company's Certificate of Formation, as filed with the Secretary of State of the State of Delaware (the "Authorized Person") for all other acts taken by the Authorized Person as authorized person. The Sole Member agree to pay all costs and expenses incurred by the Authorized Person in organizing the Company including any claims brought against the Authorized Person and any damages, court costs, attorneys fees and other costs related to the Authorized Person's defense of any claim brought or judgment rendered against the Authorized Person for the Authorized Person's actions as authorized person. * * * 13 IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date set forth in the introductory paragraph hereof. PENINSULA GAMING PARTNERS, LLC By:/s/ M. BRENT STEVENS ------------------------------ Name: M. Brent Stevens Title: Chief Executive Officer EX-3.5B 8 forms4_ex3-5bwfb071404.txt EX. 3.5B - CERT OF AMEND TO CERT OF INC - OED Exhibit 3.5B CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF THE OLD EVANGELINE DOWNS CAPITAL CORP. It is hereby certified that: 1. The name of the corporation is The Old Evangeline Downs Capital Corp. (the "Corporation"). 2. The Certificate of Incorporation of the Corporation is amended to delete ARTICLE FIRST thereof and substitute in lieu of said ARTICLE FIRST the following new ARTICLE FIRST: FIRST: The name of the Corporation is Peninsula Gaming Corp. (the "Corporation"). 3. The amendment of the Certificate of Incorporation herein certified has been duly adopted and written consent has been given in accordance with the provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, I have hereunto set my signature this 17th day of June, 2004. By: /s/ M. Brent Stevens ----------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer EX-4.1 9 forms4_ex4-1wfb071404.txt EX. 4.1 - SPECIMEN - PEN GAMING Exhibit 4.1 - -------------------------------------------------------------------------------- - ------ ------- NUMBER SHARES - ------ ---------------------------------------------------- ------- 0 Incorporated under the laws of the State of Delaware - ------ ---------------------------------------------------- ------- ---------------------- Peninsula Gaming Corp. ---------------------- - -------------------------------------------------------------------------------- Total Authorized Issue See Reverse for 1,000 Shares $0.10 Par Value Certain Common Stock Definitions - -------------------------------------------------------------------------------- SPECIMEN This is to Certify that ___________________ is the owner of _____________________ fully paid and non-assessable shares of the above Corporation transferable only on the books of the Corporation by the holder thereof in person or by a duly authorized Attorney upon surrender of this Certificate properly endorsed. Witness, the seal of the Corporation and the signatures of its duly authorized officers. Dated - -------------------------------- ------------------------------ - -------------------------------------------------------------------------------- COPYRIGHT 1999 CORPEX BANKNOTE CO., BAY SHORE N.Y. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT -- ______________ Custodian ______________ (Cust) (Minor) under Uniform Gifts to Minors Act _____________ (State) Additional abbreviations may also be used though not in the above list. For value received ___________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ___________________________________________ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Shares represented by the within Certificate, and do hereby irrevocable constitute and appoint _____________________ Attorney to transfer the said Shares on the books of the within named Corporation with full power of substitution in the premises. Dated _________________________ In presence of _________________________________ NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. The purported sale, assignment, transfer, pledge, or other disposition of any security or securities issued by a corporation that holds a license is conditional and ineffective until approved by the Louisiana Gaming Control Board. If the board finds that the owner of this security does not meet the qualification requirements of the act, then the board may suspend or revoke the license or the board may condition the license requiring that the disqualified person or persons may not: a. receive dividends or interest on the securities of the corporation; b. exercise directly or through a trustee or nominee, a right conferred by the securities of the corporation; c. receive remuneration from the licensee; d. receive any economic benefit from the licensee; e. continue in an ownership or economic interest in the licensee. THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NO SUCH SECURITY NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. EX-4.3B 10 forms4_ex4-3bwfb071404.txt EX. 4.3B - SUPPLEMENTAL INDENTURE Exhibit 4.3B SUPPLEMENTAL INDENTURE This Supplemental Indenture, dated as of March 25, 2004 (this "Supplemental Indenture"), is made by and among The Old Evangeline Downs, L.L.C., a Louisiana limited liability company (the "Company"), The Old Evangeline Downs Capital Corp., a Delaware corporation and a subsidiary of the Company ("OED Corp." and together with the Company, the "Issuers"), and U.S. Bank National Association, as trustee under the Indenture referred to herein (the "Trustee"). W I T N E S S E T H: WHEREAS, the Issuers have heretofore executed and delivered to the Trustee an indenture, dated as of February 25, 2003 (the "Indenture"), providing for the issuance of an aggregate principal amount of $123.2 million of 13% Senior Secured Notes due 2010 with Contingent Interest (the "Notes"); WHEREAS, the Issuers desire to amend certain provisions of the Indenture as set forth herein, and they have received the consent of the Holders of a majority in principal amount of the Notes currently outstanding to such amendments; WHEREAS, Section 9.2 of the Indenture permits the Indenture to be amended by a supplemental indenture with the consent of the Holders of at least a majority in principal amount of the Notes outstanding, subject to certain enumerated exceptions; WHEREAS, the parties hereto are entering into this Supplemental Indenture to amend or, as the case may be, delete certain provisions contained in Articles 4, 5, 6 and 10 of the Indenture (the "Amendments"); WHEREAS, in addition, the Amendments will (i) delete all "Events of Default" other than the failure to pay principal, premium or interest on the Notes, (ii) delete those definitions from the Indenture that are used only in provisions that are eliminated as a result of the Amendments and (iii) revise cross-references to provisions in the Indenture that have been deleted as a result of the Amendments; WHEREAS, pursuant to Section 9.2 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture; and WHEREAS, all conditions set forth in the Indenture for the execution and delivery of this Supplemental Indenture have been complied with. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Issuers and the Trustee mutually covenant and agree for the benefit of the Holders of the Notes as follows: SECTION 1. Capitalized Terms. Capitalized terms used herein without definition shall have the respective meanings ascribed to them in the Indenture. SECTION 2. Removal of Certain Provisions and Defined Terms. The texts of Article V, Sections 4.3 - 4.23, 4.25, 4.26, and 10.1 - 10.7, and subsections 6.1(c)-(l) of the Indenture are hereby deleted in their entireties together with any references thereto in the Indenture and are replaced in each case with the phrase "Intentionally Omitted." The definitions of any and all terms that are defined in Section 1.1 of the Indenture but used only in one or more of the Articles or Section referenced in the immediately preceding sentence of this paragraph are deleted in their entireties. SECTION 3. Operation of Amendments. Upon the execution and delivery of this Supplemental Indenture by the parties hereto, this Supplemental Indenture will become operative but the Amendments will not become effective until a majority in outstanding principal amount of the Notes are validly tendered and accepted pursuant to and in accordance with the terms and conditions of the tender offer and consent solicitation as set forth in the Offer to Purchase and Consent Solicitation Statement dated March 9, 2004 (the "Statement"). SECTION 4. Miscellaneous. Section 4.1 Incorporation of the Indenture. All the provisions of this Supplemental Indenture shall be deemed to be incorporated in, and made a part of, the Indenture; and the Indenture, as supplemented and amended by this Supplemental Indenture, shall be read, taken and construed as one and the same instrument. Section 4.2 Application of Supplemental Indenture. The provisions and benefits of this Supplemental Indenture shall be effective with respect to the Notes. Section 4.3 Counterparts. The Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Section 4.4 Successors and Assigns. All agreements in this Supplemental Indenture by each of the Issuers shall bind its successors and assigns, whether so expressed or not. Section 4.5 Severability Clause. In case any provision in this Supplemental Indenture shall be declared invalid, illegal or unenforceable by a court of competent jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 4.6 Benefits of Supplemental Indenture. Nothing in this Supplemental Indenture, express or implied, shall give to any person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Supplemental Indenture. Section 4.7 Regarding the Trustee. The Trustee shall not be responsible for the correctness of the recitals herein, and makes no representation as to the validity or the sufficiency of this Supplemental Indenture. The Trustee shall, in connection with this Supplemental Indenture, be entitled to all of the benefits of all of the rights, privileges, immunities and indemnities of the Trustee provided for in the Indenture. 2 SECTION 5. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(B). SECTION 6. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. 3 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the day first written above. THE OLD EVANGELINE DOWNS, L.L.C. By:/s/NATALIE A. SCHRAMM ------------------------------ Name: Natalie A. Schramm Title: Chief Financial Officer THE OLD EVANGELINE DOWNS CAPITAL CORP. By:/s/NATALIE A. SCHRAMM ----------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE By:/s/BENJAMIN J. KRUEGER --------------------------------------- Name: Benjamin J. Krueger Title: Trust Officer EX-4.4A 11 forms4_ex4-4awfb071404.txt EX. 4.4A - INDENTURE EXHIBIT 4.4A ================================================================================ DIAMOND JO, LLC AND THE OLD EVANGELINE DOWNS CAPITAL CORP. (as Issuers) $233,000,000 8 3/4% Senior Secured Notes due 2012 ------------- INDENTURE Dated as of April 16, 2004 ------------- U.S. BANK NATIONAL ASSOCIATION (as Trustee) ================================================================================ TABLE OF CONTENTS PAGE ---- ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE...........................1 SECTION 1.1 DEFINITIONS..................................................1 SECTION 1.2 OTHER DEFINITIONS...........................................33 SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT...........34 SECTION 1.4 RULES OF CONSTRUCTION.......................................35 ARTICLE II THE NOTES..........................................................35 SECTION 2.1 FORM AND DATING.............................................35 SECTION 2.2 EXECUTION AND AUTHENTICATION................................36 SECTION 2.3 REGISTRAR, PAYING AGENT AND DEPOSITARY......................36 SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.........................37 SECTION 2.5 HOLDER LISTS................................................37 SECTION 2.6 TRANSFER AND EXCHANGE.......................................37 SECTION 2.7 REPLACEMENT NOTES...........................................52 SECTION 2.8 OUTSTANDING NOTES...........................................52 SECTION 2.9 TREASURY NOTES..............................................53 SECTION 2.10 TEMPORARY NOTES.............................................53 SECTION 2.11 CANCELLATION................................................53 SECTION 2.12 DEFAULTED INTEREST..........................................53 SECTION 2.13 CUSIP NUMBERS...............................................54 SECTION 2.14 ISSUANCE OF ADDITIONAL NOTES................................55 ARTICLE III REDEMPTION........................................................55 SECTION 3.1 NOTICES TO TRUSTEE..........................................55 SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED...........................55 SECTION 3.3 NOTICE OF REDEMPTION........................................55 SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION..............................56 SECTION 3.5 DEPOSIT OF REDEMPTION PRICE.................................57 SECTION 3.6 NOTES REDEEMED IN PART......................................57 SECTION 3.7 OPTIONAL REDEMPTION.........................................57 SECTION 3.8 REGULATORY REDEMPTION.......................................58 SECTION 3.9 NO MANDATORY REDEMPTION.....................................58 ARTICLE IV COVENANTS..........................................................59 SECTION 4.1 PAYMENT OF NOTES............................................59 SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY.............................59 SECTION 4.3 SEC REPORTS AND REPORTS TO HOLDERS..........................60 SECTION 4.4 COMPLIANCE CERTIFICATE......................................60 SECTION 4.5 TAXES.......................................................60 SECTION 4.6 STAY, EXTENSION AND USURY LAWS..............................61 SECTION 4.7 LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED EQUITY INTERESTS...........................61 SECTION 4.8 LIMITATION ON LIENS.........................................64 PAGE ---- SECTION 4.9 LIMITATION ON RESTRICTED PAYMENTS...........................64 SECTION 4.10 LIMITATION ON RESTRICTIONS ON SUBSIDIARY DIVIDENDS..........67 SECTION 4.11 ADDITIONAL COLLATERAL.......................................69 SECTION 4.12 LIMITATION ON TRANSACTIONS WITH AFFILIATES..................69 SECTION 4.13 LIMITATION ON ASSET SALES...................................70 SECTION 4.14 RESTRICTION ON SALE AND ISSUANCE OF SUBSIDIARY STOCK........72 SECTION 4.15 REPURCHASE UPON A CHANGE OF CONTROL.........................73 SECTION 4.16 SUBSIDIARY GUARANTORS.......................................74 SECTION 4.17 LIMITATION ON STATUS AS INVESTMENT COMPANY..................74 SECTION 4.18 MAINTENANCE OF PROPERTIES AND INSURANCE.....................74 SECTION 4.19 CORPORATE EXISTENCE.........................................75 SECTION 4.20 RESTRICTIONS ON ACTIVITIES OF CAPITAL.......................75 SECTION 4.21 ENTITY CLASSIFICATION.......................................75 SECTION 4.22 RULE 144A INFORMATION.......................................75 SECTION 4.23 REORGANIZATION TRANSACTIONS.................................76 ARTICLE V SUCCESSORS..........................................................76 SECTION 5.1 MERGER, CONSOLIDATION OR SALE OF ASSETS.....................76 SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED...........................77 ARTICLE VI DEFAULTS AND REMEDIES..............................................77 SECTION 6.1 EVENTS OF DEFAULT...........................................77 SECTION 6.2 ACCELERATION................................................80 SECTION 6.3 OTHER REMEDIES..............................................80 SECTION 6.4 WAIVER OF DEFAULTS..........................................81 SECTION 6.5 CONTROL BY MAJORITY.........................................81 SECTION 6.6 LIMITATION ON SUITS.........................................81 SECTION 6.7 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT...............82 SECTION 6.8 COLLECTION SUIT BY TRUSTEE..................................82 SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM............................82 SECTION 6.10 PRIORITIES..................................................83 SECTION 6.11 UNDERTAKING FOR COSTS.......................................83 ARTICLE VII TRUSTEE...........................................................84 SECTION 7.1 DUTIES OF TRUSTEE...........................................84 SECTION 7.2 RIGHTS OF TRUSTEE...........................................85 SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE................................86 SECTION 7.4 TRUSTEE'S DISCLAIMER........................................86 SECTION 7.5 NOTICE OF DEFAULTS..........................................86 SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES..................87 SECTION 7.7 COMPENSATION AND INDEMNITY..................................88 SECTION 7.8 REPLACEMENT OF TRUSTEE......................................89 SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC............................90 SECTION 7.10 ELIGIBILITY; DISQUALIFICATION...............................90 SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUERS...........90 ii PAGE ---- ARTICLE VIII LEGAL DEFEASANCE AND COVENANT DEFEASANCE.........................90 SECTION 8.1 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE....90 SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE..............................90 SECTION 8.3 COVENANT DEFEASANCE.........................................91 SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE..................92 SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.......................93 SECTION 8.6 REPAYMENT TO ISSUERS........................................93 SECTION 8.7 REINSTATEMENT...............................................94 SECTION 8.8 SATISFACTION AND DISCHARGE..................................94 ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER...................................95 SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF NOTES.........................95 SECTION 9.2 WITH CONSENT OF HOLDERS OF NOTES............................96 SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT.........................98 SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS...........................98 SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES............................99 SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.............................99 ARTICLE X COLLATERAL AND SECURITY............................................100 SECTION 10.1 SECURITY DOCUMENTS; SECURITY INTERESTS.....................100 SECTION 10.2 FURTHER ASSURANCES AND SECURITY............................102 SECTION 10.3 OPINIONS...................................................102 SECTION 10.4 RELEASE OF COLLATERAL......................................103 SECTION 10.5 CERTIFICATES OF THE ISSUERS................................104 SECTION 10.6 AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE SECURITY DOCUMENTS AND THE INTERCREDITOR AGREEMENT.....104 SECTION 10.7 AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE SECURITY DOCUMENTS AND THE INTERCREDITOR AGREEMENT.....104 SECTION 10.8 INTERCREDITOR AGREEMENT....................................105 ARTICLE XI SUBSIDIARY GUARANTIES.............................................105 SECTION 11.1 SUBSIDIARY GUARANTIES......................................105 SECTION 11.2 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTIES............107 SECTION 11.3 SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS......................................................107 SECTION 11.4 SUBSIDIARY GUARANTY BY FUTURE RESTRICTED SUBSIDIARIES......108 SECTION 11.5 RELEASE OF SUBSIDIARY GUARANTORS...........................109 SECTION 11.6 LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY; CERTAIN BANKRUPTCY EVENTS..........................................109 SECTION 11.7 APPLICATION OF CERTAIN TERMS AND PROVISIONS TO THE SUBSIDIARY GUARANTORS......................................110 iii PAGE ---- ARTICLE XII MISCELLANEOUS....................................................111 SECTION 12.1 TRUST INDENTURE ACT CONTROLS...............................111 SECTION 12.2 NOTICES....................................................111 SECTION 12.3 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES......................................................112 SECTION 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.........112 SECTION 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION..............113 SECTION 12.6 RULES BY TRUSTEE AND AGENTS................................113 SECTION 12.7 LEGAL HOLIDAYS.............................................113 SECTION 12.8 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS...........................................113 SECTION 12.9 GOVERNING LAW AND SUBMISSION TO JURISDICTION...............114 SECTION 12.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS..............114 SECTION 12.11 SUCCESSORS.................................................115 SECTION 12.12 SEVERABILITY...............................................115 SECTION 12.13 COUNTERPART ORIGINALS......................................115 SECTION 12.14 TABLE OF CONTENTS, HEADINGS, ETC...........................115 iv CROSS-REFERENCE TABLE* TIA SECTION INDENTURE SECTION - ----------- ----------------- 310(a)(1)........................................................7.10 (a)(2)...........................................................7.10 (a)(3)...........................................................N.A. (a)(4)...........................................................N.A. (a)(5)...........................................................7.8; 7.10 (b)..............................................................7.8; 7.10; 12.2 (c)..............................................................N.A. 311(a)...........................................................7.11 (b)..............................................................7.11 (c)..............................................................N.A. 312(a)...........................................................2.5 (b)..............................................................12.3 (c)..............................................................12.3 313(a)...........................................................7.6 (b)(1)...........................................................N.A. (b)(2)...........................................................7.6, 7.7 (c)..............................................................7.5, 7.6; 12.2 (d)..............................................................7.6 314(a)...........................................................4.3; 4.4; 12.2 (b)..............................................................N.A. (c)(1)...........................................................12.4 (c)(2)...........................................................12.4 (c)(3)...........................................................N.A. (d)..............................................................10.5 (e)..............................................................12.5 (f)..............................................................N.A. 315(a)...........................................................7.1(b) (b)..............................................................7.5; 12.2 (c)..............................................................7.1(a) (d)..............................................................7.1(c) (e)..............................................................6.11 316(a)(last sentence)............................................2.9 (a)(1)(A)........................................................6.5 (a)(1)(B)........................................................6.4 (a)(2)...........................................................N.A. (b)..............................................................6.7 (c)..............................................................6.3 317(a)(1)........................................................6.8 (a)(2)...........................................................6.9 (b)..............................................................2.4 318(a)...........................................................12.1 (c)..............................................................12.1 - ------------- N.A. means not applicable - ------------------------ * This Cross-Reference table shall not, for any purpose, be deemed to be part of this Indenture. v INDENTURE, dated as of April 16, 2004, by and among Diamond Jo, LLC, a Delaware limited liability company, The Old Evangeline Downs Capital Corp., a Delaware corporation, the Subsidiary Guarantors (as defined herein), and U.S. Bank National Association, as trustee. Each party agrees as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 8 3/4% Series A Senior Secured Notes due 2012 (the "Series A Notes") and the 8 3/4% Series B Senior Secured Notes due 2012 (the "Series B Notes" and, together with the Series A Notes, the "Notes"): ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 DEFINITIONS "2010 Referendum" means a gaming reauthorization referendum to be submitted to the Dubuque County, Iowa electorate in the general election to be held in 2010. "144A Global Note" means one or more Global Notes bearing the Private Placement Legend, that shall be issued in an aggregate amount of denominations equal in total to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "501 Global Note" means one or more Global Notes bearing the Private Placement Legend that shall be issued in an aggregate amount of denominations equal in total to the outstanding principal amount of the Notes sold to institutional "accredited investors" within the meaning of Rule 501(a)(1), (2), (3), or (7) of the Securities Act. "Accrued Bankruptcy Interest" means, with respect to any Indebtedness, all interest accruing thereon after the filing of a petition by or against the Issuers or any of the Restricted Subsidiaries or any parent under any Bankruptcy Law, in accordance with and at the rate (including any rate applicable upon any default or event of default, to the extent lawful) specified in the documents evidencing or governing such Indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such Bankruptcy Law. "Acquired Debt" means Indebtedness of a Person or any of its subsidiaries existing at the time such Person is merged with or into the Company or a Restricted Subsidiary, becomes a Restricted Subsidiary or Indebtedness assumed in connection with the acquisition of assets from such Person other than Indebtedness incurred in connection with, or in contemplation of, such Person merging with or into the Company or a Restricted Subsidiary or becoming a Restricted Subsidiary or such acquisition of assets. "Additional Notes" means additional Notes which may be issued after the Issue Date pursuant to this Indenture (other than pursuant to an Exchange Offer or otherwise in exchange for or in replacement of outstanding Notes). All references herein to "Notes" shall be deemed to include Additional Notes. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean (a) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise or (b) beneficial ownership of 10% or more of the voting securities of such Person. Notwithstanding the foregoing, the Initial Purchaser shall be deemed not to be an Affiliate of PGP, the Company or any Restricted Subsidiary. "Agent" means any Registrar, Paying Agent or co-registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange at the relevant time. "Applicable Capital Gain Tax Rate" means a rate equal to the sum of: (a) the highest marginal Federal income tax rate applicable to net capital gain of an individual who is a citizen of the United States, plus (b) (x) the greatest of (i) an amount equal to the sum of the highest marginal state and local income tax rates applicable to net capital gain of an individual who is a resident of the State of California, (ii) an amount equal to the sum of the highest marginal state and local income tax rates applicable to net capital gain of an individual who is a resident of the State of Louisiana, and (iii) an amount equal to the sum of the highest marginal state and local income tax rates applicable to net capital gain of an individual who is a resident of the State of Iowa, multiplied by (y) a factor equal to 1 minus the highest marginal Federal income tax rate described in clause (a) above. "Applicable Income Tax Rate" means a rate equal to the sum of: (a) the highest marginal Federal ordinary income tax rate applicable to an individual who is a citizen of the United States, plus (b) (x) the greatest of (i) an amount equal to the sum of the highest marginal state and local ordinary income tax rates applicable to an individual who is a resident of the State of California, (ii) an amount equal to the sum of the highest marginal state and local ordinary income tax rates applicable to an individual who is a resident of the State of Louisiana, and (iii) an amount equal to the sum of the highest marginal state and local income tax rates applicable to net capital gain of an individual who is a resident of the State of Iowa, multiplied by (y) a factor equal to 1 minus the highest marginal Federal income tax rate described in clause (a) above. 2 "Asset Sale" means: (i) any direct or indirect sale, assignment, transfer, lease, conveyance, or other disposition (including, without limitation, by way of merger or consolidation) (collectively, a "transfer"), other than in the ordinary course of business, of any assets of the Company or any Restricted Subsidiary; or (ii) direct or indirect issuance or sale of any Equity Interests of any Restricted Subsidiary (other than directors' qualifying shares), in each case to any Person (other than the Company or a Restricted Subsidiary). For purposes of this definition, (a) any series of transactions that are part of a common plan shall be deemed a single Asset Sale and (b) the term "Asset Sale" shall not include: (1) any exchange of gaming equipment or furniture, fixtures or other equipment for replacement items in the ordinary course of business, (2) any transaction or series of transactions that have a fair market value (or result in gross proceeds) of less than $1,000,000, (3) any disposition of all or substantially all of the assets of the Company that is governed under and complies with the terms of Section 4.15 and Article V, (4) any Investments that are not prohibited by Section 4.9, (5) (A) any transfer of inventory, equipment, receivables or other assets acquired and held for resale in the ordinary course of business or (B) any transfer or liquidation of Cash Equivalents, (6) any transfer of damaged, worn out or other obsolete personal property so long as such property is no longer necessary for the proper conduct of the business of the Company or such Restricted Subsidiary, as applicable, (7) any grant of any Liens not otherwise prohibited by this Indenture, or (8) any transfer of properties or assets by the Company or a Restricted Subsidiary to the Company or any other Restricted Subsidiary. "Bankruptcy Code" means the United States Bankruptcy Code, codified at 11 U.S.C. Sections 101-1330, as amended. "Bankruptcy Law" means Title 11, U.S. Code, or any similar Federal, state or foreign law for the relief of debtors. 3 "beneficial owner" has the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether or not otherwise applicable, except that a "person" shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time. "Broker-Dealer" means any broker-dealer that receives Exchange Notes for its own account in the Exchange Offer in exchange for Notes that were acquired by such broker-dealer as a result of market-making or other trading activities. "Business Day" means any day other than a Legal Holiday. "Capital Corp." means The Old Evangeline Downs Capital Corp., a Delaware corporation, and its successors in accordance with the terms of this Indenture, and not any of its subsidiaries. "Capital Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Capital Stock" means, (i) with respect to any Person that is a corporation, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (ii) with respect to a limited liability company, any and all membership interests, (iii) with respect to any other Person, any and all partnership or other equity interests of such Person. "Cash Equivalent" means (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) time deposits and certificates of deposit and commercial paper issued by the parent corporation of any domestic commercial bank of recognized standing having capital and surplus in excess of $250,000,000 and commercial paper issued by others rated at least A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2 or the equivalent thereof by Moody's Investors Service, Inc. and in each case maturing within one year after the date of acquisition; (iii) investments in money market funds substantially all of whose assets comprise securities of the type described in clauses (i) and (ii) above and (iv) repurchase obligations for underlying securities of the types and with the maturities described above. "Change of Control" means the occurrence of any of the following events: (i) any merger or consolidation of the Company or PGP with or into any Person or any sale, transfer or other conveyance, whether direct or indirect, of all or substantially all of the assets of the Company or PGP, on a consolidated basis, in one transaction or a series of related transactions, if, immediately after giving effect to such 4 transaction(s), any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) (other than an Excluded Person) is or becomes the "beneficial owner," directly or indirectly, of more than 50% of the total voting power in the aggregate of the Voting Stock of the transferee(s) or surviving entity or entities; (ii) any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) (other than an Excluded Person) is or becomes the "beneficial owner," directly or indirectly, of more than 50% of the total voting power in the aggregate of the Voting Stock of the Company or PGP; (iii) after any bona fide underwritten registered public offering of Capital Stock of the Company, during any period of 24 consecutive months after the Issue Date, individuals who at the beginning of any such 24-month period constituted the Managers of the Company (together with any new Managers whose election by such Managers or whose nomination for election by the Members was approved by a vote of a majority of the Managers then still in office who were either Managers at the beginning of such period or whose election or nomination for election was previously so approved, including new Managers designated in or provided for in an agreement regarding the merger, consolidation or sale, transfer or other conveyance, of all or substantially all of the assets of the Company, if such agreement was approved by a vote of such majority of Managers) cease for any reason to constitute a majority of the Managers of the Company then in office, provided, however, that there shall be no Change of Control pursuant to this clause (iii) if during such 24-month period any of the Excluded Persons continues to control or manage, directly or indirectly, the day-to-day operations of the Company; (iv) the Company adopts a plan of liquidation or dissolution; or (v) the first day on which the Company fails to own 99% of the issued and outstanding Equity Interests of Capital Corp.; provided, that a "Change of Control" shall not occur solely by reason of a Permitted C-Corp Conversion. "Clearstream" means Clearstream Banking Luxembourg, Societe Anonyme, or any successors securities clearing agency. "Code" means the Internal Revenue Code of 1986, as amended. "Collateral" means all "collateral" referred to in the Security Documents, which for the avoidance of doubt, shall not include any Excluded Assets. "Company" means (i) if the Reorganization Transactions have been consummated, Peninsula Gaming, and its successors in accordance with the terms of this Indenture, and not any of its subsidiaries, and (ii) if the Reorganization Transactions have 5 not been consummated, DJL and its successors in accordance with the terms of this Indenture, and not any of its subsidiaries. "consolidated" means, with respect to the Company, the consolidation of the accounts of the Restricted Subsidiaries with those of the Company, all in accordance with GAAP; provided, that "consolidated" shall not include consolidation of the accounts of any Unrestricted Subsidiary with the accounts of the Company. "Consolidated EBITDA" means, with respect to any Person (the referent Person) for any period, the sum of Consolidated Net Income of such Person and the Restricted Subsidiaries for such period, without duplication; plus (i) consolidated income tax expense of such Person and the Restricted Subsidiaries paid or accrued in accordance with GAAP for such period and the amount of Permitted Tax Distributions subtracted from Net Income in the determination of the Consolidated Net Income of such Person for such period; plus (ii) Consolidated Interest Expense, to the extent that such Consolidated Interest Expense was deducted in computing such Consolidated Net Income; plus (iii) Consolidated Non-Cash Charges, to the extent deducted in computing such Consolidated Net Income; plus (iv) pre-opening costs and expenses, to the extent deducted in computing such Consolidated Net Income, with respect to any Gaming Property that was, or is under, construction; minus (v) (x) extraordinary non-cash charges increasing such Consolidated Net Income and (y) the amount of all cash payments made by such Person or any of the Restricted Subsidiaries during such period to the extent such payments relate to non-cash charges that were added back in determining Consolidated EBITDA for such period or any prior period; provided, however, that in determining Consolidated EBITDA with respect to OED for any period ending on or about: (A) March 31, 2004, Consolidated EBITDA of OED for such period shall be deemed to be equal to the product of (x) Consolidated EBITDA of OED for the period from January 1, 2004 to the last day of such period and (y) 4, (B) June 30, 2004, Consolidated EBITDA of OED for such period shall be deemed to be equal to the product of (x) Consolidated EBITDA of OED for the period from January 1, 2004 to the last day of such period and (y) 2, and (C) September 30, 2004, Consolidated EBITDA of OED for such period shall be deemed to be equal to the product of (x) Consolidated EBITDA of OED for the period from January 1, 2004 to the last day of such period and (y) 1.333. "Consolidated Interest Expense" means, with respect to any Person for any period, (a) the consolidated interest expense of such Person and the Restricted 6 Subsidiaries for such period, net of interest income, whether capitalized, paid, accrued or scheduled to be paid or accrued (including amortization of original issue discount, noncash interest payment, the interest component of Capital Lease Obligations and all commissions, discounts and other fees and charges owed with respect to bankers' acceptances and letters of credit financings), to the extent such expense was deducted in computing Consolidated Net Income of such Person for such period less (b) amortization expense, write-off of deferred financing costs and any charge related to any premium or penalty paid, in each case accrued during such period in connection with redeeming or retiring any Indebtedness before its stated maturity, as determined in accordance with GAAP, to the extent such expense, cost or charge was included in the calculation made pursuant to clause (a) above, provided, that any premiums, fees and expenses (including the amortization thereof) payable in connection with the offering of the Notes and the application of the net proceeds therefrom or any other refinancing of Indebtedness shall be excluded. "Consolidated Net Income" means, with respect to any Person (the referent Person) for any period, the sum of (a) the aggregate of the Net Income of such Person and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP; provided, that (i) the Net Income of any other Person (other than a Restricted Subsidiary of the referent Person) shall be included only to the extent of the amount of dividends or distributions paid to the referent Person or a Wholly Owned Subsidiary of the referent Person, and (ii) the Net Income of any Restricted Subsidiary shall not be included to the extent that declarations of dividends or similar distributions by that Restricted Subsidiary are not at the time permitted, directly or indirectly, by operation of the terms of its organizational documents or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its owners, and (b) Consolidated Non-Cash Charges described in clauses (ii) and (iv) of the definition of "Consolidated Non-Cash Charges," of such Person and the Restricted Subsidiaries to the extent deducted in computing such Net Income. "Consolidated Net Worth" means, with respect to any Person, the total stockholders' (or members') equity of such Person determined on a consolidated basis in accordance with GAAP, adjusted to exclude (to the extent included in calculating such stockholders' (or members') equity), (i) the amount of any such stockholders' (or members') equity attributable to Disqualified Capital Stock or treasury stock of such Person and its consolidated subsidiaries, and (ii) all upward revaluations and other write-ups in the book value of any asset of such Person or a consolidated subsidiary of such Person subsequent to the Issue Date, and (iii) all Investments in subsidiaries of such Person that are not consolidated subsidiaries and in Persons that are not subsidiaries of such Person. "Consolidated Non-Cash Charges" means, with respect to any Person for any period, (a) the aggregate depreciation and amortization expense for such Person and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP and (b) all other non-cash charges of such Person and the Restricted Subsidiaries for such period, in each case, determined on a consolidated basis 7 in accordance with GAAP, including, without limitation, non-cash charges related to (i) Management Arrangements or the pricing or repricing or issuances of Equity Interests of the Company or PGP to employees of the Company (whether accruing at or subsequent to the time of such repricing or issuance), (ii) impairment of goodwill, intangibles or fixed assets, (iii) purchase accounting adjustments, and (iv) restructuring charges, non-capitalized transaction costs and other non-cash charges incurred in connection with actual or proposed financings, acquisitions or divestitures (including, without limitation, the issuance of the Notes, borrowings under the Senior Credit Facility, refinancing of the Company's 12 1/4% Senior Secured Notes due 2006 and the OED 13% Senior Secured Notes due 2010 with Contingent Interest or otherwise) of such Person and the Restricted Subsidiaries for such period; but, in each case, excluding (x) any such charges constituting an extraordinary item or loss, and (y) any such charge which requires an accrual of or a reserve for cash charges for any future period. "contractually subordinate" means subordinated in right of payment by its terms or the terms of any document or instrument or instrument relating thereto. "Default" means any event that is, or after notice or the passage of time or both would be, an Event of Default. "Definitive Note" means one or more certificated Notes registered in the name of the Holder thereof and issued in accordance with Section 2.6 hereof, substantially, in the form of Exhibit A hereto except that such Note shall not include the information called for by footnotes 3 and 4 thereof. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.3 hereof as the Depositary with respect to the Notes, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter "Depositary" shall mean or include such successor. "Disqualified Capital Stock" means any Equity Interest that (i) either by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) is or upon the happening of an event would be required to be redeemed or repurchased prior to the final stated maturity of the Notes or is redeemable at the option of the holder thereof at any time prior to such final stated maturity, or (ii) is convertible into or exchangeable at the option of the issuer thereof or any other Person for debt securities that are pari passu or senior in respect of payment to the Notes. Notwithstanding the foregoing, any Equity Interests that would constitute Disqualified Capital Stock solely because such Equity Interests mature or become mandatorily redeemable, or give the holders thereof the right to require the Company to repurchase such Equity Interests, in each case, upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Capital Stock if the terms of such Equity Interests provide that the Company may not repurchase or redeem any such Equity Interests pursuant to such provisions prior to the Company's purchase of the Notes as are required to be purchased pursuant to the provisions of Section 4.15 and Section 4.13. 8 "Distribution Compliance Period" means the 40-day restricted period as defined in Regulation S. "DJL" means Diamond Jo, LLC (formerly named Peninsula Gaming Company, LLC), a Delaware limited liability company. "DJL Notes" means the $71,000,000 aggregate principal amount of 12 1/4% Senior Secured Notes due 2006 issued by DJL and PGC Corp. "Domestic Restricted Subsidiary" means any Restricted Subsidiary other than a Foreign Subsidiary. "Equity Holder" means (a) with respect to a corporation, each holder of stock of such corporation, (b) with respect to a limited liability company or similar entity, each member of such limited liability company or similar entity, (c) with respect to a partnership, each partner of such partnership, (d) with respect to any entity described in clause (a)(iv) of the definition of "Flow Through Entity," the owner of such entity, and (e) with respect to a trust described in clause (a)(v) of the definition of "Flow Through Entity," an owner thereof. "Equity Interests" means Capital Stock or warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means (i) an underwritten offering of Qualified Capital Stock of the Company pursuant to a registration statement filed with and declared effective by the Commission in accordance with the Securities Act or (ii) an offering of Qualified Capital Stock of the Company pursuant to an exemption from the registration requirements of the Securities Act. "Euroclear" means Euroclear Bank S.A./N.V., as operator of the Euroclear system, or any successor securities clearing agency. "Event of Loss" means, with respect to any property or asset, any (i) loss, destruction or damage of such property or asset or (ii) any condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such property or asset, or confiscation or requisition of the use of such property or asset. "Excess Cash Distribution Amount for Taxes" means the excess of (x) the aggregate actual cash distributions received by the Company or a Restricted Subsidiary from all Flow Through Entities that are not Restricted Subsidiaries of the Company during the period commencing with the Issue Date and continuing to and including the date on which a proposed Permitted Tax Distribution is to be made under clause (iii) Section 4.9(b) over (y) the aggregate amount of such cash distributions described in the immediately preceding clause (x) that have already been taken into account for purposes of making (I) Permitted Tax Distributions previously made and which was attributable to a Flow Through Entity that was not a Restricted Subsidiary at the time such Permitted 9 Tax Distribution was made plus (II) Restricted Payments permitted by clause (1) or (4) of (iii) (treating such cash distributions described in this clause (y)(II) as used to make a Restricted Payment in during such period only to the extent that in such period, the total amount of Restricted Payments actually made during such period exceeded the excess of (m) the total amount of Restricted Payments permitted to be made in such period over (n) the amount of such cash distributions described in the immediately preceding clause (x) that were actually received by the Company or a Restricted Subsidiary during such period and that were not previously used to make a Permitted Tax Distribution. "Exchange Act" means the Securities Exchange Act of 1934, as amended and the rules and regulations of the SEC promulgated thereunder. "Exchange Notes" means the Series B Notes, identical in all respects to the Series A Notes (including with respect to the Subsidiary Guaranties endorsed thereon, except for references to series and restrictive legends, issued pursuant to an Exchange Offer. "Exchange Offer" means an offer that may be made by the Issuers pursuant to the Registration Rights Agreement to exchange Exchange Notes for Series A Notes. "Exchange Offer Registration Statement " shall have the meaning set forth in the Registration Rights Agreement. "Excluded Assets" means (i) cash, other than cash deposited in deposit accounts; (ii)assets securing FF&E Financing, Purchase Money Obligations or Capital Lease Obligations permitted to be incurred under this Indenture to the extent acquired or refinanced with the proceeds of such FF&E Financing, Purchase Money Obligations and Capital Lease Obligations; (iii) all Gaming Licenses; (iv) any of the parcels of the Warner Land that are subject to the mortgage granted by OED to the seller of such land, unless OED or the Company has obtained the consent of such seller to subject such parcels to a Lien under the Security Documents; (v) any motor vehicles; (vi) any agreements, permits, licenses or the like that cannot be subject to a Lien under the Security Documents without the consent of third parties (including any Governmental Authority), which consent is not obtained by the Issuers; (vii) Equity Interests of each Foreign Restricted Subsidiary directly owned by the Company or any of the Domestic Restricted Subsidiaries to the extent that such Equity Interests held by the Company or such Domestic Restricted Subsidiary, as the case may be, exceed 65% of the total combined voting power of all classes of voting Equity Interests of such Foreign Restricted Subsidiary, provided, however, such excess of any class of Capital Stock of such Foreign Subsidiary shall not be an Excluded Asset to the extent the Company is able to receive an opinion of counsel nationally recognized in tax matters to the effect that the pledge of such excess will not result in an income inclusion under section 951 et. seq. of the Code; and (viii) OEDA's rights under or in respect of the Management Services Agreement and proceeds thereof (including fees paid to OEDA pursuant thereto); provided, that Excluded Assets does not include the proceeds of assets under clause (ii), (iii), (iv), (v), (vi), (vii) or (viii) or of any other Collateral to the extent such proceeds do not constitute Excluded Assets. 10 "Excluded Person" means (i) PGP, (ii) PGP Investors, LLC, (iii) M. Brent Stevens, (iv) Michael S. Luzich, (v) OEDA, (vi) any Affiliate or Manager of PGP, PGP Investors, LLC, OEDA, M. Brent Stevens or Michael S. Luzich (collectively, the "Existing Holders"), (vii) any trust, corporation, partnership or other entity (a) controlled by the Existing Holders and members of the immediate family of the Existing Holders or (b) 80% of the beneficiaries, stockholders, partners or owners of which consist solely of the Existing Holders and members of the immediate family of the Existing Holders or (viii) any partnership the sole general partners of which consist solely of the Existing Holders and members of the immediate family of the Existing Holders. "fair market value" means the price that would be paid in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Issuers. "FF&E" means furniture, fixtures and equipment (including Gaming Equipment) acquired by the Issuers and the Restricted Subsidiaries in the ordinary course of business for use in the construction and business operations of the Company or the Restricted Subsidiaries. "FF&E Financing" means Indebtedness, the proceeds of which are used solely by the Issuers and the Restricted Subsidiaries (and concurrently with the incurrence of such Indebtedness) to acquire or lease or improve or refinance, respectively, FF&E; provided, that (x) the principal amount of such FF&E Financing does not exceed the cost (including sales and excise taxes, installation and delivery charges, capitalized interest and other direct fees, costs and expenses) of the FF&E purchased or leased with the proceeds thereof or the cost of such improvements, as the case may be, and (y) such FF&E Financing is secured only by the assets so financed and assets which, immediately prior to the incurrence of such FF&E Financing, secured other Indebtedness of the Issuers and the Restricted Subsidiaries (to the extent such other Indebtedness and the Liens securing such other Indebtedness are permitted under this Indenture) to the lender of such FF&E Financing. "Flow Through Entity" means an entity that (a) for Federal income tax purposes constitutes (i) an "S corporation" (as defined in Section 1361(a) of the Code), (ii) a "qualified subchapter S subsidiary" (as defined in Section 1361(b)(3)(B) of the Code), (iii) a "partnership" (within the meaning of Section 7701(a)(2) of the Code) other than a "publicly traded partnership" (as defined in Section 7704 of the Code), (iv) an entity that is disregarded as an entity separate from its owner under the Code, the Treasury regulations or any published administrative guidance of the Internal Revenue Service, or (v) a trust, the income of which is includible in the taxable income of the grantor or another person under sections 671 through 679 of the Code (the entities described in the immediately preceding clauses (i), (ii), (iii), (iv) and (v), a "Federal Flow Through Entity") and (b) for state and local jurisdictions in respect of which Permitted Tax Distributions are being made, is subject to treatment on a basis under applicable state or local income tax law substantially similar to a Federal Flow Through Entity. 11 "Foreign Restricted Subsidiary" means any Restricted Subsidiary that is also a Foreign Subsidiary. "Foreign Subsidiary" means any Subsidiary which (i) is not organized under the laws of the United States, any state thereof or the District of Columbia and (ii) conducts substantially all of its business operations outside of the United States of America. "GAAP" means generally accepted accounting principles, as in effect from time to time, set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, and in the rules and regulations of the Commission. "Gaming Authorities" means any agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of the United States Federal government, any foreign government, any state, province or city or other political subdivision or otherwise, whether now or hereafter existing, or any officer or official thereof, including, without limitation, the Iowa Gaming Commission, the Louisiana Gaming Control Board, the Louisiana State Racing Commission and any other agency, in each case, with authority to regulate any gaming or racing operation (or proposed gaming or racing operation) owned, managed or operated by the Company or any of the Subsidiaries. "Gaming Equipment" means slot machines, video poker machines, and all other gaming equipment and related, signage, accessories and peripheral equipment. "Gaming FF&E Financing" means FF&E Financing, the proceeds of which are used solely by the Issuers and the Restricted Subsidiaries to acquire or lease FF&E that constitutes Gaming Equipment. "Gaming Licenses" means every material license, material franchise, material registration, material qualification, findings of suitability or other material approval or authorization required to own, lease, operate or otherwise conduct or manage riverboat, dockside or land-based gaming or racing activities in any state or jurisdiction in which the Company or any of the Restricted Subsidiaries conducts business (including, without limitation, all such licenses granted by the Gaming Authorities), and all applicable liquor and tobacco licenses. "Gaming Property" means: (i) the Diamond Jo and the Evangeline Downs horse racetrack and casino, in each case, so long as it is owned by the Company or a Restricted Subsidiary and (ii) any other gaming facility or gaming operation owned and controlled or to be owned and controlled after the Issue Date by the Company or a Restricted Subsidiary and that contains, or that based upon a plan approved by the Company's Managers shall contain upon the completion of the construction or development thereof, an aggregate of at least 500 slot machines or other gaming devices; 12 provided, in each case, that the property and assets (other than Excluded Assets) of such Gaming Property constitute Collateral. "Gaming Property Financing" means a financing, in whole or in part, of (x) the acquisition of any Gaming Property, (y) the construction of any Gaming Property (but only to the extent that the proceeds of such Indebtedness are used to acquire land, furniture, fixtures and equipment, prepare the site or construct improvements thereon) or (z) an investment in any Gaming Property. "Gaming Vessel" means a riverboat casino (i) which is substantially similar in size and space to the Diamond Jo, (ii) with at least the same overall qualities and amenities as the Diamond Jo, and (iii) that is developed, constructed and equipped to be in compliance with all federal, state and local laws, including, without limitation, the cruising requirements of Chapter 99F of the Iowa Code. In the event the laws of the State of Iowa change to permit the development and operation of additional land-based casinos, the term "Gaming Vessel" shall be deemed to include a land-based casino meeting the requirements of clauses (i), (ii) and (iii) above. "Global Notes" means one or more Notes in the form of Exhibit A hereto that includes the information referred to in footnotes 3 and 4 to the form of Note, attached hereto as Exhibit A, issued under this Indenture, that is deposited with or on behalf of and registered in the name of the Depositary or its nominee. "Global Note Legend" means the legend set forth in Section 2.6(g)(ii) hereof, which is required to be placed on all Global Notes issued under this Indenture. "Government Securities" means (i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Security or a specific payment of principal of or interest on any such Government Security held by such custodian for the account of the holder of such depository receipt; provided, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Security or the specific payment of principal of or interest on the Government Security evidenced by such depository receipt. "Governmental Authority" means any agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of the United States or foreign government, any state, province or any city or other political subdivision or otherwise and whether now or hereafter in existence, or any officer or official thereof, and any maritime authority. 13 "guaranty" or "guaranty," used as a noun, means any guaranty (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other Obligation. "guaranty" or "guaranty" used as a verb, has a correlative meaning. "Hedging Obligations" means, with respect to any Person, the Obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements, interest rate exchange agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates, including any arrangement whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a fixed or floating rate of interest on a stated notional amount in exchange for periodic payments made by such Person calculated by applying a fixed or floating rate of interest on the same notional amount. "Holder" means the Person in whose name a Note is registered in the register of the Notes. "Indebtedness" of any Person means (without duplication) (i) all liabilities and obligations, contingent or otherwise, of such Person (a) in respect of borrowed money (regardless of whether the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (b) evidenced by bonds, debentures, notes or other similar instruments, (c) representing the deferred purchase price of property or services (other than trade payables on customary terms incurred in the ordinary course of business), (d) created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) representing Capital Lease Obligations, (f) under bankers' acceptance and letter of credit facilities, (g) to purchase, redeem, retire, defease or otherwise acquire for value any Disqualified Capital Stock, or (h) in respect of Hedging Obligations; (ii) all Indebtedness of others that is guaranteed by such Person; and (iii) all Indebtedness of others that is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; provided, that the amount of such Indebtedness shall (to the extent such Person has not assumed or become liable for the payment of such Indebtedness) be the lesser of (1) the fair market value of such property at the time of determination and (2) the amount of such Indebtedness. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. The principal amount outstanding of any Indebtedness issued with original issue discount is the accreted value of such Indebtedness. 14 "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. "Indirect Participant" means an entity that, with respect to DTC, clears through or maintains a direct or indirect, custodial relationship with a Participant. "Initial Purchaser" mean the initial purchaser of the Series A Notes under the Purchase Agreement, dated March 25, 2004, with respect to the Series A Notes. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who is not also a QIB. "Intercreditor Agreement" means that Intercreditor Agreement among the Trustee, Wells Fargo Foothill, Inc. and acknowledgd by one or more of the Issuers and the Subsidiary Guarantors, including any amended or supplemented agreement or any replacement or substitute agreement in accordance with this Indenture, in each case substantially in the form of Exhibit F attached hereto. "Interest" means the interest payable on the Notes. "Interest Coverage Ratio" means, for any period, the ratio of (i) Consolidated EBITDA of the Company for such period, to (ii) Consolidated Interest Expense of the Company for such period. In calculating Interest Coverage Ratio for any period, (a) pro forma effect shall be given to the incurrence, repayment or retirement by the Company or any of the Restricted Subsidiaries of any Indebtedness (other than Indebtedness incurred in the ordinary course of business for general corporate purposes pursuant to working capital facilities) subsequent to the commencement of the period for which the Interest Coverage Ratio is being calculated, as if the same had occurred at the beginning of the applicable period; (b) acquisitions that have been made by the Company or any of the Restricted Subsidiaries, including all mergers and consolidations, subsequent to the commencement of such period shall be calculated on a pro forma basis, assuming that all such acquisitions, mergers and consolidations had occurred on the first day of such period, including giving effect to reductions in costs for such period that are directly attributable to the elimination of duplicative functions and expenses (regardless of whether such cost savings could then be reflected in pro forma financial statements under GAAP, Regulation S X promulgated by the SEC or any other regulation or policy of the SEC) as a result of such acquisition, merger or consolidation, provided that (x) such cost savings were identified and quantified in an Officers' Certificate delivered to the Trustee at the time of the consummation of such acquisition, merger or consolidation and such Officers' Certificate states that such officers believe in good faith that actions shall be commenced or initiated within 90 days of the consummation of such acquisition, merger or consolidation to effect such cost savings and sets forth the specific steps to be taken within the 90 days after such acquisition, merger or consolidation to accomplish such cost savings, and (y) with respect to each acquisition, merger or consolidation completed prior to the 90th day preceding such date of determination, actions were commenced or initiated by the Company or any of its Restricted Subsidiaries within 90 15 days of such acquisition, merger or consolidation to effect the cost savings identified in such Officers' Certificate (regardless, however, of whether the corresponding cost savings have been achieved). Without limiting the foregoing, the financial information of the Company with respect to any portion of such period that falls before the Issue Date shall be adjusted to give pro forma effect to the issuance of the Notes and the application of the proceeds therefrom as if they had occurred at the beginning of such period. "Interest Payment Date" means the stated due date of an installment of Interest on the Notes. "Interest Record Date" means a Interest Record Date specified in the Notes, whether or not such date is a Business Day. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of loans, guarantees, advances or capital contributions (excluding (i), payroll commission, travel and similar advances to officers and employees of such Person made in the ordinary course of business and (ii) bona fide accounts receivable arising from the sale of goods or services in the ordinary course of business consistent with past practice), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "Iowa Code" means the Code of Iowa (2003), as amended from time to time. "Iowa Gaming Commission" means the Iowa Racing and Gaming Commission, or any successor Gaming Authority. "Issue Date" means the date of first issuance of the Notes under this Indenture. "Issuers" means (i) if the Reorganization Transactions have been consummated, Peninsula Gaming, DJL and Capital Corp. and their respective successors in accordance with the terms of this Indenture, and not any of their respective subsidiaries and (ii) if the Reorganization Transactions have not been consummated, DJL and Capital Corp. and their respective successors in accordance with the terms of this Indenture, and not any of their respective subsidiaries. "Legal Holiday" means a Saturday, Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. "Letter of Transmittal" means the letter of transmittal to be prepared by the Issuers and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. 16 "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, regardless of whether filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Liquidated Damages" means all liquidated damages then owing pursuant to the Registration Rights Agreement. "Management Arrangements" means profits interests grants or similar equity interest arrangements, employment agreements, consulting agreements, management agreements and other similar arrangements between the Company or any of its Affiliates and any manager, officer, member or employee thereof or consultant thereto and such or similar agreements as may be modified, supplemented, amended, entered into or restated from time to time consistent with industry practice and approved by the Managers of PGP or the Company, provided that the aggregate amount of payments made to an Excluded Person (other than the Company or any of the Restricted Subsidiaries) pursuant to any such equity interest, employment, consulting, management or similar agreements or arrangements for any fiscal year shall not exceed 4.0% of the Consolidated EBITDA of the Company for the immediately preceding fiscal year. "Management Services Agreement" means the Amended and Restated Management Services Agreement, dated as of February 25, 2003, by and among DJL, OEDA and OED, as in effect on the Issue Date, without giving effect to any amendment or supplement thereto or modification thereof, except to the extent that such amendment, supplement or modification would otherwise have been permitted under Section 4.12 if OEDA were not a Restricted Subsidiary. "Managers" means, with respect to any Person (i) if such Person is a limited liability company, the board member, board members, manager or managers appointed pursuant to the operating agreement of such Person as then in effect or (ii) otherwise, the members of the board of directors or other governing body of such Person. "Members" means the holders of all of the Voting Stock of the Company. "Moody's" means Moody's Investors Service, Inc. and its successors. "Mortgages" means those mortgages dated the dated hereof granting the Trustee an interest in all of the Issuers' real property Collateral. "Net Income" means, with respect to any Person for any period, (a) the net income (or loss) of such Person for such period, determined in accordance with GAAP, excluding (to the extent included in calculating such net income) (i) any gain or loss, together with any related taxes paid or accrued on such gain or loss, realized in 17 connection with any Asset Sales and dispositions pursuant to sale-leaseback transactions and (ii) any extraordinary gain or loss, together with any taxes paid or accrued on such gain or loss, reduced by (b) the maximum amount of Permitted Tax Distributions attributable to such net income for such period. "Net Proceeds" means the aggregate proceeds received in the form of cash or Cash Equivalents in respect of any Asset Sale (including issuance or other payments in an Event of Loss and payments in respect of deferred payment obligations and any cash or Cash Equivalents received upon the sale or disposition of any non-cash consideration received in any Asset Sale, in each case when received), net of: (i) the reasonable and customary direct out-of-pocket costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions), other than any such costs payable to an Affiliate of the Company, (ii) taxes required to be paid by the Company, any of the Subsidiaries, or any Equity Holder of the Company (or, in the case of any Company Equity Holder that is a Flow Through Entity, the Upper Tier Equity Holder of such Flow Through Entity) in connection with such Asset Sale in the taxable year that such sale is consummated or in the immediately succeeding taxable year, the computation of which shall take into account the reduction in tax liability resulting from any available operating losses and net operating loss carryovers, tax credits and tax credit carryforwards, and similar tax attributes, (iii) amounts required to be applied to the permanent repayment of Indebtedness in connection with such Asset Sale, and (iv) appropriate amounts provided as a reserve by the Company or any Restricted Subsidiary, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Company or such Restricted Subsidiary, as the case may be, after such Asset Sale (including, without limitation, as applicable, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations arising from such Asset Sale). "Non-U.S. Person" means any Person other than a U.S. Person. "Notes Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Obligation" means any principal, premium, interest, penalty, fee, indemnification, reimbursement, damage (including, without limitation, liquidated damages) and other obligation and liability payable under the documentation governing any liability. "OED" means The Old Evangeline Downs, L.L.C., a Louisiana limited liability company. 18 "OED 13% Senior Secured Notes due 2010" means the 13% Senior Secured Notes due 2010 with Contingent Interest issued under the OED Indenture. "OED Indenture" means that certain Indenture, dated as of February 25, 2003, among OED, Capital Corp., the Guarantors (as defined therein) and U.S. Bank National Association, as trustee. "OEDA" means OED Acquisition, LLC, a Delaware limited liability company. "Offering" means the offering of the Notes by the Issuers. "Offering Circular" means that offering circular of the Issuers, dated March 31, 2004, without giving effect to any amendment or supplement thereto or modification thereof. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Assistant Secretary or any Vice President of such Person or any other Person designated by the Managers of such Person and serving in a similar capacity. "Officers' Certificate" means a certificate signed on behalf of the Company and Capital by two Officers of each of the Company and Capital, in each case, one of whom must be the Manager, Chairman of the Board, President, Chief Executive Officer, Chief Financial Officer, Treasurer, Controller or a Senior or Executive Vice President of the Company and Capital, respectively. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee. Such counsel may be an employee of or counsel to any of the Issuers, any Subsidiary of any of the Issuers or the Trustee. "OTB Operations" means all of the assets and properties of the Company and its subsidiaries (including, but not limited to, all Gaming Licenses) related to the business operation of any off-track betting parlor or similar facility operated or owned by the Company or such subsidiary. "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). "Peninsula Gaming" means Peninsula Gaming, LLC, a Delaware limited liability company. "Permitted C-Corp Conversion" means a transaction resulting in the Company becoming subject to tax under the Code as a corporation (a "C Corporation"); provided, that: 19 (1) the C Corporation resulting from such transaction, if a successor to Peninsula Gaming, LLC, (a) is a corporation, limited liability company or other entity organized and existing under the laws of any state of the United States or the District of Columbia, (b) assumes all of the obligations of the Company under the Notes, the Security Documents and this Indenture pursuant to a supplemental indenture in form reasonably satisfactory to the Trustee and (c) shall have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction; (2) after giving effect to such transaction no Default or Event of Default exists; (3) prior to the consummation of such transaction, the Company shall have delivered to the Trustee (a) an Opinion of Counsel to the effect that the Holders shall not recognize income gain or loss for Federal income tax purposes as a result of such Permitted C-Corp Conversion and shall be subject to Federal income tax on the same amounts, in the same manner, and at the same times as would have been the case if such Permitted C-Corp Conversion had not occurred and (b) an Officers' Certificate as to compliance with all of the conditions set forth in clauses (1), (2) and (3)(a) above; and (4) such transaction would not (a) result in the loss or suspension or material impairment of any Gaming License unless a comparable replacement Gaming License is effective prior to or simultaneously with such loss, suspension or material impairment or (b) require any Holder or beneficial owner of Notes to obtain a Gaming License or be qualified or found suitable under any applicable gaming or racing laws. "Permitted Investments" means: (i) Investments in the Company or in any Wholly Owned Subsidiary; (ii) Investments in Cash Equivalents; (iii) Investments in a Person, if, as a result of such Investment, such Person (a) becomes a Wholly Owned Subsidiary, or (b) is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary; (iv) Hedging Obligations; (v) Investments as a result of consideration received in connection with an Asset Sale made in compliance with Section 4.13; (vi) Investments existing on the Issue Date; (vii) Investments paid for solely with Capital Stock (other than Disqualified Capital Stock) of the Company; 20 (viii) credit extensions to gaming customers in the ordinary course of business, consistent with industry practice; (ix) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company (a) in satisfaction of judgments or (b) pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of trade creditors or customers; and (x) loans or other advances to employees of the Company and the Subsidiaries made in the ordinary course of business in an aggregate amount not to exceed $500,000 at any one time outstanding; (xi) intercompany Indebtedness incurred pursuant to clause (v) of Section 4.7(b); (xii) Investments in the Notes or any Additional Notes; (xiii) Investments not otherwise permitted by clauses (i) through (xii) above, not to exceed $10,000,000. "Permitted Liens" means: (i) Liens securing Indebtedness of the Company or any of the Restricted Subsidiaries incurred pursuant to clause (i) of Section 4.7(b); (ii) Liens arising by reason of any judgment, decree or order of any court for an amount and for a period not resulting in an event of default with respect thereto, so long as such Lien is being contested in good faith and is adequately bonded, and any appropriate legal proceedings that may have been duly initiated for the review of such judgment, decree or order shall not have been finally adversely terminated or the period within which such proceedings may be initiated shall not have expired; (iii) security for the performance of bids, tenders, trade, contracts (other than contracts for the payment of borrowed money) or leases, surety and appeal bonds, performance and return-of-money bonds and other obligations of a like nature incurred in the ordinary course of business, consistent with industry practice; (iv) Liens for taxes, assessments or other governmental charges either (a) not yet delinquent or (b) that are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Company or the Restricted Subsidiaries in accordance with GAAP; (v) Liens of carriers, warehousemen, mechanics, landlords, materialmen, suppliers, repairmen or other like Liens arising by operation of law in the ordinary course of business consistent with industry practices and Liens on deposits made to obtain the release of such Liens if (a) the underlying obligations are not overdue for a period of more than 30 days or (b) such Liens are being contested in good faith and by 21 appropriate proceedings and adequate reserves with respect thereto are maintained on the books of the Company or the Restricted Subsidiaries in accordance with GAAP; (vi) easements, rights of way, zoning and similar restrictions and other similar encumbrances or title defects incurred in the ordinary course of business, and that do not materially detract from the value of the property subject thereto (as such property is used by the Company or a Restricted Subsidiary) or materially interfere with the ordinary conduct of the business of the Company or any of the Restricted Subsidiaries; (vii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security legislation or otherwise arising from statutory or regulatory requirements of the Company or any of the Restricted Subsidiaries; (viii) Liens securing Refinancing Indebtedness incurred in compliance with this Indenture to refinance Indebtedness secured by Liens; provided, (a) such Liens do not extend to any additional property or assets; (b) if the Liens securing the Indebtedness being refinanced were subordinated to or pari passu with the Liens securing the Notes, the Subsidiary Guaranties or any intercompany loan, as applicable, such new Liens are subordinated to or pari passu with such Liens to the same extent, and any related subordination or intercreditor agreement is confirmed; and (c) such Liens are no more adverse to the interests of Holders than the Liens replaced or extended thereby; (ix) Liens that secure Acquired Debt or Liens on property of a Person existing at the time such Person is merged into or consolidated with, or such property was acquired by, the Company or any Restricted Subsidiary; provided, that such Liens do not extend to or cover any other property or assets and were not put in place in anticipation of such acquisition, merger or consolidation; (x) any interest or title of a lessor under any Capital Lease Obligation or operating lease; provided that such Liens do not extend to any property or assets which are not leased property subject to such Capital Lease Obligation or operating lease; (xi) Liens that secure Purchase Money Obligations, Capital Lease Obligations or FF&E Financing permitted to be incurred under this Indenture; provided that such Liens do not extend to or cover any property or assets other than those being acquired, leased or developed and property and assets which, immediately prior to the incurrence of such Purchase Money Obligations, Capital Lease Obligations or FF&E Financing, secured other Indebtedness of the Issuers and the Restricted Subsidiaries (to the extent such other Indebtedness and the Liens securing such other Indebtedness are permitted under this Indenture) to the lender of such Purchase Money Obligations, Capital Lease Obligations or FF&E Financing; (xii) whether or not existing on the Issue Date, Liens securing Obligations under this Indenture, the Notes, the Subsidiary Guaranties or the Security Documents; 22 (xiii) with respect to any vessel included in the Collateral, certain maritime liens, including liens for crew's wages and salvage; (xiv) Liens in favor of the Company or any Subsidiary Guarantor, in which a security interest has been granted to the Trustee to secure the payment of the Notes or a Subsidiary Guaranty, respectively; (xv) Liens arising from precautionary Uniform Commercial Code financing statement filings regarding operating leases entered into by the Company or any of the Subsidiaries in the ordinary course of business; (xvi) Liens incurred in the ordinary course of business securing Hedging Obligations, which Hedging Obligations relate to Indebtedness that is otherwise permitted under this Indenture; (xvii) Liens existing on the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date; (xviii) Liens on a pledge of the Capital Stock of any Unrestricted Subsidiary securing any Indebtedness of such Unrestricted Subsidiary; (xix) leases or subleases granted to others not interfering in any material respect with the business of the Company or any of the Restricted Subsidiaries or materially detracting from the value of the relative assets of the Company or any Restricted Subsidiary; (xx) Liens securing reimbursement obligations with respect to commercial letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (xxi) Liens securing intercompany Indebtedness incurred pursuant to clause (v) of Section 4.7(b); (xxii) Liens securing guarantees by Subsidiary Guarantors of Indebtedness issued by the Company if such guarantees are permitted by Section 4.7; (xxiii) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; and (xxiv) Liens securing Indebtedness of the Company or any of the Restricted Subsidiaries incurred pursuant to clause (xiii) of Section 4.7(b); provided that (a) such Liens do not extend to or cover any property or assets other than those of the Gaming Property being acquired and (b) such Liens are contractually subordinated to the Liens securing the Senior Credit Facility, the Notes and the Subsidiary Guaranties. 23 "Permitted Tax Distributions" in respect of the Company means, with respect to any taxable year or portion thereof in which the Company is a Flow Through Entity, the sum of: (i) the product of (a) the excess of (1) all items of taxable income or gain (other than capital gain) of the Company for such year or portion thereof over (2) all items of taxable deduction or loss (other than capital loss) of the Company for such year or portion thereof and (b) the Applicable Income Tax Rate, plus (ii) the product of (a) the net capital gain (i.e., net long-term capital gain over net short-term capital loss), if any, of the Company for such year or portion thereof and (b) the Applicable Capital Gain Tax Rate, plus (iii) the product of (a) the net short-term capital gain (i.e., net short-term capital gain in excess of net long-term capital loss), if any, of the Company for such year or portion thereof and (b) the Applicable Income Tax Rate, minus (iv) the aggregate Tax Loss Benefit Amount for the Company for such year or portion thereof; provided, that in no event shall the Applicable Income Tax Rate or the Applicable Capital Gain Tax Rate exceed the greater of (i) the greater of (a) the highest aggregate applicable effective marginal rate of Federal, state, and local income tax to which a corporation doing business in the state of California and (b) the highest aggregate applicable effective marginal rate of Federal, state, and local income tax to which a corporation doing business in the state of Louisiana, would be subject to in the relevant year of determination (as certified to the Trustee by a nationally recognized tax accounting firm) plus 5% and (ii) 60%. For purposes of calculating the amount of the Permitted Tax Distributions the items of taxable income, gain, deduction or loss (including capital gain or loss) of any Flow Through Entity of which the Company is treated for Federal income tax purposes as a member (but only for periods for which such Flow Through Entity is treated as a Flow Through Entity), which items of income, gain, deduction or loss are allocated to or otherwise treated as items of income, gain, deduction or loss of the Company for Federal income tax purposes, shall be included in determining the taxable income, gain, deduction or loss (including capital gain or loss) of the Company. Estimated tax distributions may be made within thirty days following March 15, May 15, August 15, and December 15 based upon an estimate of the excess of (x) the tax distributions that would be payable for the period beginning on January 1 of such year and ending on March 31, May 31, August 31, and December 31 if such period were a taxable year (computed as provided above) over (y) distributions attributable to all prior periods during such taxable year. The amount of the Permitted Tax Distribution for a taxable year shall be re-computed promptly after (i) the filing by the Company and each subsidiary of the Company that is treated as a Flow Through Entity of their respective annual income tax returns and (ii) an appropriate Federal or state taxing authority finally determines that the amount of the items of taxable income, gain, deduction, or loss of the Company or any such subsidiary that is treated as a Flow Through Entity for such taxable year or the aggregate Tax Loss Benefit Amount carried forward to such taxable year should be adjusted (each of clauses (i) and (ii) a "Tax Calculation Event"). To the extent that the Permitted Tax Distributions previously distributed in respect of any taxable year are either greater than (a "Tax Distribution Overage") or less than (a "Tax Distribution Shortfall") the Permitted Tax Distributions with respect to such taxable year, as 24 determined by reference to the computation of the amount of the items of income, gain, deduction, or loss of the Company and each such subsidiary in connection with a Tax Calculation Event, the amount of the estimated Permitted Tax Distributions that may be made on the estimated tax distribution date immediately following such Tax Calculation Event shall be reduced or increased as appropriate to the extent of the Tax Distribution Overage or the Tax Distribution Shortfall. To the extent that a Tax Distribution Overage remains after the estimated tax distribution date immediately following such Tax Calculation Event, the amount of the estimated Permitted Tax Distribution that may be made on the subsequent estimated tax distribution date shall be reduced to the extent of such Tax Distribution Overage. Prior to making any Permitted Tax Distributions, the Company shall require each Equity Holder to agree that promptly after the second estimated tax distribution date following a Tax Calculation Event, such Equity Holder shall reimburse the Company to the extent of its pro rata share (based on the portion of Permitted Tax Distributions distributed to such Equity Holder for the taxable year) of any remaining Tax Distribution Overage. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof, or any other entity. "PGC Corp." means Peninsula Gaming Corporation, a Delaware corporation and a co-obligor of the DJL Notes. "PGP" means Peninsula Gaming Partners, LLC, a Delaware limited liability company, the direct parent and sole manager of the Company, and the indirect parent of Capital Corp. "Private Placement Legend" means the legend set forth in Section 2.6(g)(i)(A) hereof to be placed on all Notes issued under this Indenture except where specifically stated otherwise by the provisions of this Indenture. "Pro Forma" or "pro forma" shall have the meaning set forth in Regulation S-X of the Securities Act, unless otherwise specifically stated herein. "Purchase Money Obligations" means Indebtedness representing, or incurred to finance (or to Refinance Indebtedness incurred to finance), the cost (i) of acquiring any assets (including FF&E) and (ii) of construction or build-out of facilities (including Purchase Money Obligations of any other Person at the time such other Person is merged with or into or is otherwise acquired by the Issuers); provided, that (a) the principal amount of such Indebtedness does not exceed 75% of such cost, including construction charges, (b) any Lien securing such Indebtedness does not extend to or cover any other asset or property other than the asset or property being so acquired, constructed or built and assets which, immediately prior to the incurrence of such Purchase Money Obligations, secured other Indebtedness of the Issuers and the Restricted Subsidiaries (to the extent such other Indebtedness and the Liens securing such other Indebtedness are 25 permitted under this Indenture) to the lender of such Purchase Money Obligations, and (c) such Indebtedness is (or the Indebtedness being Refinanced was) incurred, and any Liens with respect thereto are granted, within 180 days of the acquisition or commencement of construction or build-out of such property or asset. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Qualified Capital Stock" means, with respect to any Person, Capital Stock of such Person other than Disqualified Capital Stock. "Reg S Permanent Global Note" means one or more permanent Global Notes bearing the Private Placement Legend, that shall be issued in an aggregate amount of denominations equal in total to the outstanding principal amount of the Reg S Temporary Global Note upon expiration of the Distribution Compliance Period. "Reg S Temporary Global Note" means one or more temporary Global Notes bearing the Private Placement Legend and the Reg S Temporary Global Note Legend, issued in an aggregate amount of denominations equal in total to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Reg S Temporary Global Note Legend" means the legend set forth in Section 2.6(g)(iii) hereof, which is required to be placed on all Reg S Temporary Global Notes issued under this Indenture. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the Issue Date, by and among the Issuers and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time. "Regulation S" means Regulation S promulgated under the Securities Act, as it may be amended from time to time, and any successor provision thereto. "Regulation S Global Note" means a Reg S Temporary Global Note or a Reg S Permanent Global Note, as the case may be. "Related Business" means any business in which PGP, the Company or any Subsidiary of the Company was engaged on the Issue Date and any and all other businesses that in the good faith judgment of the Managers of the Company are similar, related, ancillary or complementary to such business, including, but not limited to, the entertainment and hotel businesses and food and beverage distribution operations. "Related Person" means any Person who controls, is controlled by or is under common control with an Excluded Person; provided, that for purposes of this definition "control" means the beneficial ownership of more than 50% of the total voting power of the Voting Stock of a Person. "Reorganization Transactions" means the following transactions, satisfying all of the following requirements: 26 (a) the transfer or contribution by PGP of all of the Equity Interests of DJL to Peninsula Gaming, provided that: (1) immediately prior to such transfer or contribution, Peninsula Gaming is a wholly owned subsidiary of PGP and does not hold any assets, is not liable for any obligations and has not previously engaged in any business activities; (2) concurrently with such transfer or contribution, Peninsula Gaming executes (w) a supplemental indenture, in substantially the form attached as Exhibit G to this Indenture, pursuant to which Peninsula Gaming becomes a party to this Indenture and an "Issuer" for all purposes under the Notes, this Indenture, the Security Documents, the Intercreditor Agreement and the Registration Rights Agreement and liable for all Obligations of an "Issuer" thereunder, (x) a joinder to each of the Purchase Agreement, the Registration Rights Agreement and the Intercreditor Agreement, in substantially the form attached as an exhibit thereto, (y) a supplement to the applicable Security Documents, in substantially the form attached as an exhibit thereto, and (z) such other documents as may be necessary to reflect the Peninsula Gaming becoming an "Issuer" of the Notes; and (3) immediately after giving effect to such transfer or contribution, DJL is a direct, Wholly Owned Subsidiary of Peninsula Gaming, a Restricted Subsidiary and a co-Issuer of the Notes; (b) following the transfer or contribution described in paragraph (a) above, Peninsula Gaming causing each of its Wholly Owned Subsidiaries to transfer or distribute all of the Equity Interests of OED Corp. to Peninsula Gaming, with the result that immediately after giving effect to such transfer or distribution, OED Corp. is a direct, wholly owned subsidiary of Peninsula Gaming and remains a co-Issuer of the Notes; (c) following the transfer or distribution described in paragraph (b) above, Peninsula Gaming causing each of its Wholly Owned Subsidiaries to transfer or distribute all of the Equity Interests of OED to Peninsula Gaming, with the result that: (1) OED shall remain a Subsidiary Guarantor, notwithstanding the provisions of this Indenture governing the release of Subsidiary Guarantors upon their sale or disposition; and (2) immediately after giving effect to such transfer or distribution, OED is a direct, wholly owned subsidiary of Peninsula Gaming, a Subsidiary Guarantor and a Restricted Subsidiary; (d) following the transfer or distribution described in paragraph (c) above, the designation of OEDA as an Unrestricted Subsidiary, and Peninsula Gaming causing its Wholly Owned Subsidiary DJL, to transfer or distribute all of the Equity Interests of OEDA to PGP with the result that OEDA becomes a sister entity to Peninsula Gaming; provided, however, that the transactions described in this paragraph (d) shall be excluded from the definition of an Asset Sale, an Affiliate Transaction or a Restricted 27 Payment and shall not be subject to any covenant in this Indenture to the extent, and only to the extent, that such transactions could have been consummated on the Issue Date prior to issuance of the Notes, assuming that the requisite regulatory approvals had been obtained prior to the Issue Date, and assuming that the transfer or distribution described in paragraph (c) above had occurred prior to the transactions described in this paragraph (d) (it being understood and agreed, for the avoidance of doubt, that no such transaction that could have been consummated on the Issue Date could have included any assets acquired by OEDA subsequent to the Issue Date (other than as a result of the Management Services Agreement)); and (e) the liquidation or dissolution of PGC Corp.; provided, that (i) none of the DJL Notes are outstanding and (ii) PGC Corp. does not hold any assets, is not liable for any obligations and has not engaged in any business activities other than being a co-obligor of the DJL Notes; provided further that (i) immediately prior to the foregoing transactions, no Event of Default exists, and (ii) the foregoing transactions would not result in the loss or suspension or material impairment of any Gaming License unless a comparable replacement Gaming License is effective prior to or simultaneously with such loss, suspension or material impairment. For the avoidance of doubt, an agreement or arrangement shall not cease to constitute an agreement or arrangement "as in effect on the Issue Date" solely because Peninsula Gaming has been substituted for DJL or OED as a party thereto, or has otherwise become a party thereto, in each case solely as a result of or in connection with the Reorganization Transactions. "Requisite Regulatory Approvals" means the approvals by the Louisiana Gaming Control Board, the Louisiana Racing Commission and the Iowa Gaming Control Board. "Required Regulatory Redemption" means a redemption by the Issuers of any Holder's Notes pursuant to, and in accordance with, any order of any Governmental Authority with appropriate jurisdiction and authority relating to a Gaming License, or to the extent necessary in the reasonable, good faith judgment of the Managers of the Company to prevent the loss, failure to obtain or material impairment or to secure the reinstatement of, any Gaming License, where such redemption or acquisition is required because the Holder or beneficial owner of Notes is required to be found suitable or to otherwise qualify under any gaming or similar laws and is not found suitable or so qualified within 30 days after being requested to do so (or such lesser period that may be required by any Governmental Authority). "Responsible Officer" shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate 28 trust matter is referred because of such person's knowledge of and familiarity with the particular subject. "Restricted Definitive Note" means one or more Definitive Notes bearing the Private Placement Legend, issued under this Indenture. "Restricted Global Note" means one or more Global Notes bearing the Private Placement Legend, issued under this Indenture; provided, that in no case shall an Exchange Note issued in accordance with this Indenture and the terms of the Registration Rights Agreement be a Restricted Global Note. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Payments" means: (i) any dividend or other distribution declared or paid on account of any Equity Interests of the Company or any of the Restricted Subsidiaries or any other payment to any Excluded Person of Affiliate thereof (other than, in each case, (a) dividends or distributions payable in Equity Interests (other than Disqualified Capital Stock) of the Company or (b) amounts payable to the Company or any Restricted Subsidiary); (ii) any payment to purchase, redeem or otherwise acquire or retire for value any Equity Interest of the Company, any Restricted Subsidiary or any other Affiliate of the Company (other than any such Equity Interest owned by the Company or any Restricted Subsidiary); (iii) any principal payment on, or purchase, redemption, defeasance or other acquisition or retirement for value of, any Indebtedness of the Company or any Subsidiary Guarantor that is contractually subordinated in right of payment to the Notes or such Subsidiary Guarantor's Subsidiary Guaranty thereof, as the case may be, prior to any scheduled principal payment, sinking fund payment or other payment at the stated maturity thereof; or (iv) any Restricted Investment. "Restricted Subsidiary" means any Subsidiary which at the time of determination is not an Unrestricted Subsidiary. "Return from Unrestricted Subsidiaries" means (a) 50% of any dividends or distributions received by the Company or a Restricted Subsidiary from an Unrestricted Subsidiary, to the extent that such dividends or distributions were not otherwise included in Consolidated Net Income of the Company, plus (b) to the extent not otherwise included in Consolidated Net Income of the Company, an amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from (i) repayments of the principal of loans or advances or other transfers of assets to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries or (ii) the sale or liquidation of any 29 Unrestricted Subsidiaries, plus (c) to the extent that any Unrestricted Subsidiary of the Company is designated to be a Restricted Subsidiary, the fair market value of the Company's Investment in such Subsidiary on the date of such designation. "Rule 144" means Rule 144 promulgated under the Securities Act, as it may be amended from time to time, and any successor provision thereto. "Rule 144A" means Rule 144A promulgated under the Securities Act, as it may be amended from time to time, and any successor provision thereto. "SEC" means the United States Securities and Exchange Commission, or any successor agency. "Secured Party" means the Trustee, acting as collateral agent under the Security Documents. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "Security Agreement" means that agreement dated the date hereof granting a security interest in the Collateral from the Issuers (and any future Subsidiary Guarantors) in favor of the Trustee. "Security Documents" means, collectively, the Security Agreement, the Mortgages and all mortgages, deeds of trust, security agreements, pledge agreements, control agreements, collateral assignment agreements and other agreements, instruments, financing statements and other documents evidencing, creating, setting forth or limiting any Lien on Collateral in favor of the Trustee (or, in the case of mortgages, deeds of trust or similar agreements, in favor of the Trustee or another trustee thereunder), for the benefit of the Holders. "Seller Preferred" means $4,000,000 face amount of DJL's redeemable preferred membership interests held by Greater Dubuque Riverboat Entertainment Company, L.C. on the Issue Date (without giving effect to any amendment or supplement thereto or modification thereof, except for any such amendment, supplement or modification that is not more disadvantageous to the Holders in any material respect than the original terms thereof as in effect on the Issue Date). "Senior Credit Facility" means any one or more revolving credit agreements or similar instruments, including, without limitation, working capital, construction financing or equipment purchase lines of credit, entered into by the Company or any of the Restricted Subsidiaries governing the terms of a bona fide borrowing from (i) a third party financial institution that is primarily engaged in the business of commercial lending or (ii) a vendor or other provider of financial accommodations in connection with the purchase of equipment, in either case for valid business purposes, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith and, in each case, as 30 amended, renewed, refunded, replaced or refinanced from time to time, whether in whole or in part; provided, that such agreements or instruments do not permit the Company and the Restricted Subsidiaries, taken as a whole, to incur Indebtedness under all such agreements or instruments in an aggregate principal amount at any time outstanding in excess of the maximum aggregate principal amount of Indebtedness permitted to be incurred pursuant to clause (i) of Section 4.7(b). "Shelf Registration Statement" shall have the meaning set forth in the Registration Rights Agreement. "Significant Subsidiary" shall have the meaning provided under Regulation S-X of the Securities Act, as in effect on the Issue Date. "Special Record Date" means, for payment of any Defaulted Interest, a date fixed by the Paying Agent pursuant to Section 2.12 hereof. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, and its successors. "Stated Maturity," when used with respect to any Note, means April 15, 2012. "subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity (including a limited liability company) of which more than 50% of the total voting power of shares of Voting Stock thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other subsidiaries of that Person or a combination thereof and (ii) any partnership in which such Person or any of its subsidiaries is a general partner. "Subsidiary" means any subsidiary of the Company. "Subsidiary Guaranty" means an unconditional and irrevocable guaranty by a Subsidiary Guarantor of the Obligations of the Issuers under the Notes and this Indenture, on a senior unsecured basis, as set forth in this Indenture, as amended from time to time in accordance with the terms thereof. "Subsidiary Guarantor" means each of the Issuers' present and future Restricted Subsidiaries other than Foreign Subsidiaries and other than any Restricted Subsidiary that is a co-Issuer of the Notes. "Tax Loss Benefit Amount" means with respect to any taxable year, the amount by which the Permitted Tax Distributions would be reduced were a net operating loss or net capital loss from a prior taxable year of the Company ending subsequent to the Issue Date carried forward to the applicable taxable year; provided, that for such purpose the amount of any such net operating loss or net capital loss shall be used only once and in each case shall be carried forward to the next succeeding taxable year until so used. For purposes of calculating the Tax Loss Benefit Amount, the proportionate part of the items of taxable income, gain, deduction, or loss (including capital gain or loss) of any 31 Subsidiary that is a Flow Through Entity for a taxable year of such Subsidiary ending subsequent to the Issue Date shall be included in determining the amount of net operating loss or net capital loss of the Company. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "Transactions" means the transactions described in the Offering Circular under the section "Transactions." "Transfer Restricted Notes" means Global Notes and Definitive Notes that bear or are required to bear the Private Placement Legend, issued under this Indenture. "Trustee" means U.S. Bank National Association, as trustee under this Indenture, until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means such successor serving hereunder. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend, issued under this Indenture. "Unrestricted Global Note" means one or more permanent Global Notes representing a series of Notes that does not bear and is not required to bear the Private Placement Legend, issued under this Indenture. "Unrestricted Subsidiary" means any Subsidiary that, at or prior to the time of determination, shall have been designated by the Managers of the Company as an Unrestricted Subsidiary and each subsidiary of such Subsidiary; provided, that such Subsidiary or any of its subsidiaries does not hold any Indebtedness or Capital Stock of, or any Lien on any assets of, the Company or any Restricted Subsidiary. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary as of such date. The Managers of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under the Interest Coverage Ratio test set forth in Section 4.7(a) calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Default or Event of Default would be in existence following such designation. The Company shall be deemed to make an Investment in each Subsidiary designated as an Unrestricted Subsidiary immediately following such designation in an amount equal to the Investment in such Subsidiary and its subsidiaries immediately prior to such designation. Any such designation by the Managers of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Managers 32 giving effect to such designation and an Officers' Certificate certifying that such designation complies with the foregoing conditions and is permitted by Section 4.7(a). "Upper Tier Equity Holder" means, in the case of any Flow Through Entity the Equity Holder of which is, in turn, a Flow Through Entity, the person that is ultimately subject to tax on a net income basis on the items of taxable income, gain, deduction, and loss of the Company and the Subsidiaries that are Flow Through Entities. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Voting Stock" means, with respect to any Person, (i) one or more classes of the Capital Stock of such Person having general voting power to elect at least a majority of the Board of Directors, managers or trustees of such Person (regardless of whether at the time Capital Stock of any other class or classes have or might have voting power by reason of the happening of any contingency) and (ii) any Capital Stock of such Person convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (i) above. "Warner Land" means the 93-acres of land adjacent to the racino acquired by OED from Bart C. Warner pursuant to the Sale with Mortgage, dated October 24, 2003. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years (rounded to the nearest one-twelfth) obtained by dividing (i) the then outstanding principal amount of such Indebtedness into (ii) the total of the product obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that shall elapse between such date and the making of such payment. "Wholly Owned Subsidiary" of any Person means a subsidiary of such Person all the Capital Stock of which (other than directors' qualifying shares and, in the case of DJL, other than the Seller Preferred) is owned directly or indirectly by such Person; provided, that with respect to the Company, the term Wholly Owned Subsidiary shall exclude Unrestricted Subsidiaries. SECTION 1.2 OTHER DEFINITIONS Term Defined in Section ---- ------------------ "Affiliate Transaction" 4.12 "Authentication Order" 2.2 "Benefited Party" 11.1 "C Corporation" Definition of Permitted C-Corp Conversion "Change of Control Offer" 4.15 "Change of Control Payment" 4.15 33 "Change of Control Payment Date" 4.15 "Covenant Defeasance" 8.3 "Defaulted Interest" 2.12 "DTC" 2.3 "Event of Default" 6.1 "Excess Proceeds" 4.13 "Excess Proceeds Offer" 4.13 "Excess Proceeds Offer Period" 4.13 "Existing Holders" Definition of Excluded Person "Federal Flow Through Entity" Definition of Flow Through Entity "Four Quarter Reference Period" 4.7 "incur" 4.7 "Investment Company Act" 4.17 "Legal Defeasance" 8.2 "Notes" Preamble "Paying Agent" 2.3 "Purchase Amount" 4.13 "Refinance" 4.7 "Refinancing Indebtedness" 4.7 "Registrar" 2.3 "Replacement Vessel" 4.13 "Series A Notes" Preamble "Series B Notes" Preamble "Subsidiary Guaranty Obligations" 11.1 "Tax Calculation Event" Definition of Permitted Tax Distributions "Tax Distribution Overage" Definition of Permitted Tax Distributions "Tax Distribution Shortfall" Definition of Permitted Tax Distributions SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC; and "obligor" on the Notes means each of the Issuers, each Subsidiary Guarantor and any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. 34 SECTION 1.4 RULES OF CONSTRUCTION Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; (6) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (7) references to sections of or rules under the Securities Act and the Exchange Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time; and (8) references to the "Intercreditor Agreement" shall mean if the Intercreditor Agreement is then in effect. ARTICLE II THE NOTES SECTION 2.1 FORM AND DATING (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto; provided, that the form of the Exchange Notes shall include such variations as are permitted or required by the Registration Rights Agreement. The Notes may have notations, legends or endorsements required by law, stock exchange rule, depository rule or usage. Each Note shall be dated the date of its issuance and shall show the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and each of the Issuers, the Subsidiary Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. 35 (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Notes Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.6 hereof. (c) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Banking Luxembourg" and "Customer Handbook" of Clearstream Banking Luxembourg in effect at the relevant time shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Clearstream Banking Luxembourg. SECTION 2.2 EXECUTION AND AUTHENTICATION Two Officers shall sign the Notes for each of the Issuers by manual or facsimile signature. In the case of Definitive Notes, such signatures may be imprinted or otherwise reproduced on such Notes. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Issuers signed by an Officer (an "Authentication Order"), authenticate Notes for issuance up to the aggregate principal amount stated in such Authentication Order; provided that Notes authenticated for issuance on the Issue Date shall not exceed $233,000,000 in aggregate principal amount. The Trustee may appoint an authenticating agent acceptable to the Issuers to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Issuers. SECTION 2.3 REGISTRAR, PAYING AGENT AND DEPOSITARY The Issuers shall maintain an office or agency in the Borough of Manhattan, The City of New York, which shall initially be U.S. Bank National Association, where (i) Notes may be presented for registration of transfer or for exchange 36 ("Registrar") and (ii) Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Issuers may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Issuers may change any Paying Agent or Registrar without notice to any Holder. The Issuers shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Issuers fail to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its subsidiaries may act as Paying Agent or Registrar. The Issuers initially appoint The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Issuers initially appoint the Trustee to act as the Registrar and Paying Agent and to act as Notes Custodian with respect to the Global Notes. SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST The Issuers shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or Interest on the Notes, and shall notify the Trustee of any default by the Issuers in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Issuers at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or one of its subsidiaries) shall have no further liability for the money. If the Company or one of its subsidiaries acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Issuers, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.5 HOLDER LISTS The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Issuers shall furnish, or shall cause the Registrar (if other than the Company or one of its subsidiaries) to furnish, to the Trustee at least seven Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Issuers shall otherwise comply with TIA Section 312(a). SECTION 2.6 TRANSFER AND EXCHANGE (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such 37 successor Depositary. All Global Notes shall be exchanged by the Issuers for Definitive Notes if (i) the Issuers deliver to the Trustee notice from the Depositary that (x) the Depositary is unwilling or unable to continue to act as Depositary for the Global Notes or (y) the Depositary is no longer a clearing agency registered under the Exchange Act, and in either case, the Issuers fail to appoint a successor Depositary within 90 days of such notice from the Depositary, (ii) the Issuers, in their sole discretion, determine that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee or (iii) upon request of the Trustee or Holders of a majority of the aggregate principal amount of outstanding Notes if there shall have occurred and be continuing a Default or Event of Default with respect to the Notes; provided, that in no event shall the Reg S Temporary Global Note be exchanged by the Issuers for Definitive Notes prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Registrar of any certificate identified by the Issuers and their counsel to be required pursuant to Rule 903 or Rule 904 under the Securities Act. Upon the occurrence of any of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.7 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.6 or Section 2.7 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.6(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.6(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (1) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Distribution Compliance Period, transfers of beneficial interests in the Reg S Temporary Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.6(b)(1), but the Issuers or the Trustee may request an Opinion of Counsel. 38 (2) All Other Transfers and Exchanges of Beneficial Interests in Global Notes (including for Definitive Notes). In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.6(b)(1) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) an order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) an order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (B)(1) above; provided, that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Reg S Temporary Global Note prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Registrar of any certificates identified by the Issuers or their counsel to be required pursuant to Rule 903 and Rule 904 under the Securities Act. Upon consummation of an Exchange Offer by the Issuers in accordance with Section 2.6(f) hereof, the requirements of this Section 2.6(b)(2) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.6(h) hereof. (3) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.6(b)(2) above and the Registrar receives the following: (A) if the transferee shall take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transferee shall take delivery in the form of a beneficial interest in the 501 Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (3)(d) thereof; or (C) if the transferee shall take delivery in the form of a beneficial interest in the Reg S Temporary Global Note or the Reg S Permanent Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. 39 (4) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.6(b)(2) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and Section 2.6(f) hereof, and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuers; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement and a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, is delivered by the transferor; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement and a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, is delivered by the transferor; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form, and from legal counsel, reasonably acceptable to the Registrar and the Issuers to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Issuers shall issue and, upon receipt of an Authentication Order in accordance with Section 2.2 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. 40 (c) Transfer and Exchange of Beneficial Interests for Definitive Notes. Transfer and exchange of beneficial interests in the Global Notes for Definitive Notes shall be made subject to compliance with this Section 2.6(c), and the requesting Holder shall provide any certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.6(c). Upon receipt of such applicable documentation, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Note or Unrestricted Global Note, as applicable, to be reduced accordingly pursuant to Section 2.6(h) hereof, and the Issuers shall execute and, upon receipt of an Authentication Order pursuant to Section 2.2, the Trustee shall authenticate and deliver to the Person designated in the instructions a Restricted Definitive Note or an Unrestricted Definitive Note, as applicable, in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Global Note pursuant to this Section 2.6(c) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Definitive Notes are so registered. (1) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) and (C) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable; or 41 (E) if such beneficial interest is being transferred to the Issuers or any of their respective subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof. Any Restricted Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.6(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (2) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and Section 2.6(f) hereof, and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuers; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement and a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, is delivered by the transferor; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement and a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, is delivered by the transferor; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form, and from legal counsel, reasonably acceptable to the Registrar and the Issuers to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. 42 Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a Restricted Definitive Note. (3) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note, then such holder shall satisfy the applicable conditions set forth in Section 2.6(b)(2) hereof. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.6(c)(3) shall not bear the Private Placement Legend. (4) Transfer or Exchange of Reg S Temporary Global Notes. Notwithstanding the other provisions of this Section 2.6, a beneficial interest in the Reg S Temporary Global Note may not be (A) exchanged for a Definitive Note prior to (x) the expiration of the Distribution Compliance Period (unless such exchange is approved by the Issuers, does not require an investment decision on the part of the Holder thereof and does not violate the provisions of Regulation S) and (y) the receipt by the Registrar of any certificates identified by the Issuers or their counsel to be required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act or (B) transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to the events set forth in clause (A) above or unless the transfer is pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. Transfer and exchange of Definitive Notes for beneficial interests in the Global Notes shall be made subject to compliance with this Section 2.6(d), and the requesting Holder shall provide any certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.6(d). Upon receipt from such Holder of such applicable documentation and the surrender to the Registrar of the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar, duly executed by such Holder or by its attorney, duly authorized in writing, the Registrar shall register the transfer or exchange of the Definitive Notes. The Trustee shall cancel such Definitive Notes so surrendered and cause the aggregate principal amount of the applicable Restricted Global Note or Unrestricted Global Note, as applicable, to be increased accordingly pursuant to Section 2.6(h) hereof. (1) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: 43 (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; or (D) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in accordance with Regulation D under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(d) thereof; the Trustee shall cancel the Restricted Definitive Note and increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the Regulation S Global Note and in the case of clause (D) above, the 501 Global Note. (2) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and Section 2.6(f) hereof, and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuers; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement and a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, is delivered by the transferor; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement and a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, is delivered by the transferor; or 44 (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form, and from legal counsel, reasonably acceptable to the Registrar and the Issuers to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (3) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (2)(B), (2)(D) or (3) of this Section 2.6(d) at a time when an Unrestricted Global Note has not yet been issued, the Issuers shall issue and, upon receipt of an Authentication Order in accordance with Section 2.2 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.6(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. The Trustee shall cancel any such Definitive Notes so surrendered, and the Issuers shall execute and, upon receipt of an Authentication Order pursuant to Section 2.2, the Trustee shall authenticate and deliver to the Person designated in the instructions a Restricted Definitive Note or an Unrestricted Definitive Note, as applicable, in the appropriate principal amount. Any Definitive Note issued pursuant to this Section 2.6(c) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Definitive Notes are so registered. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.6(e). 45 (1) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer shall be made to a QIB pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer shall be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; (C) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (A) and (B) above, then the transferor must deliver a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable; or (D) if such beneficial interest is being transferred to the Issuers or any of their subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof, must be delivered by the transferor. (2) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and Section 2.6(f) hereof, and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuers; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement and a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, is delivered by the transferor; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement and a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, is delivered by the transferor; or 46 (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit D hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form, and from legal counsel, reasonably acceptable to the Registrar and the Issuers to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (3) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Issuers shall issue and, upon receipt of an Authentication Order in accordance with Section 2.2 and an Opinion of Counsel for the Issuers as to certain matters discussed in this Section 2.6(f), the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the sum of (A) the principal amount of the beneficial interests in the Restricted Global Notes exchanged or transferred for beneficial interests in Unrestricted Global Notes in connection with the Exchange Offer pursuant to Section 2.6(b)(4) and (B) the principal amount of Restricted Definitive Notes exchanged or transferred for beneficial interests in Unrestricted Global Notes in connection with the Exchange Offer pursuant to Section 2.6(d)(2), in each case tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not Broker-Dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Issuers, and accepted for exchange in the Exchange Offer, and (ii) Unrestricted Definitive Notes in an aggregate principal amount equal to the sum of (A) the principal amount of the Restricted Definitive Notes exchanged or transferred for Unrestricted Definitive Notes in connection with the Exchange Offer pursuant to Section 2.6(e)(2) and (B) Restricted Global Notes exchanged or transferred for Unrestricted Definitive Notes in connection with the Exchange Offer pursuant to Section 2.6(c)(2), in each case tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not Broker-Dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Issuers, and accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cancel any Definitive Notes so surrendered and shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Issuers shall execute and, upon receipt of an Authentication Order pursuant to Section 2.2, the Trustee shall authenticate and deliver to 47 the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. The Opinion of Counsel for the Issuers referenced above shall state that: (1) the issuance and sale of the Exchange Notes by the Issuers has been duly authorized and, when executed by the Issuers and authenticated by the Trustee in accordance with the provisions of this Indenture and delivered in exchange for Series A Notes in accordance with this Indenture and the Exchange Offer, the Exchange Notes shall be entitled to the benefits of this Indenture and shall be valid and binding obligations of the Issuers, enforceable against the Issuers in accordance with their terms, subject to customary qualifications including exceptions for bankruptcy, fraudulent transfer and equitable principles; and (2) when the Exchange Notes are issued and executed by the Issuers and authenticated by the Trustee in accordance with the provisions of this Indenture and delivered in exchange for Series A Notes in accordance with this Indenture and the Exchange Offer, the Subsidiary Guaranties by the Subsidiary Guarantors endorsed thereon shall be entitled to the benefits of this Indenture and shall be the valid and binding obligations of the Subsidiary Guarantors, enforceable against the Subsidiary Guarantors in accordance with their terms, subject to customary qualifications including exceptions for bankruptcy, fraudulent transfer and equitable principles. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (1) Except as permitted by subparagraph (2) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH OTHER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(k) UNDER THE SECURITIES ACT AS PERMITTING RESALES OF RESTRICTED SECURITIES BY NON-AFFILIATES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL 48 ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PURCHASERS THAT OCCUR OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE AND IN EACH CASE IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS OF ANY U.S. STATE OR ANY OTHER APPLICABLE JURISDICTION." (2) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(4), (c)(2), (c)(3), (d)(2), (d)(3), (e)(2), (e)(3) or (f) to this Section 2.6 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. To the extent required by the Depositary, each Global Note shall bear legends in substantially the following forms: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.6 OF THE INDENTURE, (II) THIS 49 GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS." "UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN." (iii) Reg S Temporary Global Note Legend. To the extent required by the Depositary, each Reg S Temporary Global Note shall bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE CASH PAYMENTS OF INTEREST DURING THE PERIOD WHICH SUCH HOLDER HOLDS THIS NOTE. NOTHING IN THIS LEGEND SHALL BE DEEMED TO PREVENT INTEREST FROM ACCRUING ON THIS NOTE." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or cancelled in whole and not in part, each such Global Note shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another 50 Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement may be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement may be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Issuers shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Issuers may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Section 2.10, 3.6, 4.13 or 4.15 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Issuers, evidencing the same Indebtedness, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Issuers shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.2 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between an Interest Record Date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Issuers may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Issuers shall be affected by notice to the contrary. 51 (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.2 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.6 to effect a registration of transfer or exchange may be submitted by facsimile. Notwithstanding anything herein to the contrary, as to any certifications and certificates delivered to the Registrar pursuant to this Section 2.6, the Registrar's duties shall be limited to confirming that any such certifications and certificates delivered to it are in the form of Exhibits A, B, C, D and E attached hereto. The Registrar shall not be responsible for confirming the truth or accuracy of representations made in any such certifications or certificates. SECTION 2.7 REPLACEMENT NOTES If any mutilated Note is surrendered to the Trustee or the Issuers, or if the Trustee or the Issuers receive evidence (which evidence may be from the Trustee) to their satisfaction of the destruction, loss or theft of any Note, the Issuers shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Issuers, an affidavit of lost certificate and/or an indemnity bond or other indemnity must be supplied by the requesting Holder that is sufficient in the judgment of the Trustee and the Issuers to protect the Issuers, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Issuers may charge for its expenses in replacing a Note, including reasonable fees and expenses of their counsel and of the Trustee and its counsel. Every replacement Note is an additional obligation of the Issuers and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.8 OUTSTANDING NOTES The Notes outstanding at any time are all the Notes authenticated by the Trustee (including any Note represented by a Global Note) except for those cancelled by it or at its direction, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.8 as not outstanding. Except as set forth in Section 2.9 hereof, a Note does not cease to be outstanding because the Issuers or an Affiliate of either of the Issuers holds the Note. If a Note is replaced pursuant to Section 2.7 hereof, such Note, together with the Subsidiary Guaranty of that particular Note endorsed thereon, ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.1 hereof, it ceases to be outstanding and Interest on it ceases to accrue. If the Paying Agent (other than the Company, a subsidiary or an Affiliate of any thereof) holds, on a redemption date or the maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue Interest. 52 SECTION 2.9 TREASURY NOTES In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuers, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuers, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. SECTION 2.10 TEMPORARY NOTES Until certificates representing Notes are ready for delivery, the Issuers may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of Definitive Notes but may have variations that the Issuers considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Issuers shall prepare and the Trustee shall authenticate Definitive Notes in exchange for temporary Notes. Until such exchange, holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11 CANCELLATION The Issuers at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent (other than the Company or an Affiliate of the Company), and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all cancelled Notes shall be delivered to the Issuers. The Issuers may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12 DEFAULTED INTEREST Any Interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date plus, to the extent lawful, any interest payable on the defaulted Interest at the rate and in the manner provided in Section 4.1 hereof and in the Note (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered Holder on the relevant Interest Record Date, and such Defaulted Interest may be paid by the Issuers, at their election in each case, as provided in clause (1) or (2) below: (1) The Issuers may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in 53 the following manner. The Issuers shall notify the Trustee and the Paying Agent in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Issuers shall deposit with the Paying Agent an amount of cash equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements reasonably satisfactory to the Paying Agent for such deposit prior to the date of the proposed payment, such cash when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as provided in this clause (1). Thereupon the Paying Agent shall fix a "Special Record Date" for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Paying Agent of the notice of the proposed payment. The Paying Agent shall promptly notify the Issuers and the Trustee of such Special Record Date and, in the name and at the expense of the Issuers, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at its address as it appears in the Note register maintained by the Registrar not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names the Notes (or their respective predecessor Notes) are registered on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Issuers may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Issuers to the Trustee and the Paying Agent of the proposed payment pursuant to this clause, such manner shall be deemed practicable by the Trustee and the Paying Agent. Subject to the foregoing provisions of this Section 2.12, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to Interest accrued and unpaid, and to accrue, which were carried by such other Note. SECTION 2.13 CUSIP NUMBERS The Issuers in issuing the Notes may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuers shall promptly notify the Trustee of any change in the "CUSIP" numbers. 54 SECTION 2.14 ISSUANCE OF ADDITIONAL NOTES The Issuers may, subject to Section 4.7 hereof and applicable law, issue Additional Notes in an unlimited amount under this Indenture. The Notes issued on the Issue Date and any Additional Notes subsequently issued shall be treated as a single class for all purposes under this Indenture. ARTICLE III REDEMPTION SECTION 3.1 NOTICES TO TRUSTEE If the Issuers elect to redeem Notes pursuant to the optional redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee, at least 30 days (unless a shorter period is acceptable to the Trustee) but not more than 60 days (unless a longer period is acceptable to the Trustee) before a redemption date, an Officers' Certificate stating that such redemption is being made pursuant to Section 3.7 and setting forth (i) the redemption date, (ii) the principal amount of Notes to be redeemed and (iii) the redemption price. SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes or portions thereof to be redeemed among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate, provided that Notes in denomination of $1,000 or less may not be redeemed in part. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Issuers in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes in denominations of larger than $1,000 selected shall be in amounts of $1,000 or integral multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not an integral multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.3 NOTICE OF REDEMPTION Subject to the provisions of Section 3.7 hereof, at least 30 days but not more than 60 days before a redemption date (except in the case of a Regulatory 55 Redemption requiring less notice), the Issuers shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, on or after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Issuers default in making such redemption payment, Interest (and Liquidated Damages, if any) on Notes or portions thereof called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Issuers' request, the Trustee shall give the notice of redemption in the Issuers' name and at its expense; provided, however, that the Issuers shall have delivered to the Trustee, at least 35 days prior to the redemption date (unless a shorter period shall be acceptable to the Trustee or is required pursuant to a Regulatory Redemption), an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION Once notice of redemption is mailed in accordance with Section 3.3 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. At any time prior to the mailing of a notice of redemption to the Holders pursuant to Section 3.3, the Issuers may withdraw, revoke or rescind any notice of redemption delivered to the Trustee without any continuing obligation to redeem the Notes as contemplated by such notice of redemption. 56 SECTION 3.5 DEPOSIT OF REDEMPTION PRICE At or before 10:00 a.m. on the redemption date, the Issuers shall deposit with the Trustee or with the Paying Agent immediately available funds sufficient to pay the redemption price of and accrued and unpaid Interest (and Liquidated Damages, if any) on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Issuers any money deposited with the Trustee or the Paying Agent by the Issuers in excess of the amounts necessary to pay the redemption price of, and accrued and unpaid Interest (and Liquidated Damages, if any) on, all Notes to be redeemed. If the Issuers comply with the provisions of the preceding paragraph, on and after the redemption date, Interest (and Liquidated Damages, if any) shall cease to accrue on the Notes or the portions of Notes called for redemption, regardless of whether such Notes are presented for payment. If a Note is redeemed on or after an Interest Record Date but on or prior to the related Interest Payment Date, then any accrued and unpaid Interest (and Liquidated Damages, if any) shall be paid to the Person in whose name such Note was registered at the close of business on such Interest Record Date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Issuers to comply with the preceding paragraph, Interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any Interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.1 hereof. If the redemption date hereunder is on or after an Interest Record Date on which the Holders of record have a right to receive the corresponding Interest due and Liquidated Damages, if any, and on or before the associated Interest Payment Date, any accrued and unpaid Interest (and Liquidated Damages, if any), due on such Interest Payment Date shall be paid to the Person in whose name a Note is registered at the close of business on such Interest Record Date. SECTION 3.6 NOTES REDEEMED IN PART Upon surrender of a Note that is redeemed in part, the Issuers shall issue and, upon receipt of an Authentication Order, the Trustee shall authenticate for the Holder at the expense of the Issuers a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.7 OPTIONAL REDEMPTION (a) Except as set forth in Section 3.7(b), the Notes are not redeemable at the Issuers' option prior to April 15, 2008. Thereafter, the Notes shall be subject to redemption, in whole or in part, at the option of the Issuers at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid Interest (and Liquidated Damages, if any) thereon, to the applicable redemption date, if redeemed during the 12-month period beginning on April 15 of the years indicated below: 57 YEAR PERCENTAGE ---- ---------- 2008 104.375% 2009 102.917% 2010 101.458% 2011 and thereafter 100.000% (b) Notwithstanding Section 3.7(a), at any time or from time to time prior to April 15, 2007, the Issuers may redeem, at their option, up to 35% of the aggregate principal amount of the Notes then outstanding, at a redemption price of 108.75% of the principal amount thereof, plus accrued and unpaid Interest, plus Liquidated Damages, if any, thereon, if any, through the applicable redemption date, with the net cash proceeds of one or more Equity Offerings; provided, that (i) such redemption shall occur within 60 days of the date of closing of such Equity Offering and (ii) at least 65% of the aggregate principal amount of Notes issued under this Indenture remains outstanding immediately after giving effect to each such redemption. The restrictions on the optional redemption contained herein do not limit the right of the Issuers or any of the Subsidiaries to separately make open market, privately negotiated or other purchases of the Notes from time to time. (c) Any redemption pursuant to this Section 3.7 shall be made pursuant to the provisions of Sections 3.1 through 3.6 hereof. SECTION 3.8 REGULATORY REDEMPTION Notwithstanding any other provisions hereof, Notes to be redeemed pursuant to a Required Regulatory Redemption shall be redeemable by the Issuers, in whole or in part, at any time upon not less than 20 Business Days nor more than 60 days notice (or such earlier date as may be ordered by any applicable Governmental Authority) at a price equal to the lesser of (a) the Holder's cost thereof and (b) 100% of the principal amount thereof, plus in either case accrued and unpaid Interest, plus Liquidated Damages, if any, thereon, if any, to the redemption date (or such earlier period as ordered by a Governmental Authority). The Issuers are not required to pay or reimburse any Holder or beneficial owner of the Notes for the expenses of any such Holder or beneficial owner related to the application for any Gaming License, qualification or finding of suitability in connection with a Required Regulatory Redemption. Such expenses of any such Holder or beneficial owner shall, therefore, be the obligation of such Holder or beneficial owner. Any Required Regulatory Redemption shall be made in accordance with the provisions of Sections 3.3, 3.4 and 3.5 unless other procedures are required by any Governmental Authority. SECTION 3.9 NO MANDATORY REDEMPTION The Issuers shall not be required to make mandatory redemption payments with respect to the Notes (except for a Required Regulatory Redemption and any offer to repurchase Notes that the Issuers are required to make in accordance with the provisions of Sections 4.13 and 4.15 below). The Notes shall not have the benefit of any sinking fund. 58 ARTICLE IV COVENANTS SECTION 4.1 PAYMENT OF NOTES The Issuers shall pay or cause to be paid the principal of, premium, if any, and Interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and Interest shall be considered paid on the date due if the Paying Agent (if other than the Company or a subsidiary thereof) holds as of 12:00 noon Eastern time on the due date money deposited by the Issuers in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and Interest then due. The Issuers shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement and herein. The Issuers shall pay interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue principal at the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue installments of Interest and Liquidated Damages, if any, (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY The Issuers shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Issuers in respect of the Notes and this Indenture may be served. The Issuers shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuers shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office. The Issuers may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such additional designations; provided, that no such designation or rescission shall in any manner relieve the Issuers of their obligation to maintain an office or agency in the Borough of Manhattan, The City of New York. The Issuers shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Issuers hereby designate the Corporate Trust Office of the Trustee as one such office or agency of the Issuers in accordance with Section 2.3 hereof. 59 SECTION 4.3 SEC REPORTS AND REPORTS TO HOLDERS Regardless of whether required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall furnish to the Trustee and Holders, within 15 days after the Company is or would have been required to file such with the SEC, (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including for each a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's independent certified public accountants and (ii) all information that would be required to be contained in a filing with the SEC on Form 8-K if the Company were required to file such reports. From and after the time the Company files a registration statement with the SEC with respect to the Notes, the Company shall, in lieu of providing such information to the Trustee and the Holders, file such information with the SEC so long as the SEC shall accept such filings. SECTION 4.4 COMPLIANCE CERTIFICATE (a) The Issuers shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Issuers and the Restricted Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Issuers and the Restricted Subsidiaries have kept, observed, performed and fulfilled their obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to his or her knowledge the Issuers and the Restricted Subsidiaries are not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred and be continuing, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Issuers are taking or proposes to take with respect thereto). Each of the Issuers shall provide the Trustee with timely written notice of any change in its fiscal year end, which is currently December 31. (b) The Issuers shall, so long as any of the Notes are outstanding, deliver to the Trustee, within five Business Days of any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Issuers are taking or propose to take with respect thereto. SECTION 4.5 TAXES The Issuers shall pay, and shall cause each of the Restricted Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment would not have a material adverse effect on the ability of the Issuers and the Subsidiary Guarantors to satisfy their obligations under the Notes, the Subsidiary Guaranties and this Indenture. 60 SECTION 4.6 STAY, EXTENSION AND USURY LAWS Each of the Issuers covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and each of the Issuers (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.7 LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED EQUITY INTERESTS (a) The Issuers shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, (x) create, incur, issue, assume, guaranty or otherwise become directly or indirectly liable with respect to, contingently or otherwise (collectively, "incur"), any Indebtedness (including, without limitation, Acquired Debt) or (y) issue any Disqualified Capital Stock; provided, that the Company and the Restricted Subsidiaries may incur Indebtedness (including, without limitation, Acquired Debt) and issue shares of Disqualified Capital Stock if (a) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a pro forma basis to such incurrence or issuance, and (b) the Interest Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Capital Stock is issued would have been not less than 2.0 to 1.0 determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as set forth in the definition of Interest Coverage Ratio, as if the additional Indebtedness had been incurred, or the Disqualified Capital Stock had been issued, as the case may be, at the beginning of such four-quarter period. (b) Notwithstanding the foregoing, the foregoing limitations shall not prohibit the incurrence of: (i) Indebtedness under a Senior Credit Facility; provided, that the aggregate principal amount of Indebtedness so incurred on any date, together with all other Indebtedness incurred pursuant to this clause (i) and outstanding on such date, shall not exceed $35,000,000, less the aggregate amount of commitment reductions contemplated by clause (iii)(C) of Section 4.13(a); provided, however, that Indebtedness permitted to be incurred pursuant to this clause (i) shall be increased by $15,000,000 (A) upon the acquisition of any Gaming Property or (B) to effectuate a Gaming Property Financing, provided further, that any increase pursuant to this proviso shall be reduced dollar for dollar by the amount of Acquired Debt secured by the assets of such Gaming Property (unless such Acquired Debt could have been incurred under, and reduces the amount available under Section 4.7(b)(ii) below); (ii) FF&E Financing and Indebtedness represented by Capital Lease Obligations, mortgage financings or other Purchase Money Obligations; provided, 61 that (1) no Indebtedness incurred under the Notes is utilized for the purchase or lease of FF&E financed with such FF&E Financing or such other Indebtedness, and (2) the aggregate principal amount of such Indebtedness (including any Acquired Debt referred to in the parenthetical in Section 4.7(b)(i) above and including any Refinancing Indebtedness and any other Indebtedness incurred to repay, redeem, discharge, retire, defease, refund, refinance or replace any Indebtedness pursuant to this clause (ii)) outstanding at any time (excluding any Gaming FF&E Financing incurred pursuant to this clause (ii)) does not exceed the product of (x) $7,500,000 times (y) the number of Gaming Properties owned and controlled after the Issue Date by any of the Company and the Restricted Subsidiaries on the date of such incurrence; (iii) Indebtedness solely in respect of bankers acceptances, letters of credit payment obligations in connection with self-insurance or similar requirements, security for workers' compensation claims, appeal bonds, surety bonds, insurance obligations or bonds, and performance bonds, and similar bonds or obligations, all incurred in the ordinary course of business (including, without limitation, to maintain any license or permits) in accordance with customary industry practices; (iv) Hedging Obligations incurred to fix or hedge interest rate risk with respect to any fixed or variable rate Indebtedness otherwise permitted by this Indenture; provided, that the notional principal amount of each such Hedging Obligation does not exceed the principal amount of the Indebtedness to which such Hedging Obligation relates; (v) Indebtedness of any Issuer, any Subsidiary Guarantor or any Restricted Subsidiary owed to and held by a Subsidiary Guarantor or an Issuer, as the case may be, that is unsecured and subordinated in right of payment to the Notes and the Subsidiary Guaranties, as the case may be; provided, that any subsequent issuance or transfer of any Capital Stock that results in any such Subsidiary Guarantor or Restricted Subsidiary, as the case may be, ceasing to be a Subsidiary Guarantor or a Restricted Subsidiary, or any transfer of such Indebtedness (other than to an Issuer or a Subsidiary Guarantor) shall be deemed, in each case, to constitute the incurrence of such Indebtedness by such Issuer, such Subsidiary Guarantor or such Restricted Subsidiary, as the case may be; (vi) Indebtedness outstanding on the Issue Date, including the Notes outstanding on the Issue Date, but excluding Indebtedness under any Senior Credit Facility (other than the OED FF&E Facility) outstanding on the Issue Date; (vii) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; (viii) the accrual of interest, the accretion or amortization of original issue discount and the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms; 62 (ix) Indebtedness arising from agreements for indemnification, adjustment of purchase price or similar obligations, in each case, incurred in connection with the disposition of any business or assets of the Company, any of the Subsidiary Guarantors or any of the Restricted Subsidiaries; provided that the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company or the applicable Subsidiary Guarantor or Restricted Subsidiary in connection with such disposition; (x) any Subsidiary Guaranty of the Notes; (xi) Indebtedness issued in exchange for, or the proceeds of which are substantially contemporaneously used to extend, repay, redeem, discharge, refinance, renew, replace, or refund (collectively, "Refinance"), Indebtedness incurred pursuant to the Interest Coverage Ratio test set forth in the immediately preceding paragraph, Section 4.7(b)(vi) above, this clause (xi) or Section 4.7(b)(xiii) below (the "Refinancing Indebtedness"); provided, that (a) the principal amount of such Refinancing Indebtedness does not exceed the principal amount of Indebtedness so Refinanced (plus any required premiums and out-of-pocket expenses reasonably incurred in connection therewith), (b) the Refinancing Indebtedness has a final scheduled maturity that equals or exceeds the final stated maturity, and a Weighted Average Life to Maturity that is equal to or greater than the Weighted Average Life to Maturity, of the Indebtedness being Refinanced and (c) the Refinancing Indebtedness ranks, in right of payment, no more favorable to the Notes or applicable Subsidiary Guaranty, as the case may be, than the Indebtedness being Refinanced; (xii) guarantees by Restricted Subsidiaries of Indebtedness of any Restricted Subsidiary or the Company or guarantees by the Company of Indebtedness of any Restricted Subsidiaries if the Indebtedness so guaranteed is permitted under another provision of this Section 4.7 and so long as such guarantee otherwise complies with this Indenture; (xiii) Indebtedness (including, without limitation, Acquired Debt) to acquire one or more Gaming Properties if: (a) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a pro forma basis to such incurrence, and (b) the Interest Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is to be incurred (the "Four Quarter Reference Period") would have been greater than (x) 1.5 to 1.0 if the last fiscal quarter in the Four Quarter Reference Period is either the first or second fiscal quarter of 2004, (y) 1.75 to 1.0 if the last fiscal quarter in the Four Quarter Reference Period is either in the third or fourth fiscal quarter of 2004 and (z) 2.0 to 1.0 otherwise, in each case determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as set forth in the definition of Interest Coverage Ratio, as if such additional Indebtedness had been incurred at the beginning of such four-quarter period; and 63 (xiv) Indebtedness not otherwise permitted by clauses (i) through (xiii) of this Section 4.7(b) in an aggregate principal amount (or accreted value, as applicable) at any time outstanding pursuant to this clause (xiv), including all Refinancing Indebtedness incurred to repay, redeem, discharge, retire, defease, refund, refinance or replace any Indebtedness incurred pursuant to this clause (xiv), not to exceed $10,000,000. (c) Upon each incurrence of Indebtedness, if such Indebtedness could have been incurred under more than one provision of this Section 4.7, (i) the Company may designate pursuant to which provision of this Section 4.7 such Indebtedness is being incurred, (ii) the Company may subdivide an amount of Indebtedness and designate more than one provision pursuant to which such amount of Indebtedness is being incurred and shall be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify, all or a portion of such item of Indebtedness, in any manner that complies with this Section 4.7, and (iii) such Indebtedness shall not be deemed to have been incurred or outstanding under any other provision of this Section 4.7 except that all incurrences under the Notes, the Subsidiary Guaranties and this Indenture shall be deemed to have been incurred pursuant to Section 4.7(b)(vi) above. SECTION 4.8 LIMITATION ON LIENS The Issuers shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien on any asset (including, without limitation, all real, tangible or intangible property) of the Company or any Restricted Subsidiary, whether now owned or hereafter acquired, or on any income or profits therefrom, or assign or convey any right to receive income therefrom, except Permitted Liens. SECTION 4.9 LIMITATION ON RESTRICTED PAYMENTS (a) The Issuers shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly make a Restricted Payment unless, at the time of such Restricted Payment: (i) no Default or Event of Default has occurred and is continuing or would occur as a consequence thereof, and (ii) immediately after giving effect to such Restricted Payment on a pro forma basis, the Company could incur at least $1.00 of additional Indebtedness under the Interest Coverage Ratio test set forth in Section 4.7(a), and (iii) such Restricted Payment (the value of any such payment, if other than cash, being determined in good faith by the Managers of the Company and evidenced by a resolution set forth in an Officers' Certificate delivered to the Trustee), together with the aggregate of all other Restricted Payments made after the Issue Date (including Restricted Payments permitted by clauses (i), (ii), (ix) and (x) of Section 4.9(b) 64 hereof and excluding Restricted Payments permitted by the other clauses therein), is less than the sum of: (1) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first full fiscal quarter immediately following the Issue Date to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, 100% of such deficit), plus (2) 100% of the aggregate net cash proceeds (or of the net cash proceeds received upon the conversion of non-cash proceeds into cash) received by the Company from (x) the issuance or sale, other than to a Subsidiary, of Equity Interests of the Company (other than Disqualified Capital Stock) and (y) any equity contribution from a holder of the Company's Capital Stock (other than a Subsidiary), in each case, after the Issue Date and on or prior to the time of such Restricted Payment, plus (3) 100% of the aggregate net cash proceeds (or of the net cash proceeds received upon the conversion of non-cash proceeds into cash) received by the Company from the issuance or sale, other than to a Subsidiary, of any convertible or exchangeable debt security of the Company that has been converted or exchanged into Equity Interests of the Company (other than Disqualified Capital Stock) pursuant to the terms thereof after the Issue Date and on or prior to the time of such Restricted Payment (including any additional net cash proceeds received by the Company upon such conversion or exchange), plus (4) the aggregate Return from Unrestricted Subsidiaries after the Issue Date and on or prior to the time of such Restricted Payment. (b) The foregoing provisions shall not prohibit: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would not have been prohibited by the provisions of this Indenture; (ii) the redemption, purchase, retirement or other acquisition of any Equity Interests of the Company or Indebtedness of the Company or any Restricted Subsidiary in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Subsidiary) of, other Equity Interests of the Company (other than Disqualified Capital Stock); (iii) with respect to each tax year or portion thereof that the Company qualifies as a Flow Through Entity and so long as Section 4.9(a)(i) above is satisfied, the payment of Permitted Tax Distributions (whether paid in such tax year or portion thereof, or any subsequent tax year); provided, that (A) prior to the first payment of Permitted Tax Distributions during any particular calendar year the Company provides an Officers' Certificate and an Opinion of Counsel to the effect that the Company and 65 each other Flow Through Entity in respect of which such distributions are being made qualify as Flow Through Entities for Federal income tax purposes and for the states in respect of which such distributions are being made for such tax year or portion thereof, (B) at the time of such distribution, the most recent audited financial statements of the Company for periods including such tax year or portion thereof provided to the Trustee pursuant to Section 4.3 provide that the Company and each subsidiary of the Company in respect of which such distributions are being made was treated as a Flow Through Entity for the period of such financial statements, and (C) in the case of the portion, if any, of any Permitted Tax Distribution that is proposed to be distributed for a particular taxable period or portion thereof, which portion of such Permitted Tax Distribution is attributable to a Flow Through Entity that is not a Restricted Subsidiary, such portion of such proposed Permitted Tax Distribution shall be limited to the Excess Cash Distribution Amount for Taxes; (iv) the redemption, repurchase or payoff of any Indebtedness of the Company or a Restricted Subsidiary with proceeds of any Refinancing Indebtedness permitted to be incurred pursuant to clause (xi) of Section 4.7(b); (v) distributions or payments to PGP for or in respect of (A) tax preparation, accounting, licensure, legal and administrative fees and expenses, including travel and similar reasonable expenses, incurred on behalf of the Issuers or their respective Subsidiaries or in connection with PGP's ownership of the Issuers or their respective Subsidiaries, consistent with industry practice, (B) so long as Section 4.9(a)(i) above is satisfied, distributions pursuant to, and in accordance with, Management Arrangements and (C) so long as Section 4.9(a)(i) above is satisfied, reasonable and customary directors' or managers' fees to, and indemnity provided on behalf of, the Managers of PGP and the Company, and reimbursement of customary and reasonable travel and similar expenses incurred in the ordinary course of business; (vi) (A) the repurchase, redemption or other retirement or acquisition of Equity Interests of the Company or any Restricted Subsidiary from its employees, members or managers (or their heirs or estates) or employees, members or managers (or their heirs or estates) of the Restricted Subsidiaries or (B) any dividend, distribution or other payment to PGP to enable PGP to repurchase, redeem, or otherwise retire or acquire Equity Interests of PGP from any of its employees, members or managers (or their heirs or estates) or employees, members or managers (or their heirs or estates) of any of their respective subsidiaries, in the case of each of the preceding clauses (A) and (B) upon the death, disability or termination of employment or pursuant to the terms of any subscription, stock option, stockholder or other agreement or plan in effect on the Issue Date in an aggregate amount pursuant to this clause (vi) to all such employees, members or managers (or their heirs or estates) not to exceed $750,000 in any twelve month period on and after the Issue Date (provided, however, that any amounts not used in any such twelve month period may be carried forward to the next succeeding twelve month period until used); 66 (vii) the redemption and repurchase of any Equity Interests or Indebtedness of PGP, the Company or any of the Restricted Subsidiaries to the extent required by any Gaming Authority; (viii) the payment of (x) accrued distributions under the Seller Preferred in accordance with its terms and (y) an amount not in excess of the face amount of the Seller Preferred outstanding on the Issue Date, plus accrued and unpaid distributions thereon as of the redemption date; (ix) any dividend, distribution or other payment by any of the Restricted Subsidiaries on its Equity Interests that is paid pro rata to all holders of such Equity Interests; (x) the declaration and payment of dividends and distributions to holders of Disqualified Equity Interests of the Company or any of the Restricted Subsidiaries issued or incurred in accordance with Section 4.7; (xi) consummation on the Issue Date of the Transactions; and (xii) so long as Section 4.9(a)(i) above is satisfied, Restricted Payments not otherwise permitted by this Section 4.9 in an aggregate amount pursuant to this clause (xii) not to exceed $15,000,000. Promptly following the end of each fiscal quarter during which any Restricted Payment was made pursuant to clause (iii) of Section 4.9(a), the Company shall deliver to the Trustee an Officers' Certificate stating that each such Restricted Payment was permitted and setting forth the basis upon which the calculations required by this Section 4.9 were computed, which calculations may be based upon the Company's latest available internal financial statements. For purposes of this Section 4.9, the amount of any Restricted Payment made or returned, if other than in cash, shall be the fair market value thereof, as determined in the reasonable good faith judgment of the Managers of the Company, unless stated otherwise, at the time made or returned, as applicable. For purposes of determining compliance with this Section 4.9, if a Restricted Payment meets the criteria of more than one of the exceptions described in clauses (i) through (x) and (xii) of Section 4.9(b) above or is entitled to be made according to Section 4.9(a), the Company may, in its sole discretion, classify the Restricted Payment in any manner that complies with this Section 4.9. SECTION 4.10 LIMITATION ON RESTRICTIONS ON SUBSIDIARY DIVIDENDS The Issuers shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (a) pay dividends or make any other distributions to the Company or any of the Restricted Subsidiaries (i) on such Restricted Subsidiary's Capital Stock or (ii) 67 with respect to any other interest or participation in, or measured by, such Restricted Subsidiary's profits, or (b) pay any Indebtedness owed to the Company or any of the Restricted Subsidiaries, or (c) make loans or advances to the Company or any of the Restricted Subsidiaries, or (d) transfer any of its assets to the Company or any of the Restricted Subsidiaries, except, with respect to clauses (a) through (d) above, for such encumbrances or restrictions existing under or by reason of: (1) a Senior Credit Facility containing dividend or other payment restrictions that are not more restrictive in any material respect than those contained in this Indenture on the Issue Date; (2) this Indenture, the Security Documents and the Notes; (3) applicable law or any applicable rule or order of any Governmental Authority; (4) Acquired Debt; provided, that such encumbrances and restrictions are not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; (5) customary non-assignment and net worth provisions of any contract, lease or license entered into in the ordinary course of business; (6) customary restrictions on the transfer of assets subject to a Permitted Lien imposed by the holder of such Lien; (7) the agreements governing Refinancing Indebtedness; provided, that such restrictions contained in any agreement governing such Refinancing Indebtedness are no more restrictive in any material respect than those contained in any agreements governing the Indebtedness being refinanced; (8) the provisions of any Indebtedness or other agreements existing on the Issue Date, as such agreements are in effect on the Issue Date, without giving effect to any amendment or supplement thereto or modification thereof, in each case, to the extent not more restrictive in any material respect than such provisions as in effect on the Issue Date; (9) any restrictions with respect to a Restricted Subsidiary imposed pursuant to a binding agreement that has been entered into for the sale or disposition of all or substantially all of the Equity Interests or assets of such Restricted 68 Subsidiary; provided, that such restrictions only apply to the Equity Interests or assets of such Restricted Subsidiary being sold; and (10) customary restrictions imposed on the transfer of copyrighted, trademarked or patented materials. SECTION 4.11 ADDITIONAL COLLATERAL The Issuers shall, and shall cause each of the Subsidiary Guarantors to, grant to the Trustee a first priority security interest in all Collateral, whether owned on the Issue Date or thereafter acquired, and to execute and deliver all documents and to take all action reasonably necessary to perfect and protect such a security interest in favor of the Trustee, in each case, subject to the terms of the Intercreditor Agreement. SECTION 4.12 LIMITATION ON TRANSACTIONS WITH AFFILIATES (a) The Issuers shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into any contract, agreement, understanding, loan, advance or guaranty with, or for the benefit of, any Affiliate of the Issuers or any of the Restricted Subsidiaries (each of the foregoing, an "Affiliate Transaction"), except for: (i) Affiliate Transactions that, together with all related Affiliate Transactions, have an aggregate value of not more than $1,000,000; provided, that such transactions are conducted in good faith and on terms that are no less favorable to such Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time by such Issuer or such Restricted Subsidiary on an arm's length basis from a Person that is not an Affiliate of such Issuer or such Restricted Subsidiary; (ii) Affiliate Transactions that, together with all related Affiliate Transactions, have an aggregate value of not more than $5,000,000; provided, that (a) a majority of the disinterested Managers of the Company or, if none, a disinterested committee appointed by the Managers of the Company for such purpose, determine that such transactions are conducted in good faith and on terms that are no less favorable to such Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time by such Issuer or such Restricted Subsidiary on an arm's length basis from a Person that is not an Affiliate of such Issuer or such Restricted Subsidiary and (b) prior to entering into such transaction the Company shall have delivered to the Trustee an Officers' Certificate certifying to such effect; or (iii) Affiliate Transactions for which the Company delivers to the Trustee an opinion issued by an accounting, appraisal or investment banking firm of national standing (other than Jefferies & Company, Inc. or any of its Affiliates) as to the fairness of such transaction to such Issuer or such Restricted Subsidiary from a financial point of view. 69 (b) Notwithstanding the foregoing, the following shall be deemed not to be Affiliate Transactions: (i) transactions between or among the Issuers and/or any or all of the Restricted Subsidiaries; (ii) Restricted Payments permitted by the provisions of this Indenture described above under Section 4.9; (iii) reasonable and customary compensation (including directors' fees) paid to, and indemnity and customary employee benefit arrangements (including directors' and officer's liability insurance) provided for the benefit of, any director, officer, employee or consultant of the Company or any Restricted Subsidiary, or Manager of PGP, in each case entered into in the ordinary course of business and for services provided to the Company, such Restricted Subsidiary or PGP, respectively, as determined in good faith by the Managers of the Company; (iv) any agreement or arrangement as in effect on the Issue Date among the Issuers and/or one or more Restricted Subsidiaries, on the one hand, and any officers or Managers thereof and/or any Affiliates of the Company, on the other hand (without giving effect to any amendment or supplement thereto or modification thereof, except for any such amendment, supplement, modification or replacement agreement that is not more disadvantageous to the Holders in any material respect than the original agreement thereof as in effect on the Issue Date), and any transactions contemplated thereby; (v) Permitted Investments (other than Permitted Investments pursuant to clause (xiii) of the definition thereof); and (vi) transactions with a joint venture engaged in a Related Business; provided, that all the outstanding ownership interests of such joint venture are controlled only by the Company, the Restricted Subsidiaries and Persons who are not Affiliates of the Company. SECTION 4.13 LIMITATION ON ASSET SALES (a) The Issuers shall not, and shall not permit any Restricted Subsidiary to, make any Asset Sale unless: (i) such Issuer or such Restricted Subsidiary receives consideration at the time of such Asset Sale not less than the fair market value of the assets subject to such Asset Sale (as determined by the Company's Managers in good faith); (ii) at least 75% of the consideration for such Asset Sale is in the form of either (a) cash or Cash Equivalents or liabilities of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Subsidiary Guaranty) that are assumed by the transferee of such assets 70 (provided, that following such Asset Sale, there is no further recourse to the Company or the Restricted Subsidiaries or the Company and the Restricted Subsidiaries are fully indemnified with respect to such liabilities; provided, further, that the 75% limitation set forth in this clause (ii) of this Section 4.13(a) shall not apply to any proposed Asset Sale for which an independent certified accounting firm has certified to the Managers of the Company and the Trustee that the after-tax cash portion of the consideration to be received by the Company or such Restricted Subsidiary in such proposed Asset Sale is equal to or greater than what the net after-tax cash proceeds would have been had such proposed Asset Sale complied with the 75% limitation set forth in this clause (ii) of this paragraph), or (b) assets of the type described in clause (iii)(A) of this Section 4.13(a) below; and (iii) within 360 days of such Asset Sale, the Net Proceeds thereof are (A) invested in assets related to the business of the Company or the Restricted Subsidiaries (which, in the case of an Asset Sale of the Diamond Jo or any replacement Gaming Vessel (a "Replacement Vessel"), must be a Gaming Vessel having a fair market value, as determined by an independent appraisal, at least equal to the fair market value of the Diamond Jo or such Replacement Vessel immediately preceding such Asset Sale), (B) applied to repay Indebtedness under Purchase Money Obligations incurred in connection with the assets so sold, (C) applied to repay Indebtedness under the Senior Credit Facility and permanently reduce the commitment thereunder in the amount of the Indebtedness so repaid or (D) to the extent not used as provided in clauses (A), (B), or (C) of this Section 4.13(a)(iii) or any combination thereof, applied to make an offer to purchase Notes as described below (an "Excess Proceeds Offer"); provided, that the Company shall not be required to make an Excess Proceeds Offer until the amount of Excess Proceeds is greater than $10,000,000. (b) All Net Proceeds from an Event of Loss shall be used as follows: (1) first, the Company shall use such net cash proceeds to the extent necessary to rebuild, repair, replace or restore the assets subject to such Event of Loss with comparable assets and (2) then, to the extent any Net Proceeds from an Event of Loss are not used as described in the preceding clause (1), all such remaining Net Proceeds shall be reinvested or used as provided in the immediately preceding Section 4.13(a)(iii). (c) Pending the final application of any Net Proceeds, the Company may temporarily reduce Indebtedness under the Senior Credit Facility or temporarily invest such Net Proceeds in Cash Equivalents. (d) Net Proceeds not invested or applied as set forth in any of the preceding subclause (A), (B) or (C) of Section 4.13(a)(iii) above constitute "Excess Proceeds." If the Company elects, or becomes obligated to make an Excess Proceeds Offer, the Issuers shall offer to purchase Notes having an aggregate principal amount equal to the Excess Proceeds (the "Purchase Amount"), at a purchase price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid Interest (and Liquidated Damages) if any, to the purchase date. The Issuers must commence such Excess Proceeds Offer not later than 30 days after the expiration of the 360 day period following the Asset Sale that produced such Excess Proceeds. If the aggregate purchase 71 price for the Notes tendered pursuant to the Excess Proceeds Offer is less than the Excess Proceeds, the Company and the Restricted Subsidiaries may use the portion of the Excess Proceeds remaining after payment of such purchase price for general corporate purposes. Each Excess Proceeds Offer shall remain open for a period of 20 Business Days and no longer, unless a longer period is required by law (the "Excess Proceeds Offer Period"). Promptly after the termination of the Excess Proceeds Offer Period, the Issuers shall purchase and mail or deliver payment for the Purchase Amount for the Notes or portions thereof tendered, pro rata or by such other method as may be required by law, or, if less than the Purchase Amount has been tendered, all Notes tendered pursuant to the Excess Proceeds Offer. The principal amount of Notes to be purchased pursuant to an Excess Proceeds Offer may be reduced by the principal amount of Notes acquired by the Issuers through purchase or redemption (other than pursuant to a Change of Control Offer) subsequent to the date of the Asset Sale and surrendered to the Trustee for cancellation. If the Purchase Amount for the Excess Proceeds Offer hereunder is made on or after an Interest Record Date on which the Holders of record have a right to receive the corresponding Interest due and Liquidated Damages, if any, and on or before the associated Interest Payment Date, any accrued and unpaid Interest (and Liquidated Damages, if any), due on such Interest Payment Date shall be paid to the Person in whose name a Note is registered at the close of business on such Interest Record Date. Each Excess Proceeds Offer shall be conducted in compliance with applicable regulations under the Federal securities laws, including Exchange Act Rule 14e-1. To the extent that the provisions of any securities laws or regulations conflict with this Section 4.13, the Issuers shall comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations under this Section 4.13 by virtue thereof. The Issuers shall not, and shall not permit any of the Restricted Subsidiaries to, create or suffer to exist or become effective any restriction that would impair the ability of the Issuers to make an Excess Proceeds Offer upon an Asset Sale or, if such Excess Proceeds Offer is made, to pay for the Notes tendered for purchase. SECTION 4.14 RESTRICTION ON SALE AND ISSUANCE OF SUBSIDIARY STOCK The Issuers shall not, and shall not permit any Restricted Subsidiary to, issue or sell any Equity Interests (other than directors' qualifying shares) of any Restricted Subsidiary to any Person other than the Company or a Wholly Owned Subsidiary of the Company; provided, that the Company and the Restricted Subsidiaries may sell all (but not less than all) of the Capital Stock of a Restricted Subsidiary owned by the Company and the Restricted Subsidiaries if the Net Proceeds from such Asset Sale are used in accordance with the terms of Section 4.13. 72 SECTION 4.15 REPURCHASE UPON A CHANGE OF CONTROL (a) Upon the occurrence of a Change of Control, the Issuers shall offer to repurchase all of the Notes then outstanding (the "Change of Control Offer") at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid Interest (and Liquidated Damages, if any), to the date of repurchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Issuers must mail or cause to be mailed a notice to each Holder stating, among other things: (i) the purchase price and the purchase date, which shall be no earlier than 30 days nor later than 45 days from the date such notice is mailed (the "Change of Control Payment Date"); (ii) that any Holder electing to have Notes purchased pursuant to a Change of Control Offer shall be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; and (iii) that the Holder shall be entitled to withdraw such election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased. (b) The Issuers shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes in connection with a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with this Section 4.15, the Issuers shall comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations under this Section 4.15 by virtue thereof. (c) On the Change of Control Payment Date, the Issuers shall, to the extent lawful, (i) accept for payment the Notes or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and not withdrawn, and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted, together with an Officers' Certificate stating that the Notes or portions thereof tendered to the Issuers are accepted for payment. The Paying Agent shall promptly mail to each Holder of Notes so accepted payment in an amount equal to the purchase price for such Notes, and the Trustee shall authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided, that each such new Note shall be in the principal amount of $1,000 or an integral multiple thereof. The Issuers shall announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. 73 (d) The Issuers shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Issuers, and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. (e) If the Change of Control Payment Date hereunder is on or after an Interest Record Date on which the Holders of record have a right to receive the corresponding Interest due and Liquidated Damages, if any, and on or before the associated Interest Payment Date, any accrued and unpaid Interest (and Liquidated Damages, if any), due on such Interest Payment Date will be paid to the Person in whose name a Note is registered at the close of business on such Interest Record Date. SECTION 4.16 SUBSIDIARY GUARANTORS All of the Issuers' present and future Restricted Subsidiaries (other than Foreign Subsidiaries and other than a Restricted Subsidiary that is a co-Issuer of the Notes) jointly and severally shall guarantee all principal, premium, if any, Interest and Liquidated Damages, if any, on the Notes on a senior secured basis. SECTION 4.17 LIMITATION ON STATUS AS INVESTMENT COMPANY The Issuers, the Subsidiary Guarantors and the Restricted Subsidiaries shall be prohibited from being required to register as an "investment company" (as that term is defined in the Investment Company Act of 1940, as amended (the "Investment Company Act")), or from otherwise becoming subject to regulation under the Investment Company Act. SECTION 4.18 MAINTENANCE OF PROPERTIES AND INSURANCE The Issuers and the Subsidiary Guarantors shall cause all material properties used or useful to the conduct of their business and the business of each of the Restricted Subsidiaries to be maintained and kept in good condition, repair and working order (reasonable wear and tear excepted) in all material respects and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in their reasonable judgment may be necessary, so that the business carried on in connection therewith may be properly conducted at all times; provided, however, that nothing in this Section 4.18 shall prevent the Issuers, any Subsidiary Guarantor or any Restricted Subsidiary from discontinuing any operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is (a) in the good faith judgment of the Managers of each of the Issuers, desirable in the conduct of the business of such entity and (b) not otherwise prohibited by this Indenture or the Security Documents. The Issuers and Subsidiary Guarantors shall provide, or cause to be provided, for themselves and each of the Restricted Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds that, in the reasonable, 74 good faith opinion of the Managers of each of the Issuers is adequate and appropriate for the conduct of the business of the Issuers, the Subsidiary Guarantors and such Restricted Subsidiaries. SECTION 4.19 CORPORATE EXISTENCE Subject to Article V hereof, the Issuers shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) their limited liability company and corporate existence, as applicable, and the corporate, partnership or other existence of each of the Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Issuers or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Issuers and each of the Restricted Subsidiaries; provided, however, that the Issuers shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of the Restricted Subsidiaries, if the Company's Managers shall determine in good faith that the preservation thereof is no longer desirable in the conduct of the business of the Issuers and each of the Restricted Subsidiaries, taken as a whole, and that the loss thereof would not have a material adverse effect on the ability of the Issuers and the Subsidiary Guarantors to satisfy their obligations under the Notes, the Subsidiary Guaranties and this Indenture. SECTION 4.20 RESTRICTIONS ON ACTIVITIES OF CAPITAL Capital shall not hold any assets, become liable for any obligations or engage in any business activities; provided, that Capital may be a co-obligor of the Notes (including any Additional Notes incurred pursuant to Section 4.7) pursuant to the terms of this Indenture, may be a co-obligor of the OED 13% Senior Secured Notes due 2010 pursuant to the terms of the OED Indenture, may be a co-obligor under the OED Credit Facility and the OED FF&E Facility, to the extent they remain outstanding after the Issue Date, and may engage in any activities directly related or necessary in connection therewith. SECTION 4.21 ENTITY CLASSIFICATION The Company is classified as a Flow Through Entity and shall not take, or fail to take, any action which would result in the Company no longer being classified as a Flow Through Entity except (i) pursuant to a Permitted C-Corp Conversion or (ii) any transaction permitted under Article V hereof. SECTION 4.22 RULE 144A INFORMATION The Issuers shall, and the Subsidiary Guarantors shall, furnish to the Holders or beneficial holders of Notes, upon their written request, and to prospective purchasers thereof designated by such Holders or beneficial holders of Notes, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act for so long as is required for an offer or sale of the Notes to qualify for an exemption under Rule 144A. 75 SECTION 4.23 REORGANIZATION TRANSACTIONS Notwithstanding anything in this Indenture to the contrary, if the Requisite Regulatory Approvals shall have been received the Reorganization Transactions may be consummated without the consent of any Holder and, for the avoidance of doubt, the Reorganization Transactions shall not constitute an Asset Sale, an Affiliate Transaction or a Restricted Payment or be subject to Section 4.14 or Article V. ARTICLE V SUCCESSORS SECTION 5.1 MERGER, CONSOLIDATION OR SALE OF ASSETS No Issuer may consolidate or merge with or into (regardless of whether such Issuer is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets (determined on a consolidated basis for such Issuer and its Restricted Subsidiaries) in one or more related transactions to, any other Person, unless: (a) either (A) such Issuer is the surviving Person or (B) the Person formed by or surviving any such consolidation or merger (if other than such Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made is either (x) a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia or (y) if at least one Issuer following any such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition is a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia, a limited liability company formed and existing under the laws of the United States of America, any state thereof or the District of Columbia; (b) the Person formed by or surviving any such consolidation or merger (if other than such Issuer) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition has been made assumes all the Obligations of such Issuer under the Notes, this Indenture, the Security Documents, the Intercreditor Agreement and the Registration Rights Agreement, pursuant to a supplemental indenture to this Indenture and joinders, as applicable, to the Security Documents, the Intercreditor Agreement and the Registration Rights Agreement, each in a form reasonably satisfactory to the Trustee, (c) immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default exists; (d) such transaction would not result in the loss or suspension or material impairment of any Gaming License unless a comparable replacement Gaming License is effective prior to or simultaneously with such loss, suspension or material impairment; and 76 (e) such Issuer, or any Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made, shall be permitted, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, to incur at least $1.00 of additional Indebtedness pursuant to the applicable Interest Coverage Ratio test set forth in Section 4.7(a) or Section 4.7(b)(xiii). SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED In the event of any transaction (other than a lease or a transfer of less than all of the Issuers' assets) described in and complying with the conditions listed in Section 5.1 in which such Issuer is not the surviving Person, such surviving Person or transferee shall succeed to, and be substituted for, and may exercise every right and power of, such Issuer under, and such Issuer shall be discharged from its Obligations under, this Indenture, the Notes, the Security Documents and the Registration Rights Agreement, with the same effect as if such successor Person had been named as such Issuer herein or therein. ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.1 EVENTS OF DEFAULT (a) Each of the following shall constitute an "Event of Default" under this Indenture: (i) the Issuers default in the payment of Interest on any Note when the same becomes due and payable and the Default continues for a period of 30 days; (ii) the Issuers default in the payment of the principal (or premium, if any) on any Note when the same becomes due and payable at maturity, upon redemption, by acceleration, in connection with an Excess Proceeds Offer or a Change of Control Offer or otherwise; (iii) either of the Issuers default in the performance of or breaches the provisions of Section 4.13, Section 4.15 or Article V; (iv) either of the Issuers or any Subsidiary Guarantor fails to comply with any of its other agreements or covenants in, or provisions of, the Notes or this Indenture and the Default continues for 60 days after written notice thereof has been given to the Issuers by the Trustee or to the Issuers and the Trustee by the Holders of at least 25% in aggregate principal amount of the then outstanding Notes, such notice to state that it is a "Notice of Default"; (v) an event of default occurs under (after giving effect to any waivers, amendments, applicable grace periods or any extension of any maturity 77 date) any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Issuers or any Restricted Subsidiary (or the payment of which is guaranteed by the Issuers or any Restricted Subsidiary), whether such Indebtedness or guaranty now exists or is created after the Issue Date, if (a) either (1) such default results from the failure to pay principal of or interest on such Indebtedness or (2) as a result of such event of default the maturity of such Indebtedness has been accelerated, and (b) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness with respect to which such a payment event of default (after the expiration of any applicable grace period or any extension of the maturity date) has occurred, or the maturity of which has been so accelerated, exceeds $5,000,000 in the aggregate; (vi) a final non-appealable judgment or judgments for the payment of money (other than to the extent of any judgment as to which a reputable insurance company has accepted liability) is or are entered by a court or courts of competent jurisdiction against either of the Issuers or any Subsidiary and such judgment or judgments are not discharged, bonded or stayed within 60 days after entry, provided that the aggregate of all such judgments exceeds $5,000,000; (vii) the cessation of substantially all gaming operations of the Company and the Restricted Subsidiaries, taken as a whole, for more than 90 days, except as a result of an Event of Loss; (viii) any revocation, suspension, expiration (without previous or concurrent renewal) or loss of any Gaming License of the Company or any Restricted Subsidiary for more than 90 days; (ix) any Subsidiary Guaranty of a Subsidiary Guarantor which is a Significant Subsidiary ceases to be in full force and effect or shall be held in any judicial proceeding to be unenforceable or invalid or is declared null and void (other than in accordance with the terms of the Subsidiary Guaranty and this Indenture) or any Subsidiary Guarantor which is a Significant Subsidiary denies or disaffirms its Obligations under its Subsidiary Guaranty or the Security Documents (in each case, other than by reason of the termination of this Indenture or the release of any such Subsidiary Guaranty in accordance with this Indenture); (x) (A) any event of default under a Security Document (after giving effect to any applicable grace periods, applicable notice periods, waivers or amendments) or (B) the failure of the Issuers or any Restricted Subsidiary to comply with any material agreement or covenant in, or material provision of, any of the Security Documents, or any breach in any material respect of any material representation or warranty made by the Issuers or any Restricted Subsidiary in any Security Document, and the continuance of such failure or breach for a period of 30 days after written notice is given to the Issuers by the Trustee or to the Issuers and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes outstanding; 78 (xi) any of the Security Documents ceases to be in full force and effect or any of the Security Documents ceases to give the Trustee (or, in the case of a mortgage, ceases to give the Trustee or any other trustee under such mortgage) any of the Liens, rights, powers or privileges purported to be created thereby, or any of the Security Documents is declared null and void, or any of the Issuers or any Subsidiary Guarantor denies that it has any further liability under any Security Document to which it is a party or gives notice of such effect (in each case other than by reason of the termination of this Indenture or any such Security Document in accordance with its terms or the release of any Subsidiary Guarantor in accordance with this Indenture) and the continuance of such failure for a period of 30 days after written notice is given to the Issuers by the Trustee or to the Issuers and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes outstanding; (xii) either of the Issuers or any Subsidiary Guarantor pursuant to or within the meaning of any Bankruptcy Law: (1) commences a voluntary case, (2) consents to the entry of an order for relief against it in an involuntary case, (3) consents to the appointment of a custodian of it or for all or substantially all of its property, (4) makes a general assignment for the benefit of its creditors, or (5) admits in writing its inability to pay debts as the same become due; and (xiii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (1) is for relief against either of the Issuers or any Subsidiary Guarantor in an involuntary case, (2) appoints a custodian of either of the Issuers or any Subsidiary Guarantor or for all or substantially all of their property, or (3) orders the liquidation of either of the Issuers, or any Subsidiary Guarantor, and the order or decree remains unstayed and in effect for 60 days. 79 (b) The Issuers are required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default and what action the Issuers are taking or propose to take with respect thereto. SECTION 6.2 ACCELERATION Subject to the terms of the Intercreditor Agreement, if an Event of Default (other than an Event of Default specified in clause (xii) or (xiii) of Section 6.1(a)) occurs and is continuing, the Trustee by written notice to the Issuers, or the Holders of at least 25% in principal amount of the then outstanding Notes by written notice to the Issuers and the Trustee, may declare the unpaid principal of and any accrued Interest (and Liquidated Damages, if any) on all the Notes to be due and payable. Upon such declaration the principal, premium, if any, Interest (and Liquidated Damages, if any) shall be due and payable immediately. If an Event of Default specified in clause (xii) or (xiii) of Section 6.1(a) occurs, all outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after a declaration of acceleration, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the Holders of a majority in aggregate principal amount of the Notes outstanding, by written notice to the Issuers and the Trustee, may rescind and annul such declaration and its consequences if (a) the Issuers have paid or deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (ii) all overdue Interest (including any Interest accrued subsequent to an Event of Default specified in clause (xii) or (xiii) of Section 6.1(a) and Liquidated Damages, if any, on all Notes, (iii) the principal of and premium, if any, on any Notes that have become due otherwise than by such declaration or occurrence of acceleration and Interest thereon at the rate borne by the Notes, and (iv) to the extent that payment of such Interest is lawful, Interest upon overdue Interest at the rate borne by the Notes; (b) all Events of Default, other than the non-payment of principal of and Interest on the Notes that have become due solely by such declaration or occurrence of acceleration, have been cured or waived; and (c) the rescission would not conflict with any judgment, order or decree of any court of competent jurisdiction. SECTION 6.3 OTHER REMEDIES If an Event of Default occurs and is continuing, subject to the terms of the Intercreditor Agreement, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, Liquidated Damages, if any, and Interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. 80 SECTION 6.4 WAIVER OF DEFAULTS Subject to Section 6.7 hereof, Holders of a majority of the aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of the Holders of all of the Notes (a) waive any existing or past Default or Event of Default and its consequences under this Indenture (x) except a continuing Default or Event of Default in the payment of the principal of, premium, if any, or Interest (and Liquidated Damages, if any) on any Note or (y) a Default or an Event of Default with respect to any covenant or provision which cannot be modified or amended without the consent of the Holder of each outstanding Note affected or supermajority approval, which Default or Event of Default may be waived only with the consent of each outstanding Note affected or such supermajority approval, respectively, and/or (b) rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal or Interest that has become due solely because of the acceleration) have been cured or waived. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.5 CONTROL BY MAJORITY Subject to all provisions of the Indenture and applicable law, the Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that the Trustee determines in good faith may be unduly prejudicial to the rights of other Holders not joining in the giving of such direction or that may involve the Trustee in personal liability and the Trustee may take any other action it deems proper that is not inconsistent with any such direction received from Holders. SECTION 6.6 LIMITATION ON SUITS A Holder may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in aggregate principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense; 81 (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. SECTION 6.7 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT Notwithstanding any other provision of this Indenture, except as permitted by Section 9.2 hereof, the right of any Holder to receive payment of the principal of, premium and Interest (and Liquidated Damages, if any) on a Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase) or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.8 COLLECTION SUIT BY TRUSTEE If an Event of Default specified in Section 6.1(a)(i) or 6.1(a)(ii) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Issuers for the whole amount of principal of, premium and Interest (and Liquidated Damages, if any) remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Issuers (or any other obligor upon the Notes), their creditors or their property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof out of the estate in any such proceeding, shall be denied for any 82 reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and may be a member of the creditor's committee. SECTION 6.10 PRIORITIES Subject to the terms of the Intercreditor Agreement, if the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.7 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection (including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel); Second: to Holders for amounts due and unpaid on the Notes for principal, Interest and Liquidated Damages, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium Interest, and Liquidated Damages, if any, respectively; Third: without duplication, to the Holders for any other Obligations owing to the Holders under the Notes or this Indenture; and Fourth: to the applicable Issuers or Subsidiary Guarantors or to such other party as a court of competent jurisdiction shall direct. The Trustee may fix a Record Date and payment date for any payment to Holders pursuant to this Section 6.10. SECTION 6.11 UNDERTAKING FOR COSTS In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. 83 ARTICLE VII TRUSTEE SECTION 7.1 DUTIES OF TRUSTEE (a) If an Event of Default of which the Trustee has knowledge has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default of which the Trustee has knowledge: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; however, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph (c) does not limit the effect of paragraph (b) of this Section 7.1; (ii) the Trustee shall not be liable for any error of judgment made in good faith by an Officer of the Trustee, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to Sections 7.1 and 7.2 hereof. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, 84 unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) Upon request from the Issuers, the Trustee is hereby authorized and directed to and shall enter into the Intercreditor Agreement in connection with the Senior Credit Facility and any amendment, restatement, supplement, renewal, replacement or other modification thereof, entered into in accordance with the terms of this Indenture, including Section 4.7 hereof. (g) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuers. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.2 RIGHTS OF TRUSTEE (a) In connection with the Trustee's rights and duties under this Indenture, the Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting under this Indenture, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Issuers shall be sufficient if signed by an Officer of the Issuers. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) Except with respect to Section 4.1 hereof, the Trustee shall have no duty to inquire as to the performance of the Issuers' covenants in Article IV hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of 85 Default except (i) any Event of Default occurring pursuant to Sections 6.1(a)(i), 6.1(a)(ii) and 4.1 hereof or (ii) any Default or Event of Default of which the Trustee shall have received written notification in the manner set forth in this Indenture or of which a Responsible Officer of the Trustee shall have actual knowledge thereof or unless written notice of any event which is in fact a Default or Event of Default is received by the Trustee at the Corporate Trust Office, and such notice references this Indenture and the Notes. Delivery of reports, information and documents to the Trustee under Section 4.3 is for informational purposes only and the Trustee's receipt of the foregoing shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuers' compliance with any of their covenants thereunder (as to which the Trustee is entitled to rely exclusively on an Officers' Certificate). (h) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee may, in its discretion, make such further inquiry or investigation into such facts or matters as it may see fit. SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuers or any Affiliate of the Issuers with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest (as defined in the TIA) it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.4 TRUSTEE'S DISCLAIMER The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuers' use of the proceeds from the Notes or any money paid to the Issuers or upon the Issuers' direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.5 NOTICE OF DEFAULTS If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders a notice in the manner and to the extent provided by Section 313(c) of the TIA of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, Liquidated Damages, if any, or Interest on any Note, the 86 Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders. SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the 12 months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed by the Trustee to the Issuers and filed by the Trustee with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Issuers shall promptly notify the Trustee when the Notes are listed on any stock exchange. To the extent requested by the Company and at the Company's expense, the Trustee shall provide any Gaming Authority with: (a) copies of all notices, reports and other written communications that the Trustee gives to the Holders; (b) a list of all of the Holders promptly after the original issuance of the Notes and periodically thereafter if the Company so directs; (c) notice of any Default or Event of Default under this Indenture, any acceleration of the Indebtedness evidenced by the Notes, or the institution of any legal actions or proceedings before any court or governmental authority in respect of a Default or Event of Default; (d) notice of the removal or resignation of the Trustee within five Business Days of the effectiveness thereof; (e) notice of any transfer or assignment of rights under this Indenture known to the Trustee within five Business Days of the effectiveness thereof; (f) a copy of any amendment to the Notes or this Indenture within five Business Days of the effectiveness thereof; and (g) such other information and documentation that may be requested by any Gaming Authority or as otherwise required by applicable law. 87 SECTION 7.7 COMPENSATION AND INDEMNITY The Issuers shall pay to the Trustee from time to time reasonable compensation as shall be agreed to in writing by the Issuers and the Trustee for its acceptance of this Indenture and services hereunder and under the Security Documents. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuers shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel, except such disbursements and expenses as may be attributable to its negligence or bad faith. The Issuers and the Subsidiary Guarantors, jointly and severally, shall indemnify the Trustee against any and all losses, liabilities or expenses (including reasonable attorneys' fees) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture and under the Security Documents, including the costs and expenses of enforcing this Indenture and under the Security Documents against the Issuers (including this Section 7.7) and defending itself against any claim (whether asserted by the Issuers or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except, in each case, to the extent any such loss, liability or expense may be attributable to its negligence, bad faith or willful misconduct. The Trustee shall notify the Issuers promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Issuers shall not relieve the Issuers of their obligations hereunder. The Issuers shall defend the claim and the Trustee shall cooperate in the defense. In the event that a conflict of interest or conflicting defenses would arise in connection with the representation of the Issuers and the Trustee by the same counsel, the Trustee may have separate counsel and the Issuers shall pay the reasonable fees and expenses of such counsel. The Issuers need not pay for any settlement made without their consent, which consent shall not be unreasonably withheld. The obligations of the Issuers under this Section 7.7 shall survive the satisfaction and discharge of this Indenture. To secure the Issuers' payment obligations in this Section 7.7, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture until such payment obligations have been paid in full. When the Trustee incurs expenses or renders services after an Event of Default specified in Sections 6.1(a)(xii) or 6.1(a)(xiii) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. 88 SECTION 7.8 REPLACEMENT OF TRUSTEE A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.8 and upon the Issuers' receipt of notice from the successor Trustee of such appointment. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Issuers. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Issuers in writing. The Issuers may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of the Trustee for any reason, the Issuers shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuers. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuers, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuers. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture and the Intercreditor Agreement. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.7 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Issuers' obligations under Section 7.7 hereof shall continue for the benefit of the retiring Trustee. 89 SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10 ELIGIBILITY; DISQUALIFICATION There shall at all times be a Trustee hereunder that is a corporation or trust company (or a member of a bank holding company) organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has (or the bank holding company of which it is a member has) a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUERS The Trustee is subject to TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. ARTICLE VIII LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.1 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE The Issuers may, at the option of their Managers evidenced by a resolution set forth in an Officers' Certificate, elect to have either Section 8.2 or 8.3 hereof be applied to all outstanding Notes and Subsidiary Guaranties upon compliance with the conditions set forth below in this Article VIII. SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE Upon the Issuers' exercise under Section 8.1 hereof of the option applicable to this Section 8.2, each of the Issuers and the Subsidiary Guarantors, as applicable, shall, subject to the satisfaction of the applicable conditions set forth in Section 8.4 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes and Subsidiary Guaranties, as applicable, on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Issuers shall be deemed to have paid and discharged all amounts owed under the outstanding Notes and the Subsidiary Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Subsidiary Guaranties, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.5 hereof and the other Sections of this Indenture 90 referred to in clauses (a) and (b) of this Section 8.2 below, and to have satisfied all its other obligations under such Notes, such Subsidiary Guaranties and this Indenture (and the Trustee, on demand of and at the expense of the Issuers, shall execute proper instruments acknowledging the same, including instruments releasing the Collateral as security for the Notes and the Subsidiary Guaranties), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders to receive solely from the trust fund described in Section 8.4 hereof, and as more fully set forth in Section 8.4, payments in respect of the principal of, premium, if any, and Interest and Liquidated Damages, if any, on such Notes when such payments are due, (b) the Issuers' obligations with respect to such Notes under Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.10, 4.2, 4.6, 4.17, 4.19, 8.5, 8.6 and 8.7 hereof, and (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Issuers' and the Subsidiary Guarantors' obligations in connection therewith. SECTION 8.3 COVENANT DEFEASANCE Upon the Issuers' exercise under Section 8.1 hereof of the option applicable to this Section 8.3, subject to the satisfaction of the applicable conditions set forth in Section 8.4 hereof, the Issuers and the Subsidiary Guarantors shall be released from their respective obligations under Sections 4.3, 4.4, 4.5, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.18, 4.20, 4.21 and 4.22 and Article V hereof on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes and the Subsidiary Guaranties shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes and the Subsidiary Guaranties, the Issuers and the Subsidiary Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.1 hereof, but, except as specified above, the remainder of this Indenture and such Notes and Subsidiary Guaranties shall be unaffected thereby. In addition, upon the Issuers' exercise under Section 8.1 hereof of the option applicable to this Section 8.3, subject to the satisfaction of the applicable conditions set forth in Section 8.4 hereof, (x) Sections 6.1(a)(iii) through 6.1(a)(xi) hereof shall not constitute Events of Default to the extent such events occur thereafter and (y) Sections 6.1(xii) and 6.1(xiii) hereof shall not constitute an Event of Default to the extent they occur after the 91st day following the occurrence of the Issuers' exercise of Covenant Defeasance; provided, however that for all other purposes as set forth herein, such Covenant Defeasance provisions shall be effective. 91 SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE The following shall be the conditions to the application of either Section 8.2 or 8.3 hereof to the outstanding Notes: (a) in the case of an election under Section 8.2 or 8.3 hereof, the Issuers must irrevocably deposit, or cause to be irrevocably deposited, with the Trustee, in trust, for the benefit of the Holders, cash in United States legal tender, non-callable Government Securities, or a combination thereof, in such amounts as shall be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and Interest (and Liquidated Damages, if any) on the outstanding Notes on the Stated Maturity or on the applicable redemption date, as the case may be (and the Issuers must specify whether the Notes are being defeased to Stated Maturity or a particular redemption date), and the Trustee must have, for the benefit of Holders, a valid, perfected exclusive security interest in such trust; (b) in the case of an election under Section 8.2 hereof, the Issuers must deliver to the Trustee an Opinion of Counsel reasonably satisfactory to the Trustee confirming that: (i) the Issuers have received from, or there has been published by, the Internal Revenue Service a ruling or (ii) since the Issue Date, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders shall not recognize income, gain or loss for Federal income tax purposes as a result of such Legal Defeasance and shall be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.3 hereof, the Issuers must deliver to the Trustee an Opinion of Counsel reasonably satisfactory to the Trustee from United States legal counsel confirming that Holders shall not recognize income, gain or loss for Federal income tax purposes as a result of such Covenant Defeasance and shall be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) in the case of an election under Section 8.2 or 8.3 hereof, no Default or Event of Default shall have occurred and be continuing on the date of the deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit); (e) in the case of an election under Section 8.2 or 8.3 hereof, the Legal Defeasance or Covenant Defeasance, as applicable, may not result in a breach or violation of, or constitute a default under any other material agreement or instrument (other than this Indenture) to which the Issuers, any of the Subsidiary Guarantors or any of the Restricted Subsidiaries is a party or by which the Issuers or any of the Restricted Subsidiaries are bound; (f) in the case of an election under Section 8.2 or 8.3 hereof, the Issuers must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Issuers with the intent of preferring the Holders over the other creditors of 92 the Issuers with the intent of defeating, hindering, delaying or defrauding creditors of the Issuers or others; (g) in the case of an election under Section 8.2 or 8.3 hereof, the Issuers must deliver to the Trustee an Officers' Certificate confirming the satisfaction of the applicable conditions in clauses (a) through (f) above, and an Opinion of Counsel, confirming the satisfaction of the applicable conditions in clauses (a) (with respect to the validity and perfection of the security interest) (b), (c) and (e) above. Legal Defeasance and Covenant Defeasance shall be deemed to occur on the date all of the applicable conditions set forth in this Section 8.4 are satisfied. SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS Subject to Section 8.6 hereof, all money and Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.5, the "Trustee") pursuant to Section 8.4 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company or one of its subsidiaries acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and Interest (and Liquidated Damages, if any), but such money need not be segregated from other funds except to the extent required by law. The Issuers and the Subsidiary Guarantor, jointly and severally, shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or Government Securities deposited pursuant to Section 8.4 hereof or the principal and interest received in respect thereof, other than any such tax, fee or other charge which by law is for the account of the Holders. Anything in this Article VIII to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuers from time to time upon the request of the Issuers any money or Government Securities held by it as provided in Section 8.4 hereof which, in the opinion of a firm of independent public accountants nationally recognized in the United States expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.4(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.6 REPAYMENT TO ISSUERS Any money deposited with the Trustee or any Paying Agent, or then held by the Issuers, in trust for the payment of the principal of, premium, if any, Liquidated Damages, if any, or Interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, Liquidated Damages, if any, or Interest has become 93 due and payable shall be paid to the Issuers on their written request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a creditor, look only to the Issuers for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuers as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuers cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Issuers. SECTION 8.7 REINSTATEMENT If the Trustee or Paying Agent is unable to apply any United States legal tender or Government Securities in accordance with Section 8.2 or 8.3 hereof, as the case may be, by reason of any order directing the repayment of the deposited money to the Issuers or otherwise making the deposit unavailable to make payments under the Notes when due, or if any court enters an order avoiding the deposit of money with the Trustee or Paying Agent or otherwise requires the payment of the money so deposited to the Issuers or to a fund for the benefit of its creditors, then (so long as the insufficiency exists or the order remains in effect) the Issuers' and the Subsidiary Guarantors' obligations under this Indenture, the Notes, the Subsidiary Guaranties and the Security Documents shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.3 or 8.4 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.3 or 8.4 hereof, as the case may be; provided, however, that, if the Issuers make any payment of principal of, premium, if any, and Interest (and Liquidated Damages, if any) on any Note following the reinstatement of its obligations, the Issuers shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. SECTION 8.8 SATISFACTION AND DISCHARGE The Issuers may terminate their obligations and the obligations of the Subsidiary Guarantors under this Indenture, the Notes, the Subsidiary Guaranties and the Security Documents (except as described below) (whereupon the Trustee shall release the Collateral from the Lien created by the Security Documents as provided under Section 10.4(b)(3)) when: (1) either: (a) all the Notes previously authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced and Notes for whose payment money has theretofore been deposited with the Trustee or the paying agent in trust or segregated and held in trust by the Issuers and thereafter repaid to the Issuers or a Subsidiary Guarantor or discharged from such trust) have been delivered to the Trustee for cancellation, or 94 (b) (i) all Notes have been called for redemption pursuant to the provisions of Section 3.7 hereof by mailing to Holders a notice of redemption or all Notes otherwise have become due and payable; (ii) the Issuers have irrevocably deposited or caused to be irrevocably deposited with the Trustee, in trust for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, and Interest and Liquidated Damages, if any, on the Notes to the date of redemption or maturity, as the case may be, together with irrevocable instructions from the Issuers directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (iii) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit); (iv) such deposit shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Issuers, any of the Subsidiary Guarantors or any of the Restricted Subsidiaries are a party or by which the Issuers, any of the Subsidiary Guarantors or any of the Restricted Subsidiaries are bound; and (2) each of the Issuers and the Subsidiary Guarantors has paid all other sums payable by it under this Indenture, the Notes, the Subsidiary Guarantors, the Intercreditor Agreement and the Security Documents, and (3) the Issuers shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel confirming the satisfaction of all conditions set forth in clauses (1) and (2) above. ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF NOTES Notwithstanding Section 9.2 hereof, the Issuers, the Subsidiary Guarantors and the Trustee may amend or supplement this Indenture, the Notes, the Subsidiary Guaranties, the Registration Rights Agreement, or, subject to the Intercreditor Agreement, the Security Documents, without the consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes; 95 (c) to provide for the assumption of the Issuers' or the Subsidiary Guarantors' obligations to the Holders in the case of a merger or consolidation or sale of all or substantially all of its assets in accordance with this Indenture; (d) to evidence the release of any Subsidiary Guaranty permitted to be released under the terms of this Indenture and the Security Documents or to evidence the addition of any new Subsidiary Guarantor; (e) to make any change that would provide any additional rights or benefits to the Holders (including the addition of any Subsidiary Guarantor) or that does not adversely affect the rights hereunder of any Holder under this Indenture, the Notes, the Subsidiary Guaranties, the Registration Rights Agreement, the Security Documents or the Intercreditor Agreement; (f) to comply with the provisions of the Depositary, Euroclear or Clearstream or the Trustee with respect to the provisions of this Indenture or the Notes relating to transfers and exchanges of Notes or beneficial interests therein; (g) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (h) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date hereof; (i) to comply with applicable gaming laws and racing laws; or (j) to enter into additional or supplemental Security Documents. Upon the request of the Issuers accompanied by a resolution of the Managers of each Issuer authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Issuers in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that adversely affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.2 WITH CONSENT OF HOLDERS OF NOTES (a) Except as expressly stated otherwise in this Section 9.2, and subject to Sections 6.4 and 6.7 hereof, the Issuers, the Subsidiary Guarantors and the Trustee may amend, supplement or otherwise modify this Indenture, the Notes, the Subsidiary Guaranties, or, subject to the Intercreditor Agreement, the Security Documents, with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and, subject to Sections 6.4 and 6.7 hereof, any existing Default or Event of Default (other 96 than a Default or Event of Default in the payment of the principal of, premium, if any, or Interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Notes, the Subsidiary Guaranties, and, subject to the Intercreditor Agreement, the Security Documents may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes (including consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes). (b) Subject to Sections 6.4 and 6.7 hereof, and except as stated otherwise in this Section 9.2, the Holders of a majority in aggregate principal amount of the Notes then outstanding may waive compliance in a particular instance by the Issuers or any Restricted Subsidiary with any provision of this Indenture or the Notes. It being understood that, except as expressly stated otherwise in Section 9.2(c), Sections 4.13 and 4.15 hereof may be amended, waived or modified in accordance with Section 9.2(a). (c) Without the consent of each Holder affected, an amendment or waiver may not with respect to any Notes held by a non-consenting Holder: (1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (2) reduce the principal of, or the premium (including, without limitation, redemption premium but not including, except as described in clause (3) below, any redemption premium relating to Sections 4.13 and 4.15) on, or change the fixed maturity of, any Note; (3) alter the price at which repurchases of the Notes may be made pursuant to an Excess Proceeds Offer or Change of Control Offer after the corresponding Asset Sale or Change of Control has occurred; (4) reduce the rate of or change the time for payment of Interest (or Liquidated Damages, if any), including default interest, on any Note (other than any advance notice requirement with respect to any redemption of the Notes); (5) waive a Default or Event of Default in the payment of principal of, or premium, if any, Interest or Liquidated Damages, if any, on or redemption payment with respect to, any Note (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); (6) make any Note payable in money other than that stated in the Notes; (7) make any change in the provisions of this Indenture relating to waivers of past Defaults with respect to, or the rights of Holders to receive, payments of Interest on the Notes; 97 (8) waive a redemption payment with respect to any Note (other than, except as described in Section 9.2(b)(3), provisions relating to or payments required by Section 4.13 and Section 4.15; (9) adversely affect the contractual ranking of the Notes or Subsidiary Guarantors; or (10) make any changes in the foregoing amendment and waiver provisions. (d) Notwithstanding the foregoing Sections 9.2(a), (b) and (c) and subject to the Intercreditor Agreement, no portion of the Collateral may be released from the Lien of the Security Documents (except in accordance with the provisions of this Indenture and the Security Documents), and none of the Security Documents or the provisions of this Indenture relating to the Collateral may be amended or supplemented, and the rights of any Holders thereunder may not be waived or modified, without, in each case, the consent of the Holders of at least 75% in aggregate principal amount of the then outstanding Notes. (e) In connection with any amendment, supplement or waiver under this Article IX, the Issuers may, but shall not be obligated to, offer to any Holder who consents to such amendment, supplement or waiver, or to all Holders, consideration for such Holder's consent to such amendment, supplement or waiver. (f) It shall not be necessary for the consent of the Holders under Sections 9.2(a), (b), (c) or (d) to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. (g) After an amendment, supplement or waiver under this Section 9.2 becomes effective, the Trustee shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS Until an amendment, supplement or waiver becomes effective (as determined by the Issuers and which may be prior to any such amendment, supplement or waiver becoming operative), a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder that evidences the same Indebtedness as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to its Note if 98 such consent by its terms is not irrevocable and the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective (as determined by the Issuers and which may be prior to any such amendment, supplement or waiver becoming operative). The Issuers may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver, which record date shall be the date so fixed by the Issuers notwithstanding the provisions of the TIA. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date, and only those Persons (or their duly designated proxies), shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Holder unless it makes a change described in any of paragraphs (1) through (10) of Section 9.2(c) hereof, in which case, the amendment, supplement or waiver shall bind only each Holder who has consented to it and every subsequent Holder that evidences the same debt as the consenting Holder's Note; provided, that any such waiver shall not impair or affect the right of any Holder to receive payment of principal and premium of and Interest (and Liquidated Damages, if any) on a Note, on or after the respective dates set for such amounts to become due and payable expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates. SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Issuers in exchange for all Notes may issue and the Trustee shall authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amendment or supplemental indenture authorized pursuant to this Article IX if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. Upon the request of the Issuers accompanied by a resolution of the Managers of each of Issuer authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Issuers in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture adversely affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or 99 supplemental Indenture. If such amendment or supplement does adversely affect the rights, duties, liabilities or immunities of the Trustee, the Trustee may, but need not, sign it. The Issuers may not sign an amendment or supplemental indenture until the Managers of each Issuer approve it. In executing any amendment or supplemental Indenture, the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive and (subject to Section 7.1 hereof) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amendment or supplemental indenture is authorized or permitted by this Indenture. ARTICLE X COLLATERAL AND SECURITY SECTION 10.1 SECURITY DOCUMENTS; SECURITY INTERESTS. (a) The due and punctual payment of the principal and premium, if any, of, and Interest (and Liquidated Damages, if any) on, the Notes when and as the same shall be due and payable, whether on an Interest Payment Date, at maturity, by acceleration, repurchase, redemption or otherwise, Interest on the overdue principal of and Interest (to the extent permitted by law), if any, on the Notes and performance of all other Obligations under this Indenture, the Notes, the Security Documents and the Registration Rights Agreement, shall be secured as provided in the Security Documents. (b) After the Issue Date, the Issuers shall, and shall cause each of the Domestic Restricted Subsidiaries to, use commercially reasonable efforts (which shall be deemed not to include any obligation to pay money to any third parties other than filing fees, reasonable fees and expenses of the third party or other de minimis payments) to grant a perfected security interest in all of the Issuers' and the Domestic Restricted Subsidiaries' assets, including assets acquired after the Issue Date in accordance with the Security Documents, but in any event excluding the Excluded Assets. (c) Notwithstanding any provision in this Indenture or the Security Documents to the contrary, in the event that the Issuers or any of the Domestic Restricted Subsidiaries grant a Lien on any of the Issuers' or any of the Domestic Restricted Subsidiaries' assets in connection with the Senior Credit Facility, the Issuers shall be required to, and shall be required to cause the Domestic Restricted Subsidiaries to, secure the Notes with a Lien on such assets (other than Excluded Assets) that is subordinated to the obligations under the Senior Credit Facility in accordance with the Intercreditor Agreement, except in circumstances where the Trustee cannot perfect such a Lien by means other than a Lien filing. (d) The Issuers shall, and shall cause each of the Domestic Restricted Subsidiaries to, do or cause to be done all such acts and things as may be necessary or proper, or as may be required by the provisions of the Security Documents, to assure and confirm to the Trustee the security interest in the Collateral contemplated hereby and by the Security Documents, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Notes secured hereby, according to the intent and purposes herein and therein expressed, including (1) using all 100 commercially reasonable efforts to obtain customary consents and waivers from landlords of premises where any of the Collateral is located, and (2) taking all commercially reasonable efforts to grant a perfected Lien on all real property (other than real property constituting Excluded Assets) owned by the Issuers and the Domestic Restricted Subsidiaries and to provide customary title insurance for the benefit of the Trustee with respect thereto; including, without limitation, commercially reasonable efforts to cause the removal of record of all existing monetary encumbrances such that the Security Documents shall constitute a first priority Lien on all such real property, subject to Permitted Liens. The Issuers shall, and shall cause each of the Domestic Restricted Subsidiaries to, take, upon request of the Trustee, any and all actions required to cause the Security Documents to create and maintain, as security for the Obligations under this Indenture, the Notes, the Security Documents and the Registration Rights Agreement, valid and enforceable, perfected (except as expressly provided herein or therein) Liens in and on all the Collateral, in favor of the Trustee, superior to and prior to the rights of all third Persons (other than holders of Permitted Liens), and subject to no other Liens, other than as provided herein and therein; provided, that the Trustee's Lien securing the Collateral may be subordinated pursuant to the terms of the Intercreditor Agreement to a Lien securing Indebtedness outstanding pursuant to Section 4.7 hereof, but only to the extent provided in the Intercreditor Agreement. (e) Each of the Issuers represents and warrants and covenants that it (or the Domestic Restricted Subsidiaries) has executed and delivered, filed and recorded and/or shall execute and deliver, file and record, all instruments and documents, and has done or shall do or cause to be done all such acts and other things as are necessary to subject the Collateral to the Lien of the Security Documents. The Issuers (or the Domestic Restricted Subsidiaries) shall execute and deliver, file and record all instruments and do all acts and other things as may be reasonably necessary or advisable to perfect, maintain and protect the security interests created by the Security Documents and shall pay all filing, recording, mortgage or other taxes or fees incidental thereto. (f) The security interests in the Collateral created by the Security Documents as now or hereafter in effect shall be held by the Trustee for the equal and ratable benefit and security of the Notes without preference, priority or distinction of any thereof over any other by reason, or difference in time, of issuance, sale or otherwise, and for the enforcement of the payment of principal of, premium, if any, and Interest (and Liquidated Damages, if any) on the Notes in accordance with their terms. (g) Each Holder, by its acceptance of a Note, consents and agrees to the terms of the Security Documents and the Intercreditor Agreement (including, without limitation, the provisions providing for foreclosure and release of the Collateral) as the same may be in effect or may be amended from time to time in accordance with their terms and authorizes and directs the Secured Party to enter into the Security Documents and the Intercreditor Agreement and to perform its obligations and exercise its rights thereunder in accordance therewith. The Issuers initially appoint the Trustee as Secured Party and/or Trustee under the Security Documents and the Intercreditor Agreement. Any successor Trustee shall act as Secured Party and/or Trustee under the Security Documents or appoint another Person to act in such capacity. 101 SECTION 10.2 FURTHER ASSURANCES AND SECURITY. Each of the Issuers represents and warrants that at the time the Security Documents and this Indenture are executed, the Issuers (or the Restricted Subsidiaries) (a) shall have full right, power and lawful authority to grant, bargain, sell, release, convey, hypothecate, assign, mortgage, pledge, transfer and confirm, absolutely, the Collateral, in the manner and form done, or intended to be done, in the Security Documents, free and clear of all Liens, except for Permitted Liens, and shall forever warrant and defend the title to the same against the claims of all Persons whatsoever, subject to the terms of the Intercreditor Agreement; (b) shall execute, acknowledge and deliver to the Trustee, at the Issuers' expense, at any time and from time to time such further assignments, transfer, assurances or other instruments as may be required by the Trustee to effectuate the terms of this Indenture or the Security Documents, subject to the terms of the Intercreditor Agreement; and (c) shall at any time and from time to time do or cause to be done all such acts and things as may be necessary or proper, or as may be required by the Trustee, to assure and confirm to the Trustee the security interest in the Collateral contemplated hereby and by the Security Documents, subject to the terms of the Intercreditor Agreement. SECTION 10.3 OPINIONS. (a) The Issuers shall, to the extent required under the TIA, furnish to the Trustee (i) promptly after the recording or filing, or re-recording or re-filing of the Security Documents and other security filings, an Opinion of Counsel (who may be counsel for the Issuers) stating that in the opinion of such counsel the Security Documents and other security filings have been properly recorded, filed, re-recorded or re-filed so as to make effective and perfect the security interest intended to be created thereby and reciting the details of such action. (b) The Issuers shall, to the extent required under the TIA, furnish to the Trustee within three months after each anniversary of the Issue Date, an Opinion of Counsel, dated as of such date, stating either that (i) in the opinion of such counsel, all action has been taken with respect to the recording, registering, filing, re-recording, re-registering and refiling of all supplemental indentures, financing statements, continuation statements or other instruments of further assurance as is necessary to maintain the Liens of the Security Documents, subject to the terms of the Intercreditor Agreement, and reciting the details of such action or (ii) in the opinion of such Counsel, no such action is necessary to maintain such Liens, which Opinion of Counsel also shall state what actions it then believes are necessary to maintain the effectiveness of such Liens during the next year. (c) All Opinions of Counsel required by this Section 10.3, 12.4 or 12.5, may contain qualifications, assumptions, exceptions and limitations as are customary or appropriate for similar opinions relating to the nature of the Collateral and as are reasonably acceptable to the Trustee. 102 SECTION 10.4 RELEASE OF COLLATERAL. (a) Upon the full and final payment and performance of all the Issuers' and the Subsidiary Guarantors' Obligations under this Indenture, the Notes, the Subsidiary Guaranties and the Security Documents will terminate, and all of the Liens on the Collateral created hereunder and under the Security Documents shall be released. (b) In addition, the Secured Party shall release from the Liens created by this Indenture and the Security Documents at the sole cost and expense of the Issuers: (1) Collateral that is sold, transferred, disbursed or otherwise disposed of in accordance with the provisions of this Indenture and the Security Documents; provided, that the Secured Party shall not release such Liens in the event that the transaction is subject to Article V hereof; (2) Collateral that is released with the consent of the Holders of not less than 75% in aggregate principal amount of the outstanding Notes as provided under Section 9.2(d) hereof; (3) all Collateral upon defeasance of this Indenture in accordance with the provisions of Article VIII hereof or discharge of this Indenture in accordance with the provisions of Section 8.8 hereof; provided that the funds deposited with the Trustee, in trust, for the benefit of the Holders as required by such provisions shall not be released; and (4) Collateral of a Subsidiary Guarantor whose Subsidiary Guaranty is released in accordance with this Indenture and the Security Documents; provided, that the Secured Party has received all documentation required by the TIA in connection therewith. Upon compliance with the above provisions, the Trustee shall execute, deliver or acknowledge any necessary or proper instruments of termination, satisfaction or release to evidence the release of any Collateral permitted to be released pursuant to this Indenture or the Security Documents. (c) The release of any Collateral from the terms of the Security Documents shall not be deemed to impair the security under this Indenture in contravention of the provisions hereof and of the Security Documents if and to the extent the Collateral is released pursuant to the terms of this Indenture and the Security Documents. (d) For the avoidance of doubt (i) any Collateral owned by any subsidiary that is not a Foreign Subsidiary that is designated by the Managers of the Company as an Unrestricted Subsidiary in accordance with the terms of this Indenture shall be released from the Lien of this Indenture and the Security Documents at the time of such designation and (ii) any Collateral that shall constitute an Excluded Asset at any time, or from time to time, after the date of this Indenture, shall be released from the Lien 103 of this Indenture and the Security Documents at the time such Collateral shall constitute an Excluded Asset. SECTION 10.5 CERTIFICATES OF THE ISSUERS. The Issuers shall furnish to the Trustee, prior to each proposed release of Collateral, all documents required by TIA ss. 314(d). The Trustee may, to the extent permitted by Sections 7.1 and 7.2 hereof, accept as conclusive evidence of compliance with the foregoing provisions the appropriate statements contained in such instruments. Any certificate or opinion required by TIA ss. 314(d) may be made by an Officer of the Issuers, except in cases where TIA ss. 314(d) requires that such certificate or opinion be made by an independent engineer, appraiser or other expert within the meaning of TIA ss. 314(d). SECTION 10.6 AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE SECURITY DOCUMENTS AND THE INTERCREDITOR AGREEMENT. Subject to the terms of the Intercreditor Agreement, the Trustee may, in its sole discretion and without the consent of the Holders, on behalf of the Holders, take all actions it deems necessary or appropriate in order to (a) enforce any of the terms of the Security Documents or the Intercreditor Agreement and (b) collect and receive any and all amounts payable in respect of the Obligations of the Issuers and the Subsidiary Guarantors hereunder and under the Notes, the Security Documents and the Registration Rights Agreement. Subject to the terms of the Intercreditor Agreement, and to the extent permitted by this Indenture or the Security Documents, the Trustee shall have the power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts that may be unlawful or in violation of the Security Documents or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interest and the interests of the Holders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of the Holders or the Trustee). SECTION 10.7 AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE SECURITY DOCUMENTS AND THE INTERCREDITOR AGREEMENT. The Trustee is authorized to receive any funds for the benefit of the Holders distributed under the Security Documents or the Intercreditor Agreement, and to make further distributions of such funds to the Holders according to the provisions of this Indenture and the Security Documents, subject to the terms of the Intermediary Agreement. 104 SECTION 10.8 INTERCREDITOR AGREEMENT. Notwithstanding anything herein or in any Security Document to the contrary, the relative rights and remedies of the Trustee hereunder or under any Security Documents and of the agent or any other Person acting on behalf of and for the benefit of the lender(s) under the Senior Credit Facility shall be subject to and governed by the terms of the Intercreditor Agreement at any time the Intercreditor Agreement is in effect. In the event of any inconsistency between the terms hereof or of any Security Documents and the Intercreditor Agreement, the Intercreditor Agreement shall control at any time the Intercreditor Agreement is in effect. ARTICLE XI SUBSIDIARY GUARANTIES SECTION 11.1 SUBSIDIARY GUARANTIES By its execution hereof, each of the Subsidiary Guarantors acknowledges and agrees that it receives substantial benefits from the Issuers and that such party is providing its Subsidiary Guaranty for good and valuable consideration, including, without limitation, such substantial benefits and services. Accordingly, subject to the provisions of this Article XI, each Subsidiary Guarantor, jointly and severally, hereby unconditionally guarantees on a senior secured basis to each Holder of a Note authenticated and delivered by the Trustee and its successors and assigns that: (i) the principal of, premium, if any, and Interest and Liquidated Damages, if any, on the Notes shall be duly and punctually paid in full when due, whether at maturity, by acceleration, call for redemption, upon a Change of Control Offer, an Asset Sale Offer, or otherwise, and Interest on overdue principal, premium, if any, Liquidated Damages, if any, and (to the extent permitted by law) interest on any Interest, if any, on the Notes and all other obligations of the Issuers to the Holders or the Trustee under the Notes, this Indenture, the Security Documents and the Registration Rights Agreement (including fees, expenses or other) shall be promptly paid in full or performed, all in accordance with the terms hereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations under the Notes, this Indenture, the Security Documents or Registration Rights Agreement, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration, call for redemption, upon a Change of Control, an Asset Sale Offer, or otherwise, subject, however, in the case of clauses (i) and (ii) above, to the limitations set forth in Section 11.6 hereof (collectively, the "Subsidiary Guaranty Obligations"). Subject to the provisions of this Article XI, each Subsidiary Guarantor hereby agrees that its Subsidiary Guaranty hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes, this Indenture, the Security Documents, the Registration Rights Agreement or the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any thereof, any releases of the Collateral, the entry of any judgment against the Issuers, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Subsidiary Guarantor. Each Subsidiary Guarantor hereby waives and relinquishes: (a) any right to require the Trustee, the Holders or the Issuers 105 (each, a "Benefited Party") to proceed against the Issuers, the Restricted Subsidiaries or any other Person or to proceed against or exhaust any security held by a Benefited Party at any time or to pursue any other remedy in any Secured Party's power before proceeding against the Subsidiary Guarantors; (b) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other Person or Persons or the failure of a Benefited Party to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other Person or Persons; (c) demand, protest and notice of any kind (except as expressly required by this Indenture), including but not limited to notice of the existence, creation or incurring of any new or additional Indebtedness or obligation or of any action or non-action on the part of the Subsidiary Guarantors, the Issuers, the Restricted Subsidiaries, any Benefited Party, any creditor of the Subsidiary Guarantors, the Issuers or the Restricted Subsidiaries or on the part of any other Person whomsoever in connection with any obligations the performance of which are hereby guaranteed; (d) any defense based upon an election of remedies by a Benefited Party, including but not limited to an election to proceed against the Subsidiary Guarantors for reimbursement; (e) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (f) any defense arising because of a Benefited Party's election, in any proceeding instituted under the Bankruptcy Law, of the application of Section 1111(b)(2) of the Bankruptcy Code; and (g) any defense based on any borrowing or grant of a security interest under Section 364 of the Bankruptcy Code. The Subsidiary Guarantors hereby covenant that, except as otherwise provided therein, the Subsidiary Guaranties shall not be discharged except by payment in full of all Subsidiary Guaranty Obligations, including the principal, premium, if any, and Interest (and LD, if any) on the Notes and all other costs provided for under this Indenture or as provided in Article VIII. If any Holder or the Trustee is required by any court or otherwise to return to either the Issuers or the Subsidiary Guarantors, or any trustee or similar official acting in relation to either the Issuers or the Subsidiary Guarantors, any amount paid by the Issuers or the Subsidiary Guarantors to the Trustee or such Holder, the Subsidiary Guaranties, to the extent theretofore discharged, shall be reinstated in full force and effect. Each of the Subsidiary Guarantors agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Subsidiary Guaranty Obligations hereby until payment in full of all such obligations guaranteed hereby. Each Subsidiary Guarantor agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article VI hereof for the purposes hereof, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Subsidiary Guaranty Obligations, and (y) in the event of any acceleration of such obligations as provided in Article VI hereof, such Subsidiary Guaranty Obligations (whether or not due and payable) shall forthwith become due and payable by such Subsidiary Guarantor for the purpose of the Subsidiary Guaranty. 106 SECTION 11.2 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTIES To evidence the Subsidiary Guaranties set forth in Section 11.1 hereof, each of the Subsidiary Guarantors agrees that a notation of the Subsidiary Guaranties substantially in the form included in Exhibit A hereto shall be endorsed on each Note authenticated and delivered by the Trustee and that this Indenture (with respect to Subsidiary Guarantors as of the Issue Date) and, with respect to Subsidiary Guarantors after the Issue Date, a Supplemental Indenture substantially in the form of Exhibit E hereto executed in accordance with Section 11.4 hereof, shall be executed on behalf of each of the Subsidiary Guarantors by an Officer of each of the Subsidiary Guarantors. Each of the Subsidiary Guarantors agree that the Subsidiary Guaranties set forth in this Article XI shall remain in full force and effect and apply to all the Notes notwithstanding any failure to endorse on each Note a notation of the Subsidiary Guaranties. If an Officer whose signature is on a Note or a notation of Subsidiary Guaranty no longer holds that office at the time the Trustee authenticates the Note on which the Subsidiary Guaranties are endorsed, the Subsidiary Guaranties shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guaranties set forth in this Indenture on behalf of the Subsidiary Guarantors. SECTION 11.3 SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS (a) Nothing contained in this Indenture or in the Notes shall prevent any consolidation or merger of any Subsidiary Guarantor with or into each other or with or into the Company; provided, however, that such consolidation or merger shall otherwise comply with this Indenture. Upon any such consolidation or merger, the Subsidiary Guaranty of the Subsidiary Guarantor that does not survive the consolidation or merger shall no longer be of any force or effect. (b) Except for a merger or consolidation in which a Subsidiary Guarantor is sold and its Subsidiary Guaranty is released in compliance with the provisions of Section 11.5 hereof, no Subsidiary Guarantor shall consolidate or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person) another Person unless, subject to the provisions of the following paragraph and the other provisions of this Indenture and the Security Documents, (i) the Person formed by, resulting from or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) (A) expressly assumes all the obligations of such Subsidiary Guarantor pursuant to a supplemental indenture in form reasonably satisfactory to the Trustee, pursuant to which such Person shall unconditionally guaranty, on a senior secured basis, all of such Subsidiary Guarantor's obligations under such Subsidiary Guarantor's Subsidiary Guaranty on the terms set forth in this Indenture, (B) executes a secondary agreement and other Security Documents necessary or reasonably requested by the Trustee to grant, and grants, a valid, enforceable, perfected Lien on the Collateral 107 owned by such Person to secure such Obligations on the terms set forth in the Security Documents, and (C) delivers to the Trustee an Opinion of Counsel that such supplemental indenture and such guaranty and Security Documents have been duly authorized, executed and delivered and that each such document and this Indenture constitutes a legal, valid, binding and enforceable obligation of such Person, in each case, subject to customary qualifications; and (ii) immediately before and immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default shall have occurred or be continuing. The provisions of this Section 11.3(b) shall not apply to the merger of any Subsidiary Guarantors with or into each other or with or into the Company. In case of any such consolidation or merger and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and reasonably satisfactory in form to the Trustee, of the Subsidiary Guaranties endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by such Subsidiary Guarantor, such successor corporation shall succeed to and be substituted for such Subsidiary Guarantor with the same effect as if it had been named herein as a Subsidiary Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guaranties to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Issuers and delivered to the Trustee. All the Subsidiary Guaranties so issued shall in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guaranties theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guaranties had been issued at the date of the execution hereof. (c) The Trustee, subject to the provisions of Section 11.2 hereof, shall be entitled to receive an Officers' Certificate as conclusive evidence that any such consolidation or merger, and any such assumption of Subsidiary Guaranty Obligations, comply with the provisions of this Section 11.3. Such Officers' Certificate shall comply with the provisions of Section 11.2 hereof. SECTION 11.4 SUBSIDIARY GUARANTY BY FUTURE RESTRICTED SUBSIDIARIES The Issuers shall cause each of the existing and future Restricted Subsidiaries (other than Foreign Subsidiaries and other than a Restricted Subsidiary that is a co-Issuer of the Notes) to (i) execute and deliver to the Trustee a supplemental indenture substantially in the form of Exhibit E hereto and a guaranty substantially in the form included in Exhibit A hereto, pursuant to which such Restricted Subsidiary shall unconditionally guaranty on a senior secured basis, all of the Issuers' Obligations under the Notes and this Indenture on the terms set forth in this Indenture, (ii) execute a security agreement and other Security Documents necessary or reasonably requested by the Trustee to grant, and grant, the Trustee a valid, enforceable, perfected Lien on the Collateral described therein, and (iii) deliver to the Trustee an Opinion of Counsel that such supplemental indenture, guaranty and Collateral Documents have been duly authorized, executed and delivered by such Restricted Subsidiary and that each of such documents and this Indenture, guaranty and Collateral Documents have constitutes a legal, valid, binding and enforceable obligation of such Restricted Subsidiary, in each case subject to customary qualifications including exceptions for bankruptcy, fraudulent 108 transfer and equitable principles. Thereafter, such Restricted Subsidiary shall be a Subsidiary Guarantor for all purposes of this Indenture. SECTION 11.5 RELEASE OF SUBSIDIARY GUARANTORS Notwithstanding Section 11.3 hereof, upon the sale or disposition (including by merger or sale or transfer of all of the Equity Interests) of a Subsidiary Guarantor (as an entirety) to a Person which is not and is not required to become a Subsidiary Guarantor, the designation of a Domestic Restricted Subsidiary as an Unrestricted Subsidiary or the liquidation, or dissolution of a Subsidiary Guarantor, which transaction is otherwise in compliance with this Indenture (including, without limitation, Sections 4.13 and 4.14), such Subsidiary Guarantor shall be deemed released from its Obligations under its Subsidiary Guaranty and the Security Documents; provided, however, that any such termination shall occur only to the extent that all obligations of such Subsidiary Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure, any Indebtedness of the Issuers or any Indebtedness of any other of the Restricted Subsidiaries shall also terminate upon such release, sale or transfer and none of its Equity Interests are pledged for the benefit of any holder of any Indebtedness of the Issuers or any Indebtedness of any of the Restricted Subsidiaries. The Trustee, subject to the provisions of Section 12.4 hereof, shall be entitled to receive an Officers' Certificate as conclusive evidence that such sale or other disposition or that such designation was made by the Issuers in accordance with the provisions of this Indenture. Except as provided in Section 11.3 hereof, any Subsidiary Guarantor not released from its obligations under its Subsidiary Guaranty shall remain liable for the full amount of principal of and Interest on the Notes and for the other obligations of any Subsidiary Guarantor under this Indenture as provided in this Article XI. Notwithstanding the foregoing provisions of this Article XI, (i) any Subsidiary Guarantor whose Subsidiary Guaranty would otherwise be released pursuant to the provisions of this Section 11.5 may elect, at its sole discretion, by written notice to the Trustee, to maintain such Subsidiary Guaranty in effect notwithstanding the event or events that otherwise would cause the release of such Subsidiary Guaranty (which election to maintain such Subsidiary Guaranty in effect may be conditional or for a limited period of time), and (ii) any subsidiary of the Issuers which is not a Subsidiary Guarantor may elect, at its sole discretion, by written notice to the Trustee, to become a Subsidiary Guarantor (which election may be conditional or for a limited period of time). SECTION 11.6 LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY; CERTAIN BANKRUPTCY EVENTS (a) Each Subsidiary Guarantor, and by its acceptance of Notes each Holder, hereby confirms that it is the intention of all such parties that the Subsidiary Guaranty Obligation of such Subsidiary Guarantor pursuant to its Subsidiary Guaranty not constitute a fraudulent transfer or conveyance for purposes of any Bankruptcy Law, 109 the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law. To effectuate the foregoing intention, the Holders and such Subsidiary Guarantor hereby irrevocably agree that the Subsidiary Guaranty Obligations of such Subsidiary Guarantor under this Article XI shall be limited to the maximum amount as shall, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the Subsidiary Guaranty Obligations of such other Subsidiary Guarantor under this Article XI, result in the Subsidiary Guaranty Obligations of such Subsidiary Guarantor under the Subsidiary Guaranty of such Subsidiary Guarantor not constituting a fraudulent transfer or conveyance. (b) Each Subsidiary Guarantor hereby covenants and agrees, to the fullest extent that it may do so under applicable law, that in the event of the insolvency, bankruptcy, dissolution, liquidation or reorganization of either of the Issuers, such Subsidiary Guarantor shall not file (or join in any filing of), or otherwise seek to participate in the filing of, any motion or request seeking to stay or to prohibit (even temporarily) execution on the Subsidiary Guaranty and hereby waives and agrees not to take the benefit of any such stay of execution, whether under Section 362 or 105 of the Bankruptcy Law or otherwise. SECTION 11.7 APPLICATION OF CERTAIN TERMS AND PROVISIONS TO THE SUBSIDIARY GUARANTORS (a) For purposes of any provision of this Indenture which provides for the delivery by any Subsidiary Guarantor of an Officers' Certificate and/or an Opinion of Counsel, the definitions of such terms in Section 1.1 hereof shall apply to such Subsidiary Guarantor as if references therein to the Issuers were references to such Subsidiary Guarantor. (b) Any request, direction, order or demand which by any provision of this Indenture is to be made by any Subsidiary Guarantor, shall be sufficient if evidenced as described in Section 12.2 hereof as if references therein to the Issuers were references to such Subsidiary Guarantor. (c) Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders to or on any Subsidiary Guarantor may be given or served as described in Section 12.2 hereof as if references therein to the Issuers were references to such Subsidiary Guarantor. (d) Upon any demand, request or application by any Subsidiary Guarantor to the Trustee to take any action under this Indenture, such Subsidiary Guarantor shall furnish to the Trustee such certificates and opinions as are required in Section 12.4 hereof as if all references therein to the Issuers were references to such Subsidiary Guarantor. 110 ARTICLE XII MISCELLANEOUS SECTION 12.1 TRUST INDENTURE ACT CONTROLS If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by the TIA ss. 318(c), the imposed duties shall control. SECTION 12.2 NOTICES Any notice or communication by the Issuers or the Trustee to the other is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Issuers or the Subsidiary Guarantors: Diamond Jo, LLC The Old Evangeline Downs Capital Corp. 400 East Third Street P.O. Box 1750 Dubuque, Iowa 52004-1750 Attention: Michael S. Luzich Telecopier No.: (563) 557-0549 with copies (which shall not constitute notice) to: Mayer, Brown, Rowe & Maw LLP 1675 Broadway New York, NY 10019 Attn: Nazim Zilkha, Esq. Telecopier No.: (212) 262-1910 with a copy (which shall not constitute notice) to: Diamond Jo, LLC The Old Evangeline Downs Capital Corp. 7137 Mission Hills Drive Las Vegas, Nevada 89113 Attention: Michael S. Luzich Telecopier No.: 702-247-6822 111 If to the Trustee: U.S. Bank National Association 60 Livingston Avenue St. Paul, MN 55107-2292 Attention: Corporate Trust Department Telecopier No.: (651) 495-8097 The Issuers or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: (i) at the time delivered by hand, if personally delivered; (ii) five Business Days after being deposited in the mail, postage prepaid; (iii) when receipt acknowledged, if telecopied; and (iv) the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Issuers mail a notice or communication to Holders, they shall mail a copy to the Trustee and each Agent at the same time. SECTION 12.3 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Issuers, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT Upon any request or application by the Issuers to the Trustee to take any action under this Indenture, the Issuers shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.5 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and 112 (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.5 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied; provided, however, that with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificate of public officials. SECTION 12.6 RULES BY TRUSTEE AND AGENTS The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 12.7 LEGAL HOLIDAYS If any payment date is a Legal Holiday, payment may be made at the place of payment on the next succeeding day that is not a Legal Holiday, and no Interest shall accrue for the intervening period. SECTION 12.8 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator, stockholder, member or controlling person of any of the Issuers or any Subsidiary Guarantor, as such, will have any liability for any Obligations of any of the Issuers or any Subsidiary Guarantor under the Notes, the Indenture, the Security Documents or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such Obligations or their 113 creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release will be part of the consideration for issuance of the Notes and the Subsidiary Guaranties. SECTION 12.9 GOVERNING LAW AND SUBMISSION TO JURISDICTION THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(b); PROVIDED, THAT WITH RESPECT TO THE CREATION, ATTACHMENT, PERFECTION, PRIORITY, ENFORCEMENT OF AND REMEDIES RELATING TO THE SECURITY INTEREST IN ANY REAL PROPERTY COLLATERAL, THE GOVERNING LAW MAY BE THE LAWS OF THE JURISDICTIONS WHERE SUCH COLLATERAL IS LOCATED WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY OF THE ISSUERS OR GUARANTORS ARISING OUT OF OR RELATING HERETO OR ANY OF THE SECURITY DOCUMENTS, OR ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH ISSUER OR GUARANTOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY SUBMITS TO AND ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE ISSUER OR GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 12.3 OF THE INDENTURE; AGREES THAT SERVICE AS PROVIDED ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE ISSUER OR GUARANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND AGREES THE TRUSTEE RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY OF THE ISSUERS OR GUARANTORS IN THE COURTS OF ANY OTHER JURISDICTION HAVING JURISDICTION OVER SUCH ISSUER OR GUARANTOR. SECTION 12.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Issuers or the Restricted Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. 114 SECTION 12.11 SUCCESSORS All agreements of the Issuers and the Subsidiary Guarantors in this Indenture and the Notes shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 12.12 SEVERABILITY In case any one or more of the provisions of this Indenture or in the Notes or in the Subsidiary Guaranties shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. SECTION 12.13 COUNTERPART ORIGINALS The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 12.14 TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] 115 SIGNATURES IN WITNESS WHEREOF, the parties hereto have executed this Indenture as of the date first written above. THE ISSUERS: DIAMOND JO, LLC By: /s/M. BRENT STEVENS ------------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer By: /s/NATALIE A. SCHRAMM ------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer THE OLD EVANGELINE DOWNS CAPITAL CORP. By: /s/M. BRENT STEVENS ------------------------------------ Name: M. Brent Stevens Title: Chief Executive Officer By: /s/NATALIE A. SCHRAMM ------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer THE GUARANTORS: THE OLD EVANGELINE DOWNS, L.L.C. By: /s/M. BRENT STEVENS ------------------------------------ Name: M. Brent Stevens Title: Chief Executive Officer By: /s/NATALIE A. SCHRAMM ------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer OED ACQUISITION, LLC By: /s/M. BRENT STEVENS ------------------------------------ Name: M. Brent Stevens Title: Chief Executive Officer PENINSULA GAMING CORP. By: /s/M. BRENT STEVENS ------------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer THE TRUSTEE: U.S. BANK NATIONAL ASSOCIATION By: /s/FRANK P. LESLIE III ------------------------------------ Name: Frank P. Leslie III Title: Vice President EXHIBIT 4.8 EXHIBIT A [FORM OF NOTE] DIAMOND JO, LLC THE OLD EVANGELINE DOWNS CAPITAL CORP. 8 3/4% [SERIES A] [SERIES B](1) SENIOR SECURED NOTE DUE 2012 CUSIP: __________ No. $_________________ Diamond Jo, LLC, a Delaware limited liability company (the "Company") and The Old Evangeline Downs Capital Corp., a Delaware corporation ("Capital" and, together with the Company, the "Issuers," which term includes any successors under, and any additional "Issuers" that may become a party to the Indenture hereinafter referred to), for value received, hereby promise to pay to Cede & Co, or registered assigns, the principal sum of __________ Dollars, on April 15, 2012. Interest Payment Dates: April 15 and October 15, commencing October 15, 2004. Interest Record Dates: April 1 and October 1 Reference is made to the further provisions of this Note on the reverse side, which shall, for all purposes, have the same effect as if set forth at this place. Upon request, the Issuers shall promptly make available to a holder of this Note information regarding the issue price, the amount of original issue discount, the issue date, and the yield to maturity of this Note. Holders should contact Diamond Jo, LLC, 400 East Third Street, P.O. Box 1750, Dubuque, Iowa 52004-1750, Attention: Michael S. Luzich. - ---------- (1) Series A should be replaced with Series B in the Exchange Notes. A-1 IN WITNESS WHEREOF, the Issuers have caused this instrument to be duly executed. Diamond Jo, LLC, a Delaware limited liability company By: ___________________________ Name: Title: By: ___________________________ Name: Title: The Old Evangeline Downs Capital Corp., a Delaware corporation By: ___________________________ Name: Title: By: ___________________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes described in the within-mentioned Indenture. U.S. Bank National Association By: ___________________________ Authorized Signatory Dated: _______________ (Reverse of Note) 8 3/4% [Series A] [Series B](2) Senior Secured Note due 2012 [THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.6 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS.](3) [UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY A NOMINEE OF THE DEPOSITARY, TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.](4) [THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE - ---------- (2) Series A should be replaced with Series B in the Exchange Notes. (3) To be included only on Global Notes deposited with DTC as Depositary. (4) To be included only on Global Notes deposited with DTC as Depositary. A-3 ENTITLED TO RECEIVE CASH PAYMENTS OF INTEREST DURING THE PERIOD WHICH SUCH HOLDER HOLDS THIS NOTE. NOTHING IN THIS LEGEND SHALL BE DEEMED TO PREVENT INTEREST FROM ACCRUING ON THIS NOTE.](5) [THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH OTHER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(k) UNDER THE SECURITIES ACT AS PERMITTING RESALES OF RESTRICTED SECURITIES BY NON-AFFILIATES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PURCHASERS THAT OCCUR OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO - ---------- (5) To be included only on Reg S Temporary Global Notes. A-4 REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE AND IN EACH CASE IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS OF ANY U.S. STATE OR ANY OTHER APPLICABLE JURISDICTION.](6) Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. The Issuers promise to pay Interest on the principal amount of this Note at 8 3/4% per annum from the Issue Date until maturity and shall pay the Liquidated Damages, if any, payable pursuant to Section 4 of the Registration Rights Agreement referred to below. The Issuers shall pay Interest and Liquidated Damages, if any, semi-annually on April 15 and October 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). The first Interest Payment Date shall be October 15, 2004. Interest on the Notes shall accrue from the most recent date to which Interest has been paid or, if no Interest has been paid, from the Issue Date; provided that if there is no existing Default in the payment of Interest, and if this Note is authenticated between an Interest Record Date (defined below) referred to on the face hereof and the next succeeding Interest Payment Date, Interest shall accrue from such next succeeding Interest Payment Date. The Issuers shall pay Interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the rate then in effect; it shall pay Interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue installments of Interest and Liquidated Damages, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be calculated on the basis of a 360-day year consisting of twelve 30-day months. 2. Method of Payment. The Issuers shall pay Interest on the Notes and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the April 1 or October 1 next preceding the Interest Payment Date (each an "Interest Record Date"), even if such Notes are cancelled after such Interest Record Date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture (as defined below) with respect to defaulted interest. The Notes shall be payable as to principal, Interest, premium, if any, and Liquidated Damages, if any, at the office or agency of the Issuers maintained within the City and State of New York for such purpose, or, at the option of the Issuers, payment of Interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds to an account within the United States shall be required with respect to principal of and Interest, premium, if any, and Liquidated Damages, if any, on all Global - ---------- (6) To be included only on Transfer Restricted Notes. A-5 Notes. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Registrar. Initially, U.S. Bank National Association, the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Issuers may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its subsidiaries may act in any such capacity. 4. Indenture. The Issuers issued the Notes under an Indenture, dated as of the Issue Date ("Indenture"), by and among the Issuers, the Subsidiary Guarantors party thereto and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Obligations under the Indenture, the Intercreditor Agreement, the Notes and the Subsidiary Guaranties thereof are secured by the Collateral described in the Security Documents, subject to the provisions of such agreements and the Intercreditor Agreement. Holders are referred to the Security Documents and the Intercreditor Agreement for a statement of such terms. 5. Optional Redemption. (a) Except as set forth in Section 5(b), the Notes are not redeemable at the Issuers' option prior to April 15, 2008. Thereafter, the Notes shall be subject to redemption, in whole or in part, at the option of the Issuers at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid Interest (and Liquidated Damages, if any) thereon, to the applicable redemption date, if redeemed during the 12-month period beginning on April 15 of the years indicated below: YEAR PERCENTAGE ---- ---------- 2008 104.375% 2009 102.917% 2010 101.458% 2011 and thereafter 100.000% (b) Notwithstanding Section 5(a), at any time or from time to time prior to April 15, 2007, the Issuers may redeem, at their option, up to 35% of the aggregate principal amount of the Notes then outstanding, at a redemption price of 108.75% of the principal amount thereof, plus accrued and unpaid Interest (and Liquidated Damages, if any) thereon, through the applicable redemption date, with the net cash proceeds of one or more Equity Offerings; provided, that (i) such redemption shall occur within 60 days of the date of closing of such Equity Offering and (ii) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after giving effect to each such redemption. A-6 (c) Notice of redemption shall be mailed by first class mail at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date, Interest ceases to accrue on Notes or portions thereof called for redemption unless the Issuers default in such payments due on the redemption date. 6. Regulatory Redemption. Notwithstanding any other provisions hereof, Notes to be redeemed pursuant to a Required Regulatory Redemption shall be redeemable by the Issuers, in whole or in part, at any time upon not less than 20 Business Days nor more than 60 days notice (or such earlier date as may be ordered by any applicable Governmental Authority) at a price equal to the lesser of (a) the Holder's cost thereof and (b) 100% of the principal amount thereof, plus in either case accrued and unpaid Interest, plus Liquidated Damages, if any, thereon, if any, to the date of redemption (or such earlier period as ordered by a Governmental Authority). The Issuers are not required to pay or reimburse any Holder or beneficial owner of the Notes for the expenses of any such Holder or beneficial owner related to the application for any Gaming License, qualification or finding of suitability in connection with a Required Regulatory Redemption. Such expenses of any such Holder or beneficial owner shall, therefore, be the obligation of such Holder or beneficial owner. Any Required Regulatory Redemption shall be made in accordance with the provisions of Section 3.3, 3.4 and 3.5 of the Indenture unless other procedures are required by any Governmental Authority. 7. Mandatory Redemption. The Issuers shall not be required to make mandatory redemption payments with respect to the Notes (except for a Required Regulatory Redemption and any offer to repurchase Notes that the Issuers are required to make in accordance with Sections 4.13 and 4.15 of the Indenture). The Notes shall not have the benefit of any sinking fund. 8. Offers to Purchase. (a) Change of Control. Upon the occurrence of a Change of Control, the Issuers shall offer to repurchase all of the Notes then outstanding (the "Change of Control Offer") at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Issuers must mail or cause to be mailed a notice to each Holder stating, among other things: (i) the purchase price and the purchase date, which shall be no earlier than 30 days nor later than 45 days from the date such notice is mailed (the "Change of Control Payment Date"); (ii) that any Holder electing to have Notes purchased pursuant to a Change of Control Offer shall be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; and (iii) that the Holder shall be entitled to withdraw such election if the Paying Agent receives, not later than the close of business A-7 on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased. (b) Asset Sale. Subject to certain exceptions set forth in the Indenture, the Issuers shall not, and shall not permit any Restricted Subsidiary to, make any Asset Sale unless: (i) such Issuer or such Restricted Subsidiary receives consideration at the time of such Asset Sale not less than the fair market value of the assets subject to such Asset Sale (as determined by the Company's Managers in good faith); (ii) at least 75% of the consideration for such Asset Sale is in the form of either (a) cash or Cash Equivalents or liabilities of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Subsidiary Guaranty) that are assumed by the transferee of such assets (provided, that following such Asset Sale, there is no further recourse to the Company or the Restricted Subsidiaries or the Company and the Restricted Subsidiaries are fully indemnified with respect to such liabilities; provided, further, that the 75% limitation set forth in this clause (ii) of this paragraph shall not apply to any proposed Asset Sale for which an independent certified accounting firm has certified to the Managers of the Company and the Trustee that the after-tax cash portion of the consideration to be received by the Company or such Restricted Subsidiary in such proposed Asset Sale is equal to or greater than what the net after-tax cash proceeds would have been had such proposed Asset Sale complied with the 75% limitation set forth in this clause (ii) of this paragraph), or (b) assets of the type described in clause (iii)(a) below; and (iii) within 360 days of such Asset Sale, the Net Proceeds thereof are (a) invested in assets related to the business of the Company or the Restricted Subsidiaries (which, in the case of an Asset Sale of the Diamond Jo or any replacement Gaming Vessel (a "Replacement Vessel"), must be a Gaming Vessel having a fair market value, as determined by an independent appraisal, at least equal to the fair market value of the Diamond Jo or such Replacement Vessel immediately preceding such Asset Sale), (b) applied to repay Indebtedness under Purchase Money Obligations incurred in connection with the assets so sold, (c) applied to repay Indebtedness under the Senior Credit Facility and permanently reduce the commitment thereunder in the amount of the Indebtedness so repaid or (d) to the extent not used as provided in clauses (a), (b), or (c) or this paragraph or any combination thereof, applied to make an offer to purchase Notes as described below (an "Excess Proceeds Offer"); provided, that the Company shall not be required to make an Excess Proceeds Offer until the amount of Excess Proceeds is greater than $10,000,000. 9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents, and the Issuers may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuers need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed A-8 in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between an Interest Record Date and the corresponding Interest Payment Date. 10. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes. 11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture, the Notes or the Subsidiary Guaranties, or, subject to the Intercreditor Agreement, the Security Documents, may be amended or supplemented with the consent of the Holders of a majority in principal amount of the then outstanding Notes, and any existing Default or compliance with any provision of the Indenture, the Notes or the Subsidiary Guaranties may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder of a Note, the Indenture, the Notes, the Subsidiary Guaranties, the Registration Rights Agreement or, subject to the Intercreditor Agreement, the Security Documents may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Issuers' or the Subsidiary Guarantors' obligations to Holders of the Notes in case of a merger or consolidation or sale of all or substantially all of its assets in accordance with the Indenture, to evidence the release of any Subsidiary Guaranty permitted to be released under the terms of the Indenture and the Security Documents or to evidence the addition of any new Subsidiary Guarantor, to make any change that would provide any additional rights or benefits to the Holders of the Notes (including the addition of any Subsidiary Guarantor) or that does not adversely affect the rights under the Indenture, the Notes, the Subsidiary Guaranties, the Registration Rights Agreement, the Security Documents or the Intercreditor Agreement of any such Holder, to comply with the provisions of the Depositary, Euroclear or Clearstream or the Trustee with respect to the provisions of the Indenture or the Notes relating to transfers and exchanges of Notes or beneficial interests therein, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA, to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture, to comply with applicable gaming laws and racing laws, or to enter into additional or supplemental Security Documents. Notwithstanding Sections 9.2(a), (b) and (c) of the Indenture and subject to the Intercreditor Agreement, no portion of the Collateral may be released from the Lien of the Security Documents (except in accordance with the provisions of this Indenture and the Security Documents), and none of the Security Documents or the provisions of the Indenture relating to the Collateral may be amended or supplemented, and the rights of any Holders thereunder may not be waived or modified, without, in each case, the consent of the Holders of at least 75% in aggregate principal amount of the then outstanding Notes. 12. Defaults and Remedies. The Indenture provides that each of the following constitutes an Event of Default: (i) the Issuers default in the payment of Interest on any Note when the same becomes due and payable and the Default continues for a period of 30 days; (ii) the Issuers default in the payment of the principal (or premium, if any) on any Note when the same becomes due and payable at maturity, upon redemption, by A-9 acceleration, in connection with an Excess Proceeds Offer or a Change of Control Offer or otherwise; (iii) either of the Issuers default in the performance of or breaches the provisions of Section 4.13, Section 4.15 or Article V of the Indenture; (iv) either of the Issuers or any Subsidiary Guarantor fails to comply with any of its other agreements or covenants in, or provisions of, the Notes or this Indenture and the Default continues for 60 days after written notice thereof has been given to the Issuers by the Trustee or to the Issuers and the Trustee by the Holders of at least 25% in aggregate principal amount of the then outstanding Notes, such notice to state that it is a "Notice of Default"; (v) an event of default occurs under (after giving effect to any waivers, amendments, applicable grace periods or any extension of any maturity date) any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Issuers or any Restricted Subsidiary (or the payment of which is guaranteed by the Issuers or any Restricted Subsidiary), whether such Indebtedness or guaranty now exists or is created after the Issue Date, if (a) either (1) such default results from the failure to pay principal of or interest on such Indebtedness or (2) as a result of such event of default the maturity of such Indebtedness has been accelerated, and (b) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness with respect to which such a payment event of default (after the expiration of any applicable grace period or any extension of the maturity date) has occurred, or the maturity of which has been so accelerated, exceeds $5,000,000 in the aggregate; (vi) a final non-appealable judgment or judgments for the payment of money (other than to the extent of any judgment as to which a reputable insurance company has accepted liability) is or are entered by a court or courts of competent jurisdiction against either of the Issuers or any Subsidiary and such judgment or judgments are not discharged, bonded or stayed within 60 days after entry, provided that the aggregate of all such judgments exceeds $5,000,000;; (vii) the cessation of substantially all gaming operations of the Company and the Restricted Subsidiaries, taken as a whole, for more than 90 days, except as a result of an Event of Loss; (viii) any revocation, suspension, expiration (without previous or concurrent renewal) or loss of any Gaming License of the Company or any Restricted Subsidiary for more than 90 days; (ix) any Subsidiary Guaranty of a Subsidiary Guarantor which is a Significant Subsidiary ceases to be in full force and effect or shall be held in any judicial proceeding to be unenforceable or invalid or is declared null and void (other than in accordance with the terms of the Subsidiary Guaranty and the Indenture) or any Subsidiary Guarantor which is a Significant Subsidiary denies or disaffirms its Obligations under its Subsidiary Guaranty or the Security Documents (in each case, other than by reason of the termination of the Indenture or the release of any such Subsidiary Guaranty in accordance with the Indenture); (x) (A) any event of default under a Security Document (after giving effect to any applicable grace periods, applicable notice periods, waivers or amendments) or (B) the failure of the Issuers or any Restricted Subsidiary to comply with any material agreement or covenant in, or material provision of, any of the Security Documents, or any breach in any material respect of any material representation or warranty made by the Issuers or any Restricted Subsidiary in any Security Document, and the continuance of such failure or breach for a period of 30 days after written notice is given to the Issuers by the Trustee or to the Issuers and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes A-10 outstanding; (xi) any of the Security Documents ceases to be in full force and effect or any of the Security Documents ceases to give the Trustee (or, in the case of a mortgage, ceases to give the Trustee or any other trustee under such mortgage) any of the Liens, rights, powers or privileges purported to be created thereby, or any of the Security Documents is declared null and void, or any of the Issuers or any Subsidiary Guarantor denies that it has any further liability under any Security Document to which it is a party or gives notice of such effect (in each case other than by reason of the termination of the Indenture or any such Security Document in accordance with its terms or the release of any Subsidiary Guarantor in accordance with the Indenture) and the continuance of such failure for a period of 30 days after written notice is given to the Issuers by the Trustee or to the Issuers and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes outstanding; (xii) either of the Issuers or any Subsidiary Guarantor pursuant to or within the meaning of any Bankruptcy Law: (1) commences a voluntary case, (2) consents to the entry of an order for relief against it in an involuntary case, (3) consents to the appointment of a custodian of it or for all or substantially all of its property, (4) makes a general assignment for the benefit of its creditors, or (5) admits in writing its inability to pay debts as the same become due; and (xi) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (1) is for relief against either of the Issuers or any Subsidiary Guarantor in an involuntary case, (2) appoints a custodian of either of the Issuers or any Subsidiary Guarantor or for all or substantially all of their property, or (3) orders the liquidation of either of the Issuers, or any Subsidiary Guarantor, and the order or decree remains unstayed and in effect for 60 days. 14. Trustee Dealings with Issuers. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Issuers or their Affiliates, and may otherwise deal with the Issuers or their Affiliates, as if it were not the Trustee. 15. No Recourse Against Others. No director, officer, employee, incorporator, stockholder, member or controlling person of any of the Issuers or any Subsidiary Guarantor, as such, will have any liability for any Obligations of any of the Issuers or any Subsidiary Guarantor under the Notes, the Indenture, the Security Documents or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such Obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release will be part of the consideration for issuance of the Notes and the Subsidiary Guaranties. 16. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). A-11 18. Additional Rights of Holders of Transfer Restricted Notes.(7) In addition to the rights provided to Holders of Notes under the Indenture, Holders of Transfer Restricted Notes shall have all the rights set forth in the Registration Rights Agreement dated as of the date of the Indenture, by and among the Issuers, the Subsidiary Guarantors and the Initial Purchaser (the "Registration Rights Agreement"). 19. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuers have caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon, and any such redemption shall not be affected by any defect in or omission of such numbers. 20. Notation of Subsidiary Guaranty. As more fully set forth in the Indenture, to the extent permitted by law, each of the Subsidiary Guarantors from time to time, in accordance with Article XI of the Indenture, unconditionally and jointly and severally guarantees, to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, that: By its execution of its Subsidiary Guaranty, each of the Subsidiary Guarantors acknowledges and agrees that it receives substantial benefits from the Issuers and that such party is providing its Subsidiary Guaranty for good and valuable consideration, including, without limitation, such substantial benefits and services. Accordingly, subject to the provisions of Article XI of the Indenture, each Subsidiary Guarantor, jointly and severally, unconditionally guarantees on a senior secured basis to each Holder of a Note authenticated and delivered by the Trustee and its successors and assigns that: (i) the principal of, premium, if any, Interest, and Liquidated Damages, if any, on the Notes shall be duly and punctually paid in full when due, whether at maturity, by acceleration, call for redemption, upon a Change of Control Offer, an Asset Sale Offer, or otherwise, and Interest on overdue principal, premium, if any, Liquidated Damages, if any, and (to the extent permitted by law) interest on any Interest, if any, on the Notes and all other obligations of the Issuers to the Holders or the Trustee under the Notes, the Indenture, the Security Documents or the Registration Rights Agreement (including fees, expenses or other) shall be promptly paid in full or performed, all in accordance with the terms of the Indenture; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations under the Notes, the Indenture, the Security Documents, or Registration Rights Agreement, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration, call for redemption, upon a Change of Control, an Asset Sale Offer, or otherwise, subject, however, in the case of clauses (i) and (ii) above, to the limitations set forth in Section 11.6 of the Indenture. - ---------- (7) To be included only on Transfer Restricted Notes. A-12 When a successor assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor may be released from those obligations. 21. Governing Law and Consent to Jurisdiction. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(b); PROVIDED, THAT WITH RESPECT TO THE CREATION, ATTACHMENT, PERFECTION, PRIORITY, ENFORCEMENT OF AND REMEDIES RELATING TO THE SECURITY INTEREST IN ANY REAL PROPERTY COLLATERAL, THE GOVERNING LAW MAY BE THE LAWS OF THE JURISDICTIONS WHERE SUCH COLLATERAL IS LOCATED WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY OF THE ISSUERS OR GUARANTORS ARISING OUT OF OR RELATING HERETO OR ANY OF THE SECURITY DOCUMENTS, OR ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH ISSUER OR GUARANTOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY SUBMITS TO AND ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE ISSUER OR GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 12.3 OF THE INDENTURE; AGREES THAT SERVICE AS PROVIDED ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE ISSUER OR GUARANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND AGREES THE TRUSTEE RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY OF THE ISSUERS OR GUARANTORS IN THE COURTS OF ANY OTHER JURISDICTION HAVING JURISDICTION OVER SUCH ISSUER OR GUARANTOR. 20. Security. This Note is Guaranteed and secured by substantially all of the assets of the Issuer and the Subsidiary Guarantors (other than Excluded Assets), subject to certain exceptions and limitations more fully set forth in the Indenture and Security Documents. A-13 The Issuers shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: DIAMOND JO, LLC THE OLD EVANGELINE DOWNS CAPITAL CORP. 400 East Third Street P.O. Box 1750 Dubuque, Iowa 52004-1750 Attention: Michael S. Luzich A-14 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (We) assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________ to transfer this Note on the books of the Issuers. The agent may substitute another to act for it. Date: _____________________________ Your Signature:________________________ (Sign exactly as your name appears on the face of this Note) Signature Subsidiary Guaranty* ________________________________________________________________________________ *NOTICE: The Signature must be guaranteed by an Institution which is a member of one of the following recognized signature Subsidiary Guaranty Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MNSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other guaranty program acceptable to the Trustee. A-15 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Issuers pursuant to Section 4.13 or Section 4.15 of the Indenture, check the box below: Section 4.13 [ ] Section 4.15 [ ] If you want to elect to have only part of the Note purchased by the Issuers pursuant to Section 4.13 or 4.15 of the Indenture, state the amount you elect to have purchased (in denominations of $1,000 only, except if you have elected to have all of your Notes purchased): $_____________ Date:________________________________ Your Signature:______________________ (Sign exactly as your name appears on the Note) Social Security or Tax Identification No.:______________ Signature Subsidiary Guaranty* ________________________________________________________________________________ *NOTICE: The Signature must be guaranteed by an Institution which is a member of one of the following recognized signature Subsidiary Guaranty Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MNSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other guaranty program acceptable to the Trustee. A-16 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(8) The following exchanges of an interest in this Global Note for an interest in another Global Notes or for a Definitive Note, or exchanges of an interest in another Global Note or a Definitive Note for an interest in this Global Note, have been made:
Amount of Amount of Increase in Signature of Decrease in Principal Principal Amount of Authorized Officer Principal Amount Amount of this Global Note of of this Global this Global Following Such Trustee or Note Date of Exchange Note Note Decrease or Increase Custodian ---------------- ---------------- ------------ -------------------- ------------------
- ---------- (8) This should be included only if the Note is issued in global form. A-17 GUARANTEE Each of the entities listed on the signature page hereto (hereinafter referred to as the "Subsidiary Guarantors," which term includes any successors or assigns under the Indenture, dated the date hereof, among the Subsidiary Guarantors (as defined therein), the Issuers (defined below) and U.S. Bank National Association, as trustee (the "Indenture") as supplemented by any supplemental indenture thereto, has executed either the Indenture or a supplemental indenture in substantially the form attached on Exhibit E to the Indenture and has irrevocably and unconditionally guaranteed on a senior secured basis the Subsidiary Guaranty Obligations (as defined in Section 11.1 of the Indenture), which include (i) the due and punctual payment of the principal of, premium, if any, and Interest and Liquidated Damages, if any, on the 8 3/4% Senior Secured Notes due 2012 (the "Notes") of Diamond Jo, LLC, a Delaware limited liability company (the "Company") and The Old Evangeline Downs Capital Corp., a Delaware corporation ("Capital" and, together with the Company, the "Issuers," which term includes any successors under, and any additional "Issuers" that may become a party to the Indenture hereinafter referred to), whether at maturity, by acceleration, call for redemption, upon a Change of Control Offer, an Asset Sale Offer, or otherwise, and the due and punctual payment of Interest on the overdue principal and premium, if any, Liquidated Damages, if any, and (to the extent permitted by law) interest on any Interest, if any, on the Notes, and the due and punctual performance of all other obligations of the Issuers to the Holders or the Trustee under the Notes, the Indenture, the Security Documents and the Registration Rights Agreement (including fees, expenses or other) all in accordance with the terms set forth in Article XI of the Indenture, and (ii) in case of any extension of time of payment or renewal of any Notes or any such other obligations under the Noets, the Indenture, the Security Documents or Registration Rights Agreement, that the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration, call for redemption, upon a Change of Control Offer, an Asset Sale Offer, or otherwise. The obligations of each Subsidiary Guarantor to the Holders and to the Trustee pursuant to this Subsidiary Guaranty and the Indenture are expressly set forth in Article XI of the Indenture and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guaranty. No director, officer, employee, incorporator, stockholder, member or controlling person of any of the Issuers or any Subsidiary Guarantor, as such, will have any liability for any Obligations of any of the Issuers or any Subsidiary Guarantor under the Notes, the Indenture, the Security Documents or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such Obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release will be part of the consideration for issuance of the Notes and the Subsidiary Guaranties. This is a continuing Subsidiary Guaranty and shall remain in full force and effect and shall be binding upon each Subsidiary Guarantor and its successors and assigns A-18 until full and final payment of all of the Issuers' obligations under the Notes and Indenture or until released or legally defeased in accordance with the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders, and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Subsidiary Guaranty of payment and performance and not of collectibility. This Subsidiary Guaranty shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guaranty is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. The obligations of each Subsidiary Guarantor under this Subsidiary Guaranty shall be limited to the extent necessary to insure that it does not constitute a fraudulent conveyance under applicable law. THE TERMS OF ARTICLE XI OF THE INDENTURE ARE INCORPORATED HEREIN BY REFERENCE. Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated. [signature page follows] A-19 IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this instrument to be duly executed. Dated: _____________ [NAME OF SUBSIDIARY GUARANTOR] By: _________________________________ Name: Title: [NAME OF SUBSIDIARY GUARANTOR] By: _________________________________ Name: Title: [NAME OF SUBSIDIARY GUARANTOR] By: _________________________________ Name: Title: EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Diamond Jo, LLC The Old Evangeline Downs Capital Corp. 400 East Third Street P.O. Box 1750 Dubuque, Iowa 52004-1750 U.S. Bank National Association 60 Livingston Avenue St. Paul, MN 55107-2292 Re: 8 3/4% Senior Secured Notes due 2012 Dear Sirs: Reference is hereby made to the Indenture, dated as of April 16, 2004 (the "Indenture"), among Diamond Jo, LLC, a Delaware limited liability company (the "Company") and The Old Evangeline Downs Capital Corp., a Delaware corporation ("Capital" and, together with the Company, the "Issuers," which term includes any successors under, and any additional "Issuers" that may become a party to the Indenture), the Subsidiary Guarantors party thereto and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ______________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to __________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE SHALL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR OF A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any State of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall be subject to the restrictions on B-1 transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. [ ] CHECK IF TRANSFEREE SHALL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL NOTE OR OF A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Distribution Compliance Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser) and the interest transferred shall be held immediately thereafter through Euroclear or Clearstream. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [ ] CHECK IF TRANSFEREE SHALL TAKE DELIVERY OF A BENEFICIAL INTEREST IN A GLOBAL NOTE OR OF A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any State of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] Such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] Such Transfer is being effected to the Issuers or a subsidiary thereof; or (c) [ ] Such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the B-2 meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in a form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification and provided to the Issuers, which has confirmed its acceptability), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Definitive Notes and in the Indenture and the Securities Act. 4. [ ] CHECK IF TRANSFEREE SHALL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture and the Securities Act. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture and the Securities Act. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the B-3 restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. [signature page follows] B-4 This certificate and the statements contained herein are made for your benefit and the benefit of the Issuers. _______________________________ Dated: ____________________________ [Insert Name of Transferor] By: ____________________________ Name: Title: B-5 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [[CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in (i) [ ] 144A Global Note, or (ii) [ ] 501 Global Note, or (iii) [ ] Reg S Global Note; or (b) [ ] a Restricted Definitive Note. 2. After the Transfer the Transferee shall hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note, or (ii) [ ] 501 Global Note, or (iii) [ ] Reg S Global Note, (iv) [ ] Unrestricted Global Note; or (b) [ ] a Restricted Definitive Note; or (c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-6 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Diamond Jo, LLC The Old Evangeline Downs Capital Corp. 400 East Third Street P.O. Box 1750 Dubuque, Iowa 52004-1750 U.S. Bank National Association 60 Livingston Avenue St. Paul, MN 55107-2292 Re: 8 3/4% Senior Secured Notes due 2012 Dear Sirs: Reference is hereby made to the Indenture, dated as of April 16, 2004 (the "Indenture"), between Diamond Jo, LLC, a Delaware limited liability company (the "Company") and The Old Evangeline Downs Capital Corp., a Delaware corporation ("Capital" and, together with the Company, the "Issuers," which term includes any successors under, and any additional "Issuers" that may become a party to the Indenture), the Subsidiary Guarantors party thereto and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ____________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE. (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities C-1 Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any State of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any State of the United States. (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any State of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any State of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES. (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that (i) the Restricted Definitive Note is being acquired for the Owner's own account without transfer and (ii) C-2 such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any State of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued shall continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the: [CHECK ONE] [ ] 144A Global Note, [ ] Reg S Global Note, or [ ] 501 Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any State of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued shall be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. [signature page follows] C-3 This certificate and the statements contained herein are made for your benefit and the benefit of the Issuers. ______________________________ [Insert Name of Owner] By:___________________________ Name: Title: Dated:__________________ C-4 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Diamond Jo, LLC The Old Evangeline Downs Capital Corp. 400 East Third Street P.O. Box 1750 Dubuque, Iowa 52004-1750 U.S. Bank National Association 60 Livingston Avenue St. Paul, MN 55107-2292 Re: 8 3/4% Senior Secured Notes due 2012 Dear Sirs: Reference is hereby made to the Indenture, dated as of April 16, 2004 (the "Indenture"), between Diamond Jo, LLC, a Delaware limited liability company (the "Company") and The Old Evangeline Downs Capital Corp., a Delaware corporation ("Capital" and, together with the Company, the "Issuers," which term includes any successors under, and any additional "Issuers" that may become a party to the Indenture), the Subsidiary Guarantors party thereto and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) a beneficial interest in a Global Note, or (b) a Definitive Note, we confirm that: 1. We understand and acknowledge that the Notes have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any other applicable securities law, are being offered for resale in transactions not requiring registration under the Securities Act or any other securities law, including resales pursuant to Rule 144A under the Securities Act ("Rule 144A"), and may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the Securities Act or any other applicable securities law, pursuant to an exemption therefrom and in each case in compliance with the transfer set forth below. 2. We are an institutional "accredited investor" under the Securities Act within the meaning of subparagraph (a) (1), (2), (3) or (7) of Rule 501 under the Securities Act (an "Accredited Investor") and, if the Notes are to be purchased for one or more accounts ("investor accounts") for which we are acting as fiduciary or agent, each such investor account is an Accredited Investor on a like basis. We have such knowledge and D-1 experience in financial and business matters as to be capable of evaluating the merits and risks of purchasing the Notes and invest in or purchase securities similar to the Notes in the normal course of our business. We and any investor accounts for which we are acting are each aware that we may be required, and are each able, to bear the economic risk of our or its investment in the Notes for an indefinite period of time, including the risk of an entire loss of our or such investor account's investment in the Notes. 3. We are purchasing the Notes for our own account, or for one or more investor accounts for which we are acting as a fiduciary or agent, in each case for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act, subject to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and subject to our or their ability to resell such Notes pursuant to Rule 144A or any exemption from registration available under the Securities Act. 4. We agree on our own behalf and on behalf of any investor account for which we are purchasing Notes to offer, sell or otherwise transfer such Notes prior to the date which is two years (or such other period that may hereafter be provided under Rule 144(k) under the Securities Act as permitting resales of restricted securities by non-affiliates without restriction) after the later of the date of original issue and the last date on which either of the Issuers or any affiliate of the Issuers was the owner of such Notes (or any predecessor thereof) (the "Resale Restriction Termination Date") only (a) to either of the Issuers, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) for so long as the Notes are eligible for resale pursuant to Rule 144A to a person we reasonably believe is a "qualified institutional buyer" as defined in Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales to Non-U.S. purchasers that occur outside the United States in accordance with Regulation S under the securities act, (e) to an Accredited Investor that is acquiring the Notes for its own account, or for the account of such an Accredited Investor, for investment purposes, and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act, or (f) pursuant to another available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in each case in compliance with any applicable securities laws of any U.S. state or any other applicable jurisdiction. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Notes is proposed to be made pursuant to clause (d) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Issuers and the Trustee, which shall provide, among other things, that the transferee is an Accredited Investor and that it is acquiring such Notes for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Issuers and the Trustee reserve the right prior to the offer, sale or other transfer made D-2 prior to the Resale Termination Date pursuant to clause (e) or (f) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to each of them. 5. We understand that the Notes will be delivered in registered form only and that the certificates delivered to us in respect of the Notes will contain a legend substantially to the following effect: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH OTHER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(k) UNDER THE SECURITIES ACT AS PERMITTING RESALES OF RESTRICTED SECURITIES BY NON-AFFILIATES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PURCHASERS THAT OCCUR OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S RIGHT D-3 PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE AND IN EACH CASE IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS OF ANY U.S. STATE OR ANY OTHER APPLICABLE JURISDICTION. 6. If we are acquiring any of the Notes as a fiduciary or agent for one or more investor accounts, we represent that we have sole investment discretion with respect to each such account and we have full power to make the foregoing representations, warranties, acknowledgments and agreements on behalf of each such investor account. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW. [signature page follows] D-4 You and the Issuers are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. _______________________________ Dated: __________________, ____ [Insert Name of Accredited Investor] By:________________________________ Name: Title: D-5 EXHIBIT E FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT SUBSIDIARY GUARANTORS Supplemental Indenture (this "Supplemental Indenture"), dated as of ____, among ___________________ (the "Guaranteeing Subsidiary"), Diamond Jo, LLC, a Delaware limited liability company (the "Company") and The Old Evangeline Downs Capital Corp., a Delaware corporation ("Capital" and, together with the Company, the "Issuers," which term includes any successors under, and any additional "Issuers" that may become a party to the Indenture hereinafter referred to), and U.S. Bank National Association, as trustee under the Indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Issuers and the Subsidiary Guarantors (as defined therein) have heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of April 16, 2004, providing for the issuance of 8 3/4% Senior Secured Notes due 2012 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture and a Subsidiary Guaranty in the form of Annex A to the Indenture endorsed on the Notes pursuant to which it shall unconditionally guaranty all of the Issuers' obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guaranty"); and WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. Joinder to Indenture. Each of the parties hereto hereby agrees to become bound by the terms, conditions and other provisions of the Indenture with all attendant rights, duties and obligations stated therein, with the same force and effect as if originally named as a Subsidiary Guarantor therein and as if such party executed the Indenture on the date thereof. 3. Agreement to Subsidiary Guaranty. The Guaranteeing Subsidiary irrevocably and unconditionally guarantees the Subsidiary Guaranty Obligations, which include (i) the due and punctual payment of the principal of, premium, if any, and interest E-1 and Liquidated Damages, if any, on the Notes, whether at maturity, by acceleration, call for redemption, upon a Change of Control Offer, an Asset Sale Offer, or otherwise, the due and punctual payment of interest on the overdue principal and premium, if any, and (to the extent permitted by law) interest on any interest on the Notes, and payment of expenses, and the due and punctual performance of all other obligations of the Issuers, to the Holders or the Trustee under the Notes, the Indenture, the Security Documents and the Registration Rights Agreement (including fees and expenses or other) all in accordance with the terms set forth in Article XI of the Indenture, and (ii) in case of any extension of time of payment or renewal of any Notes or any such other obligations under the Notes, the Indenture, the Security Documents and the Registration Rights Agreement, that the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration, call for redemption, upon a Change of Control Offer, an Asset Sale Offer, or otherwise. The obligations of Guaranteeing Subsidiary to the Holders and to the Trustee pursuant to this Subsidiary Guaranty and the Indenture are expressly set forth in Article X of the Indenture and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guaranty. No director, officer, employee, incorporator, stockholder, member or controlling person of any of the Issuers or any Subsidiary Guarantor, as such, will have any liability for any Obligations of any of the Issuers or any Subsidiary Guarantor under the Notes, the Indenture, the Security Documents or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such Obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release will be part of the consideration for issuance of the Notes and the Subsidiary Guaranties. This is a continuing Subsidiary Guaranty and shall remain in full force and effect and shall be binding upon the Guaranteeing Subsidiary and its successors and assigns until full and final payment of all of the Issuers' obligations under the Notes and Indenture or until released in accordance with the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders, and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Subsidiary Guaranty of payment and performance and not of collectibility. The obligations of the Guaranteeing Subsidiary under its Subsidiary Guaranty shall be limited to the extent necessary to insure that it does not constitute a fraudulent conveyance under applicable law. THE TERMS OF ARTICLE XI OF THE INDENTURE ARE INCORPORATED HEREIN BY REFERENCE. 4. NEW YORK LAW TO GOVERN AND CONSENT TO JURISDICTION. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW E-2 YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(B); PROVIDED, THAT WITH RESPECT TO THE CREATION, ATTACHMENT, PERFECTION, PRIORITY, ENFORCEMENT OF AND REMEDIES RELATING TO THE SECURITY INTEREST IN ANY REAL PROPERTY COLLATERAL, THE GOVERNING LAW MAY BE THE LAWS OF THE JURISDICTIONS WHERE SUCH COLLATERAL IS LOCATED WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF. JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY OF THE ISSUERS OR GUARANTORS ARISING OUT OF OR RELATING HERETO OR ANY OF THE SECURITY DOCUMENTS, OR ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH ISSUER OR GUARANTOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY SUBMITS TO AND ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE ISSUER OR GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 12.3 OF THE INDENTURE; AGREES THAT SERVICE AS PROVIDED ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE ISSUER OR GUARNATOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND AGREES THE TRUSTEE RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY OF THE ISSUERS OR GUARANTORS IN THE COURTS OF ANY OTHER JURISDICTION HAVING JURISDICTION OVER SUCH ISSUER OR GUARANTOR. 5. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 6. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. [signature page follows] E-3 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. THE ISSUERS: Diamond Jo, LLC By: _________________________________ Name: Title: The Old Evangeline Downs Capital Corp. By: _________________________________ Name: Title: GUARANTEEING SUBSIDIARY: NAME: By: _________________________________ Name: Title: THE TRUSTEE: U.S. Bank National Association By: _________________________________ Name: Title: E-4 EXHIBIT F FORM OF INTERCREDITOR AGREEMENT [attached] F-1 EXHIBIT G FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY PENINSULA GAMING, LLC Supplemental Indenture (this "Supplemental Indenture"), dated as of ____, among Peninsula Gaming, LLC, a Delaware limited liability company (the "Parent Issuer"), the direct parent of Diamond Jo, LLC, a Delaware limited liability company (the "Company"), the Company and The Old Evangeline Downs Capital Corp., a Delaware corporation ("Capital" and, together with the Company, the "Original Issuers"), and U.S. Bank National Association, as trustee under the Indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Original Issuers and the Subsidiary Guarantors (as defined therein) have heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of April 16, 2004, providing for the issuance of 8 3/4% Senior Secured Notes due 2012 (the "Notes"); WHEREAS, on the date hereof, the Parent Issuer, the Original Issuers and the Guarantors are effecting the Reorganization Tranactions (as defined in the Indenture); WHEREAS, the Indenture requires that as part of the Reorganization Transactions the Parent Issuer execute and deliver to the Trustee this Supplemental Indenture pursuant to which the Parent Issuer shall become a party to the Indenture and an "Issuer" for all purposes under the Notes, the Indenture, the Security Documents, the Intercreditor Agreement and the Registration Rights Agreement and liable for all Obligations of an "Issuer" thereunder; and WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. Parent Issuer as Additional "Issuer." The Parent Issuer hereby becomes a party to and bound by all of the terms, conditions and other provisions of the Indenture with all attendant rights, duties and obligations stated therein, and hereby becomes an "Issuer" for all purposes under the Notes, the Indenture, the Security Documents, the Intercreditor Agreement and the Registration Rights Agreement and liable for all Obligations of an "Issuer" thereunder, with the same force and effect as if the Parent Issuer was originally named as an "Issuer" in the Indenture and as if the Parent Issuer executed the Indenture on the date thereof. G-1 3. Original Issuers Remain Issuers. For the avoidance of doubt, nothing herein shall or shall be deemed to modify or otherwise affect the Obligations of the Original Issuers or the Subsidiary Guarantors under the the Notes, the Indenture, the Security Documents, the Intercreditor Agreement or the Registration Rights Agreement, and the Original Issuers each shall remain liable, jointly and severally with the Parent Issuer, for all Obligations of an "Issuer" thereunder. 4. NEW YORK LAW TO GOVERN AND CONSENT TO JURISDICTION. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(B); PROVIDED, THAT WITH RESPECT TO THE CREATION, ATTACHMENT, PERFECTION, PRIORITY, ENFORCEMENT OF AND REMEDIES RELATING TO THE SECURITY INTEREST IN ANY REAL PROPERTY COLLATERAL, THE GOVERNING LAW MAY BE THE LAWS OF THE JURISDICTIONS WHERE SUCH COLLATERAL IS LOCATED WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF. JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY OF THE ISSUERS OR GUARANTORS ARISING OUT OF OR RELATING HERETO OR ANY OF THE SECURITY DOCUMENTS, OR ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH ISSUER OR GUARANTOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY SUBMITS TO AND ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE ISSUER OR GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 12.3 OF INDENTURE; AGREES THAT SERVICE AS PROVIDED ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE ISSUER OR GUARNATOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND AGREES THE TRUSTEE RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY OF THE ISSUERS OR GUARANTORS IN THE COURTS OF ANY OTHER JURISDICTION HAVING JURISDICTION OVER SUCH ISSUER OR GUARANTOR. 5. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. G-2 6. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. [signature page follows] G-3 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. THE ORIGINAL ISSUERS: Diamond Jo, LLC By:_________________________________ Name: Title: The Old Evangeline Downs Capital Corp. By:_________________________________ Name: Title: THE PARENT ISSUER: Peninsula Gaming, LLC By:_________________________________ Name: Title: THE TRUSTEE: U.S. Bank National Association By: _________________________________ Name: Title: G-4 EX-4.4B 12 forms4_ex4-4bwfb071404.txt EX. 4.4B - SUPPLEMENTAL INDENTURE Exhibit 4.4B SUPPLEMENTAL INDENTURE TO BE DELIVERED BY PENINSULA GAMING, LLC Supplemental Indenture (this "Supplemental Indenture"), dated as of June 16, 2004, among Peninsula Gaming, LLC, a Delaware limited liability company (the "Parent Issuer"), the direct parent of Diamond Jo, LLC, a Delaware limited liability company (the "Company"), the Company and The Old Evangeline Downs Capital Corp., a Delaware corporation ("Capital" and, together with the Company, the "Original Issuers"), and U.S. Bank National Association, as trustee under the Indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Original Issuers and the Subsidiary Guarantors (as defined therein) have heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of April 16, 2004, providing for the issuance of 8 3/4% Senior Secured Notes due 2012 (the "Notes"); WHEREAS, on the date hereof, the Parent Issuer, the Original Issuers and the Guarantors are effecting the Reorganization Transactions (as defined in the Indenture); WHEREAS, the Indenture requires that as part of the Reorganization Transactions the Parent Issuer execute and deliver to the Trustee this Supplemental Indenture pursuant to which the Parent Issuer shall become a party to the Indenture and an "Issuer" for all purposes under the Notes, the Indenture, the Security Documents, the Intercreditor Agreement and the Registration Rights Agreement and liable for all Obligations of an "Issuer" thereunder; and WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. Parent Issuer as Additional "Issuer." The Parent Issuer hereby becomes a party to and bound by all of the terms, conditions and other provisions of the Indenture with all attendant rights, duties and obligations stated therein, and hereby becomes an "Issuer" for all purposes under the Notes, the Indenture, the Security Documents, the Intercreditor Agreement and the Registration Rights Agreement and liable for all Obligations of an "Issuer" thereunder, with the same force and effect as if the Parent Issuer was originally named as an "Issuer" in the Indenture and as if the Parent Issuer executed the Indenture on the date thereof. 3. Original Issuers Remain Issuers. For the avoidance of doubt, nothing herein shall or shall be deemed to modify or otherwise affect the Obligations of the Original Issuers or the Subsidiary Guarantors under the Notes, the Indenture, the Security Documents, the Intercreditor Agreement or the Registration Rights Agreement, and the Original Issuers each shall remain liable, jointly and severally with the Parent Issuer, for all Obligations of an "Issuer" thereunder. 4. NEW YORK LAW TO GOVERN AND CONSENT TO JURISDICTION. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(B); PROVIDED, THAT WITH RESPECT TO THE CREATION, ATTACHMENT, PERFECTION, PRIORITY, ENFORCEMENT OF AND REMEDIES RELATING TO THE SECURITY INTEREST IN ANY REAL PROPERTY COLLATERAL, THE GOVERNING LAW MAY BE THE LAWS OF THE JURISDICTIONS WHERE SUCH COLLATERAL IS LOCATED WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY ARISING OUT OF OR RELATING HERETO OR ANY OF THE SECURITY DOCUMENTS, OR ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS INDENTURE, EACH PARTY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY SUBMITS TO AND ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE ISSUER OR GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 12.2 OF THE INDENTURE; AGREES THAT SERVICE AS PROVIDED ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND AGREES EACH OTHER PARTY RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY PARTY IN THE COURTS OF ANY OTHER JURISDICTION HAVING JURISDICTION OVER SUCH PARTY. 5. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 6. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. [signature page follows] IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. THE ORIGINAL ISSUERS: Diamond Jo, LLC By:/s/M. BRENT STEVENS --------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer The Old Evangeline Downs Capital Corp. By:/s/M. BRENT STEVENS --------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer THE PARENT ISSUER: Peninsula Gaming, LLC By:/s/M. BRENT STEVENS --------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer THE TRUSTEE: U.S. Bank National Association By:/s/Frank P. Leslie, III -------------------------------- Name: Frank P. Leslie, III Title: Vice President EX-4.5A 13 forms4_ex4-5awfb071404.txt EX. 4.5A - REGISTRATION RIGHTS AGMT - 04-16-04 Exhibit 4.5A DIAMOND JO, LLC THE OLD EVANGELINE DOWNS CAPITAL CORP. $233,000,000 8 3/4% SENIOR SECURED NOTES DUE 2012 REGISTRATION RIGHTS AGREEMENT April 16, 2004 JEFFERIES & COMPANY, INC. 11100 Santa Monica Boulevard 10th Floor Los Angeles, California 90025 Ladies and Gentlemen: Diamond Jo, LLC, a Delaware limited liability company (the "COMPANY"), The Old Evangeline Downs Capital Corp., a Delaware corporation ("CAPITAL" and, together with the Company, the "ISSUERS"), and the Guarantors listed on the signature pages hereto under the heading "Guarantors," are issuing and selling to Jefferies & Company, Inc. (the "INITIAL PURCHASER"), upon the terms set forth in a purchase agreement, dated as of March 25, 2004 (the "PURCHASE AGREEMENT"), by and among the Initial Purchaser, the Issuers and the Guarantors listed on the signature pages hereto under the heading "Guarantors," $233,000,000 aggregate principal amount at maturity of the Issuers' 8 3/4% Senior Secured Notes due 2012, Series A, including the Guarantees (as defined below) endorsed thereon (the "NOTES"). The Issuers and the Guarantors are seeking requisite approvals from applicable Iowa and Louisiana regulatory authorities to effect the Reorganization Transactions (as defined in the Indenture). If the approvals of the regulatory authorities are obtained for the Reorganization Transactions after the issuance of the Notes, then as a part of the Reorganization Transactions, the Indenture requires that Peninsula Gaming, LLC, a Delaware limited liability company (the "PARENT ISSUER"), execute and deliver a joinder to this Agreement substantially in the form of Exhibit A attached hereto (the "JOINDER") and become a party to this Agreement. Effective upon execution of the Joinder, all references in this Agreement to the "Issuers" shall include the Parent Issuer. As an inducement to the Initial Purchaser to enter into the Purchase Agreement, each of the Issuers and the Guarantors jointly and severally agrees with the Initial Purchaser, for the benefit of the holders of the Securities (as defined below) (including, without limitation, the Initial Purchaser), as follows: 1. DEFINITIONS. Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: ADVICE: See the last paragraph of Section 6. AGREEMENT: This Registration Rights Agreement. APPLICABLE PERIOD: See Section 2(f). BUSINESS DAY: Any day, other than a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized or obligated by law, regulation or executive order to be closed. CLOSING DATE: April 16, 2004. CONTROLLING PERSON: See Section 8(a). DTC: See Section 6(i). EFFECTIVENESS DATE: The 180th day following the Closing Date; provided, however, that if the Effectiveness Date would otherwise fall on a day that is not a Business Day, then the Effectiveness Date shall be the next succeeding Business Day. EFFECTIVENESS PERIOD: See Section 3(a). EVENT: See Section 4(a). EVENT DATE: See Section 4(a). EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. EXCHANGE OFFER: See Section 2(a). EXCHANGE OFFER REGISTRATION STATEMENT: See Section 2(a). 2 EXCHANGE SECURITIES: The 8 3/4% Senior Secured Notes due 2012, Series B, of the Issuers, including the guarantees endorsed or to be endorsed thereon, substantially identical to the Notes and the Guarantees, except (i) that such securities shall have been registered pursuant to an effective registration statement under the Securities Act, (ii) that such securities shall not contain a restrictive legend thereon, (iii) that such securities shall not contain provisions relating to the accrual or payment of Liquidated Damages and (iv) as described in the first sentence of Section 2(e). FILING DATE: The 90th day following the Closing Date; provided, however, that if the Filing Date would otherwise fall on a day that is not a Business Day, then the Filing Date shall be the next succeeding Business Day. GUARANTEES: The full and unconditional guarantee, on a senior secured basis by the Guarantors, as to payment of principal, interest, premium, if any, and the Weekly Liquidated Damages Amount, if any, with respect to the Notes. GUARANTOR: Each subsidiary of either of the Issuers that has executed or in the future executes a Guarantee in accordance with the Indenture. HOLDER: Each holder of Registrable Securities. HOLDER INDEMNIFIED PARTIES: See Section 8(a). INDEMNIFIED PARTY: See Section 8(c). INDEMNIFYING PARTIES: See Section 8(c). INDENTURE: The Indenture, dated as of the date hereof, by and among the Issuers, the Guarantors and U.S. Bank National Association, as trustee, pursuant to which the Notes are being issued, as amended or supplemented from time to time, in accordance with the terms thereof. INITIAL SHELF REGISTRATION: See Section 3(a). LOSSES: See Section 8(a). MAXIMUM CONTRIBUTION AMOUNT: See Section 8(d). NASD: The National Association of Securities Dealers, Inc. PARTICIPATING BROKER-DEALER: See Section 2(f). PERSON: An individual, trustee, corporation, limited liability 3 company, partnership, limited liability partnership, joint stock company, joint venture, trust, unincorporated organization or association, government or any agency or political subdivision thereof, union, business association, firm or other entity. PRIVATE EXCHANGE: See Section 2(g). PRIVATE EXCHANGE SECURITIES: See Section 2(g). PROSPECTUS: The prospectus included in a Registration Statement at the time that such Registration Statement is declared effective (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Securities Act), as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Securities covered by such Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. REGISTRABLE SECURITIES: The Notes (together with the Guarantees); provided, however, that any such security shall cease to be a Registrable Security when (i) it has been exchanged for an Exchange Security in the Exchange Offer as contemplated in Section 2(a) (provided, that any Exchange Security that is included in a Prospectus for use in connection with resales by Participating Broker-Dealers shall be deemed to be a Registrable Security with respect to Sections 8 and 11 until resale of such Registrable Security has been effected pursuant to a "Plan of Distribution" within the Applicable Period; (ii) a Shelf Registration registering such security under the Securities Act has been declared or becomes effective and such security has been sold or otherwise transferred by the holder thereof pursuant to and in a manner contemplated by such effective Shelf Registration;) (iii) such security is sold pursuant to Rule 144 under the Securities Act under circumstances in which any legend borne by such security relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed by the Issuers or pursuant to the Indenture; (iv) such security is eligible to be sold pursuant to paragraph (k) of Rule 144 under the Securities Act; or (v) such security shall cease to be outstanding. REGISTRATION STATEMENT: Any registration statement of the Issuers that covers any of the Securities and that is filed pursuant to the provisions of this Agreement, including the Prospectus included therein, all amendments and supplements to such registration statement and Prospectus (including post-effective amendments), all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference therein. RULE 144: Rule 144 under the Securities Act, as such rule may be 4 amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC. RULE 144A: Rule 144A under the Securities Act, as such rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. RULE 415: Rule 415 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. SEC: The Securities and Exchange Commission. SECURITIES: The Notes, the Private Exchange Securities and the Exchange Securities, collectively. SECURITIES ACT: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. SHELF EFFECTIVENESS DATE: With respect to a Shelf Registration, the 60th day after the filing of such Shelf Registration. SHELF FILING DATE: With respect to a Shelf Registration, the 30th day following (i) in the case of an Initial Shelf Registration, delivery of the Shelf Notice triggering the obligation to file such Initial Shelf Registration, and (ii) in the case of a Subsequent Shelf Registration, the cessation of effectiveness of the prior Shelf Registration; provided, however, that if the Shelf Filing Date would otherwise fall on a day that is not a Business Day, then the Shelf Filing Date shall be the next succeeding Business Day. SHELF NOTICE: See Section 2(i). SHELF REGISTRATION: The Initial Shelf Registration and any Subsequent Shelf Registration. SPECIAL COUNSEL: Counsel chosen by the holders of a majority in aggregate principal amount of Securities. SUBSEQUENT SHELF REGISTRATION: See Section 3(b). TIA: The Trust Indenture Act of 1939, as amended. TRUSTEE: The trustee under the Indenture and, if any, the trustee under any indenture governing the Exchange Securities or the Private Exchange Securities. 5 UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in which securities of the Issuers are sold to an underwriter for reoffering to the public. WEEKLY LIQUIDATED DAMAGES AMOUNT: With respect to any Event, an amount per week per $1,000 principal amount of Registrable Securities equal to $0.05 for the first 90-day period immediately following the applicable Event Date, increasing by an additional $0.05 per week per $1,000 principal amount of Registrable Securities with respect to each subsequent 90-day period, up to a maximum amount of $0.20 per week per $1,000 principal amount of Registrable Securities. 2. EXCHANGE OFFER. (a) The Issuers and the Guarantors shall: (i) prepare and file with the SEC promptly after the date hereof, but in no event later than the Filing Date, a registration statement (the "EXCHANGE OFFER REGISTRATION STATEMENT") on an appropriate form under the Securities Act with respect to a proposed offer (the "EXCHANGE OFFER") to the Holders to exchange any and all of the Notes for a like principal amount of Exchange Securities; (ii) use their respective reasonable best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act as promptly as practicable after the filing thereof, but in no event later than the Effectiveness Date; (iii) keep the Exchange Offer Registration Statement effective until the consummation of the Exchange Offer pursuant to its terms; and (iv) unless the Exchange Offer would not be permitted by a policy of the SEC, use their respective reasonable best efforts to commence the Exchange Offer and to, on or prior to 45 days after the Exchange Offer Registration Statement is declared effective, consummate the Exchange Offer and issue Exchange Securities in exchange for all Notes validly tendered and not withdrawn prior thereto in the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than (i) that the Exchange Offer does not violate Applicable Law or any applicable interpretation of the staff of the SEC, and (ii) no action or proceeding shall have been instituted in any court or by any governmental agency which might materially impair the ability of the Issuers or the Guarantors to proceed with the Exchange Offer or, if required to 6 be made pursuant to Section 2(g), the Private Exchange. (b) The Exchange Securities shall be issued under, and entitled to the benefits of, the Indenture or a trust indenture that is substantially identical to the Indenture (other than such changes as are necessary to comply with any requirements of the SEC to effect or maintain the qualification thereof under the TIA). (c) In connection with the Exchange Offer, the Issuers and the Guarantors shall: (i) mail, or cause to be mailed, to each Holder of record entitled to participate in the Exchange Offer a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal that is an exhibit to the Exchange Offer Registration Statement, and any related documents; (ii) use their respective reasonable best efforts to keep the Exchange Offer open for not less than 20 Business Days after the date notice thereof is mailed to the Holders (or longer if required by Applicable Law); (iii) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York; (iv) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York City time, on the last Business Day on which the Exchange Offer shall remain open; and (v) otherwise comply in all material respects with all laws applicable to the Exchange Offer. (d) As soon as practicable after the close of the Exchange Offer, the Issuers and the Guarantors shall: (i) subject to Section 2(i) hereof, accept for exchange all Notes validly tendered and not validly withdrawn pursuant to the Exchange Offer and the Private Exchange, if any; (ii) deliver to the Trustee for cancellation all Notes so accepted for exchange; and (iii) cause the Trustee promptly to authenticate and deliver to each Holder of Notes, Exchange Securities equal in aggregate principal amount to the Notes of such Holder so accepted for exchange; provided, that, in the case of any Notes held in global form by a depositary, authentication and delivery to such 7 depositary of one or more replacement Exchange Securities in global form in an equivalent principal amount thereto for the account of such Holders in accordance with the Indenture shall satisfy such authentication and delivery requirement. (e) Interest on each Exchange Security and each Private Exchange Security will accrue from the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the date of original issue of the Notes. Each Exchange Security and each Private Exchange Security shall bear interest at the rate set forth thereon; provided, that interest with respect to the period prior to the issuance thereof shall accrue at the rate or rates borne by the Notes surrendered in exchange therefor from time to time during such period. (f) The Issuers and the Guarantors shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that (i) any broker or dealer registered under the Exchange Act that holds Notes that were acquired for its own account as a result of market-making activities or other trading activities (other than Notes acquired directly from the Issuers or any Affiliate of the Issuers) (a "PARTICIPATING BROKER-DEALER") may exchange such Notes pursuant to the Exchange Offer, however, such Participating Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with its initial sale of any Exchange Securities received by such Participating Broker-Dealer in the Exchange Offer and (ii) the Prospectus contained in the Exchange Offer Registration Statement may be used to satisfy such prospectus delivery requirement. Such "Plan of Distribution" section shall also contain all other information with respect to such sales by such Participating Broker-Dealers that the SEC may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Participating Broker-Dealer or disclose the amount of Notes held by any such Participating Broker-Dealer, except to the extent required by the SEC. See the Shearman & Sterling no-action letter (available July 2, 1993). Such "Plan of Distribution" section shall also allow, to the extent and in the manner permitted by applicable policies and regulations of the SEC, the use of the Prospectus by all other Persons subject to the prospectus delivery requirements of the Securities Act. The Issuers and the Guarantors shall use their respective reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective and to amend and supplement the Prospectus in order to permit such Prospectus to be lawfully delivered by all Participating Broker-Dealers and other Persons subject to the prospectus delivery requirement of the Securities Act for such period of time as such Participating Broker-Dealers and Persons must comply with such requirements in order to resell the Exchange Securities (the "APPLICABLE PERIOD"). 8 (g) If, prior to consummation of the Exchange Offer, the Initial Purchaser holds any Notes acquired by it and having the status as an unsold allotment in the initial distribution of the Notes, the Issuers and the Guarantors shall, upon the request of the Initial Purchaser, simultaneously with the delivery of the Exchange Securities in the Exchange Offer, issue (pursuant to the same indenture as the Exchange Securities and subject to transfer restrictions thereon) and deliver to the Initial Purchaser, in exchange for such Notes held by the Initial Purchaser (the "PRIVATE EXCHANGE"), a like principal amount of debt securities of the Issuers, including guarantees endorsed thereon (the "PRIVATE EXCHANGE SECURITIES"), that are substantially identical to the Exchange Securities except for the placement of a restrictive legend on such Private Exchange Securities. The Private Exchange Securities shall be issued pursuant to the same Indenture as the Exchange Securities and shall bear the same CUSIP number as the Exchange Securities. (h) Each Person (including, without limitation, each Participating Broker-Dealer) participating in the Exchange Offer will be required to represent to the Issuers and the Guarantors in writing (which may be contained in the applicable letter of transmittal) prior to consummation of the Exchange Offer that: (i) any Exchange Securities acquired by such Person in the Exchange Offer will be acquired in its ordinary course of business; (ii) at the time of commencement and at the time of consummation of the Exchange Offer, such Person had and will have no arrangement or understanding with any other Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities to be received in the Exchange Offer in violation of the Securities Act; (iii) if such Person is not a Participating Broker-Dealer, it is not engaged in and does not intend to engage in, the distribution of the Exchange Securities; (iv) if such Person is a Participating Broker-Dealer, (A) it acquired the Notes for its own account as a result of market-making activities or other trading activities, (B) it may be deemed to be a statutory underwriter under the Securities Act and (C) will comply with the applicable provisions of the Securities Act (including, without limitation, the prospectus delivery requirements thereunder) in connection with any resale of Exchange Securities to be received in the Exchange Offer in exchange for such Notes; and (v) such Person is not an "affiliate" (as defined in Rule 405 of the Securities Act) of either of the Issuers or, if it is an "affiliate" (as defined in Rule 405 of the Securities Act) of either of the Issuers, that it will comply with the registration and prospectus delivery requirements of the Securities Act applicable to it. See the Exxon Holdings Capital Corp. no-action letter (available May 13, 1988), the Morgan Stanley & Co. Incorporated no-action letter (available June 5, 1991) and the Shearman & Sterling no-action letter (available July 2, 1993). (i) If: (i) prior to the consummation of the Exchange Offer, either of the Issuers or the Holders of a majority in aggregate principal amount of Registrable Securities determines in its or their reasonable judgment that (A) the Exchange 9 Securities would not, upon receipt, be tradeable by the Holders thereof without restriction under the Securities Act and the Exchange Act and without material restrictions under applicable Blue Sky or state securities laws, or (B) the interests of the Holders under this Agreement, taken as a whole, would be materially adversely affected by the consummation of the Exchange Offer; (ii) applicable interpretations of the staff of the SEC would not permit the consummation of the Exchange Offer prior to the Effectiveness Date; (iii) subsequent to the consummation of the Private Exchange, any Holder of Private Exchange Securities so requests; (iv) the Exchange Offer is not consummated within 225 days of the Closing Date for any reason; or (v) in the case of (A) any Holder not permitted to participate in the Exchange Offer (including any broker-dealer that holds Notes acquired directly from the Issuers or any of their respective affiliates that is not permitted to participate in the Exchange Offer), or (B) any Holder participating in the Exchange Offer that receives Exchange Securities that may not be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of either of the Issuers within the meaning of the Securities Act) and, in each such case contemplated by this clause (v), such Holder notifies the Issuers within six months of consummation of the Exchange Offer, then the Issuers shall promptly deliver to the Holders (or in the case of an occurrence of any event described in clause (v) of this Section 2(i), to any such Holder) and the Trustee notice thereof (the "SHELF NOTICE") and shall as promptly as practicable thereafter (but in no event later than the Shelf Filing Date) file an Initial Shelf Registration pursuant to Section 3. 3. SHELF REGISTRATION. If a Shelf Notice is required to be delivered pursuant to clause (i), (ii), (iii) or (iv) of Section 2(i), then this Section 3 shall apply to all Registrable Securities. Otherwise, upon consummation of the Exchange Offer in accordance with Section 2, the provisions of this Section 3 shall apply solely with respect to (i) Notes held by any Holder thereof not permitted to participate in the Exchange Offer, (ii) Notes held by any broker-dealer that acquired such Notes directly from the Issuers or any of their respective affiliates, and (iii) Exchange Securities that are not freely tradeable, in each case, as contemplated by clause (v) of Section 2(i), provided that the relevant Holder has duly notified the Issuers within six months of consummation of the Exchange Offer as required by clause (v) of Section 2(i). (a) Initial Shelf Registration. The Issuers and the Guarantors shall prepare and file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Securities (the "INITIAL SHELF REGISTRATION"). If the Issuers and the Guarantors have not filed an Exchange Offer Registration Statement, the Issuers and the Guarantors shall file with the SEC the Initial Shelf Registration on or prior to the Filing Date. Otherwise, the Issuers and the Guarantors shall file with the SEC the Initial Shelf Registration as 10 promptly as practicable following the delivery of the Shelf Notice, but in no event later than the Shelf Filing Date. The Initial Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Securities for resale by such Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Issuers and the Guarantors (i) shall not permit any securities other than the Registrable Securities to be included in any Shelf Registration, and (ii) shall use their respective reasonable best efforts to cause the Initial Shelf Registration to be declared effective under the Securities Act no later than the Shelf Effectiveness Date and to keep the Initial Shelf Registration continuously effective under the Securities Act until the date that is 24 months after the date it is declared effective (subject to extension pursuant to the last paragraph of Section 6) (the "EFFECTIVENESS PERIOD"), or such shorter period ending when (i) all Registrable Securities covered by the Initial Shelf Registration have been sold in the manner set forth and as contemplated in the Initial Shelf Registration, or (ii) a Subsequent Shelf Registration covering all of the Registrable Securities has been declared effective under the Securities Act or (iii) there cease to be any outstanding Registrable Securities; provided, however, that the Effectiveness Period shall be reduced to the extent that the applicable provisions of Rule 144(k) under the Securities Act are amended or revised to reduce the two year holding period set forth therein. (b) Subsequent Shelf Registrations. If any Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the Registrable Securities registered thereunder), the Issuers and the Guarantors shall use their respective reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 30 days of such cessation of effectiveness file an amendment to the Shelf Registration in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Securities (a "SUBSEQUENT SHELF REGISTRATION"). If a Subsequent Shelf Registration is filed, the Issuers and the Guarantors shall use their respective reasonable best efforts to cause the Subsequent Shelf Registration to be declared effective as promptly as practicable after such filing and to keep such Subsequent Shelf Registration continuously effective for a period equal to the number of days in the Effectiveness Period less the aggregate number of days during which the Initial Shelf Registration, and any previously filed Subsequent Shelf Registration, was previously effective. 4. LIQUIDATED DAMAGES. (a) The Issuers and the Guarantors acknowledge and agree that the Holders will suffer damages, and that it would not be feasible to ascertain the extent of such damages with precision, if the Issuers and the Guarantors fail to fulfill their 11 respective obligations under Sections 2 and 3. Accordingly, in the event of such failure, the Issuers and the Guarantors jointly and severally agree to pay liquidated damages to each Holder under the circumstances and to the extent set forth below: (i) if the Exchange Offer Registration Statement has not been filed with the SEC on or prior to the Filing Date; (ii) if the Exchange Offer Registration Statement is not declared effective by the SEC on or prior to the Effectiveness Date; or (iii) if obligated to make the Exchange Offer pursuant to this Agreement, if the Issuers and the Guarantors have not exchanged Exchange Securities for all Notes validly tendered in accordance with the terms of the Exchange Offer within 45 days after the date on which the Exchange Offer Registration Statement is declared effective by the SEC; (iv) if obligated to file an Initial Shelf Registration and the Issuers and the Guarantors fail to file such Initial Shelf Registration with the SEC on or prior to Shelf Filing Date; (v) if an Initial Shelf Registration is filed and such Initial Shelf Registration is not declared effective on or prior to the Shelf Effectiveness Date; or (vi) if a Shelf Registration is filed and declared effective by the SEC but thereafter shall either be withdrawn by the Issuers or shall become subject to an effective stop order issued pursuant to Section 8(d) of the Securities Act suspending the effectiveness of such Registration Statement without being succeeded within 30 days by a Subsequent Shelf Registration filed and declared effective; (each of the foregoing an "EVENT," and the date on which the Event occurs being referred to herein as an "EVENT DATE"). Upon the occurrence of any Event, the Issuers shall pay, or cause to be paid (and the Guarantors hereby guarantee the payment of), in addition to amounts otherwise due under the Indenture and the Registrable Securities, as liquidated damages, and not as a penalty, to each Holder for each weekly period beginning on the Event Date an amount equal to the Weekly Liquidated Damages Amount per $1,000 principal amount of Registrable Securities held by such Holder, it being understood that the Issuers shall in no event be required to pay the Weekly Liquidated Damages Amount for more than one Event at any given time; provided, that such liquidated damages will, in each case, cease to accrue (subject to the occurrence of another Event) on the date on which all Events have been cured. An Event under clause (i) above shall be cured on the date that the Exchange Offer Registration Statement (or, if an Initial Shelf Registration is required to be filed pursuant to clause (i), (ii) or (iii) of Section 2(i), the date that such Initial Shelf Registration) is filed with the SEC; an Event under clause (ii) above shall be cured on the date that the Exchange Offer Registration Statement (or, if an Initial Shelf Registration is required to be filed 12 pursuant to clause (i), (ii) or (iii) of Section 2(i), the date that such Initial Shelf Registration) is declared effective by the SEC; an Event under clause (iii) above shall be cured on the earlier of the date (A) the Exchange Offer is consummated with respect to all Notes validly tendered and not withdrawn or (B) the Issuers deliver a Shelf Notice to the Holders and the Trustee pursuant to clause (i), (ii) or (iii) of Section 2(i); an Event under clause (iv) above shall be cured on the date that such Initial Shelf Registration is filed with the SEC; an Event under clause (v) above shall be cured on the date that such Initial Shelf Registration is declared effective by the SEC; and an Event under clause (vi) above shall be cured on the earlier of (1) the date on which the applicable Shelf Registration is no longer subject to an order suspending the effectiveness thereof or proceedings relating thereto or (2) a new Subsequent Shelf Registration is declared effective. (b) The Issuers shall notify the Trustee within five Business Days after each Event Date. The Issuers shall pay the liquidated damages due on the Registrable Securities by depositing with the Trustee, in trust, for the benefit of the Holders thereof, by 12:00 noon, New York City time, on or before the applicable semi-annual interest payment date for the Registrable Securities, immediately available funds in sums sufficient to pay the liquidated damages then due. The liquidated damages amount due shall be payable in the same manner as interest payments on the Notes on each interest payment date to the record Holder entitled to receive the interest payment to be made on such date as set forth in the Indenture. 5. GAMING CONSENTS. Prior to consummating the Exchange Offer or filing the Initial Shelf Registration, as the case may be, the Issuers and the Guarantors shall make or obtain all Permits necessary in the Issuers' reasonable judgment for the consummation of the transactions contemplated hereby. 6. REGISTRATION PROCEDURES. In connection with the registration of any Securities pursuant to Section 2 or 3, the Issuers and the Guarantors shall effect such registrations to permit the sale of such Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Issuers and the Guarantors shall: (a) Prepare and file with the SEC, as soon as practicable after the date hereof but in any event on or prior to the Filing Date, with respect to an Exchange 13 Offer Registration Statement, and on or prior to the Shelf Filing Date, with respect to a Shelf Registration, as prescribed by Sections 2 and 3, respectively, and use their respective reasonable best efforts to cause each such Registration Statement to become effective and remain continuously effective as provided in this Agreement; provided, that if (i) such filing is pursuant to Section 3 or (ii) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, (A) the Issuers shall notify the Holders of the Registrable Securities covered by such Registration Statement, their Special Counsel (if the Issuers have been notified of the identity of such Special Counsel), each Participating Broker-Dealer, the managing underwriters, if any, and their counsel (if the Issuers have been notified of the identity of such counsel) of such filing at least five Business Days prior to making such filing, (B) if requested, the Issuers and the Guarantors shall furnish to and afford the Holders of the Registrable Securities covered by such Registration Statement, their Special Counsel, each Participating Broker-Dealer, the managing underwriters, if any, and their counsel a reasonable opportunity to review, and shall make available for inspection by such Persons, copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed and such financial and other information and books and records of the Issuers and the Guarantors, as shall be reasonably necessary, in the opinion of Special Counsel and the respective counsels to such Participating Broker-Dealers and underwriters, to conduct a reasonable due diligence investigation within the meaning of the Securities Act, and (C) the Issuers and the Guarantors shall use their respective reasonable best efforts to cause the members, managers, officers, directors and employees of the Issuers and the Guarantors, and counsel and independent certified public accountants of the Issuers and the Guarantors, to respond to such inquiries, as shall be necessary, in the opinion of Special Counsel and the respective counsels to such Participating Broker-Dealers and underwriters, to conduct a reasonable due diligence investigation within the meaning of the Securities Act. The Issuers and the Guarantors may require each Holder, and each of such Holder's agents and representatives to agree to keep confidential any non-public information relating to the Issuers and the Guarantors received by such Holder or such agent or representative and not to disclose such information (other than to an affiliate or prospective purchaser who agrees to respect the confidentiality provisions of this Section 6(a)) until such information has been made generally available to the public unless the release of such information is required by law or necessary to respond to inquiries of regulatory authorities. The Issuers and the Guarantors shall not file any Registration Statement or Prospectus or any amendments or supplements thereto which the Holders must be afforded an opportunity to review prior to the filing of such document, if the Holders of a majority in aggregate principal amount of the Registrable Securities covered by such 14 Registration Statement, their Special Counsel, any Participating Broker-Dealer or the managing underwriters, if any, or their counsel shall reasonably object to such filing within five Business Days after receipt of the Issuers' notice of filing described above in this Section 6(a). (b) Provide an indenture trustee for the Registrable Securities or the Exchange Securities, as the case may be, and cause the Indenture (or other indenture relating to the Registrable Securities) to be qualified under the TIA not later than the effective date of the first Registration Statement; in connection therewith, effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use their respective reasonable best efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner. (c) Prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement as may be necessary in order to cause the Registration Statement to become effective and to keep such Registration Statement continuously effective for the time periods required hereby; cause the related Prospectus to be supplemented by any prospectus supplement required by Applicable Law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act, and comply fully with Rules 424, 430A and 462, as applicable, under the Securities Act in a timely manner; and comply in all material respects with the provisions of the Securities Act and the Exchange Act applicable thereto with respect to the disposition of all securities covered by such Registration Statement, as so amended, or in such Prospectus, as so supplemented, in accordance with the intended methods of distribution set forth in such Registration Statement, as so amended, and such Prospectus, as so supplemented. (d) Furnish to such selling Holders and Participating Broker-Dealers who so request (i) upon the Issuers' receipt, a copy of the order of the SEC declaring such Registration Statement and any post-effective amendment thereto effective, (ii) such reasonable number of copies of such Registration Statement and of each amendment and supplement thereto (in each case including any documents incorporated therein by reference and all exhibits (including exhibits incorporated by reference) to such Registration Statement and each such amendment and supplement), (iii) such reasonable number of copies of the Prospectus included in such Registration Statement (including each preliminary prospectus and each supplement thereto), and such reasonable number of copies of the final Prospectus as filed by the Issuers and the Guarantors pursuant to Rule 424(b) under the Securities Act, in conformity with the requirements of the Securities Act, and (iv) any amendments and supplements required to be filed pursuant to Section 6(c) and any documents incorporated therein 15 by reference and all exhibits thereto, including exhibits incorporated by reference, as such Person may reasonably request. Subject to the last paragraph of this Section 6, the Issuers and the Guarantors hereby consent to the use of the Prospectus by each of the selling Holders of Registrable Securities and by each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Securities covered by, or the sale by Participating Broker-Dealers of the Exchange Securities pursuant to, such Prospectus and any amendment or supplement thereto. (e) If (A) a Shelf Registration is filed pursuant to Section 3 or (B) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, notify the selling Holders of Registrable Securities, their Special Counsel (if the Issuers have been notified of the identity of such Special Counsel), each Participating Broker-Dealer and the managing underwriters, if any, promptly (but in any event within two Business Days), and, if requested by such Person, confirm such notice in writing, (i) when a Prospectus or any prospectus supplement or Registration Statement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act, (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any Prospectus or the initiation of any proceedings for that purpose, (iii) if, at any time when a Prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Securities, the representations and warranties of the Issuers and the Guarantors contained in any agreement (including any underwriting agreement) contemplated by Section 6(n) below cease to be true and correct in any material respect, (iv) of the receipt by the Issuers or any of the Guarantors of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Securities or the Exchange Securities to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the contemplation, initiation or threatening of any proceeding for such purpose, (v) of the happening of any event that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference to be untrue in any material respect or that requires the making of any additions to or changes in such Registration Statement, Prospectus or documents so that it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading, (vi) of the Issuers' and the Guarantors' reasonable determination that a post-effective amendment to a Registration Statement would be appropriate, and (vii) of any written request by the 16 SEC for post-effective amendments to the Registration Statement or supplements to the Prospectus. (f) Use their respective reasonable best efforts to register or qualify, and, if applicable, to cooperate with the selling Holders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of, Registrable Securities to be included in a Registration Statement for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer or the managing underwriters reasonably request in writing; and, if Securities are offered other than through an Underwritten Offering, the Issuers and the Guarantors shall cause their respective counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 6(f) at the expense of the Issuers and the Guarantors; keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Securities covered by the applicable Registration Statement; provided, however, that none of the Issuers or the Guarantors shall be required to (i) register or qualify generally to do business in any jurisdiction where it is not then so qualified, (ii) take any action that would subject it to general service of process in any jurisdiction where it is not then so subject or (iii) take any action that would subject it to general taxation in respect of doing business in any such jurisdiction where it is not then so subject. (g) Use their respective reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Securities for sale in any jurisdiction, and, if any such order is issued, use their respective reasonable best efforts to obtain the withdrawal or lifting of any such order at the earliest possible time. (h) If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, and if requested by the managing underwriters, if any, such Participating Broker-Dealer or the Holders of a majority in aggregate principal amount of the Registrable Securities, (A) promptly incorporate in a Prospectus supplement or post-effective amendment such information as the managing underwriters, if any, or such Holders reasonably request to be included therein as required to comply with any Applicable Law and (B) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Issuers and the Guarantors have 17 received notification of such matters required by Applicable Law to be incorporated in such Prospectus supplement or post-effective amendment. (i) If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, cooperate with the selling Holders, such Participating Broker-Dealer and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company ("DTC"); and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters, if any, such Participating Broker-Dealer or the Holders may request. (j) If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, upon the occurrence of any event contemplated by Section 6(e)(v), 6(e)(vi) or 6(e)(vii), as promptly as practicable prepare a post-effective amendment to the Registration Statement, a supplement to the related Prospectus or a supplement or amendment to any such document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder or to the purchasers of the Exchange Securities to whom such Prospectus will be delivered by a Participating Broker-Dealer, such Prospectus will not contain an untrue statement of a material fact or omit to state 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, and, if SEC review is required, use their respective reasonable best efforts to cause such post-effective amendment to be declared effective as soon as practicable. (k) Use their respective reasonable best efforts to cause the Securities covered by a Registration Statement to be rated with the appropriate rating agencies, if appropriate, and if so requested by the Holders of a majority in aggregate principal amount of Securities covered by such Registration Statement or the managing underwriters, if any. (l) Prior to the effective date of the first Registration Statement relating to the Securities, (i) provide the applicable trustee with printed certificates for the Securities in a form eligible for deposit with DTC and (ii) provide a CUSIP number for each of the Securities. 18 (m) Use their respective commercially reasonable efforts to cause all Securities covered by such Registration Statement to be listed on each securities exchange, if any, on which similar debt securities issued by the Issuers are then listed. (n) If a Shelf Registration is filed pursuant to Section 3, enter into such agreements (which, if such Shelf Registration is an Underwritten Offering, shall include an underwriting agreement in form, scope and substance as is customary in Underwritten Offerings) and take all such other reasonable actions in connection therewith (including those reasonably requested by the managing underwriters, if the offering is an Underwritten Offering, or the Holders of a majority in aggregate principal amount of Registrable Securities being sold, if the offering is not an Underwritten Offering) in order to expedite or facilitate the registration or the disposition of such Registrable Securities, and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, (i) make such representations and warranties to the Holders, if the offering is not an Underwritten Offering, or the underwriters, if the offering is an Underwritten Offering, with respect to the business of the Issuers and their respective subsidiaries, if any, and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by Issuers to underwriters in Underwritten Offerings of debt securities similar to the Securities, and confirm the same if and when reasonably requested; (ii) obtain opinions of counsel to the Issuers and the Guarantors and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if the offering is an Underwritten Offering, or the Holders of a majority in aggregate principal amount of the Registrable Securities being sold, if the offering is not an Underwritten Offering, provided, that with respect to the Holders of a majority in aggregate principal amount of the Registrable Securities being sold, such opinion shall be deemed to be reasonably satisfactory to such Holders if such Holders do not provide to the Issuers written notice of their objection to such opinion within five Business Days after their receipt of such opinion), addressed to each selling Holder and each of the underwriters, if any, covering the matters customarily covered in opinions requested in Underwritten Offerings of debt securities similar to the Securities; (iii) obtain "cold comfort" letters and updates thereof (which letters and updates (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters) from the independent certified public accountants of the Issuers and the Guarantors (and, if necessary, any other independent certified public accountants of any subsidiary of the Issuers or of any business acquired by the Issuers for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each selling Holder and each of the underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters 19 in connection with Underwritten Offerings of debt securities similar to the Securities; and (iv) deliver such documents and certificates as may be reasonably requested by the Holders of a majority in principal amount of the Registrable Securities being sold, if the offering is not an Underwritten Offering, or the managing underwriters, if the offering is an Underwritten Offering, to evidence the continued validity of the representations and warranties of the Issuers and the Guarantors and their respective subsidiaries, if any, made pursuant to clause (i) above and to evidence compliance with any conditions contained in the underwriting agreement or other similar agreement entered into by the Issuers and the Guarantors. (o) Comply with all applicable rules and regulations of the SEC and make generally available to their respective security holders earnings statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing on the first day of the fiscal quarter following each fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Issuers after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (p) Upon consummation of an Exchange Offer or Private Exchange, obtain an opinion of counsel to the Issuers and the Guarantors (in form, scope and substance reasonably satisfactory to the Initial Purchaser), addressed to the Trustee for the benefit of all Holders participating in the Exchange Offer or Private Exchange, as the case may be, to the effect that (i) the Issuers and the Guarantors have duly authorized, executed and delivered the Exchange Securities or the Private Exchange Securities, as the case may be, and the Indenture, (ii) the Exchange Securities or the Private Exchange Securities, as the case may be, and the Indenture constitute legal, valid and binding obligations of the Issuers and the Guarantors, enforceable against the Issuers and the Guarantors in accordance with their respective terms and (iii) all obligations of the Issuers and the Guarantors under the Exchange Securities or the Private Exchange Securities, as the case may be, and the Indenture are secured by Liens (as defined in the Indenture) on the assets securing the obligations of the Issuers and the Guarantors under the Notes and the Indenture immediately prior to the consummation of such Exchange Offer or Private Exchange, as the case may be, in the case of each of clauses (i), (ii) and (iii), subject to customary exceptions, assumptions and qualifications. (q) If an Exchange Offer or Private Exchange is to be consummated, upon delivery of the Registrable Securities by such Holders to the Issuers and the Guarantors (or to such other Person as directed by the Issuers and the Guarantors) in 20 exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, the Issuers and the Guarantors shall request the Issuers' exchange agent or transfer agent to mark on such Registrable Securities that such Registrable Securities are being cancelled in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, and that such Registrable Securities not be marked as paid or otherwise satisfied. (r) Cooperate with each seller of Registrable Securities covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD. (s) Use their respective reasonable best efforts to take all other steps necessary to effect the registration of the Registrable Securities covered by a Registration Statement contemplated hereby. The Issuers and the Guarantors may require each selling Holder of Registrable Securities as to which any registration is being effected (including, without limitation, any Shelf Registration) to furnish to the Issuers and Guarantors in writing such information regarding such selling Holder and the distribution of such Registrable Securities as the Issuers or the Guarantors may, from time to time, reasonably request, including the information specified in Item 507 or 508 of Regulation S-K, as applicable, under the Securities Act and any other information regarding such selling Holder and the distribution of such Registrable Securities required, in the opinion of counsel to the Issuers, under the securities laws to be included in the Registration Statement (the "SEC REQUIRED INFORMATION"). The Issuers and the Guarantors may exclude from any registration of Registrable Securities (including, without limitation, any Shelf Registration) the Registrable Securities of any selling Holder who fails to furnish to the Issuers, within 20 days after receipt of a written request therefor, the SEC Required Information. No such selling Holder shall be entitled to liquidated damages pursuant to Section 4 unless and until such selling Holder shall have provided the SEC Required Information. Each Holder whose Registrable Securities are to be included in a Shelf Registration Statement agrees to promptly furnish to the Issuers all additional information required to be disclosed in order to make the information previously furnished to the Issuers by such Holder not materially misleading. Each Holder and each Participating Broker-Dealer agrees by acquisition of such Registrable Securities or Exchange Securities that, upon receipt of written notice from the Issuers and the Guarantors of the happening of any event of the kind described in Section 6(e)(ii), 6(e)(iv), 6(e)(v), 6(e)(vi) or 6(e)(vii), such Holder will forthwith discontinue disposition (in the jurisdictions specified in a notice of a 6(e)(iv) event, and elsewhere in a notice of a 6(e)(ii), 6(e)(v), 6(e)(vi) or 6(e)(vii) 21 event) of such Securities covered by such Registration Statement or Prospectus until the earlier of (i) such Holder's receipt of the copies of the amended or supplemented Prospectus contemplated by Section 6(j); or (ii) the time such Holder is advised in writing (the "ADVICE") by the Issuers and the Guarantors that offers or sales in a particular jurisdiction may be resumed, or that the use of the applicable Prospectus may be resumed, as the case may be, and has received copies of any amendments or supplements thereto. If the Issuers and the Guarantors shall give such notice, each of the Effectiveness Period and the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of such Securities covered by such Registration Statement shall have received (x) the copies of the amended or supplemented Prospectus contemplated by Section 6(j) or (y) the Advice. 7. REGISTRATION EXPENSES. (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Issuers and the Guarantors shall be borne by the Issuers and the Guarantors whether or not the Exchange Offer is consummated or the Exchange Offer Registration Statement or a Shelf Registration is filed or becomes effective, including, without limitation: (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD and (B) fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Securities or Exchange Securities and determination of the eligibility of the Registrable Securities or Exchange Securities for investment under the laws of such jurisdictions (x) where the Holders are located, in the case of the Exchange Securities, or (y) as provided in Section 6(f), in the case of Registrable Securities or Exchange Securities to be sold by a Participating Broker-Dealer during the Applicable Period)); (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities or Exchange Securities in a form eligible for deposit with DTC and of printing prospectuses if the printing of prospectuses is requested by the managing underwriters, if any, or, in respect of Registrable Securities or Exchange Securities to be sold by a Participating Broker-Dealer during the Applicable Period, by the Holders of a majority in aggregate principal amount of the Registrable Securities included in any Registration Statement or of such Exchange Securities, as the case may be); 22 (iii) messenger, telephone, duplication, word processing and delivery expenses incurred by the Issuers and the Guarantors in the performance of their obligations hereunder; (iv) fees and disbursements of counsel for the Issuers, the Guarantors and, subject to Section 7(b), the Holders; (v) fees and disbursements of all independent certified public accountants referred to in Section 6(n)(iii) (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance); (vi) fees and expenses of any "qualified independent underwriter" or other independent appraiser participating in an offering pursuant to Section 3 of Schedule E to the By-laws of the NASD, but only where the need for such a "qualified independent underwriter" arises due to a relationship with the Issuers and the Guarantors; (vii) Securities Act liability insurance, if the Issuers and the Guarantors so desire such insurance (viii) fees and expenses of all other Persons, including special experts, retained by the Issuers or the Guarantors; internal expenses of the Issuers and the Guarantors (including, without limitation, all salaries and expenses of their respective officers and employees performing legal or accounting duties), and the expenses of any annual audit; and (ix) rating agency fees and the fees and expenses incurred in connection with the listing (if any) of the Securities to be registered on any securities exchange. (b) The Issuers and the Guarantors shall reimburse the Holders for the reasonable fees and disbursements of not more than one counsel (in addition to appropriate local counsel) chosen by the Holders of a majority in aggregate principal amount of the Registrable Securities to be included in any Registration Statement and other reasonable and necessary out-of-pocket expenses of the Holders incurred in connection with the registration of the Registrable Securities. 8. INDEMNIFICATION. (a) Indemnification by the Issuers and the Guarantors. The Issuers and the Guarantors, jointly and severally, shall, without limitation as to time, indemnify and hold harmless each Holder and each Participating Broker-Dealer, each Person who controls (within the meaning of Section 15 of the Securities Act or Section 23 20(a) of the Exchange Act (any of such persons being hereinafter referred to as a "CONTROLLING PERSON")) each such Holder and any such Participating Broker-Dealer and the members, managers, officers, directors, partners, employees, representatives and agents of each such Holder, Participating Broker-Dealer and controlling person (collectively, the "HOLDER INDEMNIFIED PARTIES"), to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and reasonable attorneys' fees) and expenses (including, without limitation, costs and expenses incurred in connection with investigating, preparing, pursuing or defending against any of the foregoing) (collectively, "LOSSES"), as incurred, arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus, Prospectus or form of prospectus, or in any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that neither the Issuers nor the Guarantors shall be obligated to indemnify or hold harmless any Person pursuant to this Section 8 for any Losses insofar as such Losses arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, preliminary prospectus, Prospectus or form of prospectus, or in any amendment or supplement thereto, in reliance upon or in conformity with information relating to such Holder or Participating Broker-Dealer and furnished in writing to the Issuers and the Guarantors by such Holder or Participating Broker-Dealer expressly for use therein. The Issuers and each of the Guarantors shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their members, managers, officers, directors, agents and employees and each of their respective controlling persons to the same extent as provided above with respect to the indemnification of the Holder Indemnified Parties. (b) Indemnification by Holders of Registrable Securities. In connection with any Registration Statement, preliminary prospectus, Prospectus or form of prospectus, or any amendment or supplement thereto, in which a Holder is participating, such Holder shall furnish to the Issuers and the Guarantors in writing such information as the Issuers and the Guarantors reasonably request for use in connection with any such Registration Statement, preliminary prospectus, Prospectus or form of prospectus, any amendment or supplement thereto, and shall, severally and not jointly, without limitation as to time, indemnify and hold harmless the Issuers and the Guarantors, their respective members, managers, directors, officers, agents and employees, each controlling person of the Issuers or any of the Guarantors and the members, managers, directors, officers, partners, representatives, agents or employees of such controlling persons, to the fullest extent lawful, from and against any and all Losses, as incurred, arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any such Registration Statement, 24 preliminary prospectus, Prospectus or form of prospectus, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading to the extent, but only to the extent, that such untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact is contained in or omitted from any information so furnished in writing by such Holder to the Issuers and the Guarantors expressly for use in any Registration Statement, preliminary prospectus, Prospectus or form of prospectus, or any amendment or supplement thereto. In no event shall the liability of any selling Holder be greater in amount than such Holder's Maximum Contribution Amount (as defined below). (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnification hereunder (an "INDEMNIFIED PARTY"), such indemnified party shall promptly notify the party or parties from which such indemnification is sought (the "INDEMNIFYING PARTIES") in writing; provided, that the failure to so notify the indemnifying parties shall not relieve the indemnifying parties from any obligation or liability except to the extent (but only to the extent) that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal) that the indemnifying parties have been prejudiced materially by such failure. The indemnifying parties shall have the right, exercisable by giving written notice to an indemnified party, within 20 Business Days after receipt of written notice from such indemnified party of such Proceeding, to assume, at their expense, the defense of any such Proceeding; provided, that an indemnified party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless: (i) the indemnifying parties have agreed to pay such fees and expenses; (ii) the indemnifying parties shall have failed promptly to assume the defense of such Proceeding or shall have failed to employ counsel reasonably satisfactory to such indemnified party; or (iii) the named parties to any such Proceeding (including any impleaded parties) include both such indemnified party and one or more indemnifying parties (or any affiliates or controlling persons of any of the indemnifying parties), and such indemnified party shall have been advised by counsel that there may be one or more defenses available to such indemnified party that are in addition to, or in conflict with, those defenses available to the indemnifying party or such affiliate or controlling person (in which case, if such indemnified party notifies the indemnifying parties in writing that it elects to employ separate counsel at the expense of the indemnifying parties, the indemnifying parties shall not have the right to assume the defense thereof and the reasonable fees and expenses of such counsel shall be at the expense of the indemnifying parties; it being understood, however, that, the indemnifying parties shall not, in connection with any 25 one such Proceeding or separate but substantially similar or related Proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for such indemnified party). No indemnifying party shall be liable for any settlement of any such Proceeding effected without its written consent, but if settled with its written consent, or if there be a final judgment for the plaintiff in any such Proceeding, each indemnifying party jointly and severally agrees, subject to the exceptions and limitations set forth above, to indemnify and hold harmless each indemnified party from and against any and all Losses by reason of such settlement or judgment. The indemnifying party shall not consent to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to each indemnified party of a release, in form and substance reasonably satisfactory to the indemnified party, from all liability in respect of such Proceeding for which such indemnified party would be entitled to indemnification hereunder (whether or not any indemnified party is a party thereto). (d) Contribution. If the indemnification provided for in this Section 8 is unavailable to an indemnified party or is insufficient to hold such indemnified party harmless for any Losses in respect of which this Section 8 would otherwise apply by its terms (other than by reason of exceptions provided in this Section 8), then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall have a joint and several obligation to contribute to the amount paid or payable by such indemnified party as a result of such Losses, (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party, on the one hand, and such indemnified party, on the other hand, from the sale of Registrable Securities, or (ii) if the allocation provided by clause (i) above is not permitted by Applicable Law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such indemnifying party, on the one hand, and indemnified party, on the other hand, shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent any such statement or omission. The amount paid or payable by an indemnified party as a result of any Losses shall be deemed to include any legal or other fees or expenses incurred by such party in connection with any Proceeding, to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in Section 8(a) or 8(b) was available to such party. 26 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 8(d), an indemnifying party that is a selling Holder shall not be required to contribute, in the aggregate, any amount in excess of such Holder's Maximum Contribution Amount. A selling Holder's "MAXIMUM CONTRIBUTION AMOUNT" shall equal the excess, if any, of (i) the aggregate proceeds received by such Holder pursuant to the sale of the Registrable Securities giving rise to such indemnification obligation over (ii) the aggregate amount of damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several in proportion to the respective principal amount of the Registrable Securities held by each Holder hereunder and not joint. The Issuers' obligations to contribute pursuant to this Section 8(d) are joint and several. The indemnity and contribution agreements contained in this Section 8 are in addition to any liability that the indemnifying parties otherwise may have to the indemnified parties. 9. RULE 144 AND RULE 144A. Each of the Issuers covenants that (a) during any period that it is required to file reports under the Securities Act or the Exchange Act, it shall file all reports required to be filed by it in a timely manner in order to comply with the current public information requirements of Rule 144 under the Securities Act and (b) during any period that it is not required to file such reports, it shall, upon the request of any Holder, make available to each Holder or beneficial owner of Registrable Securities and to any prospective purchaser of Registrable Securities designated by such Holder or beneficial owner the information required by Rule 144A(d)(4) under the Securities Act. Each of the Issuers shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act pursuant to the exemptions provided by Rule 144 and Rule 144A, subject to the expiration of the holding period required for sales under Rule 144(k) under the Securities Act. Upon the written request of any Holder, each of the Issuers and the Guarantors shall deliver to such Holder a written statement as to whether such Issuer or Guarantor has complied with such information requirements. Nothing in this Section 9 shall be deemed to require the Issuers to register any Securities pursuant to the Exchange Act. 27 10. UNDERWRITTEN REGISTRATIONS. If any of the Registrable Securities covered by any Shelf Registration are to be sold in an Underwritten Offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Securities included in such offering and shall be reasonably acceptable to the Issuers. No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 11. MISCELLANEOUS. (a) Remedies. In the event of a breach by either of the Issuers or any of the Guarantors of any of their respective obligations under this Agreement, each Holder, in addition to being entitled to exercise all rights provided herein, in the Indenture or, in the case of the Initial Purchaser, in the Purchase Agreement, or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Issuers and the Guarantors agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by either of the Issuers or any of the Guarantors of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, the Issuers and the Guarantors shall waive the defense that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Issuers and the Guarantors have not entered into, as of the date hereof, and shall not enter into, after the date of this Agreement, any agreement with respect to any of their respective securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. (c) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, without the written consent of (i) the Issuers and (ii) the Holders of at least a majority of the then outstanding aggregate principal amount of Registrable Securities; provided, that Sections 4(a) and 8 shall not be amended, modified or supplemented, and waivers or consents to departures from this proviso may not be given, unless the Issuers have obtained the written consent of each Holder. Notwithstanding 28 the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority in aggregate principal amount of the Registrable Securities being sold by such Holders pursuant to such Registration Statement; provided that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. Notwithstanding the foregoing, the Issuers and the Guarantors may amend, supplement or modify the Registration Rights Agreement without the consent of any Holder as provided in Section 9.1 of the Indenture. (d) Notices. All notices and other communications (including, without limitation, any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, certified first-class mail with return receipt requested, next-day air courier or facsimile: (i) if to a Holder, at the most current address of such Holder as set forth on the register kept by the Registrar (as defined in the Indenture), with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand Avenue, Suite 3400, Los Angeles, California 90071, facsimile number (213) 687-5600, Attention: Nicholas P. Saggese, Esq.; and (ii) if to either of the Issuers or any of the Guarantors, to Diamond Jo, LLC, 400 East Third Street, P.O. Box 1750, Dubuque, Iowa 52004, facsimile number: (563) 690-2190, Attention: Natalie Schramm, with a copy to Peninsula Gaming Partners, LLC, 7137 Mission Hills Drive, Las Vegas, Nevada 89113, facsimile number: (702) 247-6822, Attention: Michael S. Luzich, and an additional copy to Mayer, Brown, Rowe & Maw, 1675 Broadway, New York, New York 10019-5820, facsimile number: (212) 262-1910, Attention: Nazim Zilkha, Esq., or at such other address, notice of which is given in accordance with the provisions of this Section 11(d). All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; one Business Day after being timely delivered to a next-day air courier, if sent by next-day air courier; and when receipt is acknowledged by the addressee, if sent by facsimile. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee under the Indenture at the address specified in the Indenture. 29 (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, including without limitation and without the need for an express assignment, subsequent Holders. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. When a reference is made in this Agreement to a Section, paragraph, subparagraph, Schedule or Exhibit, such reference shall mean a Section, paragraph, subparagraph, Schedule or Exhibit to this Agreement unless otherwise indicated. The words "INCLUDE," "INCLUDES," and "INCLUDING" when used in this Agreement shall be deemed in each case to be followed by the words "WITHOUT LIMITATION." The phrases "THE DATE OF THIS AGREEMENT," "THE DATE HEREOF," and terms of similar import, unless the context otherwise requires, shall be deemed to refer to April 16, 2004. The words "HEREOF," "HEREIN," "HEREWITH," "HEREBY" and "HEREUNDER" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement. (h) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED, AND THE RIGHTS OF THE PARTIES SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND RULE 327(b) OF NEW YORK CIVIL PRACTICE LAWS AND RULES. EACH ISSUER AND EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH ISSUER AND EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING 30 BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH ISSUER AND EACH GUARANTOR IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH ISSUER OR SUCH GUARANTOR, AS THE CASE MAY BE, AT ITS ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY OTHER PARTY TO THIS AGREEMENT IN ANY OTHER JURISDICTION. (i) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their respective reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted by the Issuers and the Guarantors in respect of securities sold pursuant to the Purchase Agreement. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (k) Securities Held By Either of the Issuers or their Respective Affiliates. Whenever the consent or approval of Holders of a specified percentage of the principal amount of Registrable Securities is required hereunder, Registrable Securities held by either of the Issuers or their respective affiliates (as such term is defined in Rule 405 under the Securities Act) (other than Holders deemed to be such affiliates solely by reason of their holdings of such Registrable Securities) shall not 31 be counted in determining whether such consent or approval was given by the Holders of such required percentage. [signature pages follow this page] 32 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. "ISSUERS": DIAMOND JO, LLC By: /s/M. BRENT STEVENS ---------------------------- Name: M. Brent Stevens Title: Chief Executive Officer THE OLD EVANGELINE DOWNS CAPITAL CORP. By: /s/M. BRENT STEVENS ---------------------------- Name: M. Brent Stevens Title: Chief Executive Officer "GUARANTORS": PENINSULA GAMING CORP. By: /s/M. BRENT STEVENS ---------------------------- Name: M. Brent Stevens Title: Chief Executive Officer THE OLD EVANGELINE DOWNS, L.L.C. By: /s/M. BRENT STEVENS ---------------------------- Name: M. Brent Stevens Title: Chief Executive Officer ACCEPTED AND AGREED TO: JEFFERIES & COMPANY, INC. By: /s/STEVE CROXTON ----------------------- Name: Steve Croxton Title: Managing Director EXHIBIT A DIAMOND JO, LLC THE OLD EVANGELINE DOWNS CAPITAL CORP. $233,000,000 8 3/4% SENIOR SECURED NOTES DUE 2012 JOINDER TO THE REGISTRATION RIGHTS AGREEMENT __________________, 2004 JEFFERIES & COMPANY, INC. 11100 Santa Monica Boulevard 10th Floor Los Angeles, California 90025 Ladies and Gentlemen: Reference is made to the Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT") dated April 16, 2004, by and among Diamond Jo, LLC, a Delaware limited liability company (the "COMPANY"), The Old Evangeline Downs Capital Corp., a Delaware corporation ("CAPITAL" and, together with the Company, the "ISSUERS"), and the Guarantors listed on the signature pages thereto under the heading "Guarantors," on the one hand, and Jefferies & Company, Inc. (the "INITIAL PURCHASER"), on the other hand. Capitalized terms used herein but not defined herein shall have the respective meanings assigned to such terms in the Registration Rights Agreement. This letter agreement is being executed and delivered concurrently with the consummation of the Reorganization Transactions. 1. Joinder. Peninsula Gaming, LLC, a Delaware limited liability company (the "PARENT ISSUER"), hereby agrees to be bound by the terms, conditions and other provisions of the Registration Rights Agreement with all attendant rights, duties and obligations stated therein, with the same force and effect as if originally named as an "Issuer" therein and as if the Parent Issuer had executed the Registration Rights Agreement on the date thereof. 2. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED, AND THE RIGHTS OF THE PARTIES SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING WITHOUT LIMITATION, SECTIONS 5 1401 AND 5 1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND RULE 327(b) OF NEW YORK CIVIL PRACTICE LAWS AND RULES. EACH ISSUER AND EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH ISSUER AND EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH ISSUER AND EACH GUARANTOR IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH ISSUER OR SUCH GUARANTOR, AS THE CASE MAY BE, AT ITS ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY OTHER PARTY TO THIS AGREEMENT IN ANY OTHER JURISDICTION. 3. Counterparts. This letter agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 4. Amendments. No amendment or waiver of any provision of this letter agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto. 5. Headings. The headings in this letter agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. [signature pages follow] If the foregoing is in accordance with your understanding of this letter agreement, kindly sign and return to us a counterpart thereof, whereupon this instrument will become a binding agreement among the Issuers, the Guarantors, the Parent Issuer party hereto and the Initial Purchaser in accordance with its terms. Very truly yours, PENINSULA GAMING, LLC By:___________________________________ Name: Title: ACCEPTED AND AGREED TO: JEFFERIES & COMPANY, INC. By:___________________________ Name: Title: EX-4.5B 14 forms4_ex4-5bwfb071404.txt EX. 4.5B - JOINDER OF PEN GAMING - 06-16-04 Exhibit 4.5B DIAMOND JO, LLC THE OLD EVANGELINE DOWNS CAPITAL CORP. $233,000,000 8 3/4% SENIOR SECURED NOTES DUE 2012 JOINDER TO THE REGISTRATION RIGHTS AGREEMENT June 16, 2004 JEFFERIES & COMPANY, INC. 11100 Santa Monica Boulevard 10th Floor Los Angeles, California 90025 Ladies and Gentlemen: Reference is made to the Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT") dated April 16, 2004, by and among Diamond Jo, LLC, a Delaware limited liability company (the "COMPANY"), The Old Evangeline Downs Capital Corp., a Delaware corporation ("CAPITAL" and, together with the Company, the "ISSUERS"), and the Guarantors listed on the signature pages thereto under the heading "Guarantors," on the one hand, and Jefferies & Company, Inc. (the "INITIAL PURCHASER"), on the other hand. Capitalized terms used herein but not defined herein shall have the respective meanings assigned to such terms in the Registration Rights Agreement. This letter agreement is being executed and delivered concurrently with the consummation of the Reorganization Transactions. 1. Joinder. Peninsula Gaming, LLC, a Delaware limited liability company (the "PARENT ISSUER"), hereby agrees to be bound by the terms, conditions and other provisions of the Registration Rights Agreement with all attendant rights, duties and obligations stated therein, with the same force and effect as if originally named as an "Issuer" therein and as if the Parent Issuer had executed the Registration Rights Agreement on the date thereof. 2. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED, AND THE RIGHTS OF THE PARTIES SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING WITHOUT LIMITATION, SECTIONS 5 1401 AND 5 1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND RULE 327(b) OF NEW YORK CIVIL PRACTICE LAWS AND RULES. EACH ISSUER AND EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH ISSUER AND EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH ISSUER AND EACH GUARANTOR IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH ISSUER OR SUCH GUARANTOR, AS THE CASE MAY BE, AT ITS ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY OTHER PARTY TO THIS AGREEMENT IN ANY OTHER JURISDICTION. 3. Counterparts. This letter agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 4. Amendments. No amendment or waiver of any provision of this letter agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto. 5. Headings. The headings in this letter agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. [signature pages follow] If the foregoing is in accordance with your understanding of this letter agreement, kindly sign and return to us a counterpart thereof, whereupon this instrument will become a binding agreement among the Issuers, the Guarantors, the Parent Issuer party hereto and the Initial Purchaser in accordance with its terms. Very truly yours, PENINSULA GAMING, LLC By:/s/M. BRENT STEVENS ------------------------------ Name: M. Brent Stevens Title: Chief Executive Officer ACCEPTED AND AGREED TO: JEFFERIES & Company, Inc. By: /s/STEVE CROXTON ---------------------- Name: Steve Croxton Title: Managing Director EX-4.6A 15 forms4_ex4-6awfb071404.txt EX. 4.6A - PLEDGE AND SEC. AGMT. EXHIBIT 4.6A PLEDGE AND SECURITY AGREEMENT DATED AS OF APRIL 16, 2004 AMONG DIAMOND JO, LLC, THE OLD EVANGELINE DOWNS CAPITAL CORP., OED ACQUISITION, LLC, PENINSULA GAMING CORPORATION, AND THE OLD EVANGELINE DOWNS, L.L.C., AND U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE, AS SECURED PARTY. TABLE OF CONTENTS 1. DEFINITIONS...............................................................2 1.1 GENERAL DEFINITIONS........................................2 1.2 DEFINITIONS; INTERPRETATION................................9 2. GRANT OF SECURITY.........................................................9 2.1 GRANT OF SECURITY..........................................9 2.2 CERTAIN LIMITED EXCLUSIONS................................10 2.3 INTERCREDITOR AGREEMENT...................................11 3. SECURITY FOR OBLIGATIONS.................................................11 3.1 SECURITY FOR OBLIGATIONS..................................11 3.2 OBLIGATIONS REMAIN........................................11 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS.............................12 4.1 GENERALLY.................................................12 4.2 EQUIPMENT AND INVENTORY...................................15 4.3 RECEIVABLES CONTRACTS.....................................16 4.4 INVESTMENT RELATED PROPERTY...............................19 4.5 INTELLECTUAL PROPERTY.....................................20 4.6 COMMERCIAL TORT CLAIMS....................................21 4.7 JUDGMENTS.................................................21 5. FURTHER ASSURANCES; ADDITIONAL DEBTORS...................................21 5.1 FURTHER ASSURANCES........................................21 5.2 ADDITIONAL DEBTORS........................................23 6. ATTORNEY-IN-FACT.........................................................23 6.1 POWER OF ATTORNEY.........................................23 6.2 NO DUTY ON THE PART OF SECURED PARTY......................24 7. REMEDIES.................................................................24 7.1 GENERALLY.................................................24 7.2 LOUISIANA REMEDIES........................................26 7.3 APPLICATION OF PROCEEDS...................................27 7.4 INVESTMENT RELATED PROPERTY...............................27 7.5 INTELLECTUAL PROPERTY.....................................27 7.6 CASH PROCEEDS.............................................29 7.7 REGULATORY MATTERS........................................29 8. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES..........................29 9. STANDARD OF CARE; SECURED PARTY MAY PERFORM..............................30 10. INDEMNITY................................................................30 11. MISCELLANEOUS............................................................30 11.1 NOTICES................................................30 11.2 EXPENSES...............................................30 11.3 SUBROGATION............................................31 11.4 DEBTOR WAIVERS.........................................31 11.5 AMENDMENTS AND WAIVERS.................................32 11.6 SUCCESSORS AND ASSIGNS.................................32 11.7 INDEPENDENCE OF COVENANTS..............................32 11.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.............................................32 i 11.9 NO WAIVER; REMEDIES CUMULATIVE.........................32 11.10 SEVERABILITY...........................................33 11.11 HEADINGS...............................................33 11.12 APPLICABLE LAW.........................................33 11.13 SUBMISSION TO JURISDICTION.............................33 11.14 COUNTERPARTS...........................................33 11.15 GAMING LAWS............................................33 11.16 EFFECTIVENESS..........................................34 11.17 ENTIRE AGREEMENT.......................................34 11.18 THE MORTGAGES..........................................34 11.19 INDENTURE CONTROLS.....................................35 11.20 TRUST INDENTURE ACT CONTROLS...........................35 SCHEDULE I -- DILIGENCE CERTIFICATE Exhibit A Supplement to Security Agreement Exhibit B Control Agreement (Securities Accounts) Exhibit C Control Agreement (Deposit Accounts) ii This PLEDGE AND SECURITY AGREEMENT, dated as of April 16, 2004 (this "AGREEMENT"), among Diamond Jo, LLC, a Delaware limited liability company ("DJL"), The Old Evangeline Downs Capital Corp., a Delaware corporation ("CAPITAL" and, together with DJL, the "ISSUERS"), OED Acquisition, LLC, a Delaware limited liability company ("OEDA"), Peninsula Gaming Corporation, a Delaware corporation ("PG CORP."), The Old Evangeline Downs, L.L.C., a Louisiana limited liability company ("OED"), and each additional Guarantor (as defined in the Indenture referred to below) and Issuer (as defined in the Indenture) from time to time party hereto pursuant to Section 5.2 (the Issuers, OEDA, PG Corp., OED and each such additional Guarantor and Issuer, each a "DEBTOR" and collectively, the "DEBTORS"), and U.S. Bank National Association, as Trustee (together with any successor Trustee pursuant to the terms of the Indenture, the "SECURED PARTY"), acting in the capacity of collateral agent for the benefit of itself and the Holders. R E C I T A L S: WHEREAS, the Debtors and the Secured Party, have entered into an Indenture, dated as of April 16, 2004 (as amended, restated, supplemented or otherwise modified from time to time, the "INDENTURE"), pursuant to which the Issuers incurred indebtedness for certain notes (such notes, together with all additional notes and all other notes issued thereunder in exchange for such notes and additional notes, the "NOTES") and the other Debtors have guaranteed the payment of the Notes and the other Obligations thereunder; WHEREAS, each Issuer desires to secure the Notes and its other Obligations under the Indenture and each other Debtor desires to secure its guarantee under the Indenture by granting to the Secured Party, for the benefit of itself and the Holders, security interests in the Collateral as set forth herein; WHEREAS, certain of the Debtors, Wells Fargo Foothill, Inc. and certain other financial institutions have entered into those certain Loan and Security Agreements dated as of February 23, 2001, June 24, 2003 and September 22, 2003 (in each case, as amended, restated, supplemented, replaced or otherwise modified from time to time, collectively, the "CREDIT AGREEMENT"); WHEREAS, the Secured Party, the Credit Facility Secured Party and Debtors have entered into that certain Intercreditor Agreement, dated as of April 16, 2004 (as amended, restated, supplemented, replaced or otherwise modified from time to time, the "INTERCREDITOR AGREEMENT"), which agreement, among other things, sets forth, as between the Secured Party and the Credit Facility Secured Party, the relative priority of their respective Liens in the Collateral and their rights with respect thereto; WHEREAS, each Debtor (other than Company) is a Subsidiary of the Company and will benefit from the proceeds of the Notes; and WHEREAS, to induce the Initial Purchaser to purchase the Notes, each Holder to hold the Notes to be held by it and U.S. Bank National Association to act in its capacity as the Secured Party, each Debtor desires to pledge, grant, transfer, and assign to the Secured Party, for its benefit and the benefit of the Holders, a security interest in the Collateral to secure the Secured Obligations of such Debtor, as provided herein. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, each Debtor and the Secured Party agree as follows: 1 1. DEFINITIONS 1.1 GENERAL DEFINITIONS. In this Agreement, the following terms shall have the following meanings: "ACCOUNT DEBTOR" shall mean each Person who is obligated on a Receivables Contract or any Supporting Obligation related thereto. "ACCOUNTS" shall mean all "accounts" as defined in Article 9 of the UCC. "AGREEMENT" shall have the meaning set forth in the preamble. "BANKRUPTCY CODE" shall mean Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute. "CASH PROCEEDS" shall mean all proceeds of any Collateral received by any Debtor consisting of cash, checks and other near-cash items. "CHATTEL PAPER" shall mean all "chattel paper" as defined in Article 9 of the UCC, including, without limitation, "electronic chattel paper" or "tangible chattel paper", as each term is defined in Revised Article 9 of the UCC. "COLLATERAL" shall have the meaning set forth in Section 2.1 hereof. "COLLATERAL RECORDS" shall mean books, records, ledger cards, files, correspondence, customer lists, blueprints, technical specifications, manuals, computer software, computer printouts, tapes, disks and related data processing software and similar items that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon. "COLLATERAL SUPPORT" shall mean all property (real or personal) assigned, hypothecated or otherwise securing any Collateral and shall include any security agreement or other agreement granting a lien or security interest in such real or personal property. "COMMERCIAL TORT CLAIMS" shall mean all "commercial tort claims" as defined in the UCC, including, without limitation, all commercial tort claims listed and described with specification on Schedule E of the Diligence Certificate (as such schedule may be amended or supplemented from time to time). "COMMODITIES ACCOUNTS" (i) shall mean all "commodity accounts" as defined in Article 9 of the UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule A of the Diligence Certificate under the heading "Commodities Accounts" (as such schedule may be amended or supplemented from time to time). "COMPANY" shall mean (i) until Peninsula Gaming, LLC, a Delaware limited liability company ("PGLLC"), shall become a party hereto pursuant to Section 5.2, DJL and (ii) thereafter, PGLLC. "CONTROLLED FOREIGN CORPORATION" shall mean "controlled foreign corporation" as defined in the Tax Code. 2 "COPYRIGHT LICENSES" shall mean any and all agreements providing for the granting of any right in or to Copyrights (whether such Debtor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule B of the Diligence Certificate (as such schedule may be amended or supplemented from time to time). "COPYRIGHTS" shall mean all United States, state and foreign copyrights, including but not limited to copyrights in software and databases, and all Mask Works (as defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether registered or unregistered, and, with respect to any and all of the foregoing: (i) all registrations and applications therefor including, without limitation, the applications referred to in Schedule B of the Diligence Certificate (as such schedule may be amended or supplemented from time to time), (ii) all extensions and renewals thereof, (iii) all rights corresponding thereto throughout the world, (iv) all rights to sue for past, present and future infringements thereof, (v) all licenses, claims, damages and proceeds of suit arising therefrom, and (vi) all payments and rights to payments arising out of the sale, lease, license, assignment, or other disposition thereof. "CREDIT FACILITY SECURED PARTY" shall mean, as the context may require, all or any of the Senior Lien Creditor Representatives (as defined in the Intercreditor Agreement). "DEPOSIT ACCOUNTS" shall mean all (i) "deposit accounts" as defined in Article 9 of the UCC and (ii) shall include, without limitation, all other accounts listed on Schedule A under the heading "Deposit Accounts" (as such schedule may be amended or supplemented from time to time). "DILIGENCE CERTIFICATE" shall mean the Pre-Closing UCC Diligence Certificate dated as of the date of this Agreement and executed by each Debtor. "DOCUMENTS" shall mean all "documents" as defined in Article 9 of the UCC. "EQUIPMENT" shall mean: (i) all "equipment" as defined in the UCC, (ii) all machinery, manufacturing equipment, data processing equipment, computers, office equipment, furnishings, furniture, appliances, fixtures and tools (in each case, regardless of whether characterized as equipment under the UCC), (iii) slot machines, electronic gaming devices and related equipment and (iv) all accessions or additions thereto, all parts thereof, whether or not at any time of determination incorporated or installed therein or attached thereto, and all replacements therefor, wherever located, now or hereafter existing, including any fixtures. "GAMING AUTHORITY" shall mean any agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of the United States of America or foreign government, any state, province or any city or other political subdivision, whether now or hereafter existing, or any officer or official thereof, including without limitation, the Louisiana Gaming Control Board and any other agency with authority to regulate any gaming operation (or proposed gaming operation) owned, managed or operated by the Company or any of its Subsidiaries. "GAMING LAWS" shall mean the gaming laws of any jurisdiction or jurisdictions to which the Company, any of its Subsidiaries or any of the Guarantors is, or may at any time after the date hereof, be subject. "GAMING LICENSE" shall mean every license, franchise, permit or other authorization required to own, lease, operate or otherwise conduct gaming activities of the Company or any of its Subsidiaries, including without limitation, all such licenses granted under the Louisiana Video Draw Poker Devices Control Act or the Louisiana Pari-Mutuel Live Racing Facility Economic Redevelopment 3 and Gaming Control Act (Slots at the Track) and regulated under the Louisiana Gaming Control Law, the regulations promulgated pursuant to each such law, and other applicable federal, state, foreign or local laws. "GENERAL INTANGIBLES" (i) shall mean all "general intangibles" as defined in Article 9 of the UCC and (ii) shall include, without limitation, all interest rate or currency protection or hedging arrangements, all tax refunds, all licenses, permits, concessions and authorizations, and all Intellectual Property (in each case, regardless of whether characterized as general intangibles under the UCC) and exclude all Gaming Licenses held by a Debtor. "GOODS" (i) shall mean all "goods" as defined in Article 9 of the UCC and (ii) shall include, without limitation, all Inventory and Equipment (in each case, regardless of whether characterized as goods under the UCC). "GOVERNMENTAL AUTHORITY" shall mean any agency, authority, board, bureau, commission, department, office, public entity, or instrumentality of any nature whatsoever of the United State federal or foreign government, any state, province or any city or other political subdivision or otherwise, whether now or hereafter in existence, or any officer or official thereof, including, without limitation, any Racing Authority or Gaming Authority. "INDEMNITEE" shall mean the Secured Party, and its and its Affiliates' officers, directors, employees and agents, and including, if the Secured Party or its agent is a partnership, its partners, and if the Secured Party or its agent is a trust, its trustee. "INDENTURE" shall have the meaning set forth in the preamble. "INDENTURE DOCUMENTS" shall mean the Indenture, the Notes, the Security Documents and the Registration Rights Agreement, and such other agreements, instruments and certificates executed and delivered (or issued) by the Debtors pursuant to the Indenture or any of the foregoing, as any or all of the same may be amended, restated, supplemented or otherwise modified from time to time. "INSTRUMENTS" shall mean all "instruments" as defined in Article 9 of the UCC. "INSURANCE" shall mean: (i) all insurance policies covering any or all of the Collateral (regardless of whether the Secured Party is the loss payee thereof) and (ii) any key man life insurance policies. "INTELLECTUAL PROPERTY" shall mean, collectively, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks, the Trademark Licenses, the Trade Secrets, and the Trade Secret Licenses. "INVENTORY" shall mean: (i) all "inventory" as defined in the UCC and (ii) all goods held for sale or lease or to be furnished under contracts of service or so leased or furnished, all raw materials, work in process, finished goods, and materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such inventory or otherwise used or consumed in any Debtor's business; all goods in which any Debtor has an interest in mass or a joint or other interest or right of any kind; and all goods which are returned to or repossessed by any Debtor, all computer programs embedded in any goods and all accessions thereto and products thereof (in each case, regardless of whether characterized as inventory under the UCC). 4 "INVESTMENT RELATED PROPERTY" shall mean: (i) all "investment property" (as such term is defined in Article 9 of the UCC); (ii) all of the following (regardless of whether classified as investment property under the UCC): all Pledged Equity Interests, Pledged Debt, the Deposit Accounts, Securities Accounts, Commodities Accounts and certificates of deposit. "LEGAL REQUIREMENTS" means all applicable restrictive covenants, applicable zoning and subdivision ordinances and building codes, all applicable health and environmental laws and regulations, all applicable Racing Laws, Gaming Laws and applicable regulations, and all other applicable laws, ordinances, rules, regulations, judicial decisions, administrative orders and other requirements of any Governmental Authority having jurisdiction over any Debtor, the Collateral and/or any Affiliate of such Debtor, in effect either at the time of execution of this Agreement or at any time during the term hereof. "LETTER OF CREDIT RIGHT" shall mean "letter-of-credit right" as defined in the UCC. "MATERIAL COLLATERAL CONTRACT" shall mean any contract or other arrangement to which any Debtor is a party for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Effect. "MONEY" shall mean "money" as defined in the UCC. "PATENT LICENSES" shall mean all agreements providing for the granting of any right in or to Patents (whether such Debtor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule B of the Diligence Certificate (as such schedule may be amended or supplemented from time to time). "PATENTS" shall mean all United States and foreign patents and certificates of invention, or similar industrial property rights, including, but not limited to each patent referred to in Schedule B of the Diligence Certificate (as such schedule may be amended or supplemented from time to time), and with respect to any and all of the foregoing, (i) all applications therefore including, without limitation, the patent applications referred to in Schedule B of the Diligence Certificate (as such schedule may be amended or supplemented from time to time), (ii) all reissues, divisions, continuations, continuations-in-part, extensions, renewals, and reexaminations thereof, (ii) all rights corresponding thereto throughout the world, (ii) all inventions and improvements described therein, (iv) all rights to sue for past, present and future infringements thereof, (v) all licenses, claims, damages, and proceeds of suit arising therefrom, and (vi) all payments and rights to payments arising out of the sale, lease, license, assignment, or other disposition thereof. "PAYMENT INTANGIBLE" shall have the meaning specified in the UCC. "PLEDGED DEBT" shall mean all Indebtedness owed to such Debtor, including, without limitation, all Indebtedness described on Schedule A of the Diligence Certificate under the heading "Pledged Debt and Instruments" (as such schedule may be amended or supplemented from time to time), issued by the obligors named therein, the instruments evidencing such Indebtedness, and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Indebtedness. "PLEDGED EQUITY INTERESTS" shall mean all Pledged Stock, Pledged LLC Interests, Pledged Partnership Interests and Pledged Trust Interests. 5 "PLEDGED LLC INTERESTS" shall mean all interests in any limited liability company including, without limitation, all limited liability company interests listed on Schedule A of the Diligence Certificate (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such limited liability company interests and any interest of such Debtor on the books and records of such limited liability company or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such limited liability company interests. "PLEDGED PARTNERSHIP INTERESTS" shall mean all interests in any general partnership, limited partnership, limited liability partnership or other partnership including, without limitation, all partnership interests listed on Schedule A of the Diligence Certificate (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such partnership interests and any interest of such Debtor on the books and records of such partnership or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such partnership interests. "PLEDGED TRUST INTERESTS" shall mean all interests in a Delaware business trust or other trust including, without limitation, all trust interests listed on Schedule A of the Diligence Certificate (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such trust interests and any interest of such Debtor on the books and records of such trust or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such trust interests. "PLEDGED STOCK" shall mean all shares of capital stock owned by such Debtor, including, without limitation, all shares of capital stock described on Schedule A of the Diligence Certificate (as such schedule may be amended or supplemented from time to time), and the certificates, if any, representing such shares and any interest of such Debtor in the entries on the books of the issuer of such shares or on the books of any securities intermediary pertaining to such shares, and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares. "PROCEEDS" shall mean: (i) all "proceeds" as defined in Article 9 of the UCC, (ii) payments or distributions made with respect to any Investment Related Property and (iii) whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary. "RACING AUTHORITY" means any agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of the United States of America or foreign government, any state, province or any city or other political subdivision, whether now or hereafter existing, or any officer or official thereof, including without limitation, the Louisiana State Racing Commission and any other agency with authority to regulate any pari-mutuel wagering operation (or proposed pari-mutuel wagering operation), including operations at live horse racing and off-track betting facilities, owned, managed or operated by the Company or any of its Subsidiaries. 6 "RACING LAW" means the pari-mutuel wagering laws, including those governing operations at live horse racing and off-track betting facilities, of any jurisdiction or jurisdictions to which the Company, any of its Subsidiaries or any of the Guarantors is, or may at any time after the date hereof, be subject. "RACING LICENSE" means any license, permit, franchise or other authorization required to own, lease, or operate or otherwise conduct racing activities, including pari-mutuel wagering activities, of the Company and its Subsidiaries, including, without limitation, all such licenses granted under the Louisiana horse racing and off-track betting statutes and regulated by the regulations promulgated pursuant to such statutes, and other Legal Requirements, including all applicable liquor and tobacco permits. "RECEIVABLES CONTRACTS" shall mean all (i) Accounts, (ii) Chattel Paper, (iii) Payment Intangibles, (iv) Instruments and (v) to the extent not otherwise covered above, all other rights to payment, whether or not earned by performance, for goods or other property sold, leased, licensed, assigned or otherwise disposed of, or services rendered or to be rendered, regardless of how classified under the UCC; together with all of such Debtors' rights, if any, in any goods or other property giving rise to such right to payment and all Collateral Support and Supporting Obligations related thereto and all Receivables Records; provided, however, that Receivables Contracts shall not include any Investment Related Property. "RECEIVABLES RECORDS" shall mean (i) all original copies of all documents, instruments or other writings or electronic records or other Records evidencing the Receivables Contracts, (ii) all books, correspondence, credit or other files, Records, ledger sheets or cards, invoices, and other papers relating to Receivables Contracts, including, without limitation, all tapes, cards, computer tapes, computer discs, computer runs, record keeping systems and other papers and documents relating to the Receivables Contracts, whether in the possession or under the control of Debtor or any computer bureau or agent from time to time acting for Debtor or otherwise, (iii) all evidences of the filing of UCC financing statements and the registration of other instruments in connection therewith, and amendments, supplements or other modifications thereto, notices to other creditors or secured parties, and certificates, acknowledgments, or other writings, including, without limitation, lien search reports, from filing or other registration officers, (iv) all credit information, reports and memoranda relating thereto and (v) all other written or non-written forms of information related in any way to the foregoing or any Receivable. "RECORD" shall have the meaning specified in Article 9 of the UCC. "SECURED OBLIGATIONS" shall have the meaning set forth in Section 3.1 hereof. "SECURED PARTY" has the meaning set forth in the preamble. "SECURITIES" shall mean any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIES ACCOUNTS" (i) shall mean all "securities accounts" as defined in Article 8 of the UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule A under the heading "Securities Accounts" (as such schedule may be amended or supplemented from time to time). 7 "SOFTWARE EMBEDDED IN GOODS" means, with respect to any Goods, any computer program embedded in Goods and any supporting information provided in connection with a transaction relating to the program if (i) the program is associated with the Goods in such a manner that it customarily is considered part of the Goods or (ii) by becoming the owner of the Goods a person acquires a right to use the program in connection with the Goods. "SUPPLEMENT TO SECURITY AGREEMENT" shall mean any supplement to this agreement in substantially the form of Exhibit A. "SUPPORTING OBLIGATION" shall mean all "supporting obligations" as defined in the UCC. "TAX CODE" shall mean the United States Internal Revenue Code of 1986, as amended from time to time. "TRADEMARK LICENSES" shall mean any and all agreements providing for the granting of any right in or to Trademarks (whether such Debtor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule B of the Diligence Certificate (as such schedule may be amended or supplemented from time to time). "TRADEMARKS" shall mean all United States, state and foreign trademarks, trade names, corporate names, company names, business names, fictitious business names, Internet domain names, service marks, certification marks, collective marks, logos, other source or business identifiers, designs and general intangibles of a like nature, all registrations and applications for any of the foregoing including, but not limited to the registrations and applications referred to in Schedule B of the Diligence Certificate (as such schedule may be amended or supplemented from time to time), all extensions or renewals of any of the foregoing, all of the goodwill of the business connected with the use of and symbolized by the foregoing, the right to sue for past, present and future infringement or dilution of any of the foregoing or for any injury to goodwill, and all proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit. "TRADE SECRET LICENSES" shall mean any and all agreements providing for the granting of any right in or to Trade Secrets (whether such Debtor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule B of the Diligence Certificate (as such schedule may be amended or supplemented from time to time). "TRADE SECRETS" shall mean all trade secrets and all other confidential or proprietary information and know-how now or hereafter owned by or used in, the business of such Debtor (all of the foregoing being collectively called a "Trade Secret"), whether or not such Trade Secret has been reduced to a writing or other tangible form, including all documents and things embodying, incorporating, or referring in any way to such Trade Secret, the right to sue for past, present and future infringement of any Trade Secret, and all proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit. "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided, if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interests in any Collateral or the priority of security interests in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or priority. 8 1.2 DEFINITIONS; INTERPRETATION. All capitalized terms used herein (including the preamble and recitals hereto) and not otherwise defined herein shall have the meanings ascribed thereto in the Indenture or, if not defined therein, in the UCC. References to "Sections," "Exhibits" and "Schedules" shall be to Sections, Exhibits and Schedules, as the case may be, of this Agreement unless otherwise specifically provided. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. The use herein of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. If any conflict or inconsistency exists between this Agreement and the Indenture, the Indenture shall govern. All references herein to provisions of the UCC shall include all successor provisions under any subsequent version or amendment to any Article of the UCC. 2. GRANT OF SECURITY 2.1 GRANT OF SECURITY. Subject to applicable Gaming Laws, each Debtor hereby grants to the Secured Party a security interest and continuing lien on all of such Debtor's right, title and interest in, to and under all property of such Debtor including, but not limited to the following, in each case whether now owned or existing or hereafter acquired or arising and wherever located (such Debtor's "COLLATERAL"): (i) Accounts; (ii) Chattel Paper, together with all returned, rejected or repossessed goods, the sale or lease of which shall have given or shall give rise to chattel paper, and all property and goods both now owned and hereafter acquired by the Debtors which are sold, leased, secured, or the subject of or otherwise covered by, the Debtors' Chattel Paper, together with all reversionary rights embodied therein and all other rights incident to such property and goods; (iii) Documents; (iv) Goods (including Documents Representing Goods and Software Embedded in Goods); (v) Instruments; (vi) Insurance; (vii) Intellectual Property; (viii) Investment Related Property; (ix) judgments; 9 (x) Letter of Credit Rights; (xi) Money; (xii) Receivables Contracts and Receivable Records; (xiii) Commercial Tort Claims; (xiv) to the extent not otherwise included above, all General Intangibles, Material Collateral Contracts and other personal property of any kind; (xv) to the extent not otherwise included above, all Collateral Records, Collateral Support and Supporting Obligations relating to any of the foregoing; and (xvi) to the extent not otherwise included above, all Proceeds, products, accessions, rents and profits of or in respect of any of the foregoing. 2.2 CERTAIN LIMITED EXCLUSIONS. (a) Notwithstanding anything herein to the contrary, in no event shall the Collateral include, and no Debtor shall be deemed to have granted a security interest in, any of such Debtor's right, title or interest in: (i) any Intellectual Property if the grant of such security interest shall constitute or result in the abandonment, invalidation or rendering unenforceable any right, title or interest of any Debtor therein or if such a grant, under the terms of such Intellectual Property license, contract or agreement results in a breach or termination of the terms of, or constitutes a default under or termination of any such Intellectual Property license, contract or agreement (other than to the extent that the terms under such Intellectual Property license, contract or agreement that restricts such grant would be rendered ineffective pursuant to Section 9-406 or 9-408 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity); (ii) any license, contract, agreement, lease, Permit or other assets or property to which such Debtor is a party or any of its rights or interests thereunder, including, without limitation, with respect to any Pledged Partnership Interests or any Pledged LLC Interests, to the extent, but only to the extent, that such a grant, under the terms of such license, contract, agreement, lease, Permit or other assets or property (including, without limitation, any partnership agreements or any limited liability company agreements), or otherwise, results in a breach or termination of the terms of, or constitutes a default under or termination of any such license, contract, agreement, lease, Permit or other assets or property, without the consent of third parties that has not been obtained (including applicable Gaming Authorities, Racing Authorities, liquor agencies and authorities and other Governmental Authorities) (other than to the extent that any such term would be rendered ineffective pursuant to Section 9-406 or 9-408 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity); provided, that each Debtor agrees to use all commercially reasonable efforts (which shall not require the payment of cash to, or the reimbursement of fees and expenses of, the consenting party or the making of any material concessions under any such license, contract, agreement, lease, Permit or other assets or property (including, without limitation, any partnership agreements, any limited liability company agreements or any of the parcels of the Warner Land that are subject to the mortgage granted by OED to the seller of such land)) to obtain all requisite consent to enable such Debtor to provide a security interest in such asset and, in any event, immediately upon the ineffectiveness, lapse or termination of any such provision of any such license, contract, agreement, lease, Permit or other assets or property, the Collateral shall include, and such Debtor shall be deemed to have granted a security interest in, all such rights and interests in, under or with respect to such license, contract, agreement, lease, Permit or other assets or property as if such provision 10 had never been in effect; (iii) in any of the outstanding capital stock of any Controlled Foreign Corporation in excess of 65% of the total combined voting power of all classes of capital stock of such Controlled Foreign Corporation entitled to vote; provided, however, that if the Company is able to receive an opinion of counsel nationally recognized in tax matters to the effect that the pledge of such excess will not result in an income inclusion under section 951 et. seq. of the Code, the Collateral shall include, and the applicable Debtor shall be deemed to have granted a security interest in, such greater percentage of capital stock of such Controlled Foreign Corporation; (iv) any assets securing FF&E Financing, Purchase Money Obligations or Capital Lease Obligations permitted to be incurred under the Indenture to the extent acquired or refinanced with the proceeds of such FF&E Financing, Purchase Money Obligations and Capital Lease Obligations; (v) any Gaming License or Racing License; (vi) the lease for the Company's off-track betting operations at New Iberia, Louisiana or any other leases of off-track betting parlors operated by the Company in any other location in the future; (vii) FF&E to the extent securing FF&E Financing permitted under the Indenture; (viii) any motor vehicles; (ix) any cash (other than cash deposited in deposit accounts); or (x) OEDA's rights under or in respect of the Management Services Agreement and proceeds thereof (including fees paid to OEDA pursuant thereto). 2.3 INTERCREDITOR AGREEMENT. Notwithstanding anything herein to the contrary, the relative rights and remedies of the Secured Party hereunder and the Credit Facility Secured Party shall be subject to and governed by the terms of the Intercreditor Agreement at any time the Intercreditor Agreement is in effect, and in the event of any inconsistency between the terms hereof and the Intercreditor Agreement, the Intercreditor Agreement shall control at any time the Intercreditor Agreement is in effect. 3. SECURITY FOR OBLIGATIONS 3.1 SECURITY FOR OBLIGATIONS. This Agreement secures, and the Collateral is collateral security for, the prompt and complete payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a) (and any successor provision thereof)), of all obligations and liabilities of every nature of each Debtor now or hereafter existing under the Indenture Documents to which such Debtor is a party (all such obligations and liabilities being the "SECURED OBLIGATIONS"). 3.2 OBLIGATIONS REMAIN. Notwithstanding anything herein to the contrary, (a) each Debtor shall remain liable under any partnership agreement or limited liability company agreement relating to any Pledged Partnership Interest or Pledged LLC Interest and/or any other contracts and agreements included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed; (b) the exercise by the Secured Party of any of its rights hereunder shall not release any Debtor from any of its duties or obligations under the contracts and agreements included in the Collateral until title or all rights thereto has been transferred from such Debtor in accordance with such contracts or agreements; and (c) the Secured Party shall not have any obligation or liability under any partnership agreement or limited liability company agreement relating to any Pledged Partnership Interests or Pledged LLC Interests or any other contracts and agreements included in the Collateral by reason of this Agreement or any other Security Document, nor shall the Secured Party be obligated to assume or perform any of the obligations or duties of any Debtor thereunder or to take any action to collect or 11 enforce any claim for payment assigned hereunder by reason of this Agreement or any other Security Document. 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS 4.1 GENERALLY. (a) Representations and Warranties. Each Debtor hereby represents and warrants, on the Issue Date, that: (i) it owns the Collateral purported to be owned by it or otherwise has the rights it purports to have in each item of Collateral and, as to all Collateral whether now existing or hereafter acquired, will continue to own or have such rights in each item of the Collateral, in each case free and clear of any and all Liens, rights or claims of all other Persons other than Permitted Liens, including, without limitation, liens arising as a result of such Debtor becoming bound (as a result of merger or otherwise) as debtor under a security agreement entered into by another Person; (ii) it has indicated in Section I of the Diligence Certificate (as such schedule may be amended or supplemented from time to time): (w) the taxpayer identification number of such Debtor and the organization identification number of such Debtor, if any, provided by the Secretary of State of such Debtor's state of organization, (x) the type of organization of such Debtor, (y) the jurisdiction of organization of such Debtor and (z) the jurisdiction where the chief executive office or its sole place of business, as the case may be, is, and for the five (5)-year period preceding the date hereof has been, located. (iii) the full legal name of such Debtor is as set forth in Section I of the Diligence Certificate and it has not done in the last five (5) years, and does not do, business under any other name (including any trade-name or fictitious business name) except for those names set forth in Section I of the Diligence Certificate (as such schedule may be amended or supplemented from time to time); (iv) the names of all companies with which such Debtor has merged or consolidated in the last five (5) years, together with the dates of such mergers or consolidations are set forth in Section I of the Diligence Certificate; (v) the location(s) at which such Debtor has kept or maintained Equipment or Inventory in the last five (5) years that is Collateral under this Agreement is set forth in Section II of the Diligence Certificate; (vi) such Debtor has not within the last five (5) years become bound (whether as a result of merger or otherwise) as debtor under a security agreement entered into by another Person, which has not heretofore or concurrently with the delivery hereof been terminated; 12 (vii) the security interests granted by each Debtor in the Collateral of such Debtor to Secured Party hereunder constitute valid security interests in such Collateral securing the payment of the Secured Obligations of such Debtor, and upon the filing of all UCC financing statements naming such Debtor as "debtor" and the Secured Party as "secured party" and describing such Collateral in the filing offices set forth opposite such Debtor's name in Section I of the Diligence Certificate (as such section may be amended or supplemented from time to time) and, to the extent not subject to Article 9 of the UCC, upon the recordation of the security interest granted hereunder in Patents, Trademarks and Copyrights in the applicable patent, trademark and copyright registries (including the United States Patent and Trademark Office and the United States Copyright Office), and the registration of all unregistered Copyrights and other filings delivered by such Debtor, the security interests granted to the Secured Party hereunder constitute perfected Liens (subject in the case of priority only to Permitted Liens) on all such Collateral (other than Collateral constituting goods covered by certificates of title, Money, deposit accounts, Letter of Credit Rights and insurance policies); (viii)all actions, consents and approvals, including all filings, notices, registrations and recordings necessary for the exercise by the Secured Party of the voting or other rights provided for in this Agreement or the exercise of remedies in respect of the Collateral have been made or obtained except to the extent any actions, consents or approvals are required (A) in the case of any action, to be performed by the Secured Party or (B) under applicable Gaming Laws, the Intercreditor Agreement or any Intellectual Property license, contract or agreement; (ix) other than the UCC financing statements filed in favor of the Secured Party, no effective UCC financing statement, fixture filing or other instrument similar in effect under any applicable law covering all or any part of the Collateral is on file in any filing or recording office except for (x) UCC financing statements for which proper termination statements have been delivered to the Secured Party for filing and (y) UCC financing statements filed in connection with Permitted Liens; (x) no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority is required for either (i) the pledge or grant by any Debtor of the Liens purported to be created in favor of the Secured Party hereunder or (ii) the exercise by Secured Party of any rights or remedies in respect of any Collateral (whether specifically granted or created hereunder or created or provided for by applicable law), except (A) for the filings contemplated by clause (vii) above, (B) as may be required, in connection with the disposition of any Investment Related Property, by laws generally affecting the offering and sale of Securities, (C) to the extent any authorizations, consents or approvals are required under applicable Gaming Laws, the Intercreditor Agreement or any Intellectual Property license, contract or agreement and (D) to the extent any actions are required to be performed by the Secured Party; 13 (xi) all written information supplied by any Debtor with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects; and (xii) none of the Collateral constitutes, or is the Proceeds of, "farm products" (as defined in the UCC). (b) Covenants and Agreements. Each Debtor hereby covenants and agrees that until the Secured Obligations have been paid in full: (i) except for the security interest created by this Agreement, it shall not create or suffer to exist any Lien upon or with respect to any of the Collateral, except Permitted Liens; (ii) it shall not produce, use or permit any Collateral to be used unlawfully or in violation of any provision of this Agreement or any applicable statute, regulation or ordinance or any policy of insurance covering the Collateral; (iii) it shall (A) not change such Debtor's name, identity, corporate structure, sole place of business or chief executive office, as the case may be, or jurisdiction of organization unless it shall have (1) notified the Secured Party in writing, by executing and delivering to the Secured Party a completed Supplement to Security Agreement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, at least thirty (30) days prior to any such change, identifying such new proposed name, identity, corporate structure, sole place of business or chief executive office, as the case may be, or jurisdiction of organization and providing such other information in connection therewith as the Secured Party may reasonably request or (2) taken all actions necessary or advisable to maintain the continuous validity and perfection of the Secured Party's security interest in the Collateral intended to be granted and agreed to hereby and (B) notify the Secured Party of any tradename established by such Debtor within thirty (30) days following such establishment; (iv) upon such Debtor or any officer of such Debtor obtaining knowledge of any event not generally known to the public at large, it shall promptly notify the Secured Party in writing of any such event that could reasonably be expected to have a material adverse effect on (A) the value of a significant portion of the Collateral, (B) the ability of any Debtor or the Secured Party to dispose of the Collateral or any significant portion thereof pursuant to applicable law or agreements that could reasonably be expected to affect such ability or (C) the rights and remedies of the Secured Party in relation to the Collateral or any significant portion thereof, including, without limitation, the levy of any legal process against the Collateral or any significant portion thereof; (v) it shall use commercially reasonable efforts (which shall not require the payment of cash to, or the reimbursement of fees and expenses of, such 14 landlord or the making of any material concessions under any such lease) to deliver to the Secured Party landlord consents, to the extent it occupies and has business activities on any premises as a lessee under a lease, executed by the landlord in respect of such lease the effect of which would subordinate the claims of such landlord to the Liens created under this Agreement and enable the Secured Party to access such premises without delay for the purpose of enforcing such Liens; and (vi) it shall, on request of the Secured Party, cause other Persons (including without limitation those in possession of any Collateral) to execute and deliver in favor of the Secured Party acknowledgments, consents and control agreements necessary, or desirable and commercially reasonable in furtherance of the purposes of this Agreement. All matters shall be in form and substance reasonably acceptable to the Secured Party and shall be at such Debtor's cost. 4.2 EQUIPMENT AND INVENTORY. (a) Representations and Warranties. Each Debtor represents and warrants, on the Issue Date, that: (i) all of the Equipment and Inventory included in the Collateral is kept only at the locations specified in Schedule C of the Diligence Certificate; and (ii) any Goods now or hereafter produced by any Debtor included in the Collateral have been and will be produced in compliance with the requirements of the Fair Labor Standards Act, as amended. (b) Covenants and Agreements. Each Debtor covenants and agrees that: (i) it shall not deliver any Document evidencing any Equipment and Inventory to any Person other than the issuer of such Document to claim the Goods evidenced therefor or the Secured Party or the Credit Facility Secured Party or any other holder or representative of a holder of a Permitted Lien; and (ii) if any Equipment or Inventory is in possession or control of any third party (other than the Credit Facility Secured Party), it shall join with the Secured Party in notifying the third party of the Secured Party's security interest and use its commercially reasonable efforts (which shall not require the payment of cash to, or the reimbursement of fees and expenses of, such third party or the making of any material concessions under any contract or agreement relating to such Equipment or Inventory) in obtaining an acknowledgment from the third party that it is holding the Equipment and Inventory for the benefit of the Secured Party and other holders of Permitted Liens. 15 4.3 RECEIVABLES CONTRACTS. Covenants and Agreements: Each Debtor hereby covenants and agrees that until the Secured Obligations have been paid in full, it shall keep and maintain at its own cost and expense satisfactory and complete records of the Receivables Contracts. 4.4 INVESTMENT RELATED PROPERTY. (a) Representations and Warranties. Each Debtor hereby represents and warrants, on the Issue Date, that: (i) Schedule A of the Diligence Certificate (as such schedule may be amended or supplemented from time to time) sets forth all of the Pledged Stock, Pledged LLC Interests, Pledged Partnership Interests and Pledged Trust Interests owned by any Debtor and such Pledged Equity Interests constitute the percentage of issued and outstanding shares of stock, percentage of membership interests, percentage of partnership interests or percentage of beneficial interest of the respective issuers thereof indicated on such Schedule; (ii) it is the record and beneficial owner of the Pledged Equity Interests free of all Liens, rights or claims of other Persons other than Permitted Liens; (iii) without limiting the generality of Section 4.1(a)(v), no consent of any Person including any other general or limited partner, any other member of a limited liability company, any other shareholder or any other trust beneficiary is necessary in connection with the creation or perfection of the security interest of the Secured Party in any Pledged Equity Interests or the exercise by the Secured Party of the voting or other rights provided for in this Agreement or the exercise of remedies in respect thereof; (iv) none of the Pledged LLC Interests nor Pledged Partnership Interests are or represent interests in issuers that are: (a) registered as investment companies, (b) are dealt in or traded on securities exchanges or markets or (c) have opted to be treated as securities under the UCC of any jurisdiction; (v) Schedule A of the Diligence Certificate (as such schedule may be amended or supplemented from time to time) sets forth under the heading "Pledged Debt" all of the Pledged Debt owned by any Debtor and all of such Pledged Debt has been duly authorized, authenticated or issued, and delivered and is the legal, valid and binding obligation of the issuers thereof and is not in default and constitutes all of the issued and outstanding inter-company Indebtedness evidenced by an instrument or certificated security of the respective issuers thereof owing to such Debtor; (vi) Schedule A of the Diligence Certificate sets forth under the headings "Securities Accounts," "Deposit Accounts," and "Commodities Accounts," respectively, all of the Securities Accounts, Deposit Accounts and Commodities Accounts in which the each Debtor has an 16 interest. Each Debtor is the sole entitlement holder of each such Securities Account, Deposit Account and Commodities Account, and such Debtor has not consented to, and is not otherwise aware of, any Person having "control" (as defined in the UCC) over, or any other interest in, any such Securities Account, Deposit Account or Commodity Account, or any securities or other property credited thereto; and (vii) The Secured Party has valid and enforceable control agreements with all Persons with whom each Debtor has Deposit Accounts or with all securities intermediaries maintaining any Securities Accounts of, or on behalf of, such Debtor. As to other Collateral in which perfection of a security interest may be obtained by control, all actions have been taken so as to ensure that the Secured Party has control of such Collateral, other than as permitted hereby in the absence of an Event of Default. (b) Covenants and Agreements. Each Debtor hereby covenants and agrees that until the Secured Obligations have been paid in full: (i) in the event it acquires rights in any Investment Related Property after the date hereof, it shall deliver to the Secured Party a completed Supplement to Security Agreement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, reflecting such new Investment Related Property and all other Investment Related Property. Notwithstanding the foregoing, it is understood and agreed that the security interest of the Secured Party shall attach to all Investment Related Property immediately upon any Debtor's acquisition of rights therein and shall not be affected by the failure of any Debtor to deliver a supplement to Schedule A of the Diligence Certificate as required hereby; (ii) except as provided in the next sentence, in the event such Debtor receives any dividends, interest or distributions on any Investment Related Property, or any securities or other property upon the merger, consolidation, liquidation or dissolution of any issuer of any Investment Related Property, then (a) such dividends, interest or distributions and securities or other property shall be included in the definition of Collateral without further action and (b) such Debtor shall immediately take all steps, if any, necessary, or advisable and commercially reasonable to ensure the validity and perfection of the Secured Party over such Investment Related Property (including, without limitation, delivery thereof to the Secured Party); (iii) it shall comply with all of its obligations under any partnership or limited liability company agreement or limited liability company agreement relating to Pledged Partnership Interests or Pledged LLC Interests and shall enforce all of its rights with respect to any Investment Related Property related to Persons that are not Guarantors; (iv) each Debtor consents to the grant by each other Debtor of a security interest in all Investment Related Property to the Secured Party and, 17 without limiting the foregoing, consents to the transfer of any Pledged Partnership Interest and any Pledged LLC Interest to the Secured Party or its nominee following an Event of Default and to the substitution of the Secured Party or its nominee as a partner in any partnership or as a member in any limited liability company with all the rights and powers related thereto; (v) with respect to any Investment Related Property consisting of Securities Accounts or Securities Entitlements, it shall cause the securities intermediary maintaining such Securities Account or Securities Entitlement to enter into an agreement substantially in the form of Exhibit B hereto pursuant to which the securities intermediary shall agree to comply with the Secured Party's "entitlement orders" without further consent by such Debtor. With respect to any Investment Related Property that is a "Deposit Account", it shall cause the depositary institution maintaining such account to enter into an agreement substantially in the form of Exhibit C hereto, pursuant to which the Secured Party shall have both sole dominion and control over such Deposit Account and "control" (within the meaning of Section 9-104 of the UCC) over such Deposit Account. Such Debtor shall have entered into such control agreement or agreements with respect to: (i) any Securities Accounts, Securities Entitlements or Deposit Accounts that exist on the Issue Date and (ii) any Securities Accounts, Securities Entitlements or Deposit Accounts that are created or acquired after the Issue Date, as of or prior to the deposit or transfer of any such Securities Entitlements or funds, whether constituting moneys or investments, into such Securities Accounts or Deposit Accounts; and (vi) with respect to any Investment Related Property in which it currently has rights, it shall have complied with the provisions of this Section on or before the Closing Date and with respect to any Investment Related Property hereafter acquired by such Debtor it shall comply with the provisions of this Section immediately upon acquiring rights therein, in each case in form and substance satisfactory to the Secured Party. With respect to any Investment Related Property that is represented by a certificate or that is an "instrument" (other than any Investment Related Property credited to a Securities Account) it shall cause such certificate or instrument to be delivered to the Secured Party, indorsed in blank by an "effective indorsement" (as defined in Section 8-107 of the UCC), regardless of whether such certificate constitutes a "certificated security" for purposes of the UCC. With respect to any Investment Related Property that is an "uncertificated security" for purposes of the UCC (other than any "uncertificated securities" credited to a Securities Account), it shall cause the issuer of such uncertificated security to register the Secured Party as the registered owner thereof on the books and records of the issuer. 18 (c) Voting and Distributions. (i) So long as no Event of Default shall have occurred and be continuing, and subject to applicable Gaming Laws, each Debtor shall be entitled to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Investment Related Property or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Indenture. (ii) Upon the occurrence and during the continuation of an Event of Default subject to Section 7.7: (A) all rights of each Debtor to exercise or refrain from exercising the voting and other consensual rights which it would otherwise be entitled to exercise pursuant hereto shall cease and all such rights shall thereupon become vested in the Secured Party who shall thereupon have the sole right to exercise such voting and other consensual rights; and (B) in order to permit the Secured Party to exercise the voting and other consensual rights which it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions which it may be entitled to receive hereunder: (1) each Debtor shall promptly execute and deliver (or cause to be executed and delivered) to the Secured Party all proxies, dividend payment orders and other instruments as the Secured Party may from time to time reasonably request and (2) each Debtor acknowledges that the Secured Party may utilize the power of attorney set forth in Section 6. 4.5 INTELLECTUAL PROPERTY. (a) Representations and Warranties. Except as disclosed in Schedule B of the Diligence Certificate (as such schedule may be amended or supplemented from time to time), each Debtor hereby represents and warrants, on the Issue Date, that: (i) Schedule B of the Diligence Certificate (as such schedule may be amended or supplemented from time to time) sets forth a true and complete list of (i) all active United States and foreign registrations of and applications for Patents, Trademarks, and Copyrights owned by each Debtor and (ii) all Patent Licenses, Trademark Licenses and Copyright Licenses material to the business of such Debtor; (ii) it is the sole and exclusive owner of the entire right, title, and interest in and to all Intellectual Property listed as "owned" by such Debtor on Schedule B of the Diligence Certificate (as such schedule may be amended or supplemented from time to time), and owns or has the valid right to use all other Intellectual Property used in or necessary to conduct its business, free and clear of all Liens, claims, encumbrances and licenses, except for Permitted Liens and the licenses set forth on 19 Schedule B of the Diligence Certificate (as each may be amended or supplemented from time to time); (iii) to each Debtor's knowledge, all Intellectual Property is valid and enforceable; no holding, decision, or judgment has been rendered in any action or proceeding before any court or administrative authority challenging the validity of, such Debtor's right to register, or such Debtor's rights to own or use, any Intellectual Property and no such action or proceeding is pending or, to the best of such Debtor's knowledge, threatened; (iv) all registrations and applications for Copyrights, Patents and Trademarks are standing in the name of each Debtor, and none of the Trademarks, Patents, Copyrights or Trade Secret Collateral has been licensed by any Debtor to any affiliate or third party, except as disclosed on Schedule B of the Diligence Certificate (as each may be amended or supplemented from time to time); and (v) there is no effective UCC financing statement or other document or instrument now executed, or on file or recorded in any public office that has not been released or terminated, granting a security interest in or otherwise encumbering any part of the Intellectual Property, other than in favor of the Secured Party. (b) Covenants and Agreements. Each Debtor hereby covenants and agrees that until the Secured Obligations have been paid in full: (i) it shall promptly (but in no event more than thirty (30) days after any Debtor obtains knowledge thereof) report to the Secured Party (i) the filing of any application to register any Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office, or any state registry or foreign counterpart of the foregoing (whether such application is filed by such Debtor or through any agent, employee, licensee, or designee thereof) and (ii) the registration of any Intellectual Property by any such office, in each case by executing and delivering to the Secured Party a completed Supplement to Security Agreement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto; (ii) it shall, promptly upon the reasonable request of the Secured Party, execute and deliver to the Secured Party any document required to acknowledge, confirm, register, record, or perfect the Secured Party's interest in any part of the Intellectual Property, whether now owned or hereafter acquired; (iii) it shall hereafter use commercially reasonable efforts (which shall not require the payment of cash to, or the reimbursement of fees and expenses of, the counterparty to any such contract or the making of any material concessions under any such contract) so as not to permit the inclusion in any contract to which it hereafter becomes a party of any 20 provision that could or might in any way materially impair or prevent the creation of a security interest in, or the assignment of, such Debtor's rights and interests in any property included within the definitions of any Intellectual Property acquired under such contracts; 4.6 COMMERCIAL TORT CLAIMS. (a) Representations and Warranties. Each Debtor hereby represents and warrants, on the Issue Date, that Schedule E of the Diligence Certificate (as such schedule may be amended or supplemented from time to time) sets forth all Commercial Tort Claims of each Debtor. (b) Covenants and Agreements. Each Debtor hereby covenants and agrees that until the Secured Obligations have been paid in full, with respect to any Commercial Tort Claim hereafter arising it shall deliver to the Secured Party a completed Supplement to Security Agreement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, identifying such new Commercial Tort Claims. 4.7 JUDGMENTS. (a) Representations and Warranties. Each Debtor hereby represents and warrants, on the Issue Date, that Schedule E of the Diligence Certificate (as such schedule may be amended or supplemented from time to time) sets forth all judgments in favor of each Debtor. (b) Covenants and Agreements. Each Debtor hereby covenants and agrees that until the Secured Obligations have been paid in full, with respect to any judgment hereafter arising in its favor it shall deliver to the Secured Party a completed Supplement to Security Agreement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, identifying such new judgments unless such Debtor was incorporated or formed under the laws of Louisiana, in which case, such Debtor shall deliver to the Secured Party a completed security agreement having terms consistent with the terms hereof, together with all Supplements to Schedules thereto, identifying such new judgments, which new security agreement shall be governed by Louisiana law. 5. FURTHER ASSURANCES; ADDITIONAL DEBTORS 5.1 FURTHER ASSURANCES. (a) Each Debtor agrees that from time to time until the Secured Obligations have been paid in full, at the expense of such Debtor, that it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary, or desirable and commercially reasonable, in order to create and/or maintain the validity, perfection or priority of and protect any security interest granted or purported to be granted hereby or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Debtor shall: (i) execute and file such financing or continuation statements, or amendments thereto, and execute and deliver such other agreements, instruments, endorsements, powers of attorney or notices, as may be necessary or desirable, in order to perfect and preserve the security interests granted or purported to be granted hereby; 21 (ii) take all actions necessary to ensure the recordation of appropriate evidence of the Liens and security interest granted hereunder in the Intellectual Property with any intellectual property registry in which said Intellectual Property is registered or in which an application for registration is pending including, without limitation, the United States Patent and Trademark Office, the United States Copyright Office, the various Secretaries of State, and the foreign counterparts on any of the foregoing; (iii) at any reasonable time, upon request by the Secured Party, exhibit the Collateral to and allow inspection of the Collateral by the Secured Party, or persons designated by the Secured Party; and (iv) at the Secured Party's reasonable request and subject to the Intercreditor Agreement, appear in and defend any action or proceeding that may affect the Secured Party's security interest in all or any part of the Collateral. (b) Each Debtor hereby authorizes the Secured Party to file, until the Secured Obligations have been paid in full, a Record or Records, including, without limitation, UCC financing or continuation statements, and amendments thereto, in all jurisdictions and with all filing offices as the Secured Party may determine, in its sole discretion, are necessary or advisable to perfect the security interest granted to the Secured Party herein. Such UCC financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner as the Secured Party may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the Collateral granted to the Secured Party herein, including, without limitation, describing such property as "all assets other than the excluded assets" or other substantially similar descriptions. Each Debtor shall furnish to the Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Secured Party may reasonably request, all in reasonable detail. (c) Each Debtor hereby authorizes the Secured Party to modify this Agreement after obtaining such Debtor's approval of or signature to such modification by amending Schedule B of the Diligence Certificate (as such schedule may be amended or supplemented from time to time) to include reference to any right, title or interest in any existing Intellectual Property or any Intellectual Property acquired or developed by any Debtor after the execution hereof or to delete any reference to any right, title or interest in any Intellectual Property in which any Debtor no longer has or claims any right, title or interest (d) Unless (i) the Secured Party shall have failed to comply with Section 9-513(c) of the UCC with respect to any Debtor, (ii) otherwise permitted under Section 4.1(b)(iii)(b) to ensure the continued effectiveness of any UCC financing statement relating to such Debtor or (iii) otherwise required under Section 5.1(a) to ensure the continued effectiveness of any UCC financing statement relating to such Debtor or perfect the security interest of the Secured Party hereunder in any Collateral of such Debtor, such Debtor agrees not to file any termination statements, amendments, corrections or supplements relative to the UCC financing statements filed in connection with this Agreement without the prior written consent of the Secured Party. 22 5.2 ADDITIONAL DEBTORS. From time to time subsequent to the date hereof, additional Guarantors and/or Issuers (as defined in the Indenture) may become additional Debtors pursuant to the terms of the Indenture, by executing a Supplement to Security Agreement, substantially in the form attached hereto as Exhibit A. Upon delivery of any such counterpart agreement to the Secured Party, notice of which is hereby waived by Debtors, (a) each additional Debtor shall be a Debtor and shall be as fully a party hereto as if additional Debtor were an original signatory hereto and (b) the supplemental schedules thereto shall be incorporated into and become a part of and supplement the respective schedules to this Agreement; and each reference to such Schedules shall mean and be a reference to such Schedules as supplemented pursuant to each Supplement to Security Agreement. Each Debtor expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Debtor hereunder, nor by any election of Secured Party not to cause any Subsidiary of the Company to become an additional Debtor hereunder. This Agreement shall be fully effective as to any Debtor that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Debtor hereunder. 6. ATTORNEY-IN-FACT 6.1 POWER OF ATTORNEY. Each Debtor hereby irrevocably appoints the Secured Party (such appointment being coupled with an interest) as such Debtor's attorney-in-fact, with full authority in the place and stead of such Debtor and in the name of such Debtor, the Secured Party, from time to time in its discretion to take any action and to execute any instrument that it may deem reasonably necessary or advisable to accomplish the purposes of this Agreement and the Intercreditor Agreement, including, without limitation, the following: (a) upon the occurrence and during the continuance of any Event of Default, to obtain and adjust insurance required to be maintained by such Debtor pursuant to the Indenture; (b) upon the occurrence and during the continuance of any Event of Default, to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (c) upon the occurrence and during the continuance of any Event of Default, to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (b) above subject in all respects to the rights of any lender under the Credit Agreement to receive, endorse and collect the same; (d) upon the occurrence and during the continuance of any Event of Default, to file any claims or take any action or institute any proceedings necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Secured Party with respect to any of the Collateral; (e) to prepare and file any UCC financing statements against such Debtor as debtor; (f) to prepare, sign, and file for recordation in any intellectual property registry, appropriate evidence of the lien and security interest granted herein in the Intellectual Property in the name of such Debtor as assignor; (g) to take or cause to be taken all actions necessary to perform or comply or cause performance or compliance with the terms of this Agreement, including, without limitation, access to pay or discharge taxes or Liens (other than Permitted Liens) levied or placed upon or threatened against the 23 Collateral, the legality or validity thereof and the amounts necessary to discharge the same, any such payments made by the Secured Party to become obligations of such Debtor to the Secured Party, due and payable immediately without demand; (h) upon the occurrence and during the continuance of any Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Secured Party were the absolute owner thereof for all purposes, and to do, at the Secured Party's option and such Debtor's expense, at any time or from time to time, all acts and things that the Secured Party deems reasonably necessary to protect, preserve or realize upon the Collateral and the Secured Party's security interest therein in order to effect the intent of this Agreement, all as fully and effectively as such Debtor might do; and (i) upon the occurrence and during the continuance of any Event of Default, to enforce all Supporting Obligations with respect to any Collateral. 6.2 NO DUTY ON THE PART OF SECURED PARTY. The powers conferred on the Secured Party hereunder are solely to protect the interests of the Secured Party in the Collateral and shall not impose any duty upon the Secured Party to exercise any such powers. The Secured Party shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to any Debtor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct. 7. REMEDIES 7.1 GENERALLY. (a) If any Event of Default shall have occurred and be continuing, the Secured Party may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it at law or in equity, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Collateral) to collect, enforce or satisfy any Secured Obligations then owing, whether by acceleration or otherwise, and also may pursue any of the following separately, successively or simultaneously: (i) require any Debtor to, and each Debtor hereby agrees that it shall at its expense and promptly upon request of the Secured Party forthwith, assemble all or part of the Collateral as directed by the Secured Party and make it available to the Secured Party at a place to be designated by the Secured Party that is reasonably convenient to both parties; (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process; (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent the Secured Party deems appropriate; (iv) without notice except as specified below or under the UCC, sell, assign, lease, license (on an exclusive or nonexclusive basis) or otherwise dispose of the Collateral or any part thereof in one or more parcels at 24 public or private sale, at any of the Secured Party's offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as the Secured Party may deem commercially reasonable; and (b) The Secured Party may be a purchaser of any or all of the Collateral at any public or, to the extent permitted under the UCC, private sale in accordance with the UCC and the Secured Party, as Secured Party for and representative of the Holders, shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such sale made in accordance with the UCC, to use and apply any of the Secured Obligations of such Debtor as a credit on account of the purchase price for any Collateral payable by the Secured Party at such sale. To the extent provided under the UCC or other applicable law, each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Debtor and Debtor hereby waives (to the extent permitted by applicable law) all rights of redemption stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted until payment in full of the Obligations. Each Debtor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days notice to such Debtor of the time and place of any public or private sale shall constitute reasonable notification. The Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor and by notice to the Company, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Debtor hereby waives any claims against the Secured Party arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Secured Party accepts the first offer received and does not offer such Collateral to more than one offeree. If the proceeds of any sale or other disposition of the Collateral of any Debtor are insufficient to pay all the Secured Obligations of such Debtor, such Debtor shall be liable for the deficiency and the fees of any attorneys employed by the Secured Party to collect such deficiency. Each Debtor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to the Secured Party, that the Secured Party has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against such Debtor, and such Debtor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. Nothing in this Section shall in any way alter the rights of the Secured Party hereunder. (c) The Secured Party may sell the Collateral following the occurrence and during the continuance of an Event of Default without giving any warranties as to the Collateral. The Secured Party may specifically disclaim or modify, in its sole discretion, any warranties of title or the like as to any Collateral. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of any of the Collateral. The Secured Party may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. Leasing and licensing of Collateral by the Secured Party to third Persons are types of sales permitted hereunder. (d) If the Secured Party sells any of the Collateral of any Debtor on credit, the Secured Obligations of such Debtor will be credited only with payments actually made by the purchaser and received by the Secured Party and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, the Secured Party may resell the Collateral. 25 (e) The Secured Party shall have no obligation to marshal any of the Collateral. (f) All amounts and proceeds (including checks and other instruments) received by any Debtor in respect of amounts due to such Debtor in respect of the Collateral or any portion thereof following the occurrence and during the continuance of an Event of Default shall be received in trust for the benefit of the Secured Party hereunder, shall be segregated from other funds of such Debtor and shall be forthwith paid over or delivered (subject to the Intercreditor Agreement to the extent then in effect) to the Secured Party in the same form as so received (with any necessary endorsement) to be held as cash Collateral and applied as provided by Section 7.6 following the occurrence and during the continuance of an Event of Default. Upon demand from the Secured Party following the occurrence and during the continuance of an Event of Default, Debtors shall not adjust, settle or compromise the amount or payment of any such amount or release wholly or partly any obligor with respect thereto or allow any credit or discount thereon. 7.2 LOUISIANA REMEDIES. The Secured Party, instead of exercising the power of sale herein conferred upon it, may, following the occurrence and during the continuance of an Event of Default, proceed by a suit or suits to foreclose the security interest and sell the Collateral or any portion thereof under a judgment of a court or courts of competent jurisdiction. For purposes of Louisiana executory process procedures, each Debtor acknowledges its Secured Obligations and does hereby confess judgment in favor of the Secured Party for the full amount of such Secured Obligations. Each Debtor agrees that upon the occurrence of an Event of Default the Secured Party may cause the Collateral to be seized and sold under executory or ordinary process, at the Secured Party's sole option, without appraisement, appraisement being hereby expressly waived, as an entirety or in parcels as the Secured Party may determine, to the highest bidder for cash, and otherwise exercise the rights, powers and remedies afforded herein and under applicable Louisiana law. Any and all declarations of fact made by authentic act before a Notary Public in the presence of two witnesses by a person declaring that such facts lie within his knowledge shall constitute authentic evidence of such facts for the purpose of executory process. Each Debtor hereby waives in favor of the Secured Party: (a) the benefit of appraisement as provided in Louisiana Code of Civil Procedure Articles 2332, 2336, 2723 and 2724, and all other laws conferring the same; (b) the demand and three days delay accorded by Louisiana Code of Civil Procedure Articles 2639 and 2721; (c) the notice of seizure required by Louisiana Code of Civil Procedure Articles 2293 and 2721; (d) the three days delay provided by Louisiana Code of Civil Procedure Articles 2331 and 2722; and (e) the benefit of the other provisions of Louisiana Code of Civil Procedure Articles 2331, 2722 and 2723, not specifically mentioned above. In the event the Collateral or any part thereof is seized as an incident to an action for the recognition or enforcement of this Agreement by executory process, ordinary process, sequestration, writ of fieri facias, or otherwise, each Debtor and the Secured Party agree that the court issuing any such order shall, if petitioned for by the Secured Party, direct the applicable sheriff to appoint as a keeper of the Collateral, the Secured Party or any agent designated by the Secured Party or any person named by the Secured Party at the time such seizure is effected. This designation is pursuant to Louisiana Revised Statutes 9:5136-9:5140.2 and the Secured Party shall be entitled to all the rights and benefits afforded thereunder as the same may be amended. It is hereby agreed that the keeper shall be entitled to receive as compensation, in excess of its costs and expenses incurred in the administration or preservation of the Collateral, an amount equal to $250.00 per day payable monthly on the first day of each month and shall be included as Secured Obligations secured by this Agreement. The designation of keeper made herein shall not be deemed to require the Secured Party to provoke the appointment of such a keeper. In addition to the normal recourse provisions noted above, the Secured Party will have to comply with the provisions of the Louisiana Administrative Code Title 42 Section 2501 et. seq. relating to holders of gaming licenses. These provisions provide for emergency situations, such as foreclosures by security interest holders. Louisiana Administrative Code Title 42 Section 2501 et. seq. delineates the process for obtaining emergency permission to take over and defines how to proceed with the Louisiana 26 Gaming Control Board. Additionally, in accordance with Louisiana Administrative Code Title 42 Section 2501 et. seq., any transfer of interest, including security interest, is subject to prior approval by the Louisiana State Racing Commission and the Louisiana Gaming Control Board. 7.3 APPLICATION OF PROCEEDS. Except as expressly provided elsewhere in this Agreement, all Proceeds received by the Secured Party in respect of any sale, any collection from, or other realization upon all or any part of the Collateral of any Debtor shall be applied in full or in part by the Secured Party against the Secured Obligations of such Debtor in the order specified in Section 6.10 of the Indenture. 7.4 INVESTMENT RELATED PROPERTY. Each Debtor recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, the Secured Party may be compelled, with respect to any sale of all or any part of the Investment Related Property conducted without prior registration or qualification of such Investment Related Property under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Investment Related Property for their own account, for investment and not with a view to the distribution or resale thereof. Each Debtor acknowledges that any such private sale may be at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances, each Debtor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Secured Party shall have no obligation to engage in public sales and no obligation to delay the sale of any Investment Related Property for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it. If the Secured Party determines to exercise its right to sell any or all of the Investment Related Property, upon written request, each Debtor shall and shall cause each issuer of any Pledged Stock to be sold hereunder, each partnership and each limited liability company from time to time to furnish to the Secured Party all such information as the Secured Party may reasonably request in order to determine the number and nature of interest, shares or other instruments included in the Investment Related Property which may be sold by the Secured Party in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. Notwithstanding any other provision of this Agreement to the contrary, with respect to any deposit accounts that constitute part of the Collateral, the Secured Party may only exercise remedies with respect to such deposit accounts at the earliest of (i) the date that an Event of Default shall be continuing for 180 consecutive days after the delivery of written notice to the Company of such Event of Default under the Indenture, (ii) the date on which a declaration of acceleration has been made under Section 6.2 of the Indenture or an Event of Default under Section 6.1(a)(xii) or (xiii) of the Indenture has occurred, and (iii) any other date to the extent permitted under the Intercreditor Agreement at any time the Intercreditor Agreement is in effect. 7.5 INTELLECTUAL PROPERTY. (a) Anything contained herein to the contrary notwithstanding, upon the occurrence and during the continuation of an Event of Default: (i) the Secured Party shall have the right (but not the obligation) to bring suit or otherwise commence any action or proceeding in the name of any Debtor, the Secured Party or otherwise, in the Secured Party's sole discretion, to enforce any Intellectual Property, in which event such Debtor shall, at the request of the Secured Party, do any and all reasonable, lawful acts and execute any and all documents reasonably 27 required by the Secured Party in aid of such enforcement and such Debtor shall promptly, upon demand, reimburse and indemnify the Secured Party as provided in Section 10 hereof in connection with the exercise of its rights under this Section, and, to the extent that the Secured Party shall elect not to bring suit to enforce any Intellectual Property as provided in this Section, each Debtor agrees to use all reasonable measures, whether by action, suit, proceeding or otherwise, to prevent the commercially material infringement of any of the material Intellectual Property by others and for that purpose agrees to diligently maintain any action, suit or proceeding against any Person so infringing as shall be reasonably necessary to prevent such infringement; (ii) upon reasonable written demand from the Secured Party, each Debtor shall grant, assign, convey or otherwise transfer to the Secured Party all of such Debtor's right, title and interest in and to the Intellectual Property and shall execute and deliver to the Secured Party such documents as are necessary or appropriate to carry out the intent and purposes of this Agreement; (iii) each Debtor agrees that such an assignment and/or recording shall be applied to reduce the Secured Obligations of such Debtor outstanding only to the extent that the Secured Party receives cash proceeds in respect of the sale of, or other realization upon, the Intellectual Property of such Debtor; (iv) within five (5) Business Days after written notice from the Secured Party, each Debtor shall make available to the Secured Party, to the extent within such Debtor's power and authority, such personnel in such Debtor's employ on the date of such Event of Default as the Secured Party may reasonably designate, by name, title or job responsibility, to permit such Debtor to continue, directly or indirectly, to produce, advertise and sell the products and services sold or delivered by such Debtor under or in connection with the Intellectual Property, such persons to be available to perform their prior functions on the Secured Party's behalf and to be compensated by the Secured Party at such Debtor's expense on a per diem, pro-rata basis consistent with the salary and benefit structure applicable to each as of the date of such Event of Default; and (v) the Secured Party shall have the right to notify, or require each Debtor to notify, any obligors with respect to amounts due or to become due to such Debtor in respect of the Intellectual Property, of the existence of the security interest created herein, to direct such obligors to make payment of all such amounts directly to the Secured Party, and, upon such notification and at the expense of such Debtor, to enforce collection of any such amounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Debtor might have done. 28 (b) If (i) an Event of Default shall have occurred and, by reason of cure, waiver, modification, amendment or otherwise, no longer be continuing, (ii) no other Event of Default shall have occurred and be continuing, (iii) an assignment or other transfer to the Secured Party of any rights, title and interests in and to the Intellectual Property shall have been previously made and shall have become absolute and effective, and (iv) the Secured Obligations shall not have become immediately due and payable, upon the written request of any Debtor, the Secured Party shall promptly execute and deliver to such Debtor, at such Debtor's sole cost and expense, such assignments or other transfer as may be necessary to reassign to such Debtor any such rights, title and interests as may have been assigned to the Secured Party as aforesaid, subject to any disposition thereof that may have been made by the Secured Party; provided, after giving effect to such reassignment, the Secured Party's security interest granted pursuant hereto, as well as all other rights and remedies of the Secured Party granted hereunder, shall continue to be in full force and effect; and provided further, the rights, title and interests so reassigned shall be free and clear of any Liens granted by or on behalf of the Secured Party. (c) Solely for the purpose of enabling the Secured Party to exercise rights and remedies under this Section 7 following the occurrence and during the continuance of an Event of Default, each Debtor hereby grants to the Secured Party, to the extent it has the right to do so, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such Debtor), subject, in the case of Trademarks, to sufficient rights to quality control and inspection in favor of such Debtor to avoid the risk of invalidation of said Trademarks, to use, operate under, license, or sublicense any Intellectual Property now owned or hereafter acquired by such Debtor, and wherever the same may be located. 7.6 CASH PROCEEDS. Cash Proceeds shall, following the occurrence and during the continuance of an Event of Default, be held by such Debtor in trust for the Secured Party, segregated from other funds of such Debtor, and shall, forthwith upon receipt by such Debtor, unless otherwise provided pursuant to Section 4.4, be turned over to the Secured Party in the exact form received by such Debtor (duly indorsed by such Debtor to the Secured Party, if required). Any Cash Proceeds received by the Secured Party (whether from a Debtor or otherwise), following the occurrence and during the continuance of an Event of Default, shall be applied by the Secured Party in accordance with Section 7.3. 7.7 REGULATORY MATTERS. The Secured Party acknowledges and agrees that the approval of the applicable Gaming Authorities of this Agreement shall not act or be construed as the approval, either express or implied, for the Secured Party to take any actions or steps provided for in this Agreement for which prior approval of such Gaming Authority is required, without first obtaining such prior and separate approval to the extent then required by applicable law. 8. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until the payment in full of all Secured Obligations, be binding upon each Debtor, its successors and assigns (except to the extent otherwise provided in the Indenture), and inure, together with the rights and remedies of the Secured Party hereunder, to the benefit of the Secured Party and its successors, transferees and assigns. Without limiting the generality of the foregoing, but subject to the terms of the Indenture, any Holder may assign or otherwise transfer any Note held by it to any other Person to the extent permitted under the Indenture, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Holders. Upon the payment in full of all Secured Obligations, the security interest granted hereby shall terminate hereunder and all rights to the Collateral granted hereunder shall revert to Debtors. Upon any such termination the Secured Party shall, at Debtors' 29 expense, execute and deliver to Debtors such documents as Debtors shall reasonably request to evidence such termination. 9. STANDARD OF CARE; SECURED PARTY MAY PERFORM The powers conferred on the Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Secured Party shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Secured Party accords its own property. Neither the Secured Party nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Debtor or otherwise. If any Debtor fails to perform any agreement contained herein, the Secured Party may itself perform, or cause performance of, such agreement, and the expenses of the Secured Party incurred in connection therewith shall be payable by each Debtor under Section 11.2 hereof. 10. INDEMNITY (a) Each Debtor agrees to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless each Indemnitee, from and against any and all claims, losses and liabilities in any way relating to, growing out of or resulting from this Agreement and the transactions contemplated hereby (including without limitation enforcement of this Agreement), except to the extent such claims, losses or liabilities result from such Indemnitee's gross negligence or willful misconduct as finally and unappeallably determined by a court of competent jurisdiction, and to pay to the Secured Party promptly following written demand the amount of any and all reasonable costs and reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents in accordance with the terms and conditions of the Indenture. (b) The obligations of each Debtor in this Section 10 shall survive the termination of this Agreement and the discharge of such Debtor's other obligations under this Agreement and the Indenture. 11. MISCELLANEOUS 11.1 NOTICES. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given to a Debtor or the Secured Party, shall be sent to such Person's address and in the manner as set forth in the Indenture. 11.2 EXPENSES. Debtors agree to pay promptly all the actual and reasonable costs and expenses of preparation of the Indenture Documents and any consents, amendments, waivers or other modifications thereto; all the costs of furnishing all opinions by counsel for the Debtors; the reasonable fees, expenses and disbursements of counsel to Secured Party (in each case including allocated costs of internal counsel) in connection with the negotiation, preparation, execution and administration of the Indenture Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requested by Debtors; all the actual costs and reasonable expenses of creating and perfecting Liens in favor of Secured Party, for the benefit of the Holders, including filing and 30 recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums and reasonable fees, expenses and disbursements of counsel to Secured Party and of counsel providing any opinions that Secured Party may reasonably request in respect of the Collateral or the Liens created pursuant to the Indenture Documents; all the actual costs and reasonable fees, expenses and disbursements of any auditors, accountants, consultants or appraisers; all the actual costs and reasonable expenses (including the reasonable fees, expenses and disbursements of any appraisers, consultants, advisors and agents employed or retained by Secured Party and its counsel) in connection with the custody or preservation of any of the Collateral; and after the occurrence of an Event of Default, all costs and expenses, including reasonable attorneys' fees (including allocated costs of internal counsel), keeper's fees and costs of settlement, incurred by Secured Party in enforcing any Secured Obligations of or in collecting any payments due from any Debtor hereunder or under the other Indenture Documents by reason of an Event of Default (including in connection with the sale of, collection from, or other realization upon any of the Collateral) or in connection with any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a "work-out" or pursuant to any insolvency or bankruptcy cases or proceedings. 11.3 SUBROGATION. Each Debtor further agrees to waive any and all rights of subrogation it may have against any other Debtor upon the sale or disposition of all or any portion of the Collateral by Secured Party pursuant to the terms of this Agreement until all of the Secured Obligations have been paid in full, and following the payment in full of all Secured Obligations, the Secured Party agrees that, at such Debtor's reasonable request, the Secured Party will execute and deliver to such Debtor appropriate documents necessary to evidence the transfer by subrogation to such Debtor of an interest in the Secured Obligations resulting from such payment by such Debtor. 11.4 DEBTOR WAIVERS. Each Debtor hereby waives to the fullest extent permitted by applicable law, for the benefit of Secured Party: (i) any right to require Secured Party, as a condition of payment or performance by such Debtor, to (A) proceed against any other Debtor or any other Person, (B) proceed against or exhaust any other security held from any other Debtor or any other Person, (C) proceed against or have resort to any balance of any deposit account or credit on the books of Secured Party attributable to any other Debtor or any other Person, or (D) pursue any other remedy in the power of Secured Party whatsoever, (ii) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of any other Debtor including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of any of the Indenture Documents or any agreement or instrument relating thereto or by reason of the cessation of the liability of any other Debtor from any cause other than indefeasible payment in full of the Secured Obligations; (iii) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (iv) any defense based upon Secured Party's errors or omissions in the administration of the Indenture Documents, except as a result of the gross negligence, bad faith or willful misconduct of the Secured Party, (v) (A) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms of this Agreement and any legal or equitable discharge of such Debtor's obligations hereunder, (B) the benefit of any statute of limitations affecting such Debtor's liability hereunder or the enforcement hereof, (C) any rights to set-offs, recoupments and counterclaims, and (D) promptness, diligence and any requirement that Secured Party protect, secure, perfect or insure any other security interest or lien or any property subject thereto; (vi) notices, demands, presentments, protests, notices of dishonor and notices of any action or inaction, notices of default under the Indenture Documents or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Indenture Documents or any agreement related thereto, notices of any extension of credit to any other Debtor and notices of any of the matters referred to in this paragraph and any right to consent to any thereof, and (vii) any defenses or benefits that 31 may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Agreement. 11.5 AMENDMENTS AND WAIVERS (a) Secured Party's Consent. Subject to Section 11.5(b) and 11.5(c) and the terms of the Indenture, no amendment, modification, termination or waiver of any provision of this Agreement, or consent to any departure by any Debtor therefrom, shall in any event be effective without the written concurrence of the Secured Party and, in the case of any such amendment or modification, by each of the Debtors; provided, that this Agreement may be modified by the execution of a Supplement to Security Agreement by (i) additional Guarantors and Issuers (as defined in the Indenture) to become parties hereto as Debtors in accordance with Section 5.2 this Agreement and (ii) existing Debtors pursuant to Section 4.1(b)(iii), 4.4(b)(i), 4.5(b)(i), 4.6(b) or 4.7(b), and each other Debtor hereby waives any requirement of notice of or consent to any such amendment. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. (b) Other Consents. No amendment, modification, termination or waiver of any provision of this Agreement, or consent to any departure by any Debtor therefrom, shall amend, modify, terminate or waive any provision herein as the same applies to Secured Party without the consent of the Secured Party except as provided in accordance with the Indenture. (c) Waiver. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on any Debtor in any case shall entitle any Debtor to any other or further notice or demand in similar or other circumstances. 11.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the parties hereto and their respective successors and assigns including all persons who become bound as debtor to this Agreement. No Debtor shall, except as permitted under the Indenture, assign any right, duty or obligation hereunder. This Agreement is for the benefit of the Secured Party and for such other Person or Persons as may from time to time become or be Holders, and this Agreement shall be transferrable with the same force and effect and to the same extent as the Secured Obligations may be transferrable, and the Collateral shall secure any and all of the then existing and thereafter arising Secured Obligations in favor of such a transferee that has effectuated such transfer in accordance with the terms of the Indenture, with retroactive rank. 11.7 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. 11.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All representations, warranties and agreements made herein shall survive the execution and delivery hereof. Notwithstanding anything herein or implied by law to the contrary, the agreements of each Debtor set forth in Sections 10 and 11.2 shall survive the payment of the Secured Obligations and the termination hereof. 11.9 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of the Secured Party in the exercise of any power, right or privilege hereunder or under any other Indenture Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights, powers and remedies existing 32 under this Agreement and the other Indenture Documents are cumulative, and not exclusive of, any rights or remedies otherwise available. Any forbearance or failure to exercise, and any delay in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. Without limiting the generality of the foregoing, each Debtor waives any right such Debtor may have to require the Secured Party and the Holders to pursue any third Person for any of the Secured Obligations. 11.10 SEVERABILITY. In case any provision in or obligation hereunder shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 11.11 HEADINGS. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect. 11.12 APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW), EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. 11.13 SUBMISSION TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY DEBTOR ARISING OUT OF OR RELATING HERETO OR ANY OTHER INDENTURE DOCUMENT, OR ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH DEBTOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY SUBMITS TO AND ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE DEBTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 11.1; AGREES THAT SERVICE AS PROVIDED ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE DEBTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND AGREES SECURED PARTY RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY DEBTOR IN THE COURTS OF ANY OTHER JURISDICTION HAVING JURISDICTION OVER SUCH DEBTOR. 11.14 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. 11.15 GAMING LAWS. The Secured Party acknowledges, understands and agrees that the Gaming Laws may impose certain licensing or transaction approval requirements prior to the exercise of 33 the rights and remedies granted to it under this Agreement with respect to the Collateral subject to the Gaming Laws. (a) If any consent under the Gaming Laws is required in connection with the taking of any of the actions which may be taken by the Secured Party in the exercise of its rights hereunder, then each Debtor agrees to use its commercially reasonable best efforts to secure such consent and to cooperate with the Secured Party in obtaining any such consent. Upon the occurrence and during the continuation of any Event of Default, each Debtor shall promptly execute and/or cause the execution of all applications, certificates, instruments, and other documents and papers that the Secured Party may be required to file in order to obtain any necessary approvals under the Gaming Laws, and if such Debtor fails or refuses to execute such documents, the Secured Party or the court with jurisdiction may execute such documents on behalf of such Debtor. (b) Notwithstanding any other provision of this Agreement to the contrary other than as set forth in Section 7.6, nothing in this Agreement shall (i) effect any transfer of any ownership interest in a Debtor or (ii) effect any transfer, sale, purchase, lease or hypothecation of, or any borrowing or loaning of money against, or any establishment of any voting trust agreement or other similar agreement with respect to any certificate of suitability or any owner's license heretofore issued to any person, including any Debtor, under any of the Gaming Laws. (c) Debtors and Secured Party each acknowledge that, to the extent required under applicable law, the consummation of the transactions contemplated hereby and the exercise of remedies hereunder are subject to the Louisiana horse racing and off-track betting statutes, La. R.S. 4:141 et seq. and 4:211 et seq., the Video Draw Poker Devices Control Law, La. R.S. 27:301 et seq., the Louisiana Pari-Mutuel Live Racing Facility Economic Redevelopment and Gaming Control Act (Slots at the Track), La. R.S. 27:351 et seq., the Louisiana Gaming Control Law, La. R.S. 27:1 et seq. and the regulations promulgated pursuant to such laws and statutes, all as amended from time to time. Debtors and Secured Party each further acknowledge that the Racing Licenses and the Gaming Licenses held by the Company are not part of the Collateral of this Agreement and that, under the above described legislation and rules promulgated thereunder, Secured Party may be precluded from or otherwise limited in taking possession of or selling the Collateral of this Agreement under the Defaults and Remedies provisions of this Agreement. Debtors and Secured Party each also acknowledge that due to various legal restrictions, including, without limitation, licensing of operators of pari-mutuel wagering facilities and prior approval of the sale or disposition of assets of a licensed pari-mutuel wagering operation, the sale of Collateral may be denied by Racing Authorities or Gaming Authorities or delayed pending Racing Authority or Gaming Authority action or approval. 11.16 EFFECTIVENESS. Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by the Secured Party of written or telephonic notification of such execution and authorization of delivery thereof. 11.17 ENTIRE AGREEMENT. This Agreement, the other Indenture Documents and the Intercreditor Agreement embody the entire agreement and understanding between the Debtors and the Secured Party and supersede all prior agreements and understandings between such parties relating to the subject matter hereof and thereof. Accordingly, the Indenture Documents and the Intercreditor Agreement may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. 11.18 THE MORTGAGES. In the event that any of the Collateral hereunder is also subject to a valid and enforceable Lien under the terms of any Mortgage and the terms of such Mortgage are 34 inconsistent with the terms of this Agreement, then with respect to such Collateral, the terms of such Mortgage shall be controlling in the case of fixtures and leases, letting and licenses of, and contracts and agreements relating to real property or leases of real property and vessels registered with the U.S. Coast Guard, and the terms of this Agreement shall be controlling in the case of all other Collateral. 11.19 INDENTURE CONTROLS. All terms, covenants, conditions, provisions and requirements of the Indenture are incorporated by reference in this Agreement. In the event of any conflict or inconsistency between the provisions of this Agreement and those of the Indenture, including, without limitation, any conflicts or inconsistencies in any definitions herein or therein, the provisions or definitions of the Indenture shall govern. 11.20 TRUST INDENTURE ACT CONTROLS. If any provision of this Agreement limits, qualifies or conflicts with the duties imposed by the Trust Indenture Act of 1939 as in effect on the date of this Agreement, the imposed duties shall control. 35 IN WITNESS WHEREOF, each Debtor and the Secured Party have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. DEBTORS: DIAMOND JO, LLC By: /s/M. BRENT STEVENS ---------------------------- Name: M. Brent Stevens Title: Chief Executive Officer THE OLD EVANGELINE DOWNS CAPITAL CORP. By: /s/M. BRENT STEVENS ---------------------------- Name: M. Brent Stevens Title: Chief Executive Officer OED ACQUISITION, LLC By: /s/M. BRENT STEVENS ---------------------------- Name: M. Brent Stevens Title: Chief Executive Officer PENINSULA GAMING CORPORATION By: /s/M. BRENT STEVENS ---------------------------- Name: M. Brent Stevens Title: Chief Executive Officer THE OLD EVANGELINE DOWNS, L.L.C. By: /s/M. BRENT STEVENS ---------------------------- Name: M. Brent Stevens Title: Chief Executive Officer SECURED PARTY: U.S. BANK NATIONAL ASSOCIATION, as Trustee, as Secured Party By: /s/FRANK P. LESLIE, II ------------------------------- Name: Frank P. Leslie, II Title: Vice President EXHIBIT A TO PLEDGE AND SECURITY AGREEMENT FORM OF SUPPLEMENT TO SECURITY AGREEMENT This SUPPLEMENT TO SECURITY AGREEMENT, dated [________ __, 20__], is delivered by the undersigned in favor of U.S. Bank National Association, as Trustee (together with any successor Trustee pursuant to the terms of the Indenture, the "SECURED PARTY"), acting in the capacity of collateral agent for the benefit of itself and the Holders, pursuant to the Pledge and Security Agreement, dated as of April 16, 2004 (as it may be from time to time amended, restated, modified or supplemented, the "SECURITY AGREEMENT"), among Diamond Jo, LLC, a Delaware limited liability company ("DJL"), The Old Evangeline Downs Capital Corp., a Delaware corporation ("CAPITAL" and, together with DJL, the "ISSUERS"), OED Acquisition, LLC, a Delaware limited liability company ("OEDA"), Peninsula Gaming Corporation, a Delaware corporation ("PG CORP."), The Old Evangeline Downs, L.L.C., a Louisiana limited liability company ("OED"), and each additional Guarantor (as defined in the Indenture referred to therein) and Issuer (as defined in the Indenture) from time to time party thereto pursuant to Section 5.2 thereof, and the Secured Party. Capitalized terms used herein not otherwise defined herein shall have the meanings ascribed thereto in the Security Agreement. The undersigned [hereby confirms, as of the date first written above, the grant to the Secured Party set forth in the Security Agreement](1) [does hereby grant to the Secured Party a security interest in, all of the undersigned's right, title and interest in and to all Collateral to secure the Secured Obligations of the undersigned, in each case whether now or hereafter existing or in which the undersigned now has or hereafter acquires an interest and wherever the same may be located](2). The undersigned hereby further agrees, as of the date first written above, to [continue to] be bound by all of the terms and provisions of the Security Agreement, as supplemented by this Supplement to Security Agreement. The undersigned hereby makes all of the representations and warranties set forth in the Security Agreement, and hereby represents and warrants that the attached supplements to Schedules accurately and completely set forth all [additional] information required pursuant to the Security Agreement and hereby agrees that such Supplements to Schedules shall constitute part of the schedules to the Security Agreement. IN WITNESS WHEREOF, the undersigned has caused this Supplement to Security Agreement to be duly executed and delivered by its duly authorized officer. [NAME OF DEBTOR] By:_____________________________ Name: Title: ACCEPTED AND AGREED TO BY: U.S. BANK NATIONAL ASSOCIATION, as Trustee, as Secured Party By:_____________________________ Name: Title: - ----------- (1) Use bracketed language for existing Debtor. (2) Use bracketed language for new Debtor. A-1 EXHIBIT B TO PLEDGE AND SECURITY AGREEMENT FORM OF CONTROL AGREEMENT (SECURITIES ACCOUNTS) [ATTACH SECURITIES CONTROL AGREEMENT] B-1 EXHIBIT C TO PLEDGE AND SECURITY AGREEMENT FORM OF CONTROL AGREEMENT (DEPOSIT ACCOUNTS) [ATTACH DEPOSIT ACCOUNT CONTROL AGREEMENT] C-1 EX-4.6B 16 forms4_ex4-6bwfb071404.txt EX. 4.6B - SUPP TO SEC AGMT - PEN GAMING Exhibit 4.6B SUPPLEMENT TO SECURITY AGREEMENT This SUPPLEMENT TO SECURITY AGREEMENT, dated June 16, 2004 is delivered by the undersigned in favor of U.S. Bank National Association, as Trustee (together with any successor Trustee pursuant to the terms of the Indenture, the "SECURED PARTY"), acting in the capacity of collateral agent for the benefit of itself and the Holders, pursuant to the Pledge and Security Agreement, dated as of April 16, 2004 (as it may be from time to time amended, restated, modified or supplemented, the "SECURITY AGREEMENT"), among Diamond Jo, LLC, a Delaware limited liability company ("DJL"), The Old Evangeline Downs Capital Corp., a Delaware corporation ("CAPITAL" and, together with DJL, the "ISSUERS"), OED Acquisition, LLC, a Delaware limited liability company ("OEDA"), Peninsula Gaming Corporation, a Delaware corporation ("PG CORP."), The Old Evangeline Downs, L.L.C., a Louisiana limited liability company ("OED"), and each additional Guarantor (as defined in the Indenture referred to therein) and Issuer (as defined in the Indenture) from time to time party thereto pursuant to Section 5.2 thereof, and the Secured Party. Capitalized terms used herein not otherwise defined herein shall have the meanings ascribed thereto in the Security Agreement. The undersigned does hereby grant to the Secured Party a security interest in, all of the undersigned's right, title and interest in and to all Collateral to secure the Secured Obligations of the undersigned, in each case whether now or hereafter existing or in which the undersigned now has or hereafter acquires an interest and wherever the same may be located. The undersigned hereby further agrees, as of the date first written above, to be bound by all of the terms and provisions of the Security Agreement, as supplemented by this Supplement to Security Agreement. The undersigned hereby makes all of the representations and warranties set forth in the Security Agreement, and hereby represents and warrants that the attached supplements to Schedules accurately and completely set forth all information required pursuant to the Security Agreement and hereby agrees that such Supplements to Schedules shall constitute part of the schedules to the Security Agreement. IN WITNESS WHEREOF, the undersigned has caused this Supplement to Security Agreement to be duly executed and delivered by its duly authorized officer. PENINSULA GAMING, LLC By:/s/M. BRENT STEVENS ------------------------------ Name: M. Brent Stevens Title: Chief Executive Officer ACCEPTED AND AGREED TO BY: U.S. BANK NATIONAL ASSOCIATION, as Trustee, as Secured Party By: /s/FRANK P. LESLIE, II ---------------------------- Name: Frank P. Leslie, II Title: Vice President EX-4.7 17 forms4_ex4-7wfb071404.txt EX. 4.7 - TRADEMARK SEC AGMT - 04-16-04 Exhibit 4.7 TRADEMARK SECURITY AGREEMENT THE OLD EVANGELINE DOWNS, L.L.C., a Louisiana limited liability company ("DEBTOR"), owns the Trademarks, Trademark registrations, and Trademark applications listed on Schedule 1 annexed hereto; and ---------- Debtor has entered into an Indenture dated as of April 16, 2004 (as the same may be amended, restated, supplemented or otherwise modified and in effect from time to time, the "INDENTURE") among Diamond Jo, LLC, a Delaware limited liability company ("DJL"), The Old Evangeline Downs Capital Corp., a Delaware corporation ("CAPITAL" and, together with DJL, the "ISSUERS"), OED Acquisition, LLC, a Delaware limited liability company ("OEDA"), Peninsula Gaming Corporation, a Delaware corporation ("PG CORP."), Debtor, and U.S. Bank National Association, solely in its capacity as trustee ("TRUSTEE") for the holders (the "HOLDERS") of Issuers 8-3/4% Senior Secured Notes due 2012; Pursuant to the terms of a Pledge and Security Agreement dated as of April 16, 2004 (as the same may be amended, restated, supplemented or otherwise modified and in effect from time to time, the "SECURITY Agreement"), among, inter alia, the Issuers, Debtor and Trustee (in such capacity, "SECURED PARTY"), Debtor has, subject to Section 2.2 thereof, granted to Secured Party, for the benefit of Secured Party and the Holders, a security interest in substantially all the assets of Debtor including all right, title and interest of Debtor in, to and under all now owned and hereafter acquired Trademarks (as defined in the Security Agreement) and all proceeds thereof, to secure the payment of all amounts owing by Debtor under the Indenture Documents to which it is a party; For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Debtor does hereby grant to Secured Party, for the benefit of Secured Party and the Holders a continuing security interest in all of Debtor's right, title and interest in, to and under the following (all of the following items or types of property being herein collectively referred to as the "TRADEMARK COLLATERAL"), whether presently existing or hereafter created or acquired: (1) each Trademark, Trademark registration and Trademark application, including, without limitation, the Trademarks, Trademark registrations (together with any reissues, continuations or extensions thereof) and Trademark applications referred to in Schedule 1 annexed hereto, and all of the goodwill of the business connected with the use of, and symbolized by, each Trademark, Trademark registration and Trademark application; and (2) all products and proceeds of the foregoing, including, without limitation, any claim by Debtor against third parties for past, present or future (a) infringement or dilution of any Trademark or Trademark registration including, without limitation, the Trademarks and Trademark registrations referred to in Schedule 1 annexed hereto, the Trademark registrations issued with respect to the Trademark applications referred in Schedule 1 and the Trademarks licensed under any Trademark license, or (b) injury to the goodwill associated with any Trademark, Trademark registration or Trademark licensed under any Trademark license. Notwithstanding anything herein to the contrary, in no event shall the Trademark Collateral include, and no Debtor shall be deemed to have granted a security interest in, any of such Debtor's right, title or interest in any of its assets to the extent such asset would be excluded from the definition of Collateral pursuant to Section 2.2 of the Security Agreement. This security interest is granted in conjunction with the security interests granted to Secured Party pursuant to the Security Agreement. Debtor hereby acknowledges and affirms that the rights and remedies of Secured Party with respect to the security interest in the Trademark Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. -2- IN WITNESS WHEREOF, Debtor has caused this Trademark Security Agreement to be duly executed by its duly authorized officer as of the date first above written. THE OLD EVANGELINE DOWNS, L.L.C., a Louisiana limited liability company By: /s/ M. Brent Stevens ------------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer Schedule 1 to Trademark Security Agreement TRADEMARKS - -------------------------------------------------------------------------------- SERIAL FILING MARK NUMBER DATE COUNTRY STATUS - -------------------------------------------------------------------------------- "Races & Aces" 76518029 3/26/03 USA Debtor applied to the (Trade Name) USPTO for registration of this mark; however, the USPTO has issued a non-final action letter rejecting the registration of the mark. - -------------------------------------------------------------------------------- EX-4.8 18 forms4_ex4-8wfb071404.txt EX. 4.8 - FORM OF NOTE DUE 2012 Exhibit 4.8 [FORM OF NOTE] DIAMOND JO, LLC THE OLD EVANGELINE DOWNS CAPITAL CORP. 8 3/4% [SERIES A] [SERIES B](1) SENIOR SECURED NOTE DUE 2012 CUSIP: __________ No. $_________________ Diamond Jo, LLC, a Delaware limited liability company (the "Company") and The Old Evangeline Downs Capital Corp., a Delaware corporation ("Capital" and, together with the Company, the "Issuers," which term includes any successors under, and any additional "Issuers" that may become a party to the Indenture hereinafter referred to), for value received, hereby promise to pay to Cede & Co, or registered assigns, the principal sum of __________ Dollars, on April 15, 2012. Interest Payment Dates: April 15 and October 15, commencing October 15, 2004. Interest Record Dates: April 1 and October 1 Reference is made to the further provisions of this Note on the reverse side, which shall, for all purposes, have the same effect as if set forth at this place. Upon request, the Issuers shall promptly make available to a holder of this Note information regarding the issue price, the amount of original issue discount, the issue date, and the yield to maturity of this Note. Holders should contact Diamond Jo, LLC, 400 East Third Street, P.O. Box 1750, Dubuque, Iowa 52004-1750, Attention: Michael S. Luzich. ________________________ (1) Series A should be replaced with Series B in the Exchange Notes. A-1 IN WITNESS WHEREOF, the Issuers have caused this instrument to be duly executed. Diamond Jo, LLC, a Delaware limited liability company By: ___________________________ Name: Title: By: ___________________________ Name: Title: The Old Evangeline Downs Capital Corp., a Delaware corporation By: ___________________________ Name: Title: By: ___________________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes described in the within-mentioned Indenture. U.S. Bank National Association By: ____________________________ Authorized Signatory Dated: _______________ (Reverse of Note) 8 3/4% [Series A] [Series B](2) Senior Secured Note due 2012 [THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.6 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS.](3) [UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY A NOMINEE OF THE DEPOSITARY, TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.](4) [THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE CASH PAYMENTS OF INTEREST DURING THE PERIOD WHICH SUCH HOLDER HOLDS THIS NOTE. NOTHING IN THIS ______________________ (2) Series A should be replaced with Series B in the Exchange Notes. (3) To be included only on Global Notes deposited with DTC as Depositary. (4) To be included only on Global Notes deposited with DTC as Depositary. A-3 LEGEND SHALL BE DEEMED TO PREVENT INTEREST FROM ACCRUING ON THIS NOTE.](5) [THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH OTHER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(k) UNDER THE SECURITIES ACT AS PERMITTING RESALES OF RESTRICTED SECURITIES BY NON-AFFILIATES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PURCHASERS THAT OCCUR OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN ______________________ (5) To be included only on Reg S Temporary Global Notes. A-4 EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE AND IN EACH CASE IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS OF ANY U.S. STATE OR ANY OTHER APPLICABLE JURISDICTION.](6) Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. The Issuers promise to pay Interest on the principal amount of this Note at 8 3/4% per annum from the Issue Date until maturity and shall pay the Liquidated Damages, if any, payable pursuant to Section 4 of the Registration Rights Agreement referred to below. The Issuers shall pay Interest and Liquidated Damages, if any, semi-annually on April 15 and October 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). The first Interest Payment Date shall be October 15, 2004. Interest on the Notes shall accrue from the most recent date to which Interest has been paid or, if no Interest has been paid, from the Issue Date; provided that if there is no existing Default in the payment of Interest, and if this Note is authenticated between an Interest Record Date (defined below) referred to on the face hereof and the next succeeding Interest Payment Date, Interest shall accrue from such next succeeding Interest Payment Date. The Issuers shall pay Interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the rate then in effect; it shall pay Interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue installments of Interest and Liquidated Damages, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be calculated on the basis of a 360-day year consisting of twelve 30-day months. 2. Method of Payment. The Issuers shall pay Interest on the Notes and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the April 1 or October 1 next preceding the Interest Payment Date (each an "Interest Record Date"), even if such Notes are cancelled after such Interest Record Date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture (as defined below) with respect to defaulted interest. The Notes shall be payable as to principal, Interest, premium, if any, and Liquidated Damages, if any, at the office or agency of the Issuers maintained within the City and State of New York for such purpose, or, at the option of the Issuers, payment of Interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds to an account within the United States shall be required with respect to principal of and Interest, premium, if any, and Liquidated Damages, if any, on all Global Notes. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. ______________________ (6) To be included only on Transfer Restricted Notes. A-5 3. Paying Agent and Registrar. Initially, U.S. Bank National Association, the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Issuers may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its subsidiaries may act in any such capacity. 4. Indenture. The Issuers issued the Notes under an Indenture, dated as of the Issue Date ("Indenture"), by and among the Issuers, the Subsidiary Guarantors party thereto and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Obligations under the Indenture, the Intercreditor Agreement, the Notes and the Subsidiary Guaranties thereof are secured by the Collateral described in the Security Documents, subject to the provisions of such agreements and the Intercreditor Agreement. Holders are referred to the Security Documents and the Intercreditor Agreement for a statement of such terms. 5. Optional Redemption. (a) Except as set forth in Section 5(b), the Notes are not redeemable at the Issuers' option prior to April 15, 2008. Thereafter, the Notes shall be subject to redemption, in whole or in part, at the option of the Issuers at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid Interest (and Liquidated Damages, if any) thereon, to the applicable redemption date, if redeemed during the 12-month period beginning on April 15 of the years indicated below: Year Percentage ---- ---------- 2008 104.375% 2009 102.917% 2010 101.458% 2011 and thereafter 100.000% (b) Notwithstanding Section 5(a), at any time or from time to time prior to April 15, 2007, the Issuers may redeem, at their option, up to 35% of the aggregate principal amount of the Notes then outstanding, at a redemption price of 108.75% of the principal amount thereof, plus accrued and unpaid Interest (and Liquidated Damages, if any) thereon, through the applicable redemption date, with the net cash proceeds of one or more Equity Offerings; provided, that (i) such redemption shall occur within 60 days of the date of closing of such Equity Offering and (ii) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after giving effect to each such redemption. (c) Notice of redemption shall be mailed by first class mail at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000, unless all of the Notes held by a A-6 Holder are to be redeemed. On and after the redemption date, Interest ceases to accrue on Notes or portions thereof called for redemption unless the Issuers default in such payments due on the redemption date. 6. Regulatory Redemption. Notwithstanding any other provisions hereof, Notes to be redeemed pursuant to a Required Regulatory Redemption shall be redeemable by the Issuers, in whole or in part, at any time upon not less than 20 Business Days nor more than 60 days notice (or such earlier date as may be ordered by any applicable Governmental Authority) at a price equal to the lesser of (a) the Holder's cost thereof and (b) 100% of the principal amount thereof, plus in either case accrued and unpaid Interest, plus Liquidated Damages, if any, thereon, if any, to the date of redemption (or such earlier period as ordered by a Governmental Authority). The Issuers are not required to pay or reimburse any Holder or beneficial owner of the Notes for the expenses of any such Holder or beneficial owner related to the application for any Gaming License, qualification or finding of suitability in connection with a Required Regulatory Redemption. Such expenses of any such Holder or beneficial owner shall, therefore, be the obligation of such Holder or beneficial owner. Any Required Regulatory Redemption shall be made in accordance with the provisions of Section 3.3, 3.4 and 3.5 of the Indenture unless other procedures are required by any Governmental Authority. 7. Mandatory Redemption. The Issuers shall not be required to make mandatory redemption payments with respect to the Notes (except for a Required Regulatory Redemption and any offer to repurchase Notes that the Issuers are required to make in accordance with Sections 4.13 and 4.15 of the Indenture). The Notes shall not have the benefit of any sinking fund. 8. Offers to Purchase. (a) Change of Control. Upon the occurrence of a Change of Control, the Issuers shall offer to repurchase all of the Notes then outstanding (the "Change of Control Offer") at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Issuers must mail or cause to be mailed a notice to each Holder stating, among other things: (i) the purchase price and the purchase date, which shall be no earlier than 30 days nor later than 45 days from the date such notice is mailed (the "Change of Control Payment Date"); (ii) that any Holder electing to have Notes purchased pursuant to a Change of Control Offer shall be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; and (iii) that the Holder shall be entitled to withdraw such election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased. A-7 (b) Asset Sale. Subject to certain exceptions set forth in the Indenture, the Issuers shall not, and shall not permit any Restricted Subsidiary to, make any Asset Sale unless: (i) such Issuer or such Restricted Subsidiary receives consideration at the time of such Asset Sale not less than the fair market value of the assets subject to such Asset Sale (as determined by the Company's Managers in good faith); (ii) at least 75% of the consideration for such Asset Sale is in the form of either (a) cash or Cash Equivalents or liabilities of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Subsidiary Guaranty) that are assumed by the transferee of such assets (provided, that following such Asset Sale, there is no further recourse to the Company or the Restricted Subsidiaries or the Company and the Restricted Subsidiaries are fully indemnified with respect to such liabilities; provided, further, that the 75% limitation set forth in this clause (ii) of this paragraph shall not apply to any proposed Asset Sale for which an independent certified accounting firm has certified to the Managers of the Company and the Trustee that the after-tax cash portion of the consideration to be received by the Company or such Restricted Subsidiary in such proposed Asset Sale is equal to or greater than what the net after-tax cash proceeds would have been had such proposed Asset Sale complied with the 75% limitation set forth in this clause (ii) of this paragraph), or (b) assets of the type described in clause (iii)(a) below; and (iii) within 360 days of such Asset Sale, the Net Proceeds thereof are (a) invested in assets related to the business of the Company or the Restricted Subsidiaries (which, in the case of an Asset Sale of the Diamond Jo or any replacement Gaming Vessel (a "Replacement Vessel"), must be a Gaming Vessel having a fair market value, as determined by an independent appraisal, at least equal to the fair market value of the Diamond Jo or such Replacement Vessel immediately preceding such Asset Sale), (b) applied to repay Indebtedness under Purchase Money Obligations incurred in connection with the assets so sold, (c) applied to repay Indebtedness under the Senior Credit Facility and permanently reduce the commitment thereunder in the amount of the Indebtedness so repaid or (d) to the extent not used as provided in clauses (a), (b), or (c) or this paragraph or any combination thereof, applied to make an offer to purchase Notes as described below (an "Excess Proceeds Offer"); provided, that the Company shall not be required to make an Excess Proceeds Offer until the amount of Excess Proceeds is greater than $10,000,000. 9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents, and the Issuers may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuers need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between an Interest Record Date and the corresponding Interest Payment Date. 10. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes. A-8 11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture, the Notes or the Subsidiary Guaranties, or, subject to the Intercreditor Agreement, the Security Documents, may be amended or supplemented with the consent of the Holders of a majority in principal amount of the then outstanding Notes, and any existing Default or compliance with any provision of the Indenture, the Notes or the Subsidiary Guaranties may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder of a Note, the Indenture, the Notes, the Subsidiary Guaranties, the Registration Rights Agreement or, subject to the Intercreditor Agreement, the Security Documents may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Issuers' or the Subsidiary Guarantors' obligations to Holders of the Notes in case of a merger or consolidation or sale of all or substantially all of its assets in accordance with the Indenture, to evidence the release of any Subsidiary Guaranty permitted to be released under the terms of the Indenture and the Security Documents or to evidence the addition of any new Subsidiary Guarantor, to make any change that would provide any additional rights or benefits to the Holders of the Notes (including the addition of any Subsidiary Guarantor) or that does not adversely affect the rights under the Indenture, the Notes, the Subsidiary Guaranties, the Registration Rights Agreement, the Security Documents or the Intercreditor Agreement of any such Holder, to comply with the provisions of the Depositary, Euroclear or Clearstream or the Trustee with respect to the provisions of the Indenture or the Notes relating to transfers and exchanges of Notes or beneficial interests therein, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA, to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture, to comply with applicable gaming laws and racing laws, or to enter into additional or supplemental Security Documents. Notwithstanding Sections 9.2(a), (b) and (c) of the Indenture and subject to the Intercreditor Agreement, no portion of the Collateral may be released from the Lien of the Security Documents (except in accordance with the provisions of this Indenture and the Security Documents), and none of the Security Documents or the provisions of the Indenture relating to the Collateral may be amended or supplemented, and the rights of any Holders thereunder may not be waived or modified, without, in each case, the consent of the Holders of at least 75% in aggregate principal amount of the then outstanding Notes. 12. Defaults and Remedies. The Indenture provides that each of the following constitutes an Event of Default: (i) the Issuers default in the payment of Interest on any Note when the same becomes due and payable and the Default continues for a period of 30 days; (ii) the Issuers default in the payment of the principal (or premium, if any) on any Note when the same becomes due and payable at maturity, upon redemption, by acceleration, in connection with an Excess Proceeds Offer or a Change of Control Offer or otherwise; (iii) either of the Issuers default in the performance of or breaches the provisions of Section 4.13, Section 4.15 or Article V of the Indenture; (iv) either of the Issuers or any Subsidiary Guarantor fails to comply with any of its other agreements or covenants in, or provisions of, the Notes or this Indenture and the Default continues for 60 days after written notice thereof has been given to the Issuers by the Trustee or to the Issuers and the Trustee by the Holders of at least 25% in aggregate principal amount of A-9 the then outstanding Notes, such notice to state that it is a "Notice of Default"; (v) an event of default occurs under (after giving effect to any waivers, amendments, applicable grace periods or any extension of any maturity date) any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Issuers or any Restricted Subsidiary (or the payment of which is guaranteed by the Issuers or any Restricted Subsidiary), whether such Indebtedness or guaranty now exists or is created after the Issue Date, if (a) either (1) such default results from the failure to pay principal of or interest on such Indebtedness or (2) as a result of such event of default the maturity of such Indebtedness has been accelerated, and (b) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness with respect to which such a payment event of default (after the expiration of any applicable grace period or any extension of the maturity date) has occurred, or the maturity of which has been so accelerated, exceeds $5,000,000 in the aggregate; (vi) a final non-appealable judgment or judgments for the payment of money (other than to the extent of any judgment as to which a reputable insurance company has accepted liability) is or are entered by a court or courts of competent jurisdiction against either of the Issuers or any Subsidiary and such judgment or judgments are not discharged, bonded or stayed within 60 days after entry, provided that the aggregate of all such judgments exceeds $5,000,000;; (vii) the cessation of substantially all gaming operations of the Company and the Restricted Subsidiaries, taken as a whole, for more than 90 days, except as a result of an Event of Loss; (viii) any revocation, suspension, expiration (without previous or concurrent renewal) or loss of any Gaming License of the Company or any Restricted Subsidiary for more than 90 days; (ix) any Subsidiary Guaranty of a Subsidiary Guarantor which is a Significant Subsidiary ceases to be in full force and effect or shall be held in any judicial proceeding to be unenforceable or invalid or is declared null and void (other than in accordance with the terms of the Subsidiary Guaranty and the Indenture) or any Subsidiary Guarantor which is a Significant Subsidiary denies or disaffirms its Obligations under its Subsidiary Guaranty or the Security Documents (in each case, other than by reason of the termination of the Indenture or the release of any such Subsidiary Guaranty in accordance with the Indenture); (x) (A) any event of default under a Security Document (after giving effect to any applicable grace periods, applicable notice periods, waivers or amendments) or (B) the failure of the Issuers or any Restricted Subsidiary to comply with any material agreement or covenant in, or material provision of, any of the Security Documents, or any breach in any material respect of any material representation or warranty made by the Issuers or any Restricted Subsidiary in any Security Document, and the continuance of such failure or breach for a period of 30 days after written notice is given to the Issuers by the Trustee or to the Issuers and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes outstanding; (xi) any of the Security Documents ceases to be in full force and effect or any of the Security Documents ceases to give the Trustee (or, in the case of a mortgage, ceases to give the Trustee or any other trustee under such mortgage) any of the Liens, rights, powers or privileges purported to be created thereby, or any of the Security Documents is declared null and void, or any of the Issuers or any Subsidiary Guarantor denies that it has any further liability under any Security Document to which it is a party or gives notice of such effect (in each case other than by reason of the termination of the A-10 Indenture or any such Security Document in accordance with its terms or the release of any Subsidiary Guarantor in accordance with the Indenture) and the continuance of such failure for a period of 30 days after written notice is given to the Issuers by the Trustee or to the Issuers and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes outstanding; (xii) either of the Issuers or any Subsidiary Guarantor pursuant to or within the meaning of any Bankruptcy Law: (1) commences a voluntary case, (2) consents to the entry of an order for relief against it in an involuntary case, (3) consents to the appointment of a custodian of it or for all or substantially all of its property, (4) makes a general assignment for the benefit of its creditors, or (5) admits in writing its inability to pay debts as the same become due; and (xi) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (1) is for relief against either of the Issuers or any Subsidiary Guarantor in an involuntary case, (2) appoints a custodian of either of the Issuers or any Subsidiary Guarantor or for all or substantially all of their property, or (3) orders the liquidation of either of the Issuers, or any Subsidiary Guarantor, and the order or decree remains unstayed and in effect for 60 days. 14. Trustee Dealings with Issuers. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Issuers or their Affiliates, and may otherwise deal with the Issuers or their Affiliates, as if it were not the Trustee. 15. No Recourse Against Others. No director, officer, employee, incorporator, stockholder, member or controlling person of any of the Issuers or any Subsidiary Guarantor, as such, will have any liability for any Obligations of any of the Issuers or any Subsidiary Guarantor under the Notes, the Indenture, the Security Documents or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such Obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release will be part of the consideration for issuance of the Notes and the Subsidiary Guaranties. 16. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. Additional Rights of Holders of Transfer Restricted Notes.7 In addition to the rights provided to Holders of Notes under the Indenture, Holders of Transfer Restricted Notes shall have all the rights set forth in the Registration Rights Agreement dated as of the date of the Indenture, by and among the Issuers, the Subsidiary Guarantors and the Initial Purchaser (the "Registration Rights Agreement"). _______________________ (7) To be included only on Transfer Restricted Notes. A-11 19. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuers have caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon, and any such redemption shall not be affected by any defect in or omission of such numbers. 20. Notation of Subsidiary Guaranty. As more fully set forth in the Indenture, to the extent permitted by law, each of the Subsidiary Guarantors from time to time, in accordance with Article XI of the Indenture, unconditionally and jointly and severally guarantees, to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, that: By its execution of its Subsidiary Guaranty, each of the Subsidiary Guarantors acknowledges and agrees that it receives substantial benefits from the Issuers and that such party is providing its Subsidiary Guaranty for good and valuable consideration, including, without limitation, such substantial benefits and services. Accordingly, subject to the provisions of Article XI of the Indenture, each Subsidiary Guarantor, jointly and severally, unconditionally guarantees on a senior secured basis to each Holder of a Note authenticated and delivered by the Trustee and its successors and assigns that: (i) the principal of, premium, if any, Interest, and Liquidated Damages, if any, on the Notes shall be duly and punctually paid in full when due, whether at maturity, by acceleration, call for redemption, upon a Change of Control Offer, an Asset Sale Offer, or otherwise, and Interest on overdue principal, premium, if any, Liquidated Damages, if any, and (to the extent permitted by law) interest on any Interest, if any, on the Notes and all other obligations of the Issuers to the Holders or the Trustee under the Notes, the Indenture, the Security Documents or the Registration Rights Agreement (including fees, expenses or other) shall be promptly paid in full or performed, all in accordance with the terms of the Indenture; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations under the Notes, the Indenture, the Security Documents, or Registration Rights Agreement, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration, call for redemption, upon a Change of Control, an Asset Sale Offer, or otherwise, subject, however, in the case of clauses (i) and (ii) above, to the limitations set forth in Section 11.6 of the Indenture. When a successor assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor may be released from those obligations. 21. Governing Law and Consent to Jurisdiction. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE A-12 LAWS AND RULES 327(b); PROVIDED, THAT WITH RESPECT TO THE CREATION, ATTACHMENT, PERFECTION, PRIORITY, ENFORCEMENT OF AND REMEDIES RELATING TO THE SECURITY INTEREST IN ANY REAL PROPERTY COLLATERAL, THE GOVERNING LAW MAY BE THE LAWS OF THE JURISDICTIONS WHERE SUCH COLLATERAL IS LOCATED WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY OF THE ISSUERS OR GUARANTORS ARISING OUT OF OR RELATING HERETO OR ANY OF THE SECURITY DOCUMENTS, OR ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH ISSUER OR GUARANTOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY SUBMITS TO AND ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE ISSUER OR GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 12.3 OF THE INDENTURE; AGREES THAT SERVICE AS PROVIDED ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE ISSUER OR GUARANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND AGREES THE TRUSTEE RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY OF THE ISSUERS OR GUARANTORS IN THE COURTS OF ANY OTHER JURISDICTION HAVING JURISDICTION OVER SUCH ISSUER OR GUARANTOR. 20. Security. This Note is Guaranteed and secured by substantially all of the assets of the Issuer and the Subsidiary Guarantors (other than Excluded Assets), subject to certain exceptions and limitations more fully set forth in the Indenture and Security Documents. The Issuers shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: DIAMOND JO, LLC THE OLD EVANGELINE DOWNS CAPITAL CORP. 400 East Third Street P.O. Box 1750 Dubuque, Iowa 52004-1750 Attention: Michael S. Luzich A-13 Assignment Form To assign this Note, fill in the form below: (I) or (We) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ to transfer this Note on the books of the Issuers. The agent may substitute another to act for it. Date: ___________________ Your Signature:__________________________________ (Sign exactly as your name appears on the face of this Note) Signature Subsidiary Guaranty* - ------------------------------------------------------------------------ *NOTICE: The Signature must be guaranteed by an Institution which is a member of one of the following recognized signature Subsidiary Guaranty Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MNSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other guaranty program acceptable to the Trustee. A-14 Option of Holder to Elect Purchase If you want to elect to have this Note purchased by the Issuers pursuant to Section 4.13 or Section 4.15 of the Indenture, check the box below: Section 4.13 |_| Section 4.15 |_| If you want to elect to have only part of the Note purchased by the Issuers pursuant to Section 4.13 or 4.15 of the Indenture, state the amount you elect to have purchased (in denominations of $1,000 only, except if you have elected to have all of your Notes purchased): $___________ Date: ___________________ Your Signature:__________________________________ (Sign exactly as your name appears on the face of this Note) Social Security or Tax Identification No.:______________ Signature Subsidiary Guaranty* - -------------------------------------------------------------------------------- *NOTICE: The Signature must be guaranteed by an Institution which is a member of one of the following recognized signature Subsidiary Guaranty Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MNSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other guaranty program acceptable to the Trustee. A-15 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(8) The following exchanges of an interest in this Global Note for an interest in another Global Notes or for a Definitive Note, or exchanges of an interest in another Global Note or a Definitive Note for an interest in this Global Note, have been made: Amount of Increase Principal Signature of Amount of in Amount of Authorized Decrease in Principal this Global Officer Principal Amount of Note of Amount of this Following Trustee or Date of this Global Global Such Decrease Note Exchange Note Note or Increase Custodian - ------- ----------- -------- ------------- ------------ _____________________ (8) This should be included only if the Note is issued in global form. A-16 GUARANTEE Each of the entities listed on the signature page hereto (hereinafter referred to as the "Subsidiary Guarantors," which term includes any successors or assigns under the Indenture, dated the date hereof, among the Subsidiary Guarantors (as defined therein), the Issuers (defined below) and U.S. Bank National Association, as trustee (the "Indenture") as supplemented by any supplemental indenture thereto, has executed either the Indenture or a supplemental indenture in substantially the form attached on Exhibit E to the Indenture and has irrevocably and unconditionally guaranteed on a senior secured basis the Subsidiary Guaranty Obligations (as defined in Section 11.1 of the Indenture), which include (i) the due and punctual payment of the principal of, premium, if any, and Interest and Liquidated Damages, if any, on the 8 3/4% Senior Secured Notes due 2012 (the "Notes") of Diamond Jo, LLC, a Delaware limited liability company (the "Company") and The Old Evangeline Downs Capital Corp., a Delaware corporation ("Capital" and, together with the Company, the "Issuers," which term includes any successors under, and any additional "Issuers" that may become a party to the Indenture hereinafter referred to), whether at maturity, by acceleration, call for redemption, upon a Change of Control Offer, an Asset Sale Offer, or otherwise, and the due and punctual payment of Interest on the overdue principal and premium, if any, Liquidated Damages, if any, and (to the extent permitted by law) interest on any Interest, if any, on the Notes, and the due and punctual performance of all other obligations of the Issuers to the Holders or the Trustee under the Notes, the Indenture, the Security Documents and the Registration Rights Agreement (including fees, expenses or other) all in accordance with the terms set forth in Article XI of the Indenture, and (ii) in case of any extension of time of payment or renewal of any Notes or any such other obligations under the Noets, the Indenture, the Security Documents or Registration Rights Agreement, that the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration, call for redemption, upon a Change of Control Offer, an Asset Sale Offer, or otherwise. The obligations of each Subsidiary Guarantor to the Holders and to the Trustee pursuant to this Subsidiary Guaranty and the Indenture are expressly set forth in Article XI of the Indenture and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guaranty. No director, officer, employee, incorporator, stockholder, member or controlling person of any of the Issuers or any Subsidiary Guarantor, as such, will have any liability for any Obligations of any of the Issuers or any Subsidiary Guarantor under the Notes, the Indenture, the Security Documents or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such Obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release will be part of the consideration for issuance of the Notes and the Subsidiary Guaranties. This is a continuing Subsidiary Guaranty and shall remain in full force and effect and shall be binding upon each Subsidiary Guarantor and its successors and assigns A-17 until full and final payment of all of the Issuers' obligations under the Notes and Indenture or until released or legally defeased in accordance with the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders, and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Subsidiary Guaranty of payment and performance and not of collectibility. This Subsidiary Guaranty shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guaranty is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. The obligations of each Subsidiary Guarantor under this Subsidiary Guaranty shall be limited to the extent necessary to insure that it does not constitute a fraudulent conveyance under applicable law. THE TERMS OF ARTICLE XI OF THE INDENTURE ARE INCORPORATED HEREIN BY REFERENCE. Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated. [signature page follows] A-18 IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this instrument to be duly executed. Dated: _____________ [NAME OF SUBSIDIARY GUARANTOR] By: _________________________________ Name: Title: [NAME OF SUBSIDIARY GUARANTOR] By: _________________________________ Name: Title: [NAME OF SUBSIDIARY GUARANTOR] By: _________________________________ Name: Title: EX-4.9A 19 forms4_ex4-9awfb071404.txt EX. 4.9A - INTERCREDITOR AGMT Exhibit 4.9A INTERCREDITOR AGREEMENT This INTERCREDITOR AGREEMENT, dated as of April 16, 2004 (as amended, restated, supplemented or otherwise modified from time to time, this "AGREEMENT"), is made by and among U.S. BANK NATIONAL ASSOCIATION, solely in its capacity as trustee under the Indenture (as defined below) (in such capacity, the "TRUSTEE"), and WELLS FARGO FOOTHILL, INC., a California corporation ("WFF"), solely in its capacities as FF&E Agent, DJL Lender, OED Lender, and New Revolver Agent (as such terms are defined below). RECITALS A. Diamond Jo, LLC, a Delaware limited liability company ("DJL"), The Old Evangeline Downs Capital Corp., a Delaware corporation ("OED CORP"; OED Corp and DJL, together with any other Person that now or hereafter becomes an "issuer" or "co-issuer" under the Indenture referred to below, whether by joinder agreement or otherwise, collectively, the "ISSUERS"), the guarantors from time to time party thereto (the "GUARANTORS"), and the Trustee have entered into an Indenture, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the "INDENTURE"), pursuant to which indebtedness was incurred by the Issuers, the repayment of which is guaranteed by the Guarantors and secured by security interests in and liens on certain now owned and hereafter acquired assets and properties described in the Indenture Security Documents (as defined below) (the "COLLATERAL"). B. DJL, as borrower, and WFF, as lender (in such capacity, the "DJL LENDER"), have entered into a Loan and Security Agreement, dated as of February 23, 2001 (as amended, restated, supplemented or otherwise modified from time to time, the "DJL CREDIT AGREEMENT"), pursuant to which the DJL Lender agreed, upon the terms and conditions stated therein, to make loans and advances to, or to issue letters of credit (or guaranties in respect thereof) for the account of, DJL, the repayment of which is secured by security interests in and liens on certain Collateral pursuant to the DJL Credit Agreement and the collateral security documents, instruments and guaranties executed and delivered in connection therewith by one or more of the Issuers and the Guarantors, together with such other agreements, instruments and certificates entered into in connection with the DJL Credit Agreement (as such may be amended, restated, supplemented or otherwise modified from time to time, together with the DJL Credit Agreement, the "DJL LOAN DOCUMENTS"). C. The Old Evangeline Downs, L.L.C., a Louisiana limited liability company ("OED"), and OED Corp, as borrowers (the "OED BORROWERS"), and WFF, as lender (in such capacity, the "OED LENDER"), have entered into a Loan and Security Agreement, dated as of June 24, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the "OED CREDIT AGREEMENT," and together with the DJL Credit Agreement, the "EXISTING Revolvers"), pursuant to which the OED Lender agreed, upon the terms and conditions stated therein, to make loans and advances to, or to issue letters of credit (or guaranties in respect thereof) for the account of, the OED Borrowers, the repayment of which is secured by security interests in and liens on certain Collateral pursuant to the OED Credit Agreement and the collateral security documents, instruments and guaranties executed and delivered in connection therewith by one or more of the Issuers and the Guarantors, together with such other agreements, instruments and certificates entered into in connection with the OED Credit Agreement (as such may be amended, restated, supplemented or otherwise modified from time to time, together with the OED Credit Agreement, the "OED LOAN DOCUMENTS"; the OED Loan Documents, together with the DJL Loan Documents, the "EXISTING REVOLVER DOCUMENTS"). D. OED and OED Corp, as borrowers (together with each of OED's subsidiaries from time to time party thereto, the "FF&E BORROWERS"), the lenders from time to time party thereto (the "FF&E LENDERS"), and WFF, as administrative agent for the FF&E Lenders (in such capacity, the "FF&E AGENT"), have entered into a Loan and Security Agreement, dated as of September 22, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the "FF&E CREDIT AGREEMENT"), pursuant to which the FF&E Lenders agreed, upon the terms and conditions stated therein, to make term loans to the FF&E Borrowers, the repayment of which is or may be secured by security interests in and liens on certain Collateral pursuant to the FF&E Credit Agreement and the collateral security documents and instruments executed and delivered in connection therewith by one or more of the Issuers and the Guarantors, together with such other agreements, instruments and certificates entered into in connection with the FF&E Credit Agreement (as such may be amended, restated, supplemented or otherwise modified from time to time, together with the FF&E Credit Agreement, the "FF&E LOAN DOCUMENTS"). E. In connection with the offering of the notes under the Indenture, each of DJL and the OED Borrowers have agreed to use their good faith commercially reasonable efforts to obtain required approvals from the relevant gaming authorities and to repay in full and refinance (the "REFINANCING") the Existing Revolvers, pursuant to a proposed new revolving loan and security agreement (as amended, restated, supplemented, refinanced or otherwise modified from time to time, the "NEW REVOLVER AGREEMENT") among DJL, the OED Borrowers, certain lenders from time to time party thereto (the "NEW REVOLVER LENDERS"), and WFF, as administrative agent for the New Revolver Lenders (in such capacity, the "NEW REVOLVER AGENT"). As with the Existing Revolvers, it is contemplated that the New Revolver Agreement will be secured by security interests in and liens on certain Collateral pursuant to the agreements, collateral security documents, instruments and guaranties executed and delivered in connection therewith by one or more of the Issuers and the Guarantors, together with the other agreements, instruments and certificates entered into in connection with the New Revolver Agreement (as such may be amended, restated, supplemented or otherwise modified from time to time, together with the New Revolver Agreement, the "NEW REVOLVER DOCUMENTS"). F. One of the conditions of the Senior Lien Documents is that the priority of the security interests and liens on the Collateral securing the obligations under such documents be senior to the security interests in and liens on the Collateral in favor of the Trustee in the manner and to the extent provided for in this Agreement. 2 G. The Trustee and the Senior Lien Creditor Representatives (on behalf of the Senior Lien Creditors) desire to enter into this Agreement concerning their respective rights with respect to the priority of their respective security interests in and liens on the Collateral. H. The terms of the Indenture permit the Issuers and the Guarantors to (1) remain obligated under the FF&E Loan Documents and the Existing Revolver Documents to which they are parties, and (2) enter into the New Revolver Documents and, in connection therewith, authorize and direct the Trustee to enter into an intercreditor agreement substantially in the form of this Agreement. NOW, THEREFORE, the Parties hereby agree as follows: ARTICLE I DEFINITIONS Section 1.1 Definitions. In addition to the capitalized terms defined above in the preamble and the recitals hereto, as used in this Agreement, the following terms shall have the meanings set forth below: "CREDIT FACILITY INDEBTEDNESS" shall mean all present and future obligations (including principal, interest, fees and reimbursement obligations under letters of credit), contingent or otherwise, of the Issuers and the Guarantors to the Senior Lien Creditors arising under or pursuant to the Senior Lien Documents, including, in each case, interest, fees, and expenses accruing after the initiation of any Insolvency Proceeding (irrespective of whether allowed as a claim in such proceeding), and including the secured claims of any Senior Lien Creditor in respect of the Collateral in any Insolvency Proceeding. "ENFORCEMENT ACTION" shall mean the exercise of any right or remedy with respect to any Collateral (including any right of set-off) or the taking of any Foreclosure Action or other action to enforce, collect or realize upon any Collateral, or the commencement of any action, whether judicial or otherwise, for the enforcement of such Party's rights and remedies as a secured creditor with respect to the Collateral, or the commencement of any receivership proceedings or any other sale of, collection on, or disposition of, any Collateral, including the exercise of any right, remedy or action to: (a) exercise any collection rights in respect of any Collateral or notify any account debtors to make payment directly to such Party or its agents or other Persons acting on its behalf or retain any proceeds of accounts and other obligations receivable paid by any account debtor; (b) take or accept any transfer of title in lieu of foreclosure upon any Collateral; (c) enforce any claim to the proceeds of insurance upon any Collateral; (d) deliver any notice, claim or demand relating to the Collateral to any Person (including any securities intermediary, depositary bank or landlord) in the possession or control of any Collateral or acting as bailee, custodian or agent for any Party in respect of any Collateral; or (e) otherwise enforce any remedy available to such Party upon default for the enforcement of any Lien upon the Collateral. 3 "ENFORCEMENT EVENT" shall mean the occurrence and continuance of an "Event of Default" as defined under Section 6 of the Indenture. "ENFORCEMENT EVENT NOTICE" shall have the meaning ascribed thereto in Section 3.2. "ENTITLED PARTY" shall have the meaning ascribed thereto in Section 4.1(a). "EVENT OF DEFAULT" shall mean, with respect to any Senior Lien Document, the occurrence of an "Event of Default" under, and as defined in, such Senior Lien Document. "FF&E SECURED LIABILITIES" shall mean Secured Liabilities evidenced by the FF&E Loan Documents. "FINANCING DOCUMENTS" shall mean the Indenture Documents and the Senior Lien Documents. "FORECLOSURE ACTION" shall mean any action to foreclose upon or enforce a Lien against any of the Collateral, including (a) commencing judicial or non-judicial foreclosure proceedings, (b) exercising any rights afforded to secured creditors in a case under the Bankruptcy Law with respect to the Collateral, or (c) taking any action under the Bankruptcy Law that directly relates to or directly affects any such Collateral, other than any such action that relates to or affects all or substantially all of the property of the bankruptcy estate. "FULLY PAID" shall mean (a) with respect to the Indenture Documents, the payment in cash or cash equivalents in full of all obligations (other than contingent, unliquidated indemnity obligations that survive payment in full) under the Indenture Documents, and (b) with respect to any Senior Lien Document, (i) the payment in cash or cash equivalents in full of all obligations (other than contingent, unliquidated indemnity obligations that survive payment in full) under such Senior Lien Document (it being agreed and understood that with respect to any Senior Lien Document, the principal amount of such obligations shall at no time exceed the applicable Maximum Credit Facility Amount), plus related interest, fees, costs, expenses and reimbursement and indemnification obligations), and (ii) the termination of all commitments or other obligations of the Senior Lien Creditors under such Senior Lien Document to extend credit thereunder to any Issuer, any Guarantor, or any other subsidiary of an Issuer. "INDENTURE DOCUMENTS" shall mean the Indenture, the Notes, the Indenture Security Documents and the Registration Rights Agreement, and such other agreements, instruments and certificates executed and delivered (or issued) by the Issuers or the Guarantors pursuant to the Indenture, as any or all of the same may be amended, restated, supplemented or otherwise modified from time to time. "INDENTURE SECURITY DOCUMENTS" has the meaning assigned to the term "Security Documents" in the Indenture. 4 "INSOLVENCY PROCEEDING" shall mean any proceeding for the purposes of dissolution, winding up, liquidation, arrangement or reorganization of the Issuers, any Guarantor, or any other subsidiary of the Issuers, or their respective successors or assigns, whether in bankruptcy, insolvency, arrangement, reorganization or receivership proceedings, or upon an assignment for the benefit of creditors or any other marshaling of the assets and liabilities of the Issuers, any Guarantor, or any other subsidiary of the Issuers, or their respective successors or assigns. "LIEN PRIORITY" shall mean, with respect to any Lien in and to the Collateral, the order of priority of such Lien as specified in Sections 2.1 and 2.2. "MAXIMUM CREDIT FACILITY AMOUNT" shall mean, with respect to Credit Facility Indebtedness owed pursuant to (a) the FF&E Loan Documents, $[16,000,000] (less any permanent principal reductions thereto), and (b) the Senior Lien Documents (other than the FF&E Loan Documents), $35,000,000, which amount may be increased or decreased as provided in Section 4.7(b)(i) of the Indenture (as in effect on the date hereof), in each case in aggregate principal amount of such Credit Facility Indebtedness, plus all related interest, fees expenses and indemnification obligations or such greater amount or amounts as the Trustee may consent to in its discretion. "NEW REVOLVER SECURED LIABILITIES" shall mean Secured Liabilities evidenced by the New Revolver Loan Documents. "PARTY" shall mean each of (a) the Trustee, (b) the FF&E Agent, (c) prior to the Refinancing, the DJL Lender, (d) prior to the Refinancing, the OED Lender, and (e) upon and after the Refinancing, the New Revolver Agent. "SECURED LIABILITIES" shall mean the Subordinated Lien Indebtedness and the Credit Facility Indebtedness (up to the Maximum Credit Facility Amount). "SECURITY DOCUMENTS" shall mean any and all Indenture Security Documents and any and all Senior Lien Documents, in each case executed, delivered or authorized by an Issuer or any Guarantor or any subsidiary of an Issuer pursuant to which such Person grants to the Trustee (as security for the Subordinated Lien Indebtedness) or any Senior Lien Creditor (as security for the applicable Credit Facility Indebtedness) a security interest in any Collateral. "SENIOR LIEN DOCUMENTS" shall mean, collectively and individually, (a) the FF&E Loan Documents, and (b) (i) prior to the Refinancing, the Existing Revolver Documents, and (ii) upon and after the Refinancing, the New Revolver Documents. "SENIOR LIEN CREDITORS" shall mean, collectively and individually, (a) the FF&E Agent and the FF&E Lenders, and (b) (i) prior to the Refinancing, the DJL Lender and the OED Lender, and (ii) upon and after the Refinancing, the New Revolver Agent and the New Revolver Lenders. "SENIOR LIEN CREDITOR REPRESENTATIVES" shall mean, collectively and individually, (a) the FF&E Agent, on behalf of the FF&E Lenders, and (b) (i) prior to the 5 Refinancing, the DJL Lender and the OED Lender, and (ii) upon and after the Refinancing, the New Revolver Agent on behalf of the New Revolver Lenders. "SUBORDINATED LIEN INDEBTEDNESS" shall mean all present and future obligations, contingent or otherwise, of the Issuers and the Guarantors to the Trustee or Holders arising under or pursuant to the Indenture Documents, including, in each case, interest, fees and expenses accruing after the initiation of any Insolvency Proceeding (irrespective of whether allowed as a claim in such proceeding), and including the secured claims of the Trustee or the Holders in respect of the Collateral in any Insolvency Proceeding. Section 1.2 Indenture Definitions. All other capitalized terms that are used but not defined herein shall have the respective meaning indicated in the Indenture, as in effect on the date hereof. Section 1.3 Miscellaneous. All definitions herein (whether set forth herein directly or by reference to definitions in other documents) shall be equally applicable to both the singular and the plural forms of the terms defined. The words "hereof," "herein" or "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Article and section references are to articles and sections of this Agreement unless otherwise specified. The term "including" shall mean "including without limitation." ARTICLE II LIEN PRIORITY Section 2.1 Agreement to Subordinate Liens. The Trustee hereby agrees that all Liens of the Trustee for the benefit of itself and the Holders in and to the Collateral are and shall be junior to and subordinate in priority to the Liens of any or all of the Senior Lien Creditors in and to the Collateral securing Credit Facility Indebtedness (up to the Maximum Credit Facility Amount); provided that, the rights of a Party under this Agreement shall be void and of no further force and effect if, and only to the extent, that the Liens of such Party in and to the Collateral are avoided, disallowed, set aside or otherwise invalidated in any action or proceeding by a court, tribunal or administrative agency of competent jurisdiction and such avoidance, disallowance, set aside or other invalidation is permanent and is not later reversed. The subordination of the Liens of the Trustee for the benefit of itself and the Holders in and to the Collateral in favor of the Senior Lien Creditors provided for herein shall not be deemed to (a) subordinate the Liens of the Trustee for the benefit of itself and the Holders to the Liens of any other Person, or (b) subordinate the Subordinated Lien Indebtedness to any other Indebtedness of the Issuers or any of the Guarantors, including the Credit Facility Indebtedness. Section 2.2 Non-Contest; Excluded Assets. Each Party agrees that it will not attack or contest the validity, perfection, priority or enforceability of the Liens of the other Party or finance or urge any other Person to do so; provided that, any Party may enforce its rights and privileges hereunder without being deemed to have violated this 6 provision. Any provision contained in this Agreement to the contrary notwithstanding, the terms and conditions of this Agreement shall not apply, as between any Senior Lien Creditor Representative on the one hand, and the Trustee on the other hand, to any property or assets (including property or assets that do not constitute Collateral) as to which such Senior Lien Creditor Representative has a Lien and as to which the Trustee does not have a Lien, or as to which the Trustee has a Lien and such Senior Lien Creditor Representative does not have a Lien. Section 2.3 Exercise of Rights. (a) The Trustee may exercise, and nothing herein shall constitute a waiver of, any right it may have at law or equity to receive notice of, or to commence or join with any creditor in commencing any Insolvency Proceeding; provided that, the exercise of any such right by the Trustee shall be (i) subject to the Lien Priority and application of proceeds of Collateral as provided in Section 3.4 and (ii) subject to the provisions of Sections 3.1 and 3.2. (b) Notwithstanding any other provision hereof, the Trustee may make such demands or file such claims as may be necessary to prevent the waiver or bar of such claims under applicable statutes of limitations or other statutes, court orders or rules of procedure. Section 2.4 Priority of Liens. (a) Irrespective of any priority otherwise available to the Trustee by law or agreement or irrespective of the order of recording of mortgages, financing statements, security agreements or other instruments, and irrespective of the descriptions of Collateral contained in the Financing Documents, including any financing statements, each of the Trustee and the Senior Lien Creditor Representatives hereby agree among themselves that their respective Liens in the Collateral shall be governed by the Lien Priority, which shall be controlling in the event of any conflict between this Agreement and any of the Financing Documents. (b) Each Party agrees that this Agreement and the Lien Priority shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated, modified or otherwise affected by any circumstance or occurrence whatsoever (other than in accordance with the terms hereof), including any of the following (whether or not such Party consents thereto or has notice thereof): (i) any change in or waiver of the time, place or manner of payment, or any other term, of any of the Secured Liabilities or Financing Documents, any waiver of or any renewal, extension, increase, refinancing, amendment or modification of or addition, consent or supplement to or deletion from, or any other action or inaction under or in respect of, any of the Secured Liabilities or Financing Documents or any other document, instrument or agreement referred to therein or any assignment or transfer of any of the Secured Liabilities or Financing Documents; (ii) any furnishing of any additional collateral for any of the Secured Liabilities or any sale, exchange, release or surrender of, or realization on, any collateral for any of the Secured Liabilities; (iii) any settlement, release or compromise of any of the Secured Liabilities or Financing Documents, any collateral therefor, or any liability of any other party (including any other Party) with respect to any 7 of the Secured Liabilities or Financing Documents, or any subordination of payment of any Secured Liabilities to the payment of any other indebtedness, liability or obligation of any of the Issuers, Guarantors or any subsidiary of any Issuer; (iv) any bankruptcy, insolvency, reorganization, composition, adjustment, merger, consolidation, dissolution, liquidation or other like proceeding or occurrence relating to any of the Issuers, Guarantors, or any subsidiary of any Issuer, or any other change in the ownership, control, composition or nature of any of the Issuers, Guarantors, or any subsidiary of any Issuer; (v) any application of sums paid by any of the Issuers, Guarantors or any subsidiary of any Issuer with respect to any of the Secured Liabilities, except to the extent actually applied against such Secured Liabilities, regardless of what other liabilities of the Issuers, Guarantors, or any subsidiary of any Issuer remain unpaid; or (vi) the failure of any Party to assert any claim or demand or to enforce any right or remedy against the Issuers, Guarantors, any subsidiary of any Issuer or any other Person (including any other Party with respect to any of the Secured Liabilities) under the provisions of any of the Financing Documents or otherwise. Section 2.5 Insolvency. (a) The provisions of this Agreement will be applicable both before and after the filing or commencement of any Insolvency Proceeding and all converted or succeeding cases in respect thereof, and all references herein to any Issuer or Guarantor shall be deemed to apply to the trustee for such Issuer and/or Guarantor and such Issuer and/or Guarantor as a debtor-in-possession. The relative rights of the Senior Lien Creditors in or to any distributions from or in respect of any Collateral or proceeds of Collateral shall continue after the filing of such Insolvency Proceeding on the same basis as prior to the date of such filing, subject to any court order approving the financing of, or use of cash collateral by, any Issuer or Guarantor as debtor-in-possession. If, in any Insolvency Proceeding and at any time any Credit Facility Indebtedness exists that has not been Fully Paid, all of the Senior Lien Creditors (or such number of the Senior Lien Creditors as may have the power to bind all of them): (i) consent to any order for use of cash collateral or agree to the extension of any Credit Facility Indebtedness (including any debtor-in-possession financing) to any Issuer or Guarantor; (ii) consent to any order granting any priming lien, replacement lien, cash payment or other relief on account of Credit Facility Indebtedness as adequate protection (or its equivalent) for the interests of the Senior Lien Creditors in the property subject to such Lien of a Senior Lien Creditor Representative; (iii) consent to any order approving post-petition financing pursuant to Section 364 of the United States Bankruptcy Code (including any "roll-up" of Credit Facility Indebtedness); or (iv) consent to any order relating to a sale of assets of any Issuer or Guarantor that provides, to the extent the sale is to be free and clear of Liens, that all Liens of the Senior Lien Creditor 8 Representatives and the Lien of the Trustee shall attach to the proceeds of the sale, then the Trustee and the Holders will not oppose or otherwise contest the entry of such order. (b) So long as there is any Credit Facility Indebtedness existing that has not been Fully Paid, none of the Holders or the Trustee will: (i) request judicial relief, in an Insolvency Proceeding or in any other court, that would hinder, delay, limit or prohibit the lawful exercise or enforcement of any right or remedy otherwise available to the Senior Lien Creditor Representatives in respect of the Collateral or that would limit, invalidate, avoid or set aside any Lien of a Senior Lien Creditor Representative or Senior Lien Document or subordinate the Lien of a Senior Lien Creditor Representatives to the Lien of the Trustee or grant the Lien of a Senior Lien Creditor Representatives equal ranking to the Lien of the Trustee; (ii) oppose or otherwise contest any motion for relief from the automatic stay or from any injunction against foreclosure or enforcement of Lien of a Senior Lien Creditor Representatives made by any Senior Lien Creditor Representatives in any Insolvency Proceeding; (iii) oppose or otherwise contest any lawful exercise by any Senior Lien Creditor Representatives of the right to credit bid at any sale in foreclosure of a Lien of a Senior Lien Creditor Representative; (iv) oppose or otherwise contest any other request for judicial relief made in any court by any Senior Lien Creditor Representative relating to the lawful enforcement of any Lien of a Senior Lien Creditor Representative; (v) request relief from the automatic stay in any Insolvency Proceeding unless any Senior Lien Creditor requests such relief; or (vi) challenge the enforceability, perfection or the validity of the Credit Facility Indebtedness or the Lien of a Senior Lien Creditor Representative. (c) The Trustee will not file or prosecute in any Insolvency Proceeding any motion for adequate protection or for relief from the automatic stay (in each case, or any comparable request for relief) based upon its interests in the Collateral, except that: 9 (i) it may freely seek and obtain relief granting a replacement lien, additional lien, superpriority, administrative claim or other adequate protection co-extensive in all respects with, but subordinated in accordance with the Lien Priority in all respects to, all Liens granted in such Insolvency Proceeding to the Senior Lien Creditors in connection with Credit Facility Indebtedness; (ii) it may assert rights consistent with this Agreement in connection with the confirmation of any plan of reorganization or similar dispositive restructuring plan; and (iii) it may freely seek and obtain any relief upon a motion for adequate protection or for relief from the automatic stay (in each case, or any comparable relief), without any condition or restriction whatsoever, at any time when all Credit Facility Indebtedness has been Fully Paid. (d) If, in any Insolvency Proceeding, debt obligations of the reorganized debtor secured by Liens upon any property of the reorganized debtor are distributed, both on account of Credit Facility Indebtedness and on account of the Subordinated Lien Indebtedness, then, to the extent the debt obligations distributed on account of the Credit Facility Indebtedness and on account of the Subordinated Lien Indebtedness are secured by Liens upon the same property, the provisions of this Agreement will survive the distribution of such debt obligations pursuant to such plan and will apply with like effect to the Liens securing such debt obligations. (e) Subject to Section 3.4(a)(ii), the Trustee will not assert or enforce, at any time when any Credit Facility Indebtedness exists that has not been Fully Paid, any claim under ss.506(c) of the Bankruptcy Code senior to or on a parity with the Lien of a Senior Lien Creditor Representative for costs or expenses of preserving or disposing of any Collateral. Section 2.6 Insurance and Condemnation Proceeds. At any time any Credit Facility Indebtedness exists that has not been Fully Paid, the Senior Lien Creditor Representatives will have the sole right to adjust settlement of all insurance claims and condemnation awards in the event of any covered loss, theft, destruction or condemnation of any Collateral and all claims under insurance constituting Collateral, subject to the terms of the Senior Lien Documents. ARTICLE III ACTIONS OF THE PARTIES Section 3.1 Limitation on Certain Actions. Subject to Section 3.2, until the first date on which the Maximum Credit Facility Amount is Fully Paid, the Trustee will not, without the prior written consent of each Senior Lien Creditor Representative, take any Enforcement Action. 10 Section 3.2 Standstill Period. If an Enforcement Event has occurred and is continuing, the Trustee, on behalf of the holders of the Notes, may give the Senior Lien Creditor Representative written notice thereof (an "ENFORCEMENT EVENT NOTICE"), which notice shall constitute notice to each Senior Lien Creditor. If (a) such Enforcement Event is continuing for more than 180 consecutive days after the delivery of such Enforcement Event Notice (the "EXPIRY DATE"), (b) no Senior Lien Creditor Representative has, on or before the Expiry Date, commenced (and notified the Trustee that such Senior Lien Creditor Representative has commenced) one or more Enforcement Actions, and (c) the Issuer or the Guarantor against which the Trustee's proposed Enforcement Action is to be taken is not the subject of an Insolvency Proceeding, then the Trustee may, subject to the Lien Priority and the application of all proceeds of the Collateral in accordance with Section 3.4, take one or more Enforcement Actions. If (i) any Senior Lien Creditor Representative has commenced any Enforcement Action on or prior to the Expiry Date and, at any time after the Expiry Date, is no longer pursuing one or more Enforcement Actions, (ii) no Insolvency Proceeding is pending against the Issuers or the Guarantor against which the Trustee's proposed Enforcement Action is to be taken, and (iii) the Enforcement Event that was the subject of, or existing on the date of, the Enforcement Event Notice is then continuing, then the Trustee may, subject to the Lien Priority and the prior application of all proceeds of the Collateral in accordance with Section 3.4, take one or more Enforcement Actions. Except as expressly provided for in this Agreement, nothing in this Agreement shall prevent the Parties from exercising any other remedy, or taking any other action, under any of the Financing Documents. Section 3.3 Foreclosure. Any Party taking a permitted Enforcement Action may enforce its Financing Documents independently as to the Issuers and each Guarantor and independently of any other remedy or security such Party at any time may have or hold in connection with its Secured Liabilities, and, except as provided herein, it shall not be necessary for such Party to marshal assets in favor of any other Party or any other Person or to proceed upon or against or exhaust any other security or remedy before proceeding to enforce the Financing Documents. Each of the Trustee (for so long as the Maximum Credit Facility Amount is not Fully Paid) and each Senior Lien Creditor Representative (for so long as the Trustee and the Holders are owed any Subordinated Lien Indebtedness) expressly waives any right to require the other Party to marshal assets in favor of any Party or to proceed against any Collateral provided by the Issuers or any Guarantor, or any other property, assets, or collateral provided by the Issuers, any Guarantor, or any other Person, and agrees that the Party taking such permitted Enforcement Action may proceed against the Issuers, any Guarantor, any Collateral or other property, assets, or other collateral provided by any of them or by any other Person, in such order as it shall determine in its sole and absolute discretion. The foregoing notwithstanding: (a) with respect to the sale or other disposition of any Collateral governed by Article 9 of the Uniform Commercial Code, the Party conducting such sale or other disposition agrees in favor of the other Parties that every aspect of such sale or other disposition, including the method, manner, time, place, and terms, must be commercially reasonable, (b) with respect to the sale or other disposition of any other Collateral consisting of real property, the Party conducting such sale or other disposition agrees in favor of the other Parties that such sale or other disposition shall be conducted according to the normal practices of commercial real property secured lenders generally, 11 (c) with respect to the sale or other disposition of any Collateral by any Party, such Party agrees to provide the other Parties with such written notice as it is required by applicable law (including, if applicable, the Uniform Commercial Code) to provide to the Issuers or the Guarantors (without regard to whether the Issuers or the Guarantors have waived their entitlement to receive such notice), and (d) each Senior Lien Creditor Representative agrees that, at such time as the Maximum Credit Facility Amount applicable to its Senior Lien Documents is Fully Paid, such Senior Lien Creditor Representative thereupon promptly shall cease all further Enforcement Actions in connection with its Senior Lien Documents. Section 3.4 Distribution. Each Party agrees that, upon any distribution as a result of any Enforcement Action, or the receipt of any other payment or distribution with respect to the Collateral, the proceeds thereof shall be distributed in the order of, and in accordance with, the following priorities: (a) FIRST: (i) if the Enforcement Action is taken by a Senior Lien Creditor, to the payment of all reasonable costs and expenses, commissions and taxes of such Senior Lien Creditor incurred in connection with taking such Enforcement Action or other realization, including all reasonable expenses (including attorneys fees and expenses), liabilities and advances made or incurred by or on behalf of such Senior Lien Creditor in connection therewith; (ii) if the Enforcement Action is taken and entitled to be taken hereunder by the Trustee, to the payment of all reasonable costs and expenses, commissions and taxes of the Trustee incurred in connection with taking such Enforcement Action or other realization, including all reasonable expenses (including attorneys fees and expenses), liabilities and advances made or incurred by or on behalf of the Trustee in connection therewith; (b) SECOND, to the Senior Lien Creditor Representatives, for the benefit of the Senior Lien Creditors, until the first date on which the Maximum Credit Facility Amount is Fully Paid; (c) THIRD, to the Trustee, until all Subordinated Lien Indebtedness is Fully Paid; and (d) FOURTH, to or at the direction of the applicable Issuer or Guarantor, or as a court of competent jurisdiction shall direct. Section 3.5 Notice of Certain Events; Information. (a) Each Party agrees that it will notify the other Parties (it being understood that, to the extent this Section 3.5 applies to an obligation of the Trustee to give notice, it may satisfy such obligation by giving notice to any Senior Lien Creditor Representative), in writing, (x) if it receives actual notice of the occurrence of an Event of Default or an Enforcement 12 Event, not later than 30 days after the date of any such occurrence, and (y) at least 15 days prior to exercising any remedies with respect to any portion of the Collateral. Notwithstanding the foregoing, no Senior Lien Creditor Representative shall be obligated to provide such prior written notice if exigent circumstances require that such Senior Lien Creditor Representative act immediately in order to preserve, protect, or obtain possession or control over the Collateral or any portion thereof; provided that, if such exigent circumstances require such Senior Lien Creditor Representative to so act immediately, such Senior Lien Creditor Representative agrees to provide the Trustee with written notice as soon as practicable following such Senior Lien Creditor Representative first exercising any of its secured creditor remedies with respect to the Collateral, and no Party shall incur any liability to the other under this Section 3.5 as a result of the failure of such Party to provide any such notice so long as the failure to so provide such notice was not the result of willful misconduct, bad faith or gross negligence. (b) The Senior Lien Creditor Representatives, on the one hand, and the Trustee, on the other hand, shall each be responsible for keeping themselves informed of the financial condition of the Issuers, Guarantors and their subsidiaries and all other circumstances bearing upon the risk of nonpayment of the Secured Liabilities. Neither any Senior Lien Creditor Representative, nor the Trustee, on the other hand, shall have any duty to advise the other party of information regarding such condition or circumstances or, except as otherwise expressly provided herein, as to any other matter. If any Senior Lien Creditor Representative on the one hand, or the Trustee, on the other hand, in their respective discretion, undertakes at any time or from time to time to provide any such information to any Party, such first Party shall be under no obligation to provide any similar information on any subsequent occasion, to provide any additional information, to undertake any investigation, or to disclose any information which, pursuant to accepted or reasonable commercial finance practice, it wishes to maintain confidential. ARTICLE IV ENFORCEMENT OF PRIORITIES Section 4.1 In Furtherance of Lien Priorities. Each Party agrees as follows: (a) All payments or distributions of or with respect to the Collateral that are received by any Party contrary to the provisions of this Agreement (including payments or distributions in connection with any Insolvency Proceeding) shall be segregated from other funds and property held by such Party and shall be held in trust for the Party entitled thereto in accordance with the provisions of Section 3.4 (the "ENTITLED PARTY") and such Party shall forthwith pay over such remaining proceeds to the Entitled Party in the same form as so received (with any necessary endorsement) to be applied (in the case of cash) or held as Collateral (in the case of non-cash property or securities) in accordance with the provisions hereof and the provisions of the applicable Financing Documents. 13 (b) After the first date on which the Maximum Credit Facility Amount relating to any Senior Lien Documents is Fully Paid, each applicable Senior Lien Creditor Representative will promptly execute and deliver all further instruments and documents, and take all further acts that may be necessary, or that the Trustee may reasonably request, to permit the Trustee to evidence the termination of the Lien Priority applicable to such Senior Lien Creditor Representative hereunder, or in furtherance thereof; provided that, no Senior Lien Creditor Representative shall be required to pay over any payment or distribution, execute any instruments or documents, or take any other action referred to in this clause (b) to the extent that such action would contravene any law, order or other legal requirement, and in the event of a controversy or dispute, such Senior Lien Creditor Representative may interplead any payment or distribution in any court of competent jurisdiction. (c) Each Party is hereby authorized to demand specific performance of this Agreement, whether or not the Issuers or any Guarantor shall have complied with any of the provisions hereof applicable to it, at any time when any other Party shall have failed to comply with the provisions of this Agreement applicable to it, provided that, the remedy of specific performance shall not be available, and the asserting Party shall be free to assert any and all legal defenses it may possess, if such remedy would result in, or otherwise constitute, a violation of the Employee Retirement Income Security Act of 1974, as amended. Each Party hereby irrevocably waives any defense based on the adequacy of a remedy at law, which might be asserted as a bar to such remedy of specific performance. (d) Upon the earlier to occur of (x) the Refinancing and (y) ten Business Days after the date hereof, (i) the Trustee and the applicable Senior Lien Creditor Representative shall enter into a control agreement or control agreements with respect to the deposit accounts of any Issuer or Guarantor at any financial institution, constituting part of the Collateral, in form and substance reasonably acceptable to the Trustee and such Senior Lien Creditor Representative, which shall supersede any existing control agreements between the Trustee and such financial institution, and (ii) the Trustee and such Senior Lien Creditor Representative agrees to terminate or amend and restate such existing control agreements. (e) This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Secured Liabilities is, other than as a result of any intentional fraud or gross negligence of the applicable Party, rescinded or must otherwise be returned by the applicable Party upon the insolvency, bankruptcy or reorganization of the Issuers or any Guarantor or otherwise, all as though such payment had not been made. Section 4.2 Perfection of Possessory or Control Security Interests. (a) For the limited purpose of perfecting the security interests of the Parties in those types or items of Collateral in which a security interest only may be perfected by possession or control (including perfection of a security interest in deposit accounts under Article 9 of the Uniform Commercial Code), each Party hereby appoints the other as its representative for the limited purpose of possessing or controlling on its behalf any such 14 Collateral that may come into the possession or control of such other Party from time to time, and each Party agrees to act as the other's representative for such limited purpose of perfecting the other's security interest by possession or control through a representative, provided that, neither Party shall incur any liability to the other by virtue of acting as the other's representative hereunder for such purpose. In this regard, any Party that is in possession or control of any such item of Collateral agrees that if it elects to relinquish possession or control of such item of Collateral it shall deliver possession or control thereof to another Party; provided that, no Party shall be required to deliver any such item of Collateral or take any other action referred to in this Section 4.2 to the extent that such action would contravene any law, order or other legal requirements, and in the event of a controversy or dispute, such Party may interplead any item of Collateral in any court of competent jurisdiction. (b) The Senior Lien Creditor Representatives and the Trustee agree that if a Senior Lien Creditor Representative shall enter into a control agreement with respect to any security account or deposit account of an Issuer or a Guarantor, the Trustee will be given notice by such Issuer or Guarantor and sufficient opportunity to also become a party thereto in order to perfect its security interest in such accounts. If and to the extent such control agreements provide for the right of either the applicable Senior Lien Creditor Representative or the Trustee to give notice or direction to the depository or intermediary, as applicable, with respect to such accounts, the Trustee hereby agrees that, subject to Section 3.2, it will not give any such notice or direction to any such depository or intermediary unless and until all Credit Facility Indebtedness has been Fully Paid. The duties or responsibilities of the Senior Lien Creditor Representatives under this Section 4.2 shall be limited solely to holding the pledged Collateral as bailee for the Trustee for purposes of perfecting the Lien therein held by the Trustee to secure the Subordinated Lien Obligations. The Senior Lien Creditor Representatives shall not have any obligation to the Trustee or any Holder to care for, protect or insure any pledged Collateral or to ensure that the Lien on such pledged Collateral has been properly or sufficiently created or entitled to any particular priority. The Senior Lien Creditor Representative shall be entitled to deal with the pledged Collateral in accordance with the terms of the Senior Lien Documents and this Agreement. The Senior Lien Creditor Representative shall not have any obligation whatsoever to the Trustee or the Holders to assure that the pledged Collateral is genuine or owned by any Issuer or Guarantor or otherwise or to preserve rights or benefits of any Person except as expressly set forth in this Section. The Senior Lien Creditor Representative shall not have, by reason of this Agreement or any other document or instrument, a fiduciary relationship in respect of the Trustee or the Holders. Section 4.3 Control of Dispositions of Collateral and Effect thereof on Junior Liens. (a) Each Party hereby agrees that any Uniform Commercial Code collection, sale, or other disposition of Collateral by any Senior Lien Creditor Representative shall be free and clear of any Lien of the Trustee in such Collateral; provided that, the Trustee shall retain a Lien (having the same priority as the Lien it previously had on the item of Collateral that was collected, sold or otherwise disposed of) 15 on the proceeds of such collection, sale, or other disposition (except to the extent such proceeds are applied to the Credit Facility Indebtedness (up to the Maximum Credit Facility Amount) in accordance with Section 3.4). (b) To the extent reasonably requested by any Party, the other Parties will cooperate in providing any necessary or appropriate releases to permit a collection, sale, or other disposition of Collateral, as provided in Section 4.3(a). Section 4.4 Certain Other Collateral. Subject to Section 4.1(c), any provision of any Indenture Security Document that requires any Debtor (as defined in the Security Agreement referred to in the Indenture) to (a) deliver any Collateral to the Trustee or any Senior Lien Creditor Representative, (b) provide that the Trustee or any Senior Lien Creditor Representative have control (as defined in the Uniform Commercial Code) over any Collateral, or (c) list the Trustee or any Senior Lien Creditor Representative as (x) loss payee or additional insured on any insurance policy or (y) sole lienholder on any certificate of title relating to any Collateral, may be satisfied by (A) the delivery of such Collateral by such Debtor to any Senior Lien Creditor Representative (or its designee), (B) providing that any Senior Lien Creditor Representative (or its designee) be provided with control (as defined in the Uniform Commercial Code) with respect to such Collateral, or (C) listing any Senior Lien Creditor Representative (or its designee) as (x) loss payee or additional insured on any insurance policy or (y) sole lienholder on any certificate of title relating to Collateral, in each of the foregoing cases in clauses (A), (B) and (C), for the benefit of all of the Senior Lien Creditors and the Trustee. ARTICLE V MISCELLANEOUS Section 5.1 Rights of Subrogation. The Trustee agrees that no payment or distribution to any Senior Lien Creditor pursuant to the provisions of this Agreement shall entitle the Trustee to exercise any rights of subrogation in respect thereof until the first date on which the Maximum Credit Facility Amount of all the Senior Lien Documents shall have been Fully Paid. Section 5.2 Further Assurances. The Parties will, at their own expense and at any time and from time to time, promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that any Party may reasonably request, in order to protect any right or interest granted or purported to be granted hereby or to enable any Party to exercise and enforce its rights and remedies hereunder; provided that, no Party shall be required to pay over any payment or distribution, execute any instruments or documents, or take any other action referred to in this Section 5.2 to the extent that such action would contravene any law, order or other legal requirement binding upon such Party, and in the event of a controversy or dispute, any Party may interplead any payment or distribution in any court of competent jurisdiction, without further responsibility in respect of such payment or distribution under this Section 5.2. Without limiting the foregoing, but in furtherance thereof, the Trustee agrees, upon the request of the New Revolver Agent, to execute and deliver to the New Revolver Agent (or its designees) a subordination of mortgage, 16 subordination of preferred ship mortgage and subordination of trademark security interests, in each case in form to be recordable with the applicable governmental authorities and otherwise in form and substance reasonable acceptable to the New Revolver Agent and the Trustee. Section 5.3 Defenses Similar to Suretyship Defenses. All rights, interests, agreements and obligations of each of the Parties under this Agreement, shall remain in full force and effect irrespective of: (a) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Liabilities, or any other amendment or waiver of or any consent to departure from the Financing Documents; provided that, this clause (a) shall not apply to, and the Trustee's Liens in the Collateral shall not be subordinated in priority by virtue of this Agreement to, any Senior Lien Creditor Representative's Liens therein if and to the extent that the Credit Facility Indebtedness applicable to such Senior Lien Creditor Representative's Senior Lien Documents is increased, without the express written consent of the Trustee, to an amount in excess of the applicable Maximum Credit Facility Amount for such Senior Lien Document; (b) any exchange, release, non-enforcement or non-perfection of any Party's Liens with respect to any Collateral, or any release, amendment or waiver of or consent to departure from any guaranty, for all or any of the Secured Liabilities; or (c) any failure by any Party to marshal assets in favor of any other Party or any other Person or to proceed upon or against or exhaust any security or remedy before proceeding to enforce the Financing Documents. Section 5.4 Waiver. Except as otherwise provided in Section 2.1 and the other provisions hereof, to the maximum extent permitted by applicable law, the Trustee hereby waives, solely with respect to the Collateral to which the Lien Priority relates, any failure, omission, delay or lack on the part of any Senior Lien Creditor to enforce, assert or exercise any right, power or remedy conferred on such Senior Lien Creditor in any of the Senior Lien Documents or the inability of such Senior Lien Creditor to enforce any provision of the Senior Lien Documents or this Agreement. Section 5.5 Amendments, Etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by any Party shall in any event be effective unless the same shall be in writing and signed by each Party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that, neither Section 4.4 nor this Section 5.5 may be amended or otherwise modified without the prior written consent of the Issuers. Section 5.6 Addresses for Notices. All demands, notices and other communications provided for hereunder shall be in writing and, if to the Trustee, mailed or sent by telecopy or delivered to it, addressed to it as follows: 17 U.S. Bank National Association 60 Livingston Avenue St. Paul, MN 55107 Attention: Corporate Trust Department Facsimile: (651) 495-8097 and if to any Senior Lien Creditor Representative, mailed or sent by telecopy or delivered to such Senior Lien Creditor Representative, addressed to it as follows: Wells Fargo Foothill, Inc. 2450 Colorado Avenue, Suite 3000W Santa Monica, CA 90404 Attention: Business Finance Division Manager Facsimile: (310) 453-7313 With a copy to: Paul Hastings Janofsky & Walker, LLP 600 Peachtree Street, NE, Suite 2400 Atlanta, GA 30308 Attention: Cindy J. K. Davis, Esq. Facsimile: (404) 815-2424 or as to any Party at such other address as shall be designated by such Party in a written notice to the other parties complying as to delivery with the terms of this Section 5.6. All such demands, notices and other communications shall be effective: when mailed, two business days after deposit in the mails, postage prepaid; when sent by telecopy, when receipt is acknowledged by the receiving telecopy equipment (or at the opening of the next business day if receipt is acknowledged after normal business hours); or when delivered, as the case may be, addressed as aforesaid. Section 5.7 No Waiver of Remedies. No failure on the part of any Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 5.8 Continuing Agreement. This Agreement is a continuing agreement and shall (a) be binding upon the Parties and their successors and assigns (including all Holders and all Persons that become lenders or participants under the Senior Lien Documents), and (b) inure to the benefit of and be enforceable by the Parties, the Holders, the Senior Lien Creditors and their respective successors, transferees and assigns. Section 5.9 Governing Law; Entire Agreement. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York including Sections 5-1401 and 5-1402 of the New York General Obligations Law, except as otherwise preempted by applicable federal law. This Agreement 18 constitutes the entire agreement and understanding among the Parties with respect to the subject matter hereof and supersedes any prior agreements, written or oral, with respect thereto. Section 5.10 Counterparts. This Agreement may be executed in any number of counterparts, and it is not necessary that the signatures of all Parties be contained on any one counterpart hereof, each counterpart will be deemed to be an original, and all together shall constitute one and the same document. Section 5.11 No Third Party Beneficiary. This Agreement is solely for the benefit of the Parties (and their successors and assigns) and the holders of the Secured Liabilities (including the Senior Lien Creditors and the Holders). No other Person (including the Issuers, any Guarantor or any subsidiary or affiliate of the Issuers, except the Issuers and Guarantors solely with respect to Section 4.4 and the proviso to Section 5.5) shall be deemed to be a third-party beneficiary of this Agreement or shall have any rights to enforce any provisions hereof. Section 5.12 Headings. The headings of the articles and sections of this Agreement are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 5.13 Severability. If any of the provisions in this Agreement shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement and shall not invalidate the Lien Priority or any other priority set forth in this Agreement. Section 5.14 Trustee Status. Notwithstanding any term herein to the contrary, it is hereby expressly agreed and acknowledged that the lien-subordination and related agreements set forth herein by the Trustee are made solely in its capacity as trustee and collateral agent under the Indenture Documents and with respect to the Notes issued under the Indenture (and not in its individual commercial capacity, except to the extent that it is or becomes a Holder of any such Note). The Trustee shall not have any duties, obligations, or responsibilities to any Senior Lien Creditor or any Senior Lien Creditor Representative under this Agreement except as expressly set forth herein. Nothing in this Agreement shall be construed to operate as a waiver by the Trustee, with respect to the Issuers or any holder of any Subordinated Lien Indebtedness, of the benefit of any exculpatory provisions, presumptions, indemnities, protections, benefits, immunities or reliance rights contained in the Indenture, and, by its acknowledgment hereof, each Issuer expressly agrees that as between itself and the Trustee, the Trustee shall have such benefit with respect to all actions or omissions by the Trustee pursuant to this Agreement. For all purposes of this Agreement, the Trustee may (a) rely in good faith, as to matters of fact, on any representation of fact believed by the Trustee to be true (without any duty of investigation) and that is contained in a written certificate of any authorized representative of the Issuers or of any Senior Lien Creditor or any Senior Lien Creditor Representative, (b) rely in good faith, as to matters of law, on any advice received from its legal counsel or an opinion of its counsel, counsel to the Issuers or 19 counsel to any Senior Lien Creditor or any Senior Lien Creditor Representative, and shall have no liability for any action or omission taken in reliance thereon, and (c) assume in good faith (without any duty of investigation), and rely upon, the genuineness, due authority, validity, and accuracy of any certificate, instrument, notice, or other document believed by it in good faith to be genuine and presented by the proper person. Section 5.15 New Revolver. (a) Each of the Parties hereby acknowledges and agrees that, upon consummation of the Refinancing, (a) the New Revolver Agent shall be, and each of the DJL Lender and the OED Lender shall cease to be, a Senior Lien Creditor and/or a Senior Lien Creditor Representative hereunder; and (b) the New Revolver Documents shall constitute, and each of the Existing Revolver Documents shall cease to constitute, Senior Lien Documents hereunder, in each case, automatically and without further consent of any Party. (b) The Parties agree that, notwithstanding anything herein to the contrary, in connection with the Refinancing, the FF&E Secured Liabilities and the New Revolver Secured Liabilities may be evidenced by a common set of agreements, instruments and other documents, and if so evidenced, all references herein to the FF&E Loan Documents shall be deemed to be references to such agreements, instruments and other documents as they relate to the FF&E Secured Liabilities, and all references herein to the New Revolver Loan Documents shall be deemed to be references to such agreements, instruments and other documents as they relate to the New Revolver Secured Liabilities. In furtherance thereof, all references to the FF&E Agent, the FF&E Lenders, the FF&E Borrowers, the FF&E Credit Agreement, the New Revolver Agreement, the New Revolver Lenders and the New Revolver Agent shall be construed in like manner, mutatis mutandis. [signature pages follow] 20 IN WITNESS WHEREOF, each Party has caused this Agreement to be duly executed and delivered as of the date first above written. WELLS FARGO FOOTHILL, INC., as FF&E Agent, OED Lender, DJL Lender and New Revolver Agent By: /s/ Todd R. Nakamoto ------------------------------------ Name: Todd R. Nakamoto Title: Vice President U.S. BANK NATIONAL ASSOCIATION, as Trustee By: /s/ Frank P. Leslie, II ------------------------------------ Name: Frank P. Leslie, II Title: Vice President ACKNOWLEDGMENT Each of the undersigned hereby acknowledges that (a) it has received a copy of the foregoing Intercreditor Agreement, dated as of April 16, 2004 (the "INTERCREDITOR AGREEMENT"; undefined capitalized terms used in this Acknowledgment have the meanings assigned to them in the Intercreditor Agreement), by and among U.S. Bank National Association, as Trustee, and Wells Fargo Foothill, Inc., as FF&E Agent, OED Lender, DJL Lender and New Revolver Agent, and consents thereto, and agrees to recognize all rights granted thereby to the Parties, and will not do any act or perform any obligation that is not in accordance with the agreements set forth in such Intercreditor Agreement; and (b) it is not an intended beneficiary or third party beneficiary under the Intercreditor Agreement (other than with respect to Section 4.4 and the proviso to Section 5.5 thereof). Dated as of the date first above written. DIAMOND JO, LLC, as an Issuer By: /s/ M. Brent Stevens ------------------------------------ Name: M. Brent Stevens Title: Chief Executive Officer THE OLD EVANGELINE DOWNS CAPITAL CORP., as an Issuer By: /s/ M. Brent Stevens ------------------------------------ Name: M. Brent Stevens Title: Chief Executive Officer OED ACQUISITION, LLC, as a Guarantor By: /s/ M. Brent Stevens ------------------------------------ Name: M. Brent Stevens Title: Chief Executive Officer THE OLD EVANGELINE DOWNS, L.L.C., as a Guarantor By: /s/ M. Brent Stevens ------------------------------------ Name: M. Brent Stevens Title: Chief Executive Officer PENINSULA GAMING CORP., as a Guarantor By: /s/ M. Brent Stevens ------------------------------------ Name: M. Brent Stevens Title: Chief Executive Officer EX-4.9B 20 forms4_ex4-9bwfb071404.txt EX. 4.9B - ACK OF PEN GAMING - 06-16-04 Exhibit 4.9B ACKNOWLEDGMENT The undersigned hereby acknowledges that (a) it has received a copy of the foregoing Intercreditor Agreement, dated as of April 16, 2004 (the "INTERCREDITOR AGREEMENT"; undefined capitalized terms used in this Acknowledgment have the meanings assigned to them in the Intercreditor Agreement), by and among U.S. Bank National Association, as Trustee and Secured Party, and Wells Fargo Foothill, Inc., as Credit Facility Lender (as defined below), and consents thereto, and agrees to recognize all rights granted thereby to the Parties, and will not do any act or perform any obligation that is not in accordance with the agreements set forth in such Intercreditor Agreement; and (b) it is not an intended beneficiary or third party beneficiary under the Intercreditor Agreement. Dated June 16, 2004. PENINSULA GAMING, LLC, as an Issuer By: /s/ M. Brent Stevens --------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer EX-5.1 21 forms4_ex5-1wfb071404.txt EX. 5.1 - OPINION OF MBR&M LLP EXHIBIT 5.1 [LETTERHEAD OF MAYER BROWN ROWE & MAW LLP] July 29, 2005 Mayer, Brown, Rowe & Maw LLP 1675 Broadway New York, New York 10019-5820 Main Tel (212) 506-2500 Main Fax (212) 262-1910 www.mayerbrownrowe.com Peninsula Gaming, LLC Diamond Jo, LLC Peninsula Gaming Corp. P.O. Box 90270 Lafayette, Louisiana 70509-0270 Ladies and Gentlemen: We have acted as counsel to Peninsula Gaming, LLC, a Delaware limited liability company ("PGL"), Diamond Jo, LLC, a Delaware limited liability company ("DJL"), and Peninsula Gaming Corp., a Delaware corporation ("PGC", together with PGL and DJL, the "Issuers"), in connection with the preparation of a Registration Statement on Form S-4 (the "Registration Statement") filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"), relating to the proposed exchange of 8 3/4% Senior Secured Notes due 2012 of the Issuers (the "New Notes") for any and all issued and outstanding 8 3/4% Senior Secured Notes due 2012 of the Issuers (the "Old Notes"). The Old Notes were, and the New Notes will be, issued pursuant to an indenture (the "Indenture") dated April 16, 2004 between the Issuers and U.S. Bank National Association, as trustee. Capitalized terms used and not defined herein shall have the meanings ascribed to them in the Indenture. In rendering the opinions set forth below, we have examined the originals, or certified, conformed or reproduction copies, of all such records, agreements, instruments and documents as we have deemed necessary or appropriate. In all such examinations, we have relied upon the genuineness of all signatures, the authenticity of all original or certified copies and the conformity to original or certified copies of all copies submitted to us as conformed or reproduction copies. We also have assumed, with respect to all parties to agreements or instruments relevant hereto, (i) that such parties had the requisite power and authority (corporate or otherwise) to execute, deliver and perform such agreements or instruments, (ii) that such agreements or instruments have been duly authorized by all requisite action (corporate or otherwise) and have been executed and delivered by such parties, and (iii) that such agreements or instruments are the valid, binding and enforceable obligations of such parties (other than the Issuers and the Guarantor). As to various questions of fact relevant to such opinions, we have relied upon, and have assumed the accuracy of, certificates and oral or written statements and other information of or from public officials, officers or representatives of the Issuers and others. BRUSSELS CHARLOTTE CHICAGO COLOGNE FRANKFURT HOUSTON LONDON LOS ANGELES MANCHESTER NEW YORK PALO ALTO PARIS WASHINGTON, D.C. INDEPENDENT MEXICO CITY CORRESPONDENT: JAUREGUI, NAVARRETE, NADER Y ROJAS, S.C. Mayer, Brown, Rowe & Maw LLP operates in combination with our associated English limited liability partnership in the offices listed above. Mayer, Brown, Rowe & Maw LLP July 29, 2004 Page 2 Based upon the foregoing and subject to the other limitations, qualifications and assumptions set forth herein, we are of the opinion that: 1. Upon the due execution and authentication of the New Notes in accordance with the terms of the Indenture and delivery thereof in exchange for the Old Notes, the New Notes will constitute valid and binding obligations of the Issuers, enforceable in accordance with their terms and entitled to the benefits of the Indenture, subject to (i) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other laws now or hereafter in effect affecting creditors' rights generally, and (ii) general principles of equity (including, without limitation, standards of materiality, good faith, fair dealing and reasonableness) whether considered in a proceeding in equity or at law. 2. Upon the due execution and delivery thereof and the due execution and authentication of the New Notes in accordance with the terms of the Indenture and delivery thereof in exchange for the Old Notes, the Guaranty will constitute the valid and binding obligation of The Old Evangeline Downs, L.L.C. (the "Guarantor"), enforceable in accordance with its terms and entitled to the benefits of the Indenture, subject to (i) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other laws now or hereafter in effect affecting creditors' rights generally, and (ii) general principles of equity (including, without limitation, standards of materiality, good faith, fair dealing and reasonableness) whether considered in a proceeding in equity or at law. We hereby consent to the filing of this opinion as an Exhibit to the Registration Statement and to the reference to this firm under the caption "Legal Matters" in the Prospectus that is included in the Registration Statement. In giving this consent, we do not admit that we are "experts," within the meaning of that term as used in the Securities Act or the rules and regulations of the Securities and Exchange Commission issued thereunder, with respect to any part of the Registration Statement, including this opinion as an Exhibit or otherwise. The foregoing opinion is strictly limited to the matters stated herein, and no other or more extensive opinion is intended or implied or to be inferred beyond the matters expressly stated herein. The foregoing opinion is based on and is limited to, as in effect on the date hereof, the General Corporation Law of the State of Delaware, which includes those statutory provisions as well as all applicable provisions of the Delaware Constitution and the reported judicial decisions interpreting such laws, the internal laws of the State of New York and the relevant Federal law of the United States of America. With respect to certain matters of Louisiana law, we have relied on the opinion of McGlinchey Stafford PLLC of even date herewith. We render no opinion with respect to the law of any other jurisdiction or, without limiting the generality of the foregoing, the effect of the laws of any other jurisdiction. Mayer, Brown, Rowe & Maw LLP July 29, 2004 Page 3 It is understood that this opinion is to be used only in connection with the exchange offer of the New Notes while the Registration Statement is in effect and may not be relied upon for any other purpose. This opinion is not a guarantee or an opinion respecting matters of fact and should not be construed or relied on as such. Other than as expressly stated above, we express no opinion on any issue relating to the Issuers or to any investment therein. Sincerely, MAYER, BROWN, ROWE & MAW LLP EX-10.1A 22 forms4_ex10-1awfb071404.txt SCHRAMM EMPLOYMENT AGREEMENT EXHIBIT 10.1A EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into effective this 29th day of July 2004 by and between Natalie Schramm (hereinafter referred to as "Employee") and Peninsula Gaming, LLC, a Delaware limited liability company (hereinafter referred to as "Employer"). WHEREAS, the Employer and the Employee desire to enter into an employment agreement on the terms and conditions hereinafter provided. NOW, THEREFORE, in consideration of the promises made in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties, the parties agrees as follows: 1. TERM OF AGREEMENT. The term of the Agreement shall be for a three (3) year period commencing July 1, 2004 through June 30, 2007 (the "Initial Term"). This Agreement shall automatically renew and continue for successive one-year terms commencing at the end of the Initial Term and every year thereafter, unless either party gives the other party written notice of the party's intention not to renew this Agreement for a further one-year term at least thirty (30) days prior to the expiration of a term, unless terminated by agreement of the parties or pursuant to Section 2 of this Agreement (the Initial Term, together with any subsequent renewal period, hereinafter referred to as the "Term"). 2. TERMINATION. This Agreement may be terminated at any time before any expiration date by the agreement of the parties, and may be terminated by Employee upon ninety (90) days advance written notice to the Chief Executive Officer of the Employer. In the event that this Agreement is terminated by Employee upon ninety (90) days advance written notice, Employee shall be entitled to continue receiving her regular salary for so long as Employee is permitted to and actually continues to render services to Employer during the ninety (90) day period following such notice. If Employee is directed by Employer to cease work prior to expiration of the ninety (90) day period, Employee shall nevertheless be entitled to receive her regular salary for the ninety (90) day period. In addition, this Agreement may be terminated by the Employer immediately upon the occurrence of any of the following events: (a) Employee's death, (b) Employee becoming physically or mentally disabled (a "Disability"), which Disability renders Employee unable to perform, as certified by a mutually agreeable competent medical physician, a substantial portion of Employee's duties hereunder for a continuous period of sixty (60) days or a total of ninety (90) days in any three hundred sixty-five (365) day period, (c) Employee's commission of an act of embezzlement, fraud, misappropriation against the Employer, (d) Employee's conviction of, or entry of a plea of guilty or nolo contendere or its equivalent of, a felony, (e) Employee's continued neglect or failure to discharge Employee's duties or responsibilities or the repeated taking of any action prohibited by Employee's immediate supervisor, the managing member or the board of managers of the Employer materially affecting the fundamental operating results of the Employer, or Employee's engagement of conduct injurious to the Employer or having an adverse effect on the Employer's reputation or business operations, all of which threatens or is likely to threaten the licensed status of the Employee or the Employer, (f) the revocation, suspension for more than thirty (30) days, or voluntary relinquishment of any gaming license necessary for the performance of Employee's duties hereunder, or (g) Employee's breach or violation of any material term or material provision of this Agreement; provided, however, that, in the case of clauses (e), (f) and (g) of this Section 2, Employee shall be entitled to thirty (30) days notice of termination, during which thirty (30) day period Employee shall have the right to remedy any such breach or default, but in no event will Employee be entitled to more than one thirty (30) day notice for breach of violation of the same offense; subsequent commission of the same offense shall warrant immediate termination. In the event of a termination of this Agreement by Employer, other than for violation or breach of subparagraphs (a), (b), (c), (d), (e), (f) or (g) or this paragraph, during any Term of the Agreement, Employee shall be entitled to receive as severance pay the greater of (a) the balance of base compensation due to Employee for the remainder of the Term, or (b) twelve month's compensation, which payments shall be made as they would otherwise have become due under the payroll schedule of Employer. Employee shall also be entitled to receive a prorated share of the cash bonus to which Employee otherwise would be entitled had Employee's employment continued to the end of the Term, as provided in paragraph 4(a). In addition, the employee shall also be entitled to receive the immediate payment for the value of all Granted Units previously vested, as described in paragraph 4 (b) below. 3. DUTIES. Employee shall carry out the duties and responsibilities generally as identified as the Chief Financial Officer of the Employer and General Manager of the Diamond Jo, LLC, consistent with the terms of the Position Description appended to the Agreement as Exhibit A and which may be amended from time to time, consistent with the above-defined general responsibilities by the Employer's Chief Executive Officer. Employer acknowledges and agrees that Employee, in her sole discretion, shall set the time period, number of hours and location that Employee works in carrying out her duties under this Agreement. Employer further acknowledges and agrees that Employee may provide consulting and other services to third parties, provided such services do not significantly interfere with the performance of Employee's duties under this Agreement, and further provided such services would not result in a breach by Employee of the non-competition or non-disclosure agreements set forth in Section 8 of this Agreement. 4. COMPENSATION AND BENEFITS. a. Employee shall be paid by Employer (i) as compensation for her services for the twelve month period commencing on the date hereof the base annual salary of Two Hundred Thirty Thousand Dollars ($230,000). Employee's base annual salary shall be reviewed on an annual basis and adjusted upward annually by not less than five percent (5%) of the prior year's compensation. In addition to the base salary, upon January 1st of each year of service with the Employer, Employee shall be entitled to receive a cash bonus payable by the Employer based on Employee's performance during the previous calendar year, which shall be consistent with past practices and/or the bonus plan in place for similarly situated executive officers of the Employer and, in any event, no less than $20,000 per year. If this Agreement is terminated prior to completion of any Term, EMPLOYEE shall be eligible for a prorated bonus at termination. b. Additionally, Employee shall be entitled to an initial grant, under Peninsula Gaming Partners LLC's incentive units plan, of a profits interest representing 2 no less than 0.5% of its outstanding capital interests on a fully diluted basis (the "Granted Units"). (i) twenty-five percent (25%) of the Granted Units shall automatically vest on the date of execution hereof and for so long as no termination of this Agreement or of Employee's employment with the Employer hereunder shall have occurred, (ii) twenty-five percent (25%) of the Granted Units shall vest on the first anniversary of the date hereof, (iii) twenty-five percent (25%) of the Granted Units shall vest on the second anniversary of the date hereof and (iv) twenty-five percent (25%) of the Granted Units shall vest on the third anniversary of the date hereof. Upon any termination of this Agreement or of Employee's employment with the Employer hereunder, all Granted Units that shall have not yet vested pursuant to the preceding sentence as of such date of termination shall be forfeited by Employee and cancelled upon such termination; Provided however that in connection with any termination arising out of a sale of the business (as contemplated in paragraph 5 hereof), all granted units shall be deemed vested. All Granted Units which shall have vested as of the date of termination or expiration of the Term, shall, upon the request of the Employee, be redeemed by the Employer for cash at fair market value, within 90 days of the date of said request. For purposes of redemption, "fair market value" shall be determined by the board in it's reasonable discretion. c. To the extent not inconsistent with Employee's status as a salaried employee under a continuing contract, Employee shall be entitled to all benefits accorded executive officers of Employer in accordance with the terms of the Employer's personnel policies. 5. SALE OF EMPLOYER'S BUSINESS. In the event the controlling interest in the Employer or substantially all of the Employer's assets and operations are transferred or sold to an unrelated entity or person at any time during any Term of this Agreement, Employee shall receive at the time of such sale as severance pay an amount equal to twelve (12) months' base salary. This paragraph shall not be applicable so long as the transfer is to or for the benefit of Brent Stevens or so long as Brent Stevens remains as Managing Member and/or CEO of the Employer. 6. INDEMNIFICATION. Employer shall indemnify, defend and hold and save Employee, her heirs, administrators or executors and each of them harmless from any and all actions and causes of action, claims, demand, liabilities, losses, damages or expenses, of whatsoever kind and nature, including judgments, interest and reasonable attorney's fees and all other reasonable costs, expenses and charges which Employee, her heirs, administrators or executors and each of them shall or may at any time or from time to time, subsequent to the effective date of this Agreement, sustain or incur, or become subject to by reason of any claim or claims against Employee, her heirs, administrators or executors and each of them while acting within the scope of her employment, except for gross negligence, misconduct or criminal acts or omissions on the part of the Employee, and provided that Employee, her heirs, administrators or executors or one of them properly and promptly notifies Employer of adverse claims or threatened or actual lawsuits. Employee, her heirs, administrators or executors as appropriate, 3 shall provide complete cooperation to Employer, its attorneys and agents in such case to the extent possible. 7. NON-COMPETITION AGREEMENT. a. Both parties acknowledge that the Employee's position is one of considerable responsibility and requires considerable training, relationships and contacts with customers, clients and potential customers and clients, and experience that it will take a substantial amount of Employer's time to replace an employee who has received such training, relationships, contacts and experience as are typically afforded by Employer; and b. As a condition of employment and continued employment of Employee by Employer, the parties mutually agree that confidentiality of material matters is required in connection with the business of Employer and in connection with the operations and the names of Employer's customers and clients, and that accordingly, it is vital that Employer be protected from direct or indirect competition from key employees whose employment might be terminated by or from Employer, said protection required during employment and for a reasonable period of time after termination thereof. c. It is hereby agreed by and between the parties that, as a part of the valuable consideration of the employment and continued employment of Employee by Employer: (1) That Employee shall treat and keep secret all material matters relating directly or indirectly to the business of Employer, including but not limited to, the content of all manuals, memoranda, production, marketing, promotional and training materials, financial statements, sales and operations records, business methods, systems and forms, production records, billing rates, cost rates, employee salaries and work histories, customer and client lists, mailing lists, processes, inventions, formulas, job production and cost records, special terms with customers and clients or any other material information relative to the past, present or prospective customers and operations as completely confidential information entrusted to her solely for use in her capacity as an employee of Employer. Employee further agrees not to keep and/or use any papers, records, or any information whatsoever relative to any of the matters referred to in the preceding sentence, nor shall Employee furnish, make available or otherwise divulge such information to any person during or after her employment by Employer, unless specifically instructed to do so in writing signed by the Chief Executive Officer of Employer. (2) That if for any reason Employee shall voluntarily or involuntarily terminate her employment or Employer shall terminate Employee, it is specifically agreed and understood that Employee, for a period of one (1) year from the date of termination, shall not, within a radius of one hundred (100) miles of Dubuque, Iowa or Opelousas, Louisiana and/or any entities within Peninsula Gaming, LLC (the "Territories"), directly or indirectly 4 engage in, be interested in, or in any manner whatsoever be connected with any casino located within the Territory. (3) That if for any reason Employee shall voluntarily or involuntarily terminate her employment or Employer shall terminate Employee, it is specifically agreed and understood that Employee, for a period of one (1) year from the date of termination, shall not, directly or indirectly, in any capacity whatsoever, hire or solicit for employment any employee of Employer. 8. ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement contains the entire agreement of the parties and there are no other promises or conditions in any other agreement whether oral or written. This Agreement supersedes any prior written or oral agreement between the parties. 9. AMENDMENTS. This Agreement may be modified or amended, if the amendment is made in writing and is signed by both parties. 10. SEVERABILITY. If any provision of this Agreement shall be held to be invalid or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written, construed and enforced as so limited. 11. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Agreement. 12. APPLICABLE LAW. This Agreement shall be governed by the laws of the State of Iowa. 13. REPRESENTATION. The undersigned persons executing this Agreement for and on behalf of Employer as its sole Managing Member and as its General Manager represent that they are fully authorized to sign this Agreement for and on behalf of Employer, and Employee may rely upon this representation. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective the day and year first above written. 5 EMPLOYER: EMPLOYEE: Peninsula Gaming Company, LLC By: /s/ M. Brent Stevens /s/ Natalie A. Schramm --------------------------------------- ------------------------------- Name: M. Brent Stevens Name: Natalie Schramm Title: Chief Executive Officer 6 EX-10.1B 23 forms4_ex10-1bwfb071404.txt SWAIN EMPLOYMENT AGREEMENT EXHIBIT 10.1B EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into effective this 14th day of July 2004, by and between Jonathan Swain (hereinafter referred to as "Employee") and Peninsula Gaming, LLC, a Delaware limited liability company (hereinafter referred to as "Employer"). WHEREAS, the Employer and the Employee desire to enter into an employment agreement on the terms and conditions hereinafter provided. NOW, THEREFORE, in consideration of the promises made in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties, the parties agree as follows: 1. TERM OF AGREEMENT. The term of the Agreement shall be for a 3 year period commencing July 14, 2004 through July 14, 2007 (the "Term"). No later than ninety (90) days prior to the expiration of the Term, Employer shall notify the Employee whether the Agreement will be extended beyond the initial Term. In the event the Employer requests that the Employee continue his employment after the expiration date (the "Extended Term"), the parties agree to immediately negotiate the provisions of the Extended Term in good faith. Provided however, if the negotiations for the Extended Term are not completed by the expiration date of the Term, the Employee may elect to continue his employment during the completion of the negotiations under the same terms and conditions as contained the Agreement. The minimum period for any Extension Term shall be one (1) year. 2. TERMINATION. This Agreement may be terminated at any time before any expiration date by the agreement of the parties, and may be terminated by Employee upon ninety (90) days advance written notice to the Chief Executive Officer of the Employer. In the event that this Agreement is terminated by Employee upon ninety (90) days advance written notice, Employee shall be entitled to continue receiving his base salary for so long as Employee is permitted to and actually continues to render services to Employer during the ninety (90) day period following such notice. If Employee is directed by Employer to cease work prior to expiration of the ninety (90) day period (a "Mutual Termination"), Employee shall nevertheless be entitled to receive his regular salary for the ninety (90) day period. In addition, this Agreement may be terminated by the Employer immediately upon the occurrence of any of the following events: (a) Employee's death, (b) Employee becoming physically or mentally disabled (a "Disability"), which Disability renders Employee unable to perform, as certified by a mutually agreeable competent medical physician, a substantial portion of Employee's duties hereunder for a continuous period of sixty (60) days or a total of ninety (90) days in any three hundred sixty-five (365) day period, (c) Employee's commission of an act of embezzlement, fraud, misappropriation against the Employer, (d) Employee's conviction of, or entry of a plea of guilty or nolo contendere or its equivalent of, a felony, (e) Employee's continued negligence or failure to discharge Employee's duties or responsibilities or the repeated taking of any action prohibited by Employee's immediate supervisor, the managing member or the board of managers of the Employer, (f) Employee's being under the influence of illegal drugs or chronic alcohol abuse while performing his duties hereunder, (g) the revocation, suspension for more than thirty (30) days, or voluntary relinquishment of any gaming license necessary for the performance of Employee's duties hereunder, or (h) Employee's breach or violation of any material term or material provision of this Agreement (each of the foregoing clauses (a) through (h) are herein referred to as "For Cause"); provided, however, that, in the case of clauses (e), (f), (g) or (h) of this Section 2, Employee shall be entitled a detailed explanation of the offense. The Employer shall provide thirty (30) days notice of termination, during which thirty (30) day period Employee shall have the right to remedy any such breach or default, but in no event will Employee be entitled to more than one thirty (30) day notice for breach of violation of the same offense; subsequent commission of the same offense shall warrant immediate termination. In the event of a termination of this Agreement by Employer, other than in connection with a Mutual Termination or For Cause, during the Term of the Agreement, Employee shall be entitled to receive (A) as severance pay the lesser of (a) the balance of base compensation due to Employee for the remainder of the Term, or (b) twelve months base compensation, which payments shall be made as they would otherwise have become due under the payroll schedule of Employer, and (B) a prorated share of the cash bonus to which Employee otherwise would be entitled had Employee's employment continued to the end of the then current calendar, as provided in paragraph 4(a); provided, however, that as a condition of receiving any severance payments under this agreement, Employee will be required to execute a settlement and general release of claims against the Employer, its officers, managers, members, agents, employees, successors and assigns, for matters arising out of or relating to Employee's employment with the Employer, in a form acceptable to the Employer. 3. DUTIES. Employee shall carry out the duties and responsibilities as the Chief Operating Officer ("COO") of the Employer. The Employee shall have a direct reporting relationship to the Chief Executive Officer ("CEO"). The Employee's duties shall include the authority to hire, supervise, discipline and terminate employees of the company, provided however, the Employee may hire and terminate employees with annual salaries in excess of $100,000 only in accordance with the Employer's organizational documents. Employee shall devote Employee's full business time, attention and ability to the business and affairs of the Employer, shall comply with all of the Employer's policies and codes of conduct, a copy of which has been provided to the Employee. The Employee shall use his best efforts to carry out Employee's responsibilities as COO faithfully and efficiently in a professional manner. Employer acknowledges and agrees that Employee, in his sole discretion, shall set the location that Employee works in carrying out his duties as the COO under this Agreement, provided however, it is understood that an office of the company from which the Employee shall be entitled to work shall be located in Las Vegas, Nevada. Employee shall not provide any paid consulting or other services to third parties without the Employer's prior consent, which consent shall not be unreasonably withheld or delayed; provided, that such consent may be withheld in the Employer's sole discretion in the event that such consulting or other services would interfere with the performance of Employee's duties as COO under this Agreement or would result in a breach by Employee of the non-competition or non-disclosure agreements set forth in Section 8 of this Agreement. 4. COMPENSATION AND BENEFITS. a. Employee shall be paid by Employer as compensation for his services for the twelve month period commencing on the date hereof the base annual salary of four hundred thousand dollars ($400,000), payable in accordance with the payroll policy of the Employer, less such deductions or amounts to be withheld as shall be required by applicable law and regulations or as elected by the Employer for any employee benefit plans of the Employer. Upon execution of this Agreement, Employee shall be paid a signing bonus of $30,000, and, provided that the Employee's employment with the Employer hereunder shall have not yet terminated, on October 4, 2004, Employee shall be entitled to receive an additional bonus of $30,000. In addition to the base salary, on January 1, 2005, if Employee shall remain employed by the Employer as of such date, Employee shall be entitled to receive a bonus in respect of Employee's employment during the 2004 calendar year equal to (i) $100,000 times (ii) a fraction, (A) the numerator of which equals the actual number of calendar days elapsed from, and including, the date hereof through, but excluding, January 1, 2005, and (B) the denominator of which equals 365; provided, however, that the foregoing bonus may be increased, but not decreased, as determined by the chief executive officer of the Employer. On January 1 of each calendar year of the Term thereafter, commencing on January 1, 2006, if Employee shall remain employed by the Employer as of such date, Employee shall be entitled to receive a cash bonus of no less than $100,000 and up to $300,000, payable by the Employer based on Employee's performance during the previous employment year, which performance shall be based on meeting or exceeding the approved budget targets established by the COO and CEO. Such payments shall at least be consistent with past practices and/or the bonus plan in place for similarly situated executive officers of the Employer. b. Additionally, the Employee shall be issued 30,000 Common Units of Peninsula Gaming Partners LLC, which represents 2% of its outstanding capital interests on a fully diluted basis (the "Granted Units"). For so long as no termination of this Agreement or of Employee's employment with the Employer hereunder shall have occurred, (i) twenty-five percent (25%) of the Granted Units shall vest on the date hereof, (ii) twenty-five percent (25%) of the Granted Units shall vest on the first anniversary of the date hereof, (iii) twenty-five percent (25%) of the Granted Units shall vest on the second anniversary of the date hereof and (iv) twenty-five percent (25%) of the Granted Units shall vest on the third anniversary of the date hereof. Upon any termination of this Agreement or of Employee's employment with the Employer hereunder either (A) by the Employer for any reason other than For Cause or (B) by the Employee as a result of a material reduction in the Employee's salary or responsibilities hereunder ("For Good Reason"), all Granted Units that shall have not yet vested pursuant to the preceding sentence as of such date of termination shall immediately vest as of the date of such termination. Upon any termination of this Agreement or of Employee's employment with the Employer hereunder either (A) by the Employer For Cause or (B) by the Employee other than For Good Reason, all Granted Units that shall have not yet vested pursuant to the preceding sentence as of such date of termination shall be forfeited by Employee and cancelled upon such termination. Upon any termination of this Agreement or of Employee's employment with the Employer hereunder for any reason, all Granted Units which shall have vested as of the date of termination or expiration of the Term, shall, upon the request of the Employee, be redeemed by the Employer for cash at fair market value, within 90 days of the date of said request. For purposes of redemption, "fair market value" shall be determined by an independent Certified Public Accountant (the "CPA") selected by mutual agreement of Employer and Employee. The CPA shall consider the enterprise value of the company in the event of a sale, without any reduction based upon the fact that the interests to be redeemed represent a minority interest. The determination of the CPA shall be binding upon the parties. c. To the extent not inconsistent with Employee's status as a salaried employee under a continuing contract, Employee shall, during the continuation of Employee's employment by the Employer hereunder, be entitled to all benefits accorded executive officers of Employer in accordance with the terms of the Employer's personnel policies, including a deferred compensation plan to be implemented by Employer. At a minimum, benefits shall included, health insurance and a life insurance policy from an AM Best A rated company for the face amount of One-Million Dollars ($1,000,000). d. The Employer shall promptly reimburse Employee for reasonable out-of-pocket housing and lodging expenses in Louisiana incurred in connection with the fulfillment of the Employee's obligations to the Employer hereunder. Further, the Employee shall be entitled to three (3) weeks of paid vacation for each year of the Term. 5. SALE OF EMPLOYER'S BUSINESS. In the event the controlling interest in the Employer or substantially all of the Employer's assets and operations are transferred or sold and the sale or transfer is closed at any time during the Term of this Agreement or any Extended Term, and, within twelve (12) months following the closing of such sale or transfer, either (a) the Employer terminates Employee's employment hereunder for any reason other than For Cause, or (b) the Employee shall terminate the Employee's employment hereunder For Good Reason, Employee shall be entitled to receive (A) as severance pay the balance of base compensation due to Employee for the remainder of the Term, which payments shall be made as they would otherwise have become due under the payroll schedule of Employer, and the redemption of the Granted Units as provided paragraph 4(b) above, (B) a prorated share of the cash bonus to which Employee otherwise would be entitled had Employee's employment continued to the end of the then current calendar, as provided in paragraph 4(a). Employee will be required to execute a settlement and general release of claims against the Employer, its officers, directors, shareholders, agents, employees, successors and assigns, for matters arising out of or relating to Employee's employment with the Employer, in a form acceptable to the Employer. "Controlling interest" is defined as the majority ownership of the Employer or a majority of the members of the managing board of the Employer. 6. INDEMNIFICATION. Employer shall indemnify, defend and hold and save Employee, his heirs, administrators or executors and each of them harmless from any and all actions and causes of action, claims, demand, liabilities, losses, damages or expenses, of whatsoever kind and nature, including judgments, interest and reasonable attorney's fees and all other reasonable costs, expenses and charges which Employee, his heirs, administrators or executors and each of them shall or may at any time or from time to time, subsequent to the effective date of this Agreement, sustain or incur, or become subject to by reason of any claim or claims against Employee, his heirs, administrators or executors and each of them while acting within the scope of his employment, except for gross negligence, misconduct or criminal acts or omissions on the part of the Employee, and provided that Employee, his heirs, administrators or executors or one of them properly and promptly notifies Employer of adverse claims or threatened or actual lawsuits. Employee, his heirs, administrators or executors as appropriate, shall provide complete cooperation to Employer, its attorneys and agents in such case to the extent possible. 7. NON-COMPETITION AGREEMENT. a. Both parties acknowledge that the Employee's position is one of considerable responsibility and requires considerable training, relationships and contacts with customers, clients and potential customers and clients, and experience that it will take a substantial amount of Employer's time to replace an employee who has received such training, relationships, contacts and experience as are typically afforded by Employer. b. As a condition of employment and continued employment of Employee by Employer, the parties mutually agree that confidentiality is required in connection with the business of Employer and in connection with the operations and the names of Employer's customers and clients, and that accordingly, it is vital that Employer be protected from direct or indirect competition from key employees whose employment might be terminated by or from Employer, said protection required during employment and for a reasonable period of time after termination thereof. c. It is hereby agreed by and between the parties that, as a part of the valuable consideration of the employment and continued employment of Employee by Employer: (1) That Employee shall treat and keep secret all matters relating directly or indirectly to the business of Employer, including but not limited to, the content of all manuals, memoranda, production, marketing, promotional and training materials, financial statements, sales and operations records, business methods, systems and forms, production records, billing rates, cost rates, employee salaries and work histories, customer and client lists, mailing lists, processes, inventions, formulas, job production and cost records, special terms with customers and clients or any other information relative to the past, present or prospective customers and operations as completely confidential information entrusted to him solely for use in his capacity as an employee of Employer. Employee further agrees not to keep and/or use any papers, records, or any information whatsoever relative to any of the matters referred to in the preceding sentence, nor shall Employee furnish, make available or otherwise divulge such information to any person during or after his employment by Employer, unless specifically instructed to do so in writing signed by the Chief Executive Officer of Employer. (2) That if for any reason Employee shall voluntarily or involuntarily terminate his employment or Employer shall terminate Employee, it is specifically agreed and understood that Employee, for a period commencing on the date of termination and terminating on the earlier of (i) the normal expiration of the then effective Term or Extended Term or (ii) the one (1) year anniversary of the date of termination, shall not, within a radius of one hundred (100) miles of Dubuque, Iowa or Opelousas, Louisiana and/or any entities within Peninsula Gaming, LLC (the "Territories"), directly or indirectly engage in, be interested in, or in any manner whatsoever be connected with any casino or racino located within the Territories. The Territories shall not include the State of Nevada. (3) That if for any reason Employee shall voluntarily or involuntarily terminate his employment or Employer shall terminate Employee, it is specifically agreed and understood that Employee, for a period of one (1) year from the date of termination, shall not, directly or indirectly, in any capacity whatsoever, hire or solicit for employment any individual employed as an employee of Employer at any time during the three (3) months preceding the date of termination. 8. ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement contains the entire agreement of the parties and there are no other promises or conditions in any other agreement whether oral or written. This Agreement supersedes any prior written or oral agreement between the parties. 9. AMENDMENTS. This Agreement may be modified or amended, if the amendment is made in writing and is signed by both parties. 10. SEVERABILITY. If any provision of this Agreement shall be held to be invalid or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written, construed and enforced as so limited. 11. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Agreement. 12. APPLICABLE LAW. This Agreement shall be governed by the laws of the State of Iowa. Any dispute arising out of the Agreement, or the interpretation of is terms, whether monetary or otherwise, shall be decided by binding Arbitration pursuant to the Commercial Arbitration Rules of the American Arbitration Association ("AAA"). The Arbitration shall be heard before a single arbitrator in Las Vegas, Nevada, under the expedited rules of the AAA. The costs of the arbitration shall be borne equally by Employer and Employee with each side to bear their own attorneys fees and costs. 13. NOTICES. Any notice or communication required or permitted hereunder shall be in writing and shall be delivered by certified, registered or express mail, postage prepaid. Any such notice shall be deemed given when so delivered, as follows: (i) If to Employer, to: M. Brent Stevens Peninsula Gaming, LLC c/o Jefferies & Company 11100 Santa Monica Blvd, 10th Floor Los Angeles, CA 90025 with a copy (which shall not constitute notice) to: Mayer, Brown, Rowe & Maw 1675 Broadway New York, New York 10019 Attn: Ronald S. Brody Telecopy: 212-262-1910 (ii) If to the Employee, to: [------------------------] [------------------------] [------------------------] [------------------------] Any party may change its address for notices hereunder by notice to the other party in accordance with this Section 13. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective the day and year first above written. EMPLOYER: Peninsula Gaming, LLC By: /s/ M. Brent Stevens -------------------------------------- Name: M. Brent Stevens Title: Chief Executive Officer EMPLOYEE: Name: /s/ Jonathan Swain ------------------------------------- EX-10.19 24 forms4_ex10-19wfb071404.txt EX. 10.19 - LOAN AND SEC. AGMT EXHIBIT 10.19 ================================================================================ LOAN AND SECURITY AGREEMENT BY AND AMONG DIAMOND JO, LLC AND THE OLD EVANGELINE DOWNS, L.L.C. AS BORROWERS, THE LENDERS THAT ARE SIGNATORIES HERETO AS THE LENDERS, AND WELLS FARGO FOOTHILL, INC. AS THE ARRANGER AND AGENT DATED AS OF JUNE 16, 2004 ================================================================================ TABLE OF CONTENTS Page ---- 1. DEFINITIONS AND CONSTRUCTION..............................................1 1.1 Definitions......................................................1 1.2 Accounting Terms................................................36 1.3 Code............................................................36 1.4 Construction....................................................36 1.5 Schedules and Exhibits..........................................36 2. LOAN AND TERMS OF PAYMENT................................................36 2.1 Advances........................................................36 2.2 Term Loan.......................................................37 2.3 Borrowing Procedures and Settlements............................37 2.4 Payments........................................................44 2.5 Overadvances....................................................46 2.6 Interest: Rates, Payments, and Calculations....................47 2.7 [Intentionally Omitted].........................................48 2.8 Crediting Payments..............................................48 2.9 Designated Account..............................................48 2.10 Maintenance of Loan Account; Statements of Obligations..........49 2.11 Fees............................................................49 2.12 Letters of Credit...............................................50 2.13 Registered Notes................................................52 2.14 Capital Requirements............................................53 2.15 Joint and Several Liability of Borrowers........................53 2.16 LIBOR Option....................................................56 3. CONDITIONS; TERM OF AGREEMENT............................................58 3.1 Conditions Precedent to Initial Extension of Credit.............58 3.2 Conditions Subsequent to Initial Extension of Credit............61 3.3 Conditions Precedent to all Extensions of Credit................61 3.4 Term............................................................62 3.5 Effect of Termination...........................................62 3.6 Early Termination by Borrowers..................................62 -i- TABLE OF CONTENTS (continued) Page ---- 4. CREATION OF SECURITY INTEREST............................................63 4.1 Grant of Security Interest......................................63 4.2 Negotiable Collateral...........................................63 4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral...........................................64 4.4 Delivery of Additional Documentation Required...................64 4.5 Power of Attorney...............................................65 4.6 Right to Inspect................................................66 4.7 Control Agreements..............................................66 4.8 FF&E Letter of Credit...........................................66 5. REPRESENTATIONS AND WARRANTIES...........................................66 5.1 No Encumbrances.................................................67 5.2 [Intentionally Omitted].........................................67 5.3 [Intentionally Omitted].........................................67 5.4 Equipment.......................................................67 5.5 Location of Inventory and Equipment.............................67 5.6 Inventory Records...............................................67 5.7 State of Incorporation; Location of Chief Executive Office; FEIN; Organizational ID Number; Commercial Tort Claims..........67 5.8 Due Organization and Qualification; Subsidiaries................67 5.9 Due Authorization; No Conflict..................................68 5.10 Litigation......................................................69 5.11 No Material Adverse Change......................................69 5.12 Fraudulent Transfer.............................................69 5.13 Employee Benefits...............................................69 5.14 Environmental Condition.........................................69 5.15 Brokerage Fees..................................................70 5.16 Intellectual Property...........................................70 5.17 Leases..........................................................70 5.18 Deposit Accounts................................................70 5.19 Complete Disclosure.............................................70 -ii- TABLE OF CONTENTS (continued) Page ---- 5.20 Indebtedness....................................................71 5.21 Licenses and Permits............................................71 5.22 Senior Debt.....................................................71 6. AFFIRMATIVE COVENANTS....................................................71 6.1 Accounting System...............................................71 6.2 Reporting.......................................................72 6.3 Financial Statements, Reports, Certificates.....................72 6.4 [Intentionally Omitted].........................................75 6.5 [Intentionally Omitted].........................................75 6.6 Maintenance of Properties.......................................75 6.7 Taxes...........................................................75 6.8 Insurance.......................................................76 6.9 Location of Inventory and Equipment.............................77 6.10 Compliance with Laws............................................78 6.11 Leases..........................................................78 6.12 Brokerage Commissions...........................................78 6.13 Existence.......................................................78 6.14 Environmental...................................................78 6.15 Disclosure Updates..............................................78 6.16 Government Authorization........................................79 6.17 License Renewals................................................79 6.18 Licenses and Permits............................................79 6.19 Subsidiary Guarantees...........................................79 6.20 Collateral for FF&E Obligations.................................80 7. NEGATIVE COVENANTS.......................................................80 7.1 Indebtedness....................................................80 7.2 Liens...........................................................82 7.3 Restrictions on Fundamental Changes.............................82 7.4 Disposal of Assets..............................................82 7.5 Change Name.....................................................84 -iii- TABLE OF CONTENTS (continued) Page ---- 7.6 Guarantee.......................................................84 7.7 Nature of Business..............................................84 7.8 Prepayments and Amendments......................................84 7.9 Change of Control...............................................85 7.10 Operation of Diamond Jo Vessels.................................85 7.11 Restricted Payments.............................................85 7.12 Accounting Methods..............................................87 7.13 Investments.....................................................88 7.14 Transactions with Affiliates....................................88 7.15 Suspension......................................................89 7.16 Compensation....................................................89 7.17 Use of Proceeds.................................................89 7.18 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees......................................89 7.19 Securities Accounts.............................................89 7.20 Financial Covenants.............................................90 7.21 Management Agreements...........................................91 8. EVENTS OF DEFAULT........................................................91 9. AGENT'S RIGHTS AND REMEDIES..............................................94 9.1 Rights and Remedies.............................................94 9.2 Remedies Cumulative.............................................99 10. TAXES AND EXPENSES.......................................................99 11. WAIVERS; INDEMNIFICATION................................................100 11.1 Demand; Protest................................................100 11.2 The Lender Group's Liability for Collateral....................100 11.3 Indemnification................................................100 12. NOTICES.................................................................100 13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER..............................102 14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS..............................103 14.1 Assignments and Participations.................................103 -iv- TABLE OF CONTENTS (continued) Page ---- 14.2 Successors.....................................................106 15. AMENDMENTS; WAIVERS.....................................................106 15.1 Amendments and Waivers.........................................106 15.2 Replacement of Holdout Lender..................................107 15.3 No Waivers; Cumulative Remedies................................108 16. AGENT; THE LENDER GROUP.................................................108 16.1 Appointment and Authorization of Agent.........................108 16.2 Delegation of Duties...........................................109 16.3 Liability of Agent.............................................109 16.4 Reliance by Agent..............................................109 16.5 Notice of Default or Event of Default..........................109 16.6 Credit Decision................................................110 16.7 Costs and Expenses; Indemnification............................110 16.8 Agent in Individual Capacity...................................111 16.9 Successor Agent................................................111 16.10 Lender in Individual Capacity..................................111 16.11 Withholding Taxes..............................................112 16.12 Collateral Matters.............................................114 16.13 Restrictions on Actions by the Lenders; Sharing of Payments....114 16.14 Agency for Perfection..........................................115 16.15 Payments by Agent to the Lenders...............................115 16.16 Concerning the Collateral and Related Loan Documents...........115 16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by the Lenders; Other Reports and Information......115 16.18 Several Obligations; No Liability..............................117 17. GENERAL PROVISIONS......................................................117 17.1 Effectiveness..................................................117 17.2 Section Headings...............................................117 17.3 Interpretation.................................................117 17.4 Severability of Provisions.....................................117 -v- TABLE OF CONTENTS (continued) Page ---- 17.5 Amendments in Writing..........................................117 17.6 Counterparts; Telefacsimile Execution..........................117 17.7 Revival and Reinstatement of Obligations.......................118 17.8 Integration....................................................118 17.9 Combined Administration........................................118 -vi- EXHIBITS AND SCHEDULES Exhibit A-1 Form of Assignment and Acceptance Exhibit B-1 Form of Borrowing Base Certificate Exhibit C-1 Form of Compliance Certificate Exhibit L-1 Form of LIBOR Notice Schedule A-1 Agent's Account Schedule C-1 Commitments Schedule D-1 Designated Account Schedule P-1 Permitted Liens Schedule P-2 Existing Investments Schedule R-1 Real Property Collateral Schedule 2.12 Existing Letters of Credit Schedule 5.5 Locations of Equipment Schedule 5.7 Jurisdiction; Chief Executive Office; FEIN; State Organizational No.; Commercial Tort Claims Schedule 5.8(b) Capitalization of Borrowers Schedule 5.8(c) Capitalization of Borrowers' Subsidiaries Schedule 5.8(e) Restricted Subsidiaries; Unrestricted Subsidiaries Schedule 5.10 Litigation Schedule 5.14 Environmental Matters Schedule 5.16 Intellectual Property Schedule 5.18 Demand Deposit Accounts Schedule 5.20 Existing Indebtedness Schedule 5.21 Licenses and Permits Schedule 7.14 Affiliate Transactions LOAN AND SECURITY AGREEMENT THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as of June 16, 2004, by and among, on the one hand, the lenders identified on the signature pages hereof (such lenders, together with their respective successors and permitted assigns, are referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), WELLS FARGO FOOTHILL, INC., a California corporation, as the arranger and agent for the Lenders ("Agent"), and, on the other hand, DIAMOND JO, LLC (formerly known as Peninsula Gaming Company, LLC), a Delaware limited liability company ("DJL"), and THE OLD EVANGELINE DOWNS, L.L.C., a Louisiana limited liability company ("OED", together with DJL, referred to hereinafter each individually as a "Borrower", and individually and collectively, jointly and severally, as "Borrowers"). The parties agree as follows: 1. DEFINITIONS AND CONSTRUCTION. 1.1 DEFINITIONS. As used in this Agreement, the following terms shall have the following definitions: "Account" means an "account" (as that term is defined in the Code), and any and all supporting obligations in respect thereof. "Account Debtor" means any Person who is or who may become obligated under, with respect to, or on account of, an Account, chattel paper, or a General Intangible. "Acquired Debt" means Indebtedness of a Person or any of its Subsidiaries existing at the time such Person is merged with or into either Borrower or a Restricted Subsidiary, becomes a Restricted Subsidiary or Indebtedness assumed in connection with the acquisition of assets from such Person other than Indebtedness incurred in connection with, or in contemplation of, such Person merging with or into either Borrower or a Restricted Subsidiary or becoming a Restricted Subsidiary or such acquisition of assets. "Additional Documents" has the meaning set forth in Section 4.4(b)(i). "Advances" has the meaning set forth in Section 2.1(a). "Affiliate" means, as applied to any Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of Capital Stock, by contract, or otherwise. "Affiliate Transaction" has the meaning set forth in Section 7.14. "Agent" means Wells Fargo Foothill, solely in its capacity as agent for the Lenders hereunder, and any successor thereto. "Agent's Account" means the account identified on Schedule A-1. "Agent Advances" has the meaning set forth in Section 2.3(e)(i). "Agent's Liens" means the Liens granted by Borrowers or Guarantors to Agent for the benefit of the Lender Group under this Agreement or the other Loan Documents. "Agent-Related Persons" means Agent, together with its Affiliates, officers, directors, employees and agents. "Agreement" has the meaning set forth in the preamble hereto. "Annualized Quarterly Combined EBITDA" means, as of any date of determination (which date of determination shall be as of the last day of any month and need not be the end of a fiscal quarter), the product of Borrowers' Combined EBITDA for the period of 3 months then ending times 4. "Applicable Capital Gain Tax Rate" means a rate equal to the sum of: (a) the highest marginal Federal income tax rate applicable to net capital gain of an individual who is a citizen of the United States, plus (b) (i) the greatest of (x) an amount equal to the sum of the highest marginal state and local income tax rates applicable to net capital gain of an individual who is a resident of the State of California, (y) an amount equal to the sum of the highest marginal state and local income tax rates applicable to net capital gain of an individual who is a resident of the State of Louisiana, and (z) an amount equal to the sum of the highest marginal state and local income tax rates applicable to net capital gain of an individual who is a resident of the State of Iowa, multiplied by (ii) a factor equal to 1 minus the highest marginal Federal income tax rate described in clause (a) above. "Applicable Income Tax Rate" means a rate equal to the sum of: (a) the highest marginal Federal ordinary income tax rate applicable to an individual who is a citizen of the United States, plus (b) (i) the greatest of (x) an amount equal to the sum of the highest marginal state and local ordinary income tax rates applicable to an individual who is a resident of the State of California, (y) an amount equal to the sum of the highest marginal state and local ordinary income tax rates applicable to an individual who is a resident of the State of Louisiana, and (z) an amount equal to the sum of the highest marginal state and local ordinary income tax rates applicable to an individual who is a resident of the State of Iowa, multiplied by (ii) a factor equal to 1 minus the highest marginal Federal income tax rate described in clause (a) above. "Applicable Gaming Laws" has the meaning set forth in Section 9.1. 2 "Applicable Margin" means as of any date of determination, the applicable percentage indicated below that corresponds to Combined EBITDA for the 12-month period ended immediately prior to the date of determination: - -------------------------------------------------------------------------------- Pricing Combined Applicable Applicable Applicable Level EBITDA as of Margin for Margin for Margin for the end of Advances that Advances that Letter of each fiscal are Base Rate are LIBOR Credit Fee quarter Loans Rate Loans - -------------------------------------------------------------------------------- Level I Less than 1.00% 3.50% 3.00% $25,000,000 - -------------------------------------------------------------------------------- Level II Greater than or 0.75% 3.25% 2.75% equal to $25,000,000, but less than $35,000,000 - -------------------------------------------------------------------------------- Level III Greater than or 0.50% 3.00% 2.50% equal to $35,000,000 - -------------------------------------------------------------------------------- The Applicable Margin for each Advance and the Letter of Credit Fee shall be determined as of the end of each fiscal quarter by reference to Combined EBITDA for the 12-month period then ending; provided, however, that (a) no change in the Applicable Margin shall be effective until 3 Business Days after the date on which Agent receives financial statements pursuant to Section 6.3(a), and a certificate of the chief financial officer of Parent demonstrating such amount, attaching thereto a schedule in form reasonably satisfactory to Agent of the computations used by Parent in determining such Combined EBITDA for such preceding 12 month period ending as of the end of the most recently ended fiscal quarter, and (b) the Applicable Margin shall be the interest rate margin set forth for Level I above with respect to the applicable Advances and Letter of Credit Fee, respectively, (i) from the Closing Date through and including the second Business Day after Agent receives the information required by clause (a) of this proviso for the fiscal quarter ending September 30, 2004, (ii) if Parent has not submitted to Agent the information described in clause (a) of this proviso as and when required under Section 6.3(a), for so long as such information has not been received by Agent, and (iii) at the election of Agent or the Required Lenders, upon the occurrence and during the continuation of any Event of Default (whether or not the Default Rate of interest shall then be in effect). "Applicable Prepayment Premium" means, as of any date of determination, an amount equal to (a) during the period of time from and after the date of the execution and delivery of this Agreement up to the date that is the first anniversary of the Closing Date, $1,400,000, (b) during the period of time from and including the date that is the first anniversary of the Closing Date up to the date that is the second anniversary of the Closing Date, $1,050,000, (c) during the period of time from and including the date that is the second anniversary of the Closing Date up to the third anniversary of the Closing Date, $700,000, and (d) during the period of time from and including the date that is the third anniversary of the Closing Date up to the Maturity Date, $350,000. 3 "Asset Sale" means: (a) any direct or indirect sale, assignment, transfer, lease, conveyance, or other disposition (including, without limitation, by way of merger or consolidation) (collectively, a "transfer") of any assets of Borrowers or any Restricted Subsidiary; or (b) any direct or indirect issuance or sale of any Equity Interests of any Borrower or any Restricted Subsidiary (other than directors' qualifying shares), in each case to any Person (other than Borrowers or a Restricted Subsidiary). "Assignee" has the meaning set forth in Section 14.1(a). "Assignment and Acceptance" means an Assignment and Acceptance in the form of Exhibit A-1. "Authorized Person" means any officer or other employee of any Borrower. "Availability" means, as of any date of determination, if such date is a Business Day, and determined at the close of business on the immediately preceding Business Day, if such date of determination is not a Business Day, the amount that Borrowers are entitled to borrow as Advances under Section 2.1 (after giving effect to all then outstanding Obligations and all sublimits and reserves applicable hereunder). "Bankruptcy Code" means title 11 of the United States Code, as in effect from time to time. "Base LIBOR Rate" means the rate per annum, determined by Agent in accordance with its customary procedures, and utilizing such electronic or other quotation sources as it considers appropriate (rounded upwards, if necessary, to the next 1/100%), to be the rate at which Dollar deposits (for delivery on the first day of the requested Interest Period) are offered to major banks in the London interbank market 2 Business Days prior to the commencement of the requested Interest Period, for a term and in an amount comparable to the Interest Period and the amount of the LIBOR Rate Loan requested (whether as an initial LIBOR Rate Loan or as a continuation of an extant LIBOR Rate Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by Borrowers in accordance with this Agreement, which determination shall be conclusive in the absence of manifest error. "Base Rate" means, the rate of interest announced within Wells Fargo at its principal office in San Francisco as its "prime rate", with the understanding that the "prime rate" is one of Wells Fargo's base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publication or publications as Wells Fargo may designate. "Base Rate Loan" means the portion of the Advances or the Term Loan that bears interest at a rate determined by reference to the Base Rate. "Base Rate Term Loan Margin" means 2.50%. 4 "Beneficial Owner" or "beneficial owner" has the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Closing Date) whether or not otherwise applicable. "Benefit Plan" means a "defined benefit plan" (as defined in Section 3(35) of ERISA) for which any Borrower or any Subsidiary or ERISA Affiliate of any Borrower has been an "employer" (as defined in Section 3(5) of ERISA) within the past 6 years. "Board of Directors" means the board of directors (or comparable managers) of Parent or any committee thereof duly authorized to act on behalf thereof. "Books" means all of Borrowers' and their respective Subsidiaries' now owned or hereafter acquired books and records (including all of their Records indicating, summarizing, or evidencing their assets (including the Collateral) or liabilities, all of Borrowers' and their respective Subsidiaries' Records relating to their business operations or financial condition, and all of their goods or General Intangibles related to such information). "Borrower" and "Borrowers" have the respective meanings set forth in the preamble to this Agreement. "Borrower Collateral" means all of each Borrower's now owned or hereafter acquired right, title, and interest in and to each of the following: (a) all of its Accounts, (b) all of its Books, (c) all of its commercial tort claims described on Schedule 5.7, (d) all of its Deposit Accounts; (e) all of its Equipment, (f) all of its General Intangibles, (g) all of its Inventory, (h) all of its Investment Property, (i) all of its judgments, (j) all of its Negotiable Collateral, (k) all of its Real Property Collateral, (l) all money or other assets of each such Borrower that now or hereafter come into the possession, custody, or control of Agent, and (m) the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the foregoing, and any and all 5 Accounts, Books, Equipment, General Intangibles, Inventory, Investment Property, Negotiable Collateral, Real Property, money, deposit accounts, or other tangible or intangible property resulting from the sale, exchange, collection, or other disposition of any of the foregoing, or any portion thereof or interest therein, and the proceeds thereof. Notwithstanding the foregoing, "Borrower Collateral" shall not include any of the Excluded Assets. "Borrowing" means a borrowing hereunder consisting of Advances (or term loans, in the case of the Term Loan) made on the same day by the Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing Loan, or by Agent in the case of an Agent Advance, in each case, to a Borrower. "Borrowing Base" has the meaning set forth in Section 2.1(a). "Borrowing Base Certificate" means a certificate in the form of Exhibit B-1. "Business Day" means any day that is not a Saturday, Sunday, or other day on which national banks are authorized or required to close in New York, New York or Los Angeles, California, except that, if a determination of a Business Day shall relate to a LIBOR Rate Loan, the term "Business Day" also shall exclude any day on which banks are closed for dealings in Dollar deposits in the London interbank market. "Capital Expenditure Carry Forward Amount" shall mean, to the extent positive, for any fiscal year, a carry forward amount equal to (a) for fiscal year 2005, $7,000,000 less the aggregate amount of capital expenditures made pursuant to Section 7.20(b)(i) in fiscal year 2004 and (b) for fiscal year 2006 and each fiscal year thereafter, $6,000,000 less the aggregate amount of capital expenditures made pursuant to Section 7.20(b)(i) in the immediately preceding fiscal year. "Capital Lease" means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP. "Capitalized Lease Obligation" means that portion of the obligations under a Capital Lease that is required to be capitalized in accordance with GAAP. "Capital Stock" means, (a) with respect to any Person that is a corporation, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (b) with respect to a limited liability company, any and all membership interests, and (c) with respect to any other Person, any and all partnership or other equity interests of such Person. "Cash Equivalents" means (a) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof), (b) time deposits and certificates of deposit and commercial paper issued by the parent corporation of any domestic commercial bank of recognized standing having capital and surplus in excess of $250,000,000 and commercial paper issued by others rated at least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody's and in each case maturing within 6 one year after the date of acquisition, (c) investments in money market funds substantially all of whose assets comprise securities of the type described in clauses (a) and (b) above and (d) repurchase obligations for underlying securities of the types and with the maturities described above. "CFC" means a controlled foreign corporation (as that term is defined in the IRC). "Change of Control" means the occurrence of any of the following: (a) during any period of 2 consecutive calendar years, individuals who at the beginning of such period constituted the Managers of Parent (together with any new Managers whose election as a Manager or whose nominations for election by Parent's members or stockholders, was approved by a majority of Managers then still in office who were either Managers at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of such Managers then in office; provided, however, that there shall be no Change of Control pursuant to this clause (a) if during such 2-year period any of the Excluded Persons continue to (i) own, directly or indirectly, a majority of the Voting Stock of Parent or (ii) control or manage, directly or indirectly, the day-to-day operations of Parent; (b) any Person (other than an Excluded Person) is or becomes the Beneficial Owner, directly or indirectly, of more than 50% of the aggregate voting power of the Voting Stock of Parent, or conversely, any Person that beneficially owns, directly or indirectly, a majority of the aggregate voting power of the Voting Stock of Parent on the Closing Date becomes the Beneficial Owner, directly or indirectly, of less than a majority of the voting power of the Voting Stock of Parent; (c) any Borrower adopts a plan of liquidation; (d) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of any Borrower and its Restricted Subsidiaries, in each case, taken as a whole, to any Person other than a Borrower or a Restricted Subsidiary; or (e) the first day on which Parent fails to own 100% of the issued and outstanding Capital Stock of Borrowers. As used in this definition, "Person" (including any group that is deemed to be a "Person") has the meaning given by Section 13(d) of the Exchange Act, whether or not applicable. "Closing Date" means June ___, 2004. "Closing Date Business Plan" means the set of Projections of Borrowers for the period from the Closing Date to December 31, 2004 (on a month by month basis), in form and substance (including as to scope and underlying assumptions) satisfactory to Agent. "Code" means the New York Uniform Commercial Code, as in effect from time to time. "Collateral" means all assets and interests in assets and proceeds thereof now owned or hereafter acquired by each Borrower, its Subsidiaries or each Guarantor in or upon which a Lien is granted under any of the Loan Documents. Notwithstanding the foregoing, "Collateral" shall not include any of the Excluded Assets. "Collateral Access Agreement" means a landlord waiver, bailee letter, or acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other Person 7 in possession of, having a Lien upon, or having rights or interests in the Books, Equipment or Inventory, in each case, in form and substance satisfactory to Agent. "Collections" means all cash, checks, notes, instruments, and other items of payment (including insurance proceeds and proceeds of cash sales, rent and tax refunds). "Combined EBITDA" means, with respect to Borrowers for any fiscal period, the sum of Combined Net Income for such period, without duplication; plus (a) consolidated income tax expense of Borrowers and the Restricted Subsidiaries paid or accrued in accordance with GAAP for such period and the amount of Permitted Tax Distributions subtracted from Net Income in the determination of the Combined Net Income of such Person for such period; plus (b) Combined Interest Expense, to the extent that such Combined Interest Expense was deducted in computing such Combined Net Income; plus (c) Combined Non-Cash Charges, to the extent deducted in computing such Combined Net Income; plus (d) reasonable costs and expenses (other than costs and expenses incurred in connection with the acquisition, construction or renovation of any Gaming Property) directly relating to the opening of any Gaming Property that was, or is under, construction, to the extent deducted in computing such Combined Net Income; minus (e) (i) non-cash gains increasing such Combined Net Income and (ii) the amount of all cash payments made by Borrowers or any of the Restricted Subsidiaries during such period to the extent such payments relate to non-cash charges that were added back in determining Combined EBITDA for such period or any prior period; provided, however, that in determining Combined EBITDA with respect to OED for any period ending on or about: (x) March 31, 2004, Combined EBITDA of OED for such period shall be deemed to be equal to the product of (i) Combined EBITDA of OED for the period from January 1, 2004 to the last day of such period and (ii) 4; (y) June 30, 2004, Combined EBITDA of OED for such period shall be deemed to be equal to the product of (i) Combined EBITDA of OED for the period from January 1, 2004 to the last day of such period and (ii) 2; and (z) September 30, 2004, Combined EBITDA of OED for such period shall be deemed to be equal to the product of (i) Combined EBITDA of OED for the period from January 1, 2004 to the last day of such period and (ii) 1.333. "Combined Interest Expense" means, with respect to Borrowers for any period, the result of (a) the consolidated interest expense of Borrowers and their Restricted Subsidiaries for such period, whether paid or accrued (including amortization of original issue discount, noncash interest payment, and the interest component of Capitalized Lease Obligations), to the extent such expense was deducted in computing Combined Net Income for such period, minus (b) amortization expense, write-off of deferred financing costs and any charge related to any premium or penalty paid, in each case, accrued during such period in connection with redeeming or retiring any Indebtedness before its stated maturity, as determined in accordance with GAAP, to the extent such expense, cost, or charge was included in the calculation made pursuant to 8 clause (a) above; provided that any premiums, fees and expenses (including the amortization thereof) payable in connection with the initial offering of the Notes and the application of the net proceeds therefrom and the refinancing of the obligations under that certain Loan and Security Agreement between DJL and Wells Fargo Foothill, dated as of February 23, 2001, that certain Loan and Security Agreement among OED, OED Capital and Wells Fargo Foothill, dated as of June 24, 2003, in each case as amended through the Closing Date and the Equipment Loan Agreement, and all documents executed in connection with any of the foregoing, shall be excluded from this definition. "Combined Net Income" means, with respect to Borrowers for any period, the aggregate of the Net Income of Borrowers and their Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP excluding (to the extent included in calculating such net income) (a) any gain or loss, together with any related taxes paid or accrued on such gain or loss, realized in connection with any Asset Sales and dispositions pursuant to sale-leaseback transactions and (b) any extraordinary gain or loss, together with any taxes paid or accrued on such gain or loss; provided, that (a) the Net Income of any other Person (other than a Restricted Subsidiary of a Borrower) shall be included only to the extent of the amount of dividends or distributions paid to a Borrower or a Wholly Owned Subsidiary of a Borrower, and (b) the Net Income of any Restricted Subsidiary shall not be included to the extent that declarations of dividends or similar distributions by such Restricted Subsidiary are not at the time permitted, directly or indirectly, by operation of the terms of its organizational documents or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary or its owners. "Combined Non-Cash Charges" means, with respect to Borrowers for any period, (a) the aggregate depreciation and amortization expense for Borrowers and their Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP and (b) all other non-cash charges of Borrowers and their Restricted Subsidiaries for such period, in each case, determined on a consolidated basis in accordance with GAAP, including, without limitation, non-cash charges related to (i) the Management Agreements or the pricing or repricing or issuances of Equity Interests of Borrowers or PGP to employees of Borrowers (whether accruing at or subsequent to the time of such repricing or issuance), (ii) impairment of goodwill, intangibles or fixed assets, (iii) purchase accounting adjustments, and (iv) restructuring charges, non-capitalized transaction costs and other non-cash charges incurred in connection with actual or proposed financings, acquisitions or divestitures (including, without limitation, the initial issuance of the Notes) of Borrowers and their Restricted Subsidiaries for such period; but, in each case, excluding (x) any such charges constituting an extraordinary item or loss, and (y) any such charge which requires an accrual of or a reserve for cash charges for any future period. "Commercial Tort Claim/Judgment Assignment" has the meaning set forth in Section 4.4(e). "Commitment" means, with respect to each Lender, its Revolver Commitment, its Term Loan Commitment, or its Total Commitment, as the context requires, and, with respect to all Lenders, their Revolver Commitments, their Term Loan Commitments, or their Total Commitments, as the context requires, in each case as such Dollar amounts are set forth beside such Lender's name under the applicable heading on Schedule C-1 or on the signature page of 9 the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 14.1. "Compliance Certificate" means a certificate substantially in the form of Exhibit C-1 delivered by the chief financial officer of Parent to Agent. "Contractor" means W.G. Yates & Sons Construction Company. "Control Agreement" means a control agreement, in form and substance satisfactory to Agent, executed and delivered by the applicable Borrower, Agent, and the applicable securities intermediary with respect to a Securities Account or the applicable bank with respect to a Deposit Account. "Daily Balance" means, with respect to each day during the term of this Agreement, the amount of an Obligation owed at the end of such day. "Default" means an event, condition, or default that, with the giving of notice, the passage of time, or both, would be an Event of Default. "Defaulting Lender" means any Lender that fails to make any Advance (or other extension of credit) that it is required to make hereunder on the date that it is required to do so hereunder. "Defaulting Lender Rate" means (a) the Base Rate for the first 3 days from and after the date the relevant payment is due, and (b) thereafter, the interest rate then applicable to Advances (inclusive of the Base Rate Margin applicable thereto). "Deposit Account" means any deposit account (as that term is defined in the Code). "Designated Account" means, with respect to each Borrower, that certain Deposit Account of such Borrower identified on Schedule D-1. "Designated Account Bank" means American Trust and Savings Bank, 895 Main Street, Dubuque, Iowa 52001. "Diamond Jo" means DJL's riverboat casino which is documented under the laws and flag of the United States with Official Number 973800, and which has as its hailing port Dubuque, Iowa. "Diamond Jo II" means DJL's riverboat casino which is documented under the laws and flag of the United States with Official Number 973801, and which has as its hailing port Dubuque, Iowa. 10 "Diamond Jo Ship Mortgage" means that Preferred Ship Mortgage dated as of the date hereof and executed by DJL in favor of Agent, encumbering the Diamond Jo Vessels and their related personal property, in form and substance satisfactory to Agent. "Diamond Jo Vessels" means those certain riverboat casinos owned and operated by DJL as of the Closing Date, which are known as Diamond Jo and Diamond Jo II. "Disbursement Letter" means an instructional letter executed and delivered by Borrowers to Agent regarding the extensions of credit to be made on the Closing Date, the form and substance of which is satisfactory to Agent. "Disqualified Capital Stock" means any Equity interest that (a) either by its terms (or the terms of any security into which it is convertible or for which it is exchangeable) is or upon the happening of any event would be required to be redeemed or repurchased prior to the Maturity Date or is redeemable at the option of the holder thereof at any time prior to the Maturity Date, or (b) is convertible or exchangeable at the option of the issuer thereof or any other Person for debt securities that are pari passu or subordinate in respect of payment to the Obligations. Notwithstanding the foregoing, any Equity Interests that would constitute Disqualified Capital Stock solely because such Equity Interests mature or become mandatorily redeemable, or give the holders thereof the right to require Borrowers to repurchase such Equity Interests, in each case, upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Capital Stock if the terms of such Equity Interests provide that the applicable Borrower may not repurchase or redeem any such Equity Interests pursuant to the provisions of this Agreement. "DJL" has the meaning set forth in the preamble to this Agreement. "Dollars" or "$" means United States dollars. "Eligible Transferee" means (a) a commercial bank organized under the laws of the United States, or any state thereof, and having total assets in excess of $250,000,000, (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development or a political subdivision of any such country and which has total assets in excess of $250,000,000, provided that such bank is acting through a branch or agency located in the United States, (c) a finance company, insurance company, or other financial institution or fund that is engaged in making, purchasing, or otherwise investing in commercial loans in the ordinary course of its business and having (together with its Affiliates) total assets in excess of $250,000,000, (d) any Affiliate (other than individuals) of a Lender that was party hereto as of the Closing Date, (e) so long as no Event of Default has occurred and is continuing, any other Person approved by Agent and Borrowers, and (f) during the continuation of an Event of Default, any other Person approved by Agent. "Environmental Actions" means any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter, or other communication from any Governmental Authority, or any third party involving violations of Environmental Laws or releases of Hazardous Materials from (a) any assets, properties, or businesses of any Borrower, any Subsidiary of a Borrower or any of their predecessors in interest, (b) from adjoining properties or businesses, or (c) from or onto any 11 facilities which received Hazardous Materials generated by any Borrower, any Subsidiary of a Borrower or any of their predecessors in interest. "Environmental Law" means any applicable federal, state, provincial, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy, or rule of common law now or hereafter in effect and in each case as amended, or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, to the extent binding on any Borrower or any Subsidiary of a Borrower, relating to the environment, employee health and safety, or Hazardous Materials, including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 USC ss. 1251 et seq.; the Toxic Substances Control Act, 15 USC, ss. 2601 et seq.; the Clean Air Act, 42 USC ss. 7401 et seq.; the Safe Drinking Water Act, 42 USC. ss. 3803 et seq.; the Oil Pollution Act of 1990, 33 USC. ss. 2701 et seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 USC. ss. 11001 et seq.; the Hazardous Material Transportation Act, 49 USC ss. 1801 et seq.; and the Occupational Safety and Health Act, 29 USC. ss.651 et seq. (to the extent it regulates occupational exposure to Hazardous Materials); any state and local or foreign counterparts or equivalents, in each case as amended from time to time. "Environmental Liabilities and Costs" means all liabilities, monetary obligations, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts, or consultants, and costs of investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any Environmental Action. "Environmental Lien" means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs. "Equipment" means equipment (as that term is defined in the Code), machinery, machine tools, motors, furniture, furnishings, fixtures, vehicles (including motor vehicles), computer hardware, tools, parts and goods (other than consumer goods, farm products, or Inventory), wherever located, including all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing. "Equipment Loan Agreement" means that certain Loan and Security Agreement, dated as of September 22, 2003, by and among OED, OED Capital, the lenders party thereto, and Wells Fargo Foothill, as the arranger and administrative agent, and the other parties party thereto from time to time. "Equity Holder" means (a) with respect to a corporation, each holder of Capital Stock of such corporation, (b) with respect to a limited liability company or similar entity, each member of such limited liability company or similar entity, (c) with respect to a partnership, each partner of such partnership, (d) with respect to any entity described in clause (a)(iv) of the definition of "Flow Through Entity", the owner of such entity, and (e) with respect to a trust described in clause (a)(v) of the definition of "Flow Through Entity", the persons treated for Federal income tax purposes as the owners of the trust property. 12 "Equity Interests" means Capital Stock or warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto. "ERISA Affiliate" means (a) any Person subject to ERISA whose employees are treated as employed by the same employer as the employees of a Borrower or a Subsidiary of a Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA whose employees are treated as employed by the same employer as the employees of a Borrower or a Subsidiary of a Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any organization subject to ERISA that is a member of an affiliated service group of which a Borrower or a Subsidiary of a Borrower is a member under IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any Person subject to ERISA that is a party to an arrangement with a Borrower or a Subsidiary of a Borrower and whose employees are aggregated with the employees of a Borrower or a Subsidiary of a Borrower under IRC Section 414(o). "Event of Default" has the meaning set forth in Section 8. "Event of Loss" means, with respect to any property or asset, any (a) loss, destruction or damage of such property or asset or (b) any condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such property or asset, or confiscation or requisition of the use of such property or asset. "Excess Availability" means the amount, as of the date any determination thereof is to be made, equal to Availability minus the aggregate amount, if any, of all trade payables of Borrowers and their Subsidiaries aged in excess of their historical levels with respect thereto and all book overdrafts of Borrowers and their Subsidiaries in excess of their historical practices with respect thereto, in each case as determined by Agent in its Permitted Discretion. "Excess Cash Distribution Amount for Taxes" means the excess of (a) the aggregate actual cash distributions received by any Borrower or a Restricted Subsidiary from all Flow Through Entities that are not Restricted Subsidiaries during the period commencing with the Closing Date and continuing to and including the date on which a proposed Permitted Tax Distribution is to be made under clause 3 of the second paragraph of Section 7.11 over (b) the aggregate amount of such cash distributions described in the immediately preceding clause (a) that have already been taken into account for purposes of making (i) Permitted Tax Distributions previously made and which were attributable to a Flow Through Entity that was not a Restricted Subsidiary at the time such Permitted Tax Distribution was made plus (ii) Restricted Payments permitted by clause (c)(i) of Section 7.11 (treating such cash distributions in this clause (b)(ii) as used to make a Restricted Payment during such period only to the extent that in such period, the total amount of Restricted Payments during such period exceeded the excess of (1) the total amount of Restricted Payments permitted to be made in such period over (2) the amount of such cash distributions described in the immediately preceding clause (a) that were actually received by Borrowers or a Restricted Subsidiary during such period and that were not previously used to make a Permitted Tax Distribution. 13 "Exchange Act" means the Securities Exchange Act of 1934, as in effect from time to time. "Excluded Assets" means (a) the lease for the off track betting parlor operated by Parent in New Iberia, Louisiana; (b) cash, other than cash deposited in Deposit Accounts; (c) assets securing Purchase Money Obligations or Capitalized Lease Obligations permitted to be incurred under this Agreement to the extent a second Lien would not be permitted under the documents evidencing such obligations; and (d) any agreements, permits, licenses (including Gaming Licenses), or the like (including any parcels of the Warner Land that are subject to the mortgage granted by OED to the seller of such land) solely in the event and to the extent that: (i) such agreements, permits, licenses, or the like (including any parcels of the Warner Land that are subject to the mortgage granted by OED to the seller of such land) cannot be subjected to a consensual security interest in favor of Agent without the consent of the licensor or other party to such agreement, permit, license, or the like; (ii) any such restriction is effective and enforceable under applicable law; and (iii) such consent is not obtainable by any Borrower; provided, that each Borrower agrees to use all commercially reasonable efforts (which shall not require the payment of cash to, or the reimbursement of fees and expenses of the consenting party or the making of any material concessions under any such agreement, permit, license (including a Gaming License) or the like (including any parcels of the Warner Land that are subject to the mortgage granted by OED to the seller of such land) to obtain all requisite consents to enable such Borrower to provide a security interest in such agreement, permit, license (including Gaming Licenses) or the like; provided, further, however, that (i) Excluded Assets shall not include (and, accordingly, the Collateral shall include) any and all proceeds of any of the assets described in clause (d) above and any and all proceeds of any of the assets described in clauses (b) and (c) above or of any other Collateral to the extent such proceeds do not constitute Excluded Assets, and (ii) any agreement, permit, license, or the like qualifying as an Excluded Asset under clause (d) above no longer shall constitute an Excluded Asset (and instead shall constitute Collateral) immediately from and after such time as the licensor or other party to such agreement, permit, license, or the like consents to the grant of a security interest in favor of Agent in such agreement, permit, license, or the like or the prohibition against granting a security interest therein in favor of Agent shall cease to be effective. "Excluded Person" means (a) Parent, (b) PGP; (c) PGP Investors; (d) M. Brent Stevens, Michael S. Luzich and any Affiliate or Manager of PGP, DJL, PGP Investors, M. Brent Stevens or Michael S. Luzich (collectively, the "Existing Holders"), (e) any trust, corporation, partnership or other entity (i) controlled by the Existing Holders and members of the immediate family of the Existing Holders or (ii) 80% of the beneficiaries, stockholders, partners or owners of which consist solely of the Existing Holders and members of the immediate family of the Existing Holders or (f) any partnership, the sole general partners of which consist solely of the Existing Holders and members of the immediate family of the Existing Holders. "Fee Letter" means that certain fee letter, dated as of even date herewith, between Borrowers and Agent, in form and substance satisfactory to Agent. "FEIN" means Federal Employer Identification Number. 14 "FF&E" means furniture, fixtures and equipment (including Gaming Equipment) acquired by Borrowers and the Restricted Subsidiaries in the ordinary course of business for use in the construction and business operations of Borrowers and the Restricted Subsidiaries. "FF&E Collateral" means all of OED's now owned or hereafter acquired right, title and interest in and to (a) any and all Gaming Equipment or other Equipment, the purchase of which was financed or refinanced, in full or in part, with proceeds of the Term Loan or proceeds of loans made under the Equipment Loan Agreement, and (b) the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance coverage of any and all of the foregoing. "FF&E Letter of Credit" means that certain letter of credit issued in favor of Agent by Wells Fargo in the face amount of $3,200,000.00, and in form and substance acceptable to the Lender Group. "FF&E Obligations" means the principal and interest owing by OED to the Lender Group in connection with the Term Loan. "Fixed Construction Costs" means, in connection with the Racino Project to the extent actually incurred by or on behalf of OED, the sum of all: (a) costs incurred in connection with the purchase of real property (including the land on which the Racino Project is to be located, all adjacent tracts and any other real property purchased by Borrowers related to the Racino Project) and off-site improvements such as easements, access roads, drainage systems, as evidenced by invoices, sales contracts and the like with respect to same, plus (b) construction costs incurred to date in connection with the completion of the Racino Project as detailed in the Fixed Price Contract as evidenced by invoices with respect to same, plus (c) costs incurred in connection with architectural plans, drawings and specifications with respect to any of the foregoing clauses (a) and (b), plus (d) costs of acquiring furniture, fixtures and Equipment, to the extent such furniture, fixtures and Equipment constitute Collateral hereunder, in connection with the construction of the Racino Project. "Fixed Price Contract" means that certain Agreement, dated as of February 25, 2003, between OED and Contractor, as amended, restated, supplemented or otherwise modified from time to time to the extent permitted hereunder. "Flow Through Entity" means an entity that (a) for federal income tax purposes constitutes (i) an "S corporation" (as defined in Section 1361(a) of the IRC), (ii) a "qualified subchapter S subsidiary" (as defined in Section 1361(b)(3)(B) of the IRC), (iii) a "partnership" (within the meaning of Section 7701(a)(2) of the IRC) other than a "publicly traded partnership" (as defined in Section 7704 of the IRC), (iv) a business entity that is disregarded as an entity separate from its owners under the IRC, the Treasury regulations, or any published administrative guidance of the Internal Revenue Service or (v) a trust to the extent its income is includible in the taxable income of the grantor or another person under Sections 671 through 679 of the IRC (each of the entities described in the preceding clauses (i), (ii), (iii), (iv) and (v), a "Federal Flow Through Entity"), and (b) for state and local jurisdictions is subject to treatment on a basis under applicable state or local income tax law substantially similar to a Federal Flow Through Entity. 15 "Four Quarter Reference Period" has the meaning set forth in Section 7.1(l). "Funding Date" means the date on which a Borrowing occurs. "Funding Losses" has the meaning set forth in Section 2.16(b)(ii). "GAAP" means generally accepted accounting principles as in effect from time to time in the United States, consistently applied. "Gaming Authority" means any agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of the United States of America or foreign government (including Native American governments), any state, province or city or other political subdivision thereof, whether now or hereafter existing, or any officer or official thereof, including the Louisiana Regulatory Authorities and the Iowa Regulatory Authorities, and any other agency with authority to regulate any gaming or racing operation (or proposed gaming or racing operation) owned, managed or operated by any Borrower or any of its Subsidiaries. "Gaming Equipment" means all Equipment composed of slot machines, video poker machines, and all other gaming equipment and related signage, accessories and peripheral equipment. "Gaming License" means any material license, franchise, registration, qualification, findings of suitability or other approval or authorization required to own, lease, operate or otherwise conduct or manage riverboat, dockside or land-based gaming activities, including racing facilities and activities, in any state or jurisdiction in which any Borrower or any of its Subsidiaries conduct business or propose to conduct business (including, without limitation, all such licenses granted by the Louisiana Regulatory Authorities and granted by the Iowa Regulatory Authorities under Chapter 99F of the Iowa Code), and all applicable liquor licenses. "Gaming Property" or "Gaming Properties" means one or more of the foregoing: (a) the Diamond Jo Vessels; (b) the Racino Project, in each case, so long as it is owned by Borrowers or a Restricted Subsidiary; and (c) any other gaming facility or gaming operation owned and controlled or to be owned and controlled after the Closing Date by Borrowers or a Restricted Subsidiary and that contains, or that based upon a plan approved by the applicable Borrower's Managers will contain upon the completion of the construction or development thereof, an aggregate of at least 500 slot machines or other gaming devices, provided, in each case, that the property and assets (other than Excluded Assets) of such Gaming Property constitute Collateral. "Gaming Property Financing" means a financing, in whole or in part, of (a) the acquisition of any Gaming Property, (b) the construction of any Gaming Property (but only to the extent that the proceeds of such Indebtedness are used to acquire land, furniture, fixtures and equipment, prepare the site or construct improvements thereon) or (c) an investment in any Gaming Property. "Gaming Vessel" means a riverboat casino (a) which is substantially similar in size and space to the Diamond Jo Vessels, (b) with at least the same overall qualities and 16 amenities as the Diamond Jo Vessels, and (c) that is developed, constructed and equipped to be in compliance with all federal, state and local laws, including, without limitation, the cruising requirements of Chapter 99F of the Iowa Code. In the event the laws of the State of Iowa change to permit the development and operation of additional land-based casinos, the term "Gaming Vessel" shall be deemed to include a land-based casino meeting the requirements of clauses (a), (b) and (c) herein. "General Intangibles" means general intangibles (as that term is defined in the Code), including payment intangibles, contract rights, rights to payment, rights to gaming permits, rights arising under common law, statutes, or regulations, choses or things in action, goodwill, patents, trade names, trade secrets, trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements, infringement claims, computer programs, information contained on computer disks or tapes, software (including software imbedded in goods), literature, reports, catalogs, insurance premium rebates, tax refunds, and tax refund claims), and any and all supporting obligations in respect thereof, and any other personal property other than goods, Accounts, Investment Property, Deposit Accounts and Negotiable Collateral. "Governing Documents" means, with respect to any Person, the certificate or articles of incorporation, by-laws, or other organizational documents of such Person. "Governmental Authority" means any federal, state, local, or other governmental or administrative body, instrumentality, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body. "Guarantor Security Agreement" means one or more security agreements executed and delivered by each Guarantor in favor of Agent, in each case in form and substance satisfactory to Agent. "Guarantors" means Parent, OED Capital, the Restricted Subsidiaries and all other Persons executing a Guaranty of the Obligations in favor of Agent. "Guaranty" means one or more guaranties executed and delivered by each Guarantor in favor of Agent, for the benefit of the Lender Group, in form and substance satisfactory to Agent, including, without limitation, the Subsidiary Guaranty. "Hazardous Materials" means (a) substances that are defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations as "hazardous substances," "hazardous materials," "hazardous wastes," "toxic substances," or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal resources, (c) any flammable substances or explosives or any radioactive materials, and (d) asbestos in any form or electrical equipment that 17 contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of 50 parts per million. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (a) interest rate swap agreements, interest rate cap agreements, interest rate exchange agreements and interest rate collar agreements and (b) other agreements or arrangements designed to protect such Person against fluctuations in interest rates, including any arrangement whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a fixed or floating rate of interest on a stated notional amount in exchange for periodic payments made by such Person calculated by applying a fixed or floating rate of interest on the same notional amount, provided that, in any such case, such agreement or arrangement shall have been entered into for risk management purposes and not for speculative purposes. "Holdout Lender" has the meaning set forth in Section 15.2. "Ice Harbor Facility" means the Diamond Jo Vessels (or either of them), the Real Property relating thereto and the Lease. "Ice Harbor Parking Agreement" means that certain Revised Ice Harbor Parking Agreement for Ice Harbor Urban Renewal District dated May 23, 2000, by and among the City of Dubuque, Dubuque Racing Association, Ltd., the Dubuque County Historical Society, DJL and Spirit of Dubuque, Inc. regarding the parking rights of the parties relating to the real property described therein. "Indebtedness" means (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, interest rate swaps, or other financial products, (c) all obligations under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of a Borrower or its Subsidiaries, irrespective of whether such obligation or liability is assumed, (e) all obligations for the deferred purchase price of assets (other than trade debt incurred in the ordinary course of business and repayable in accordance with customary trade practices), and (f) any payment obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person. "Indemnified Liabilities" has the meaning set forth in Section 11.3. "Indemnified Person" has the meaning set forth in Section 11.3. "Indenture" means that certain Indenture dated as of April 16, 2004, among Parent, OED Capital, the "Subsidiary Guarantors" (as defined therein) and the Indenture Trustee as in effect on such date. "Indenture Trustee" means (a) U.S. Bank National Association, a National Association, in its capacity as trustee under the Indenture, or (b) any successor trustee under the Indenture from time to time. 18 "Insolvency Proceeding" means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief. "Intangible Assets" means, with respect to any Person, that portion of the book value of all of such Person's assets that would be treated as intangibles under GAAP. "Intercompany Subordination Agreement" means a subordination agreement executed and delivered by Borrowers, the Restricted Subsidiaries and Agent, the form and substance of which is satisfactory to Agent. "Intercreditor Agreement" means that certain Intercreditor Agreement between Wells Fargo Foothill and the Indenture Trustee, dated as of April 16, 2004, in form and substance satisfactory to Agent. "Interest Coverage Ratio" means with respect to Borrowers for any period, the ratio of (a) Combined EBITDA, to (b) Combined Interest Expense, in each case, for such period. In calculating Interest Coverage Ratio for any period, (i) pro forma effect shall be given to the incurrence, repayment or retirement by any Borrower or any of its Restricted Subsidiaries of any Indebtedness (other than Indebtedness incurred in the ordinary course of business for general corporate purposes pursuant to working capital facilities) subsequent to the commencement of the period for which the Interest Coverage Ratio is being calculated, as if the same had occurred at the beginning of the applicable period; and (ii) acquisitions that have been made by any Borrower or any of the Restricted Subsidiaries, including all mergers and consolidations, subsequent to the commencement of such period shall be calculated on a pro forma basis, assuming that all such acquisitions, mergers and consolidations had occurred on the first day of such period. Without limiting the foregoing, the financial information of Borrowers with respect to any portion of such period that falls before the Closing Date shall be adjusted to give pro forma effect to the issuance of the Notes and the application of the proceeds therefrom as if they had occurred at the beginning of such period. "Interest Period" means, with respect to each LIBOR Rate Loan, a period commencing on the date of the making of such LIBOR Rate Loan (or the continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan to a LIBOR Rate Loan) and ending 1, 2, 3 or 6 months thereafter; provided, however, that (a) if any Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended (subject to clauses (c)-(e) below) to the next succeeding Business Day, (b) interest shall accrue at the applicable rate based upon the LIBOR Rate from and including the first day of each Interest Period to, but excluding, the day on which any Interest Period expires, (c) any Interest Period that would end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day, (d) with respect to an Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period), the Interest Period shall end on the last Business Day of the calendar month that is 1, 2, 3 or 6 months after the date on which the 19 Interest Period began, as applicable, and (e) Borrowers may not elect an Interest Period which will end after the Maturity Date. "Inventory" means inventory (as that term is defined in the Code). "Investment" means, with respect to any Person, any investment by such Person in any other Person (including Affiliates) in the form of loans, guarantees, advances, or capital contributions (excluding (a) commission, travel, and similar advances to officers and employees of such Person made in the ordinary course of business, and (b) bona fide Accounts arising in the ordinary course of business consistent with past practices), purchases or other acquisitions for consideration of Indebtedness or Capital Stock, and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "Investment Property" means "investment property" (as that term is defined in the Code), and any and all supporting obligations in respect thereof. "Iowa Code" means the Code of Iowa (1999), as amended from time to time. "Iowa Regulatory Authorities" means the Iowa Racing and Gaming Commission, or any successor Gaming Authority in Iowa. "IRC" means the Internal Revenue Code of 1986, as in effect from time to time. "L/C" has the meaning set forth in Section 2.12(a). "L/C Disbursement" means a payment made by Agent pursuant to a Letter of Credit. "L/C Undertaking" has the meaning set forth in Section 2.12(a). "Lease" means that certain Lease Agreement dated as of February 28, 1990, between the City of Dubuque, Iowa, a municipal corporation, as lessor, and Dubuque Racing Association, Ltd., an Iowa nonprofit corporation, as lessee, as amended from time to time, together with any subleases relating thereto, including (a) that certain Sublease Agreement dated as of October 18, 1993, between Dubuque Racing Association, Ltd., as lessor, and Greater Dubuque Riverboat Entertainment Company, L.C., an Iowa limited liability company, as lessee, as amended by that certain First Amendment to Sublease Agreement entered into effective as of July 15, 1999, by and between Dubuque Racing Association, Ltd., as lessor, and Greater Dubuque Riverboat Entertainment Company, L.C., an Iowa limited liability company, as lessee, and (b) that certain Sublease Assignment entered into as of July 15, 1999, by and between Greater Dubuque Riverboat Entertainment Company, L.C., an Iowa limited liability company, as assignor, and DJL, as assignee. "Lender" has the meaning set forth in the preamble to this Agreement. "Lender Group" means, individually and collectively, each of the Lenders and Agent. 20 "Lender Group Expenses" means all (a) costs or expenses (including taxes, and insurance premiums) required to be paid by a Borrower, its Subsidiaries or a Guarantor under any of the Loan Documents that are paid, advanced or incurred by the Lender Group, (b) the actual fees or charges paid or incurred by Agent in connection with the Lender Group's transactions with Borrowers, their Subsidiaries or the Guarantors, including, fees or charges for photocopying, notarization, couriers and messengers, telecommunication, public record searches (including tax lien, litigation, and Uniform Commercial Code searches and including searches with the patent and trademark office, the copyright office, or the department of motor vehicles), filing, recording, publication, appraisal (including periodic Collateral appraisals or business valuations to the extent of the fees and charges (and up to the amount of any limitation) contained in this Agreement), real estate surveys, real estate title policies and endorsements, and environmental audits, (c) costs and expenses incurred by Agent in the disbursement of funds to or for the account of Borrowers or other members of the Lender Group (by wire transfer or otherwise), (d) charges paid or incurred by Agent resulting from the dishonor of checks, (e) reasonable costs and expenses paid or incurred by the Lender Group to correct any default or enforce any provision of the Loan Documents, or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated, (f) audit fees and expenses of Agent related to audit examinations of the Books to the extent of the fees and charges (and up to the amount of any limitation) contained in this Agreement, (g) reasonable costs and expenses of third party claims or any other suit paid or incurred by the Lender Group in enforcing or defending the Loan Documents or in connection with the transactions contemplated by the Loan Documents or the Lender Group's relationship with any Borrower or any Guarantor of the Obligations, (h) Agent's reasonable fees and expenses (including attorneys fees) incurred in advising, structuring, drafting, reviewing, administering, or amending the Loan Documents, and (i) Agent's and each Lender's reasonable fees and expenses (including attorneys fees) incurred in terminating, enforcing (including attorneys fees and expenses incurred in connection with a "workout," a "restructuring," or an Insolvency Proceeding concerning any Borrower or in exercising rights or remedies under the Loan Documents), or defending the Loan Documents, irrespective of whether suit is brought, or in taking any Remedial Action concerning the Collateral. "Lender-Related Person" means, with respect to any Lender, such Lender, together with such Lender's Affiliates, and the officers, directors, employees, and agents of such Lender or any of such Lender's Affiliates. "Letter of Credit" means an L/C or an L/C Undertaking, as the context requires. "Letter of Credit Usage" means, as of any date of determination, the aggregate undrawn face amount of all outstanding Letters of Credit. "LIBOR Deadline" has the meaning set forth in Section 2.16(b)(i). "LIBOR Notice" means a written notice in the form of Exhibit L-1. "LIBOR Option" has the meaning set forth in Section 2.16(a). 21 "LIBOR Rate" means, for each Interest Period for each LIBOR Rate Loan, the rate per annum determined by Agent (rounded upwards, if necessary, to the next 1/16%) by dividing (a) the Base LIBOR Rate for such Interest Period, by (b) 100% minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage. "LIBOR Rate Loan" means each portion of an Advance that bears interest at a rate determined by reference to the LIBOR Rate. "Lien" means any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, whether such interest shall be based on the common law, statute, or contract, whether such interest shall be recorded or perfected, and whether such interest shall be contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances, including the lien or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes and also including reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting Real Property. "Loan Account" has the meaning set forth in Section 2.10. "Loan Documents" means this Agreement, the Control Agreements, the Diamond Jo Ship Mortgage, the FF&E Letter of Credit, the Disbursement Letter, the Fee Letter, the Guaranties, the Intercompany Subordination Agreement, the Intercreditor Agreement, the Letters of Credit, the Mortgages, the Management Fees Subordination Agreement, the Guarantor Security Agreement, the Officers' Certificate, the Trademark Security Agreement, the Pledge Agreement, the Subordination of Preferred Fleet Mortgage, the Subordinations of Mortgage, any Commercial Tort Claim/Judgment Assignments, any note or notes executed by a Borrower in connection with this Agreement and payable to a member of the Lender Group, and any other agreement entered into, now or in the future, by any Borrower or any Guarantor in favor of Agent or the Lender Group in connection with this Agreement. "Louisiana Regulatory Authorities" means, collectively, the Louisiana Gaming Control Board and the Louisiana State Racing Commission, or any successor Gaming Authority in Louisiana. "Management Agreements" means, collectively, profits interests grants or similar equity interest arrangements, employment agreements, consulting agreements, management agreements and other similar arrangements entered into from time to time by any Borrower, any Guarantor or any of their Affiliates and any manager, officer, member or employee thereof or consultant thereto and such or similar agreements, as amended, modified, supplemented or restated from time to time consistent with industry practice to the extent permitted by Section 7.8(b). "Management Fees Subordination Agreement" means that certain Management Fees Subordination Agreement, dated as of the Closing Date, among Parent, Borrowers, Agent, 22 and PGP, and each supplement thereto executed by any Person entitled to receive management or similar fees from any Borrower, the form and substance of which is satisfactory to Agent. "Manager" means, with respect to any Person (a) if such Person is a limited liability company, the members of the board of managers, or members of such other body performing similar functions for such Person, manager or managers, as appointed pursuant to the operating agreement of such Person as then in effect, or in the event that there are no managers or board of managers or similar governing body, the sole member or (b) otherwise, the members of the board of directors (if such Person is a corporation) or other governing body of such Person. "Material Adverse Change" means (a) a material adverse change in the business, prospects, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Borrowers and their Subsidiaries taken as a whole, (b) a material impairment of a Borrower's or a Subsidiary of a Borrower's ability to perform its obligations under the Loan Documents to which it is a party or of the Lender Group's ability to enforce the Obligations or realize upon the Collateral or the FF&E Letter of Credit, or (c) a material impairment of the enforceability or priority of the Agent's Liens with respect to the Collateral as a result of an action or failure to act on the part of a Borrower or a Subsidiary of a Borrower. "Maturity Date" has the meaning set forth in Section 3.4. "Maximum Revolver Amount" means $35,000,000. "Monthly Financial Report" has the meaning set forth in Section 6.3(a). "Moody's" means Moody's Investors Service, Inc., a Delaware corporation, and its successors. "Mortgage Policy" has the meaning set forth in Section 3.1(o). "Mortgages" means, individually and collectively, one or more mortgages, deeds of trust, or deeds to secure debt, executed and delivered by a Borrower or a Guarantor in favor of Agent, in form and substance satisfactory to Agent, that encumber the Real Property Collateral and the related improvements thereto. "Negotiable Collateral" means letters of credit, letter of credit rights, instruments, promissory notes, drafts, documents, and chattel paper (including electronic chattel paper and tangible chattel paper), and any and all supporting obligations in respect thereof. "Net Income" means, with respect to any Person for any period, (a) the net income (or loss) of such Person for such period, determined in accordance with GAAP, reduced by (b) the maximum amount of Permitted Tax Distributions attributable to such net income for such period. "Net Proceeds" means the aggregate proceeds received in the form of cash or Cash Equivalents in respect of any Asset Sale (including insurance or other payments in an Event of Loss and payments in respect of deferred payment obligations and any cash or Cash 23 Equivalents received upon the sale or disposition of any non-cash consideration received in any Asset Sale, in each case when received), net of: (a) the reasonable and customary direct out-of-pocket costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions), other than any such costs payable to an Affiliate of Borrowers, (b) taxes required to be paid by Borrowers, any of their Restricted Subsidiaries, or any Equity Holder of Borrowers (or, in the case of any Equity Holder of Borrowers that is a Flow Through Entity, the Upper Tier Equity Holder of such Flow Through Entity) in connection with such Asset Sale in the taxable year that such sale is consummated or in the immediately succeeding taxable year, the computation of which shall take into account the reduction in tax liability resulting from any available operating losses and net operating loss carryovers, tax credits and tax credit carryforwards, and similar tax attributes, (c) amounts required to be applied to the permanent repayment of Indebtedness in connection with such Asset Sale, and (d) appropriate amounts provided as a reserve by the applicable Borrower or any Restricted Subsidiary, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the applicable Borrower or such Restricted Subsidiary, as the case may be, after such Asset Sale (including, without limitation, as applicable, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations arising from such Asset Sale). "Note" and "Notes" shall have the meanings ascribed thereto in the Indenture. "Obligations" means all loans (including the Term Loan), Advances, debts, principal, interest (including any interest that, but for the provisions of the Bankruptcy Code, would have accrued), contingent reimbursement obligations with respect to outstanding Letters of Credit, premiums (including the Applicable Prepayment Premium), liabilities (including all amounts charged to Borrowers' Loan Account pursuant hereto), obligations, fees (including the fees provided for in the Fee Letter), charges, costs, Lender Group Expenses (including any fees or expenses that, but for the provisions of the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants, and duties of any kind and description owing by Borrowers to the Lender Group pursuant to or evidenced by the Loan Documents and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all interest not paid when due and all Lender Group Expenses that Borrowers are required to pay or reimburse by the Loan Documents or by law. Any reference in this Agreement or in the Loan Documents to the Obligations shall include all amendments, changes, extensions, modifications, renewals replacements, substitutions, and supplements, thereto and thereof, as applicable, both prior and subsequent to any Insolvency Proceeding. "OED EBITDA" means, with respect to any fiscal period, OED's and its Subsidiaries consolidated net earnings (or loss), minus extraordinary gains and interest income, plus interest expense, income taxes, and depreciation and amortization for such period, as determined in accordance with GAAP; provided, however, that in determining EBITDA for any 24 period ending on or about: (a) March 31, 2004, EBITDA for such period shall be deemed to be equal to the product of (x) EBITDA for the period from January 1, 2004 to the last day of such period and (y) 4, (b) June 30, 2004, EBITDA for such period shall be deemed to be equal to the product of (x) EBITDA for the period from January 1, 2004 to the last day of such period and (y) 2, and (c) September 30, 2004, EBITDA for such period shall be deemed to be equal to the product of (x) EBITDA for the period from January 1, 2004 to the last day of such period and (y) 1.333. "OED Capital" means The Old Evangeline Downs Capital Corp., a Delaware corporation. "OED Indenture" means that certain Indenture dated as of February 25, 2003, among OED, OED Capital, the "Guarantors" (as defined therein) and U.S. Bank National Association, as trustee. "OED Note Documents" means, collectively, the OED Indenture, the Notes (as defined in the OED Indenture), and the Collateral Documents (as defined in the OED Indenture), in each case as such document may be amended, restated, supplements or modified from time to time with the consent of Agent. "Officers' Certificate" means the representations and warranties of officers form submitted by Agent to each Borrower, together with such Borrower's completed responses to the inquiries set forth therein, the form and substance of such responses to be satisfactory to Agent. "Originating Lender" has the meaning set forth in Section 14.1(e). "Overadvance" has the meaning set forth in Section 2.5. "Parent" means Peninsula Gaming, LLC, a Delaware limited liability company. "Participant" has the meaning set forth in Section 14.1(e). "Participant Register" has the meaning set forth in Section 14.1(i). "Permitted Discretion" means a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment. "Permitted Dispositions" means (a) sales or other dispositions by any Borrower or any Guarantor of FF&E Collateral (other than assets that compose the Ice Harbor Facility and the Racino Project) that is substantially worn, damaged, or obsolete in the ordinary course of business; provided, however, Agent shall have received 10 days' prior written notice of such sale or disposition, and upon the consummation of such sale of disposition, OED shall repay the Term Loan in an amount equal to the Net Proceeds for such Collateral (which repayment shall be applied against the installments due under Section 2.2 in the inverse order of maturity), (b) sales or other dispositions by any Borrower or any Guarantor of Equipment (other than (i) assets that compose the Ice Harbor Facility and the Racino Project and (ii) FF&E Collateral) that is substantially worn, damaged, or obsolete in the ordinary course of business; provided, however, Agent shall have received 10 days' prior written notice of such sale or disposition, and upon the consummation of such sale of disposition, such Borrower shall repay Advances, as applicable, in 25 an amount equal to the Net Proceeds for such Collateral, (c) sales by any Borrower or any Guarantor of Inventory to buyers in the ordinary course of business, (d) the use or transfer of money or Cash Equivalents by any Borrower, any Restricted Subsidiary or any Guarantor in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents, (e) the licensing by any Borrower, any Restricted Subsidiary or any Guarantor, on a non-exclusive basis, of patents, trademarks, copyrights, and other intellectual property rights in the ordinary course of business, (f) transfers of assets by a Borrower or a Restricted Subsidiary to another Borrower or another Restricted Subsidiary, (g) any exchange of Equipment for replacement Equipment in the ordinary course of business, so long as such replacement Equipment is of equal fair market value to the Equipment so replaced and (h) so long as no Event of Default has occurred and is then continuing, dispositions of assets (other than FF&E Collateral) with an aggregate fair market value not to exceed $1,000,000 during the term of this Agreement. "Permitted Investments" means: (a) Investments in Borrowers or in any Restricted Subsidiary; (b) Investments in Cash Equivalents; (c) Investments in a Person, if, as a result of such Investment, such Person (i) becomes a Wholly Owned Subsidiary, or (ii) is, subject to the terms of Section 7.3, merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, Borrowers or a Wholly Owned Subsidiary; (d) Hedging Obligations; (e) Investments as a result of consideration received in connection with an Asset Sale made in compliance Section 7.4; (f) Investments existing on the Closing Date and set forth on Schedule P-2 attached hereto; (g) Investments paid for solely with Capital Stock (other than Disqualified Capital Stock) of Parent; (h) credit extensions to gaming customers in the ordinary course of business, consistent with industry practice; (i) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to Borrowers (i) in satisfaction of judgments or (ii) pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of trade creditors or customers; (j) loans or other advances to employees of Borrowers and the Restricted Subsidiaries made in the ordinary course of business in an aggregate amount not to exceed $500,000 at any one time outstanding; (k) intercompany Indebtedness incurred pursuant to clause (f) of Section 7.1; 26 (l) Investments in the Notes or any additional Notes; and (m) Investments not otherwise permitted by clauses (a) through (l) above, not to exceed $10,000,000. "Permitted Lien" means: (a) Liens in favor of Agent securing the Obligations; (b) Liens arising by reason of any judgment, decree or order of any court for an amount and for a period not resulting in an Event of Default with respect thereto, so long as such Lien is being contested in good faith and is adequately bonded, and any appropriate legal proceedings that may have been duly initiated for the review of such judgment, decree or order shall not have been finally adversely terminated or the period within which such proceedings may be initiated shall not have expired; (c) security for the performance of bids, tenders, trade, contracts (other than contracts for the payment of borrowed money) or leases, surety and appeal bonds, performance and return-of-money bonds and other obligations of a like nature incurred in the ordinary course of business, consistent with industry practice and not in connection with the borrowing of money; (d) Liens for taxes, assessments or other governmental charges that do not cause an Event of Default hereunder and are either (i) not yet delinquent or (ii) the subject of a Permitted Protest; (e) Liens of carriers, warehousemen, mechanics, landlords, material men, suppliers, repairmen or other like Liens, in each case arising by operation of law in the ordinary course of business consistent with industry practices (other than Liens arising under ERISA) and not in connection with the borrowing of money if (i) the underlying obligations are not overdue for a period of more than 30 days or (ii) such Liens are the subject of a Permitted Protest; (f) easements, rights of way, zoning and similar restrictions and other similar encumbrances or title defects incurred in the ordinary course of business, and that, in the aggregate, do not materially detract from the value of the property subject thereto (as such property is used by Borrowers or a Restricted Subsidiary) or materially interfere with the ordinary conduct of the business of Borrowers or any of the Restricted Subsidiaries; (g) Liens arising from deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security legislation or otherwise arising from statutory or regulatory requirements of Borrowers or any of the Restricted Subsidiaries; (h) Liens securing Refinancing Indebtedness incurred in compliance with the terms hereof to refinance Indebtedness secured by Permitted Liens; provided, (i) such Liens do not extend to any additional property or assets; (ii) if the Liens securing the Indebtedness being refinanced were subordinated to or pari passu with the Obligations, such new Liens are subordinated to or pari passu with such Liens to the same extent, and any related subordination or intercreditor agreement is confirmed on terms reasonably satisfactory to Agent; and (iii) such 27 Liens are no more adverse to the interests of the Lenders than the Liens replaced or extended thereby; (i) Liens that secure Acquired Debt or Liens on property acquired by a Borrower or any Restricted Subsidiary in the ordinary course of business or in connection with a Permitted Investment; provided, that such Liens do not extend to or cover any other property or assets and were not put in place in anticipation of such acquisition; (j) any interest or title of a lessor under any operating lease; provided that such Liens do not extend to any property or assets which are not leased property subject to such operating lease; (k) Liens that secure Purchase Money Obligations and Capitalized Lease Obligations permitted to be incurred under this Agreement; provided that such Liens do not extend to or cover any property or assets other than those being acquired, leased or developed and property and assets which, immediately prior to the incurrence of such Purchase Money Obligations or Capitalized Lease Obligations, secured other Indebtedness of a Borrower and the Restricted Subsidiaries (to the extent such other Indebtedness and the Liens securing such other Indebtedness are permitted under this Agreement) to the lender of such Purchase Money Obligations or Capitalized Lease Obligations; (l) Liens in favor of the Indenture Trustee securing the Senior Note Documents; provided such Liens are subject to the Intercreditor Agreement at all times; (m) with respect to any vessel included in the Collateral, certain maritime liens, including liens for crew's wages and salvage; (n) Liens on deposit accounts or Cash Equivalents incurred in the ordinary course of business securing Hedging Obligations, which Hedging Obligations are otherwise permitted under this Agreement; (o) Liens existing on the Closing Date to the extent and in the manner such Liens are in effect on the Closing Date; (p) Liens on the Capital Stock of any Unrestricted Subsidiary securing any Indebtedness of such Unrestricted Subsidiary; (q) leases or subleases of Real Property (other than the Racino Project and the Ice Harbor Facility) granted to others that do not interfere in any material respect with the business of Borrowers or any of the Restricted Subsidiaries or materially detract from the value of the relative assets of Borrowers or any Restricted Subsidiary; (r) Liens securing reimbursement obligations with respect to commercial letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; and (s) Liens with respect to the Real Property Collateral that are exceptions to the commitments for title insurance issued in connection with the Mortgages, as accepted by Agent. 28 "Permitted Protest" means the right of any Borrower or any of its Subsidiaries, as applicable, to protest any Lien (other than any such Lien that secures the Obligations), taxes (other than payroll taxes or taxes that are the subject of a United States federal tax lien), or rental payment, provided that (a) a reserve with respect to such obligation is established on the Books in such amount as is required under GAAP, (b) any such protest is instituted promptly and prosecuted diligently by such Borrower or any of its Subsidiaries, as applicable, in good faith, and (c) Agent is satisfied that, while any such protest is pending, there will be no impairment of the enforceability, validity, or priority of any of the Agent's Liens. "Permitted Tax Distribution" in respect of Borrowers, means, with respect to any taxable year or portion thereof in which a Borrower is a Flow Through Entity, the sum of: (i) the product of (a) the excess of (1) all items of taxable income or gain (other than capital gain) of such Borrower for such year or portion thereof over (2) all items of taxable deduction or loss (other than capital loss) of such Borrower for such year or portion thereof, multiplied by (b) the Applicable Income Tax Rate, plus (ii) the product of (a) the net capital gain (i.e., net long-term capital gain over net short-term capital loss), if any, of such Borrower for such year or portion thereof, multiplied by (b) the Applicable Capital Gain Tax Rate, plus (iii) the product of (a) the net short-term capital gain (i.e., net short-term capital gain in excess of net long-term capital loss), if any, of such Borrower for such year or portion thereof, multiplied by (b) the Applicable Income Tax Rate, minus (iv) the aggregate Tax Loss Benefit Amount for such Borrower for such year or portion thereof; provided, that in no event shall the Applicable Income Tax Rate or the Applicable Capital Gain Tax Rate exceed the greater of (i) the greater of (a) the highest aggregate applicable effective marginal rate of Federal, state, and local income tax to which a corporation doing business in the State of California and (b) the highest aggregate applicable effective marginal rate of Federal, state, and local income tax to which a corporation doing business in the state of Louisiana, would be subject to in the relevant year of determination (as certified to Agent by a nationally recognized tax accounting firm) plus 5% and (ii) 60%. For purposes of calculating the amount of the Permitted Tax Distributions the items of taxable income, gain, deduction or loss (including capital gain or loss) of any Flow Through Entity of which such Borrower is treated for Federal income tax purposes as a member (but only for periods for which such Flow Through Entity is treated as a Flow Through Entity), which items of income, gain, deduction or loss are allocated to or otherwise treated as items of income, gain, deduction or loss of such Borrower for Federal income tax purposes, shall be included in determining the taxable income, gain, deduction or loss (including capital gain or loss) of such Borrower. Estimated tax distributions may be made within 30 days following March 15, May 15, August 15, and December 15 based upon an estimate of the excess of (x) the tax distributions that would be payable for the period beginning on January 1 of such year and ending on March 31, May 31, August 31, and December 31 if such period were a taxable year (computed as provided above) over (y) distributions attributable to all prior periods during such taxable year. The amount of the Permitted Tax Distribution for a taxable year shall be re-computed promptly after (i) the filing by the applicable Borrower and each Subsidiary of such Borrower that is treated as a Flow Through Entity of their respective annual income tax returns and (ii) an appropriate Federal or state taxing authority finally determines that the amount of the items of taxable income, gain, deduction, or loss of such Borrower or any such Subsidiary that is 29 treated as a Flow Through Entity for such taxable year or the aggregate Tax Loss Benefit Amount carried forward to such taxable year should be adjusted (each of clauses (i) and (ii) a "Tax Calculation Event"). To the extent that the Permitted Tax Distributions previously distributed in respect of any taxable year are either greater than (a "Tax Distribution Overage") or less than (a "Tax Distribution Shortfall") the Permitted Tax Distributions with respect to such taxable year, as determined by reference to the computation of the amount of the items of income, gain, deduction, or loss of such Borrower and each such Subsidiary in connection with a Tax Calculation Event, the amount of the estimated Permitted Tax Distributions that may be made on the estimated tax distribution date immediately following such Tax Calculation Event shall be reduced or increased as appropriate to the extent of the Tax Distribution Overage or the Tax Distribution Shortfall. To the extent that a Tax Distribution Overage remains after the estimated tax distribution date immediately following such Tax Calculation Event, the amount of the estimated Permitted Tax Distribution that may be made on the subsequent estimated tax distribution date shall be reduced to the extent of such Tax Distribution Overage. Prior to making any Permitted Tax Distributions, the applicable Borrower shall require each Equity Holder to agree that promptly after the second estimated tax distribution date following a Tax Calculation Event, such Equity Holder shall reimburse the applicable Borrower to the extent of its pro rata share (based on the portion of Permitted Tax Distributions distributed to such Equity Holder for the taxable year) of any remaining Tax Distribution Overage. "Person" means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof. "Personal Property Collateral" means all Borrower Collateral other than Real Property Collateral and the proceeds thereof constituting Real Property. "PGC Indenture" means that certain Indenture, dated as of July 15, 1999, among DJL, Peninsula Gaming Corporation, a Delaware corporation, and U.S. Bank National Association, as trustee. "PGP" means Peninsula Gaming Partners, LLC, a Delaware limited liability company, the direct parent and sole manager of Parent. "PGP Investors" means PGP Investors, LLC, a Delaware limited liability company. "Pledge Agreement" means a stock pledge agreement executed and delivered by (a) Parent in respect of the Capital Stock of Borrowers and OED Capital, and (b) Borrowers in respect of the Capital Stock of the Restricted Subsidiaries, in form and substance satisfactory to Agent. "Pro Rata Share" means, as of any date of determination: (a) with respect to a Lender's obligation to make Advances and receive payments of principal, interest, fees, costs, and expenses with respect thereto, (i) prior to the Revolver Commitments being terminated or reduced to zero, the percentage obtained by dividing 30 (y) such Lender's Revolver Commitment, by (z) the aggregate Revolver Commitments of all Lenders, and (ii) from and after the time that the Revolver Commitments have been terminated or reduced to zero, the percentage obtained by dividing (y) the aggregate outstanding principal amount of such Lender's Advances by (z) the aggregate outstanding principal amount of all Advances, (b) with respect to a Lender's obligation to participate in Letters of Credit, to reimburse Agent, and to receive payments of fees with respect thereto, (i) prior to the Revolver Commitments being terminated or reduced to zero, the percentage obtained by dividing (y) such Lender's Revolver Commitment, by (z) the aggregate Revolver Commitments of all Lenders, and (ii) from and after the time that the Revolver Commitments have been terminated or reduced to zero, the percentage obtained by dividing (y) the aggregate outstanding principal amount of such Lender's Advances by (z) the aggregate outstanding principal amount of all Advances, (c) with respect to a Lender's obligation to make the Term Loan and receive payments of interest, fees, and principal with respect thereto, (i) prior to the making of the Term Loan, the percentage obtained by dividing (y) such Lender's Term Loan Commitment, by (z) the aggregate amount of all Lenders' Term Loan Commitments, and (ii) from and after the making of the Term Loan, the percentage obtained by dividing (y) the principal amount of such Lender's portion of the Term Loan by (z) the principal amount of the Term Loan, and (d) with respect to all other matters as to a particular Lender (including the indemnification obligations arising under Section 16.7), the percentage obtained by dividing (i) such Lender's Revolver Commitment plus the outstanding principal amount of such Lender's portion of the Term Loan, by (ii) the aggregate amount of Revolver Commitments of all Lenders plus the outstanding principal amount of the Term Loan; provided, however, that in the event the Revolver Commitments have been terminated or reduced to zero, Pro Rata Share under this clause shall be the percentage obtained by dividing (A) the outstanding principal amount of such Lender's Advances plus such Lender's ratable portion of the Risk Participation Liability with respect to outstanding Letters of Credit plus the outstanding principal amount of such Lender's portion of the Term Loan, by (B) the outstanding principal amount of all Advances plus the aggregate amount of the Risk Participation Liability with respect to outstanding Letters of Credit plus the outstanding principal amount of the Term Loan. "Projections" means Borrowers' forecasted (a) balance sheets, (b) profit and loss statements, and (c) cash flow statements, all prepared on a consistent basis with Borrowers' historical financial statements, together with appropriate supporting details and a statement of underlying assumptions. "Purchase Money Obligations" means Indebtedness the proceeds of which are used solely by Borrowers and the Restricted Subsidiaries (and concurrently with the incurrence of such Indebtedness) to acquire or lease or improve, respectively, FF&E; provided, that (a) the principal amount of such Indebtedness does not exceed the costs (including sales and excise taxes, installation and delivery charges, capitalized interest and other direct fees, costs and expenses) of the FF&E purchased or leased with proceeds thereof and (b) such Indebtedness is secured only by the assets so financed and assets which, immediately prior to the incurrence of such Indebtedness, secured other Indebtedness of Borrowers and the Restricted Subsidiaries (to 31 the extent such other Indebtedness and the Liens securing such other Indebtedness are permitted under this Agreement) to the lender of such Indebtedness. "Racino Project" means the project to design, develop, construct, equip and operate that certain casino and race track to be located in Opelousas, St. Landry Parish, Louisiana. "Real Property" means any estates or interests in real property now owned or hereafter acquired by any Borrower, any Subsidiary of a Borrower or any Guarantor and the improvements thereto. "Real Property Collateral" means the parcel or parcels of Real Property identified on Schedule R-1, and any Real Property hereafter acquired by any Borrower or any Guarantor. "Record" means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form. "Refinance" has the meaning set forth in Section 7.1(k). "Refinancing Indebtedness" has the meaning set forth in Section 7.1(k). "Register" has the meaning set forth in Section 14.1(h). "Registered Loan" has the meaning set forth in Section 2.13. "Registered Note" has the meaning set forth in Section 2.13. "Related Business" means the gaming, entertainment and hotel businesses conducted (or proposed to be conducted) by Borrowers and their Restricted Subsidiaries as of the Closing Date and any and all other businesses that in the good faith judgment of the Managers of Borrowers are materially related or incidental businesses (including, without limitation, food and beverage distribution operations). "Remedial Action" means all actions taken to (a) clean up, remove, remediate, contain, treat, monitor, assess, evaluate, or in any way address Hazardous Materials in the indoor or outdoor environment, (b) prevent or minimize a release or threatened release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (c) perform any pre-remedial studies, investigations, or post-remedial operation and maintenance activities, or (d) conduct any other actions authorized by 42 USC ss. 9601. "Replacement Lender" has the meaning set forth in Section 15.2. "Report" has the meaning set forth in Section 16.17(a). "Required Lenders" means, at any time, (a) Agent, and (b) the Lenders whose Pro Rata Shares aggregate 51% of the Commitments, or if the Commitments have been terminated, 51% of the Obligations outstanding. 32 "Reserve Percentage" means on any day, for Agent, the maximum percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor Governmental Authority) for determining the reserve requirements (including any basic, supplemental, marginal, or emergency reserves) that are in effect on such date with respect to eurocurrency funding (currently referred to as "eurocurrency liabilities") of Agent, but so long as Agent is not required or directed under applicable regulations to maintain such reserves, the Reserve Percentage shall be zero. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Payment" means: (a) any dividend or other distribution declared or paid on account of any Equity Interests of a Borrower or any of the Subsidiaries, any payment of any management fees to any Person, or any other payment to any Affiliate of a Borrower or any Excluded Person or Affiliate thereof (other than, in each case, (i) dividends or distributions payable in Equity Interests (other than Disqualified Capital Stock) of such Borrower or (ii) amounts payable to the applicable Borrower or any Restricted Subsidiary); (b) any payment to purchase, redeem or otherwise acquire or retire for value any Equity Interest of a Borrower, any Subsidiary or any other Affiliate of such Borrower (other than any such Equity Interest owned by the applicable Borrower or any Restricted Subsidiary); or (c) any Restricted Investment. "Restricted Subsidiaries" means any Subsidiary which at the time of determination is not an Unrestricted Subsidiary. "Return from Unrestricted Subsidiaries" has the meaning set forth in the Indenture. "Revolver Commitment" means, with respect to each Lender, its Revolver Commitment, and, with respect to all Lenders, their Revolver Commitments, in each case as such Dollar amounts are set forth beside such Lender's name under the applicable heading on Schedule C-1 or in the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 14.1. "Revolver Usage" means, as of any date of determination, the sum of (a) the then extant amount of outstanding Advances, plus (b) the then extant amount of the Letter of Credit Usage. "Revolving Lender" means a Lender with a Revolver Commitment. "Risk Participation Liability" means, as to each Letter of Credit, all reimbursement obligations of Borrowers to Agent with respect to an L/C Undertaking, consisting of (a) the amount available to be drawn or which may become available to be drawn, (b) all amounts that have been paid by Agent to the Underlying Issuer to the extent not reimbursed by 33 Borrowers, whether by the making of an Advance or otherwise, and (c) all accrued and unpaid interest, fees, and expenses payable with respect thereto. "S&P" means Standard & Poor's Rating Service, a division of The McGraw-Hill Companies, Inc., a New York corporation, and its successors. "SEC" means the United States Securities and Exchange Commission and any successor thereto. "Securities Account" means a "securities account" as that term is defined in the Code. "Seller Preferred" means the $4,000,000 face amount of DJL's redeemable preferred membership interests issued on July 15, 1999. "Senior Note Documents" means, collectively, the Indenture, the Notes, and the Security Agreements (as such term is defined in the Indenture), in each case as such document may be amended, restated, supplemented or modified from time to time with the consent of Agent. "Settlement" has the meaning set forth in Section 2.3(f)(i). "Settlement Date" has the meaning set forth in Section 2.3(f)(i). "Solvent" means, with respect to any Person on a particular date, that such Person is not insolvent (as such term is defined in the Uniform Fraudulent Transfer Act). "Subordination of Mortgage" means those certain subordination agreements relating to the Mortgages (as such term is defined in the Indenture) dated as of even date herewith and executed by Indenture Trustee in favor of Agent, in form and substance satisfactory to Agent. "Subordination of Preferred Fleet Mortgage" means that Subordination of Preferred Fleet Mortgage in respect of the Diamond Jo Vessels dated as of the date hereof and executed by the Indenture Trustee in favor of Agent, in form and substance satisfactory to Agent. "Subsidiary" of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the shares of Capital Stock having ordinary voting power to elect a majority of the board of directors (or appoint other comparable managers) of such corporation, partnership, limited liability company, or other entity. "Subsidiary Guaranty" means each guaranty, in form and substance satisfactory to Agent, executed by the Restricted Subsidiaries in favor of Agent. "Swing Lender" means Wells Fargo Foothill or any other Revolving Lender that, at the request of a Borrower and with the consent of Agent agrees, in such Revolving Lender's sole discretion, to become the Swing Lender under Section 2.3(d). 34 "Swing Loan" has the meaning set forth in Section 2.3(d)(i). "Taxes" has the meaning set forth in Section 16.11(e). "Tax Loss Benefit Amount" means with respect to any taxable year, the amount by which the Permitted Tax Distributions would be reduced were a net operating loss or net capital loss from a prior taxable year of such Borrower ending subsequent to the Closing Date available to be carried forward to the applicable taxable year; provided that for such purpose the amount of any such net operating loss or net capital loss shall be used only once and in each case shall be carried forward to the next succeeding taxable year until so used. For purposes of calculating the Tax Loss Benefit Amount, the proportionate part of the items of taxable income, gain, deduction, or loss (including capital gain or loss) of any Subsidiary that is a Flow Through Entity for a taxable year of such Subsidiary ending subsequent to the Closing Date shall be included in determining the amount of net operating loss or net capital loss of the applicable Borrower. "Term Loan" has the meaning set forth in Section 2.2. "Term Loan Amount" means $14,666,666.68. "Term Loan Commitment" means, with respect to each Lender, its Term Loan Commitment, and, with respect to all Lenders, their Term Loan Commitments, in each case as such Dollar amounts are set forth beside such Lender's name under the applicable heading on Schedule C-1 or in the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 14.1. "Total Commitment" means, with respect to each Lender, its Total Commitment, and, with respect to all Lenders, their Total Commitments, in each case as such Dollar amounts are set forth beside such Lender's name under the applicable heading on Schedule C-1 attached hereto or on the signature page of the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 14.1. "Trademark Security Agreement" means a trademark security agreement executed and delivered by Borrowers and Agent, the form and substance of which is satisfactory to Agent. "Underlying Issuer" means a third Person which is the beneficiary of an L/C Undertaking and which has issued a letter of credit at the request of Agent for the benefit of Borrowers. "Underlying Letter of Credit" means a letter of credit that has been issued by an Underlying Issuer. "Unrestricted Subsidiary" means any Subsidiary of a Borrower that, at or prior to the time of determination, shall have been designated by the Managers of Borrowers as an Unrestricted Subsidiary and each subsidiary of such Subsidiary; provided, that such Subsidiary or any of its subsidiaries does not hold any Indebtedness or Capital Stock of, or any Lien on any assets of, Borrowers or any Restricted Subsidiary. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Agreement and any Indebtedness of 35 such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary as of such date. The Managers of Borrowers may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (a) such Indebtedness is permitted under the Interest Coverage Ratio test set forth in Section 7.1 hereof calculated on a pro forma basis as if such designation had occurred at the beginning of the 4-quarter reference period, and (b) no Default or Event of Default would be in existence following such designation. Borrowers shall be deemed to make an Investment in each Subsidiary designated as an Unrestricted Subsidiary immediately following such designation in an amount equal to the Investment in such Subsidiary and its subsidiaries immediately prior to such designation. Any such designation by the Managers of Borrowers shall be evidenced to Agent by filing with Agent a certified copy of the resolution of the Managers giving effect to such designation and an officers' certificate certifying that such designation complies with the foregoing conditions and is permitted by Section 7.1 hereof. "Upper Tier Equity Holder" means, in the case of any Flow Through Entity, the Equity Holder of which is, in turn, a Flow Through Entity, the Person that is ultimately subject to tax on a net income basis on the items of taxable income, gain, deduction, and loss of Borrowers and the Subsidiaries that are Flow Through Entities. "Voidable Transfer" has the meaning set forth in Section 17.7. "Voting Stock" means Stock of any Person which at the time are entitled to vote in the election of, as applicable, directors, Managers, members or partners generally of such Person. "Warner Land" means the 93 acres of land adjacent to the Racino Project acquired by OED from Bart C. Warner pursuant to the Sale with Mortgage, dated October 24, 2003. "Wells Fargo" means Wells Fargo Bank, National Association, a national banking association. "Wells Fargo Foothill" means Wells Fargo Foothill, Inc., a California corporation, and its successors and assigns. "Wholly Owned Subsidiary" means, with respect to any Person, a Subsidiary of such Person all the Capital Stock of which (other than directors' qualifying shares) is owned directly or indirectly by such Person; provided, that with respect to Borrowers, the term Wholly Owned Subsidiary shall exclude Unrestricted Subsidiaries. 1.2 ACCOUNTING TERMS. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. When used herein, the term "financial statements" shall include the notes and schedules thereto. Whenever the term "Parent" is used in respect of a financial covenant or a related definition, it shall be understood to mean Parent and its Subsidiaries on a consolidated basis unless the context clearly requires otherwise. 1.3 CODE. Any terms used in this Agreement that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein. 36 1.4 CONSTRUCTION. Unless the context of this Agreement or any other Loan Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document, as the case may be. Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement or in the other Loan Documents to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). Any reference herein to any Person shall be construed to include such Person's successors and assigns. Any requirement of a writing contained herein or in the other Loan Documents shall be satisfied by the transmission of a Record and any Record transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein. 1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached to this Agreement shall be deemed incorporated herein by reference. 2. LOAN AND TERMS OF PAYMENT. 2.1 ADVANCES. (a) Subject to the terms and conditions of this Agreement, and during the term of this Agreement, each Lender, severally and not jointly, in accordance with such Lender's Revolver Commitment, agrees to make advances ("Advances") to Borrowers in an amount at any one time outstanding not to exceed an amount equal to the lesser of (i) the Maximum Revolver Amount, less the Letter of Credit Usage or (ii) the Borrowing Base less the Letter of Credit Usage. For purposes of this Agreement, "Borrowing Base", as of any date of determination, shall mean the result of (y) the lesser of (i) the product of Borrowers' Combined EBITDA for the 12 month period ending as of the last day of the most recent month for which the Monthly Financial Report has been delivered pursuant to Section 6.3(a) times 150%, or (ii) the product of Borrowers' Annualized Quarterly Combined EBITDA as of the last day of the most recent month for which the Monthly Financial Report has been delivered pursuant to Section 6.3(a) times 150%, minus (z) the aggregate amount of reserves, if any, established by Agent under Section 2.1(b). (b) Anything to the contrary in this Section 2.1 notwithstanding, Agent shall have the right to establish reserves in such amounts, and with respect to such matters, as Agent in its Permitted Discretion shall deem necessary or appropriate, against the Borrowing Base, including reserves with respect to (i) sums that Borrowers are required to pay (such as taxes, assessments, insurance premiums, or, in the case of leased assets, rents or other amounts payable under such leases) and has failed to pay under any Section of this Agreement or any other Loan Document, and (ii) amounts owing by Borrowers or their Subsidiaries to any Person to the extent secured by a Lien on, or trust over, any of the Collateral (other than any existing Permitted Lien 37 set forth on Schedule P-1 which is specifically identified thereon as entitled to have priority over the Agent's Liens), which Lien or trust, in the Permitted Discretion of Agent likely would have a priority superior to the Agent's Liens (such as Liens or trusts in favor of landlords, warehousemen, carriers, mechanics, (including, without limitation, any Liens in favor of mechanics or subcontractors arising in connection with the Racino Project), materialmen, laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes where given priority under applicable law) in and to such item of the Collateral. (c) The Lenders with Revolver Commitments shall not have any obligation to make additional Advances hereunder to the extent such additional Advances would cause the Revolver Usage to exceed the Maximum Revolver Amount. (d) Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement. 2.2 TERM LOAN. Subject to the terms and conditions of this Agreement, on the Closing Date each Lender with a Term Loan Commitment agrees, severally and not jointly, in accordance with such Lender's Term Loan Commitment, to make term loans (collectively, the "Term Loan") to OED in an amount equal to such Lender's Pro Rata Share of the Term Loan Amount. The proceeds of the Term Loan shall be used to refinance all outstanding obligations of OED and OED Capital under the Equipment Loan Agreement. The Term Loan shall be repayable in equal monthly installments of principal each in the amount of $333,333.33, commencing on July 1, 2004, and continuing on the first day of each month thereafter until the unpaid balance of the Term Loan is paid in full. The outstanding principal balance and all accrued and unpaid interest under the Term Loan shall also be due and payable in full upon the Maturity Date or any earlier termination of this Agreement, whether by its terms, by prepayment, by acceleration, or otherwise. 2.3 BORROWING PROCEDURES AND SETTLEMENTS. (a) PROCEDURE FOR BORROWING. Each Borrowing (other than the funding of the Term Loan on the Closing Date) shall be made by a written request by an Authorized Person delivered to Agent (which notice must be received by Agent no later than 10:00 a.m. (California time) 5 Business Days prior to the date that is the requested Funding Date specifying (i) the amount of such Borrowing and (ii) the requested Funding Date, which shall be a Business Day; provided, however, that in the case of a request for Swing Loan in an amount of $1,000,000, or less, such notice will be timely received if it is received by Agent no later than 10:00 a.m. (California time) on the Business Day that is the requested Funding Date). At Agent's election, in lieu of delivering the above-described request in writing, any Authorized Person may give Agent telephonic notice of such request by the required time, with such telephonic notice to be confirmed in writing within 24 hours of the giving of such notice. (b) AGENT'S ELECTION. Promptly after receipt of a request for a Borrowing pursuant to Section 2.3(a), Agent shall elect, in its discretion, (i) to have the terms of Section 2.3(c) apply to such requested Borrowing, or (ii) if the Borrowing is for an Advance, to request Swing Lender to make a Swing Loan pursuant to the terms of Section 2.3(d) in the amount of the requested Borrowing; provided, however, that if Swing Lender declines in its sole discretion to 38 make a Swing Loan pursuant to Section 2.3(d), Agent shall elect to have the terms of Section 2.3(c) apply to such requested Borrowing. (c) MAKING OF LOANS. (i) In the event that Agent shall elect to have the terms of this Section 2.3(c) apply to a requested Borrowing as described in Section 2.3(b), then, promptly after receipt of a request for a Borrowing pursuant to Section 2.3(a) (other than the funding of the Term Loan on the Closing Date), Agent shall notify the Lenders, not later than 1:00 p.m. (California time) on the Business Day immediately preceding the Funding Date applicable thereto, by telecopy, telephone, or other similar form of transmission, of the requested Borrowing. Each Lender shall make the amount of such Lender's Pro Rata Share of the requested Borrowing available to Agent in immediately available funds, to Agent's Account, not later than 10:00 a.m. (California time) on the Funding Date applicable thereto. After Agent's receipt of the proceeds of such Advances (or the Term Loan, as applicable), upon satisfaction of the applicable conditions precedent set forth in Section 3 hereof, Agent shall make the proceeds thereof available to Borrowers on the applicable Funding Date by transferring immediately available funds equal to such proceeds received by Agent to the applicable Borrower's Designated Account; provided, however, that, subject to the provisions of Section 2.3(i), Agent shall not request any Lender to make, and no Lender shall have the obligation to make, any Advance (or its portion of the Term Loan, as applicable) if Agent shall have actual knowledge that one or more of the applicable conditions precedent set forth in Section 3 will not be satisfied on the requested Funding Date for the applicable Borrowing unless such condition has been waived. (ii) Unless Agent receives notice from a Lender on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least 1 Business Day prior to the date of such Borrowing, that such Lender will not make available as and when required hereunder to Agent for the account of Borrowers the amount of that Lender's Pro Rata Share of the Borrowing, Agent may assume that each Lender has made or will make such amount available to Agent in immediately available funds on the Funding Date and Agent may (but shall not be so required), in reliance upon such assumption, make available to Borrowers on such date a corresponding amount. If and to the extent any Lender shall not have made its full amount available to Agent in immediately available funds and Agent in such circumstances has made available to Borrowers such amount, that Lender shall on the Business Day following such Funding Date make such amount available to Agent, together with interest at the Defaulting Lender Rate for each day during such period. A notice submitted by Agent to any Lender with respect to amounts owing under this subsection shall be conclusive, absent manifest error. If such amount is so made available, such payment to Agent shall constitute such Lender's Advance (or portion of the Term Loan, as applicable) on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to Agent on the Business Day following the Funding Date, Agent will notify Borrowers of such failure to fund and, upon demand by Agent, Borrowers 39 shall pay such amount to Agent for Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Advances (or portion of the Term Loan, as applicable) composing such Borrowing. The failure of any Lender to make any Advance (or portion of the Term Loan, as applicable) on any Funding Date shall not relieve any other Lender of any obligation hereunder to make an Advance (or portion of the Term Loan, as applicable) on such Funding Date, but no Lender shall be responsible for the failure of any other Lender to make the Advance (or portion of the Term Loan, as applicable) to be made by such other Lender on any Funding Date. (iii) Agent shall not be obligated to transfer to a Defaulting Lender any payments made by Borrowers to Agent for the Defaulting Lender's benefit, and, in the absence of such transfer to the Defaulting Lender, Agent shall transfer any such payments to each other non-Defaulting Lender member of the Lender Group ratably in accordance with their Commitments (but only to the extent that such Defaulting Lender's Advance was funded by the other members of the Lender Group) or, if so directed by any Borrower and if no Default or Event of Default had occurred and is continuing (and to the extent such Defaulting Lender's Advance was not funded by the Lender Group), retain same to be re-advanced to Borrowers as if such Defaulting Lender had made Advances to Borrowers. Subject to the foregoing, Agent may hold and, in its Permitted Discretion, re-lend to Borrowers for the account of such Defaulting Lender the amount of all such payments received and retained by Agent for the account of such Defaulting Lender. Solely for the purposes of voting or consenting to matters with respect to the Loan Documents, such Defaulting Lender shall be deemed not to be a "Lender" and such Lender's Commitment shall be deemed to be zero. This Section shall remain effective with respect to such Lender until (x) the Obligations under this Agreement shall have been declared or shall have become immediately due and payable, (y) the non-Defaulting Lenders, Agent, and Borrowers shall have waived such Defaulting Lender's default in writing, or (z) the Defaulting Lender makes its Pro Rata Share of the applicable Advance and pays to Agent all amounts owing by Defaulting Lender in respect thereof. The operation of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, to relieve or excuse the performance by such Defaulting Lender or any other Lender of its duties and obligations hereunder, or to relieve or excuse the performance by Borrowers of their duties and obligations hereunder to Agent or to the Lenders other than such Defaulting Lender. Any such failure to fund by any Defaulting Lender shall constitute a material breach by such Defaulting Lender of this Agreement and shall entitle Borrowers at their option, upon written notice to Agent, to arrange for a substitute Lender to assume the Commitment of such Defaulting Lender, such substitute Lender to be acceptable to Agent. In connection with the arrangement of such a substitute Lender, the Defaulting Lender shall have no right to refuse to be replaced hereunder, and agrees to execute and deliver a completed form of Assignment and Acceptance in favor of the substitute Lender (and agrees that it shall be deemed to have executed and delivered such document if it fails to do so) subject only to being repaid its share of the outstanding Obligations (including an assumption of 40 its Pro Rata Share of the Risk Participation Liability) without any premium or penalty of any kind whatsoever without any premium or penalty of any kind whatsoever; provided further, however, that any such assumption of the Commitment of such Defaulting Lender shall not be deemed to constitute a waiver of any of the Lender Group's or Borrowers' rights or remedies against any such Defaulting Lender arising out of or in relation to such failure to fund. (d) MAKING OF SWING LOANS. (i) In the event Agent shall elect, with the consent of Swing Lender, as a Lender, to have the terms of this Section 2.3(d) apply to a requested Borrowing as described in Section 2.3(b), Swing Lender as a Lender shall make such Advance in the amount of such Borrowing (any such Advance made solely by Swing Lender as a Lender pursuant to this Section 2.3(d) being referred to as a "Swing Loan" and such Advances being referred to collectively as "Swing Loans") available to Borrowers on the Funding Date applicable thereto by transferring immediately available funds to the applicable Borrower's Designated Account; provided that, notwithstanding anything to the contrary contained in this Section 2.3(d), the aggregate principal amount of Swing Loans outstanding at any one time shall not exceed $5,000,000. Each Swing Loan shall be deemed to be an Advance hereunder and shall be subject to all the terms and conditions applicable to other Advances, except that no such Swing Loan shall be eligible to be a LIBOR Rate Loan and all payments on any Swing Loan shall be payable to Swing Lender as a Lender solely for its own account (and for the account of the holder of any participation interest with respect to such Swing Loan). Subject to the provisions of Section 2.3(i), Agent shall not request Swing Lender as a Lender to make, and Swing Lender as a Lender shall not make, any Swing Loan if Agent has actual knowledge that one or more of the applicable conditions precedent set forth in Section 3 will not be satisfied on the requested Funding Date for the applicable Borrowing unless such condition has been waived. Swing Lender as a Lender shall not otherwise be required to determine whether the applicable conditions precedent set forth in Section 3 have been satisfied on the Funding Date applicable thereto prior to making, in its sole discretion, any Swing Loan. (ii) The Swing Loans shall be secured by the Agent's Liens, constitute Obligations hereunder, and bear interest at the rate applicable from time to time to Advances that are Base Rate Loans. (e) AGENT ADVANCES. (i) Agent hereby is authorized by Borrowers and the Lenders, from time to time in Agent's sole discretion, (1) after the occurrence and during the continuance of a Default or an Event of Default, or (2) at any time that any of the other applicable conditions precedent set forth in Section 3 have not been satisfied, to make Advances to Borrowers on behalf of the Lenders that Agent, in its Permitted Discretion deems necessary or desirable (A) to preserve or protect the Collateral, or any portion thereof, (B) to enhance the likelihood of repayment of the Obligations, or (C) to pay any other amount chargeable to Borrowers 41 pursuant to the terms of this Agreement, including Lender Group Expenses and the costs, fees, and expenses described in Section 10 (any of the Advances described in this Section 2.3(e) shall be referred to as "Agent Advances"); provided, that notwithstanding anything to the contrary contained in this Section 2.3(e), the aggregate principal amount of Agent Advances outstanding at any one time shall not exceed $2,000,000. Each Agent Advance is an Advance hereunder and shall be subject to all the terms and conditions applicable to other Advances, except that all payments thereon shall be payable to Agent solely for its own account (and for the account of the holder of any participation interest with respect to such Agent Advance). (ii) The Agent Advances shall be repayable on demand and secured by the Agent's Liens granted to Agent under the Loan Documents, shall constitute Advances and Obligations hereunder, and shall bear interest at the rate applicable from time to time to Advances. (f) SETTLEMENT. It is agreed that each Lender's funded portion of the Advances is intended by the Revolving Lenders to equal, at all times, such Lender's Pro Rata Share of the outstanding Advances. Such agreement notwithstanding, Agent, Swing Lender, and the Revolving Lenders agree (which agreement shall not be for the benefit of or enforceable by Borrowers) that in order to facilitate the administration of this Agreement and the other Loan Documents, settlement among them as to the Advances, the Swing Loans, and the Agent Advances shall take place on a periodic basis in accordance with the following provisions: (i) Agent shall request settlement ("Settlement") with the Revolving Lenders on a weekly basis, or on a more frequent basis if so determined by Agent, (1) on behalf of Swing Lender, with respect to the outstanding Swing Loans, (2) for itself, with respect to each Agent Advance, and (3) with respect to Collections of Borrowers or their Subsidiaries received, as to each by notifying the Revolving Lenders by telecopy, telephone, or other similar form of transmission, of such requested Settlement, no later than 1:00 p.m. (California time) on the Business Day immediately prior to the date of such requested Settlement (the date of such requested Settlement being the "Settlement Date"). Such notice of a Settlement Date shall include a summary statement of the amount of outstanding Advances, Swing Loans, and Agent Advances for the period since the prior Settlement Date. Subject to the terms and conditions contained herein (including Section 2.3(c)(iii)): (y) if a Revolving Lender's balance of the Advances (including Swing Loans and Agent Advances) exceeds such Revolving Lender's Pro Rata Share of the Advances (including Swing Loans and Agent Advances) as of a Settlement Date, then Agent shall, by no later than 12:00 p.m. (California time) on the Settlement Date, transfer in immediately available funds to the account of such Revolving Lender as such Revolving Lender may designate, an amount such that each such Revolving Lender shall, upon receipt of such amount, have as of the Settlement Date, its Pro Rata Share of the Advances (including Swing Loans and Agent Advances), and (z) if a Revolving Lender's balance of the Advances (including Swing Loans and Agent Advances) is less than such Revolving Lender's Pro Rata Share of the Advances (including Swing Loans and Agent Advances) as of a Settlement Date, such Revolving Lender shall no later than 42 12:00 p.m. (California time) on the Settlement Date transfer in immediately available funds to the Agent's Account, an amount such that each such Revolving Lender shall, upon transfer of such amount, have as of the Settlement Date, its Pro Rata Share of the Advances (including Swing Loans and Agent Advances). Such amounts made available to Agent under clause (z) of the immediately preceding sentence shall be applied against the amounts of the applicable Swing Loans or Agent Advances and, together with the portion of such Swing Loans or Agent Advances representing Swing Lender's Pro Rata Share thereof, shall constitute Advances of such Revolving Lenders. If any such amount is not made available to Agent by any Revolving Lender on the Settlement Date applicable thereto to the extent required by the terms hereof, Agent shall be entitled to recover for its account such amount on demand from such Revolving Lender together with interest thereon at the Defaulting Revolving Lender Rate. (ii) In determining whether a Revolving Lender's balance of the Advances, Swing Loans and Agent Advances is less than, equal to, or greater than such Revolving Lender's Pro Rata Share of the Advances, Swing Loans and Agent Advances as of a Settlement Date, Agent shall, as part of the relevant Settlement, apply to such balance the portion of payments actually received in good funds by Agent with respect to principal, interest, fees payable by Borrowers and allocable to the Revolving Lenders hereunder, and proceeds of Collateral. To the extent that a net amount is owed to any such Revolving Lender after such application, such net amount shall be distributed by Agent to that Revolving Lender as part of such next Settlement. (iii) Between Settlement Dates, Agent, to the extent no Agent Advances or Swing Loans are outstanding, may pay over to Swing Lender any payments received by Agent, that, in accordance with the terms of this Agreement would be applied to the reduction of the Advances, for application to Swing Lender's Pro Rata Share of the Advances. If, as of any Settlement Date, Collections of Borrowers or their Subsidiaries received since the then immediately preceding Settlement Date have been applied to Swing Lender's Pro Rata Share of the Advances other than to Swing Loans, as provided for in the previous sentence, Swing Lender shall pay to Agent for the accounts of the Revolving Lenders, and Agent shall pay to the Revolving Lenders, to be applied to the outstanding Advances of such Revolving Lenders, an amount such that each Revolving Lender shall, upon receipt of such amount, have, as of such Settlement Date, its Pro Rata Share of the Advances. During the period between Settlement Dates, Swing Lender with respect to Swing Loans, Agent with respect to Agent Advances, and each Revolving Lender (subject to the effect of letter agreements between Agent and individual Revolving Lenders) with respect to the Advances other than Swing Loans and Agent Advances, shall be entitled to interest at the applicable rate or rates payable under this Agreement on the daily amount of funds employed by Swing Lender, Agent, or the Revolving Lenders, as applicable. (g) NOTATION. Agent shall record on its books the principal amount of the Advances (or portion of the Term Loan, as applicable) owing to each Lender, including the 43 Swing Loans owing to Swing Lender, and Agent Advances owing to Agent, and the interests therein of each Lender, from time to time, such records constituting conclusive evidence, absent manifest error, of the accuracy of the information contained therein. In addition, each Lender is authorized, at such Lender's option, to note the date and amount of each payment or prepayment of principal of such Lender's Advances or portion of the Term Loan in its books and records, including computer records, such books and records constituting conclusive evidence, absent manifest error, of the accuracy of the information contained therein. (h) LENDERS' FAILURE TO PERFORM. All Advances (other than Swing Loans and Agent Advances) and the Term Loan shall be made by the Lenders contemporaneously and in accordance with their Pro Rata Shares. It is understood that (i) no Lender shall be responsible for any failure by any other Lender to perform its obligation to make any Advance (or the Term Loan or other extension of credit) hereunder, nor shall any Commitment of any Lender be increased or decreased as a result of any failure by any other Lender to perform its obligations hereunder, and (ii) no failure by any Lender to perform its obligations hereunder shall excuse any other Lender from its obligations hereunder. (i) OPTIONAL OVERADVANCES. Any contrary provision of this Agreement notwithstanding, the Lenders hereby authorize Agent or Swing Lender, as applicable, and Agent or Swing Lender, as applicable, may, but is not obligated to, knowingly and intentionally, continue to make Advances (including Swing Loans) to Borrowers notwithstanding that an Overadvance exists or thereby would be created, so long as (i) after giving effect to such Advances, the outstanding Revolver Usage does not exceed the Borrowing Base by more than the lesser of (A) 10% of the Borrowing Base and (B) $2,000,000, (ii) after giving effect to such Advances, the outstanding Revolver Usage (except for and excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) does not exceed the Maximum Revolver Amount, and (iii) at the time of the making of any such Advance, Agent does not believe, in good faith, that the Overadvance created by such Advance will be outstanding for more than 90 days. The foregoing provisions are for the exclusive benefit of Agent, Swing Lender, and the Lenders and are not intended to benefit Borrowers in any way. The Advances and Swing Loans, as applicable, that are made pursuant to this Section 2.3(i) shall be subject to the same terms and conditions as any other Advance or Swing Loan, as applicable, except that they shall not be eligible for the LIBOR Option and the rate of interest applicable thereto shall be the rate applicable to Advances that are Base Rate Loans under Section 2.6(c) hereof without regard to the presence or absence of a Default or Event of Default. (i) In the event Agent obtains actual knowledge that the Revolver Usage exceeds the amounts permitted by the preceding paragraph, regardless of the amount of, or reason for, such excess, Agent shall notify the Lenders as soon as practicable (and prior to making any (or any additional) intentional Overadvances (except for and excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) unless Agent determines that prior notice would result in imminent harm to the Collateral or its value), and the Revolving Lenders thereupon shall, together with Agent, jointly determine the terms of arrangements that shall be implemented with Borrowers intended to reduce, within a reasonable time, the outstanding principal amount of the Advances to Borrowers to an amount permitted by the preceding paragraph. In the event Agent or any Lender disagrees over the terms of reduction or repayment 44 of any Overadvance, the terms of reduction or repayment thereof shall be implemented according to the determination of the Required Lenders. (ii) Each Revolving Lender shall be obligated to settle with Agent as provided in Section 2.3(f) for the amount of such Revolving Lender's Pro Rata Share of any unintentional Overadvances by Agent reported to such Revolving Lender, any intentional Overadvances made as permitted under this Section 2.3(i), and any Overadvances resulting from the charging to the Loan Account of interest, fees, or Lender Group Expenses. 2.4 PAYMENTS. (a) PAYMENTS BY BORROWERS. (i) Except as otherwise expressly provided herein, all payments by Borrowers shall be made to Agent's Account for the account of the Lender Group and shall be made in immediately available funds, no later than 11:00 a.m. (California time) on the date specified herein. Any payment received by Agent later than 11:00 a.m. (California time), shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue until such following Business Day. (ii) Unless Agent receives notice from any Borrower prior to the date on which any payment is due to the Lenders that Borrowers will not make such payment in full as and when required, Agent may assume that Borrowers have made (or will make) such payment in full to Agent on such date in immediately available funds and Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent Borrowers do not make such payment in full to Agent on the date when due, each Lender severally shall repay to Agent on demand such amount distributed to such Lender, together with interest thereon at the Defaulting Lender Rate for each day from the date such amount is distributed to such Lender until the date repaid. (b) APPORTIONMENT, APPLICATION AND REVERSAL OF PAYMENTS. (i) Except as otherwise provided with respect to Defaulting Lenders and except as otherwise provided in the Loan Documents (and letter agreements between Agent and individual Lenders), aggregate principal and interest payments shall be apportioned ratably among the Lenders (according to the unpaid principal balance of the Obligations to which such payments relate held by each Lender, after giving effect to any letter agreements between Agent and individual Lenders) and payments of fees and expenses (other than fees or expenses that are for Agent's separate account), shall be apportioned ratably among the Lenders having a Pro Rata Share of the type of Commitment or Obligation to which a particular fee relates. All payments shall be remitted to Agent and all such payments (other than payments received while no Default or Event of Default has occurred and is continuing and which relate to the payment of principal or interest 45 of specific Obligations or which relate to the payment of specific fees), and, subject to the last sentence of this Section 2.4(b)(i), all proceeds of Collateral or the FF&E Letter of Credit received by Agent, shall be applied as follows: (A) first, to pay any Lender Group Expenses then due to Agent under the Loan Documents, until paid in full, (B) second, to pay any Lender Group Expenses then due to the Lenders under the Loan Documents, on a ratable basis, until paid in full, (C) third, to pay any fees then due to Agent (for its separate accounts, after giving effect to any letter agreements between Agent and individual Lenders)under the Loan Documents until paid in full, (D) fourth, to pay any fees then due to any or all of the Lenders (after giving effect to any letter agreements between Agent and individual Lenders) under the Loan Documents, on a ratable basis, until paid in full, (E) fifth, to pay interest due in respect of all Agent Advances, until paid in full, (F) sixth, ratably to pay interest due in respect of the Advances (other than Agent Advances), the Swing Loans, and the Term Loan until paid in full, (G) seventh, to pay the principal of all Agent Advances until paid in full, (H) eighth, ratably to pay all principal amounts then due and payable (other than as a result of an acceleration thereof) with respect to the Term Loan until paid in full, (I) ninth, to pay the principal of all Swing Loans until paid in full, (J) tenth, so long as no Event of Default has occurred and is continuing, to pay principal of all Advances until paid in full, (K) eleventh, if an Event of Default has occurred and is continuing, ratably (i) to pay the principal of all Advances until paid in full, (ii) to pay the outstanding principal balance of the Term Loan (in the inverse order of the maturity of the installments due thereunder) until the Term Loan is paid in full and (iii) to Agent, to be held by Agent, for the ratable benefit of Agent and those Lenders having a Revolver Commitment, as cash collateral in an amount up to 105% of the then extant Letter of Credit Usage until paid in full, (L) twelfth, if an Event of Default has occurred and is continuing, to pay any other Obligations, and 46 (M) thirteenth, to Borrowers (to be wired to the Designated Account) or such other Person entitled thereto under applicable law. Notwithstanding the foregoing, (x) proceeds of FF&E Collateral and the FF&E Letter of Credit shall be applied first to repay the FF&E Obligations and then to repay the principal of or interest on any Advances or any Letter of Credit reimbursement obligations, and (y) proceeds of Collateral (other than the FF&E Collateral and the FF&E Letter of Credit) shall not be used to repay principal of or interest on the Term Loan. (ii) In each instance, so long as no Default or Event of Default has occurred and is continuing, this Section 2.4(b) shall not be deemed to apply to any payment by Borrowers specified by Borrowers to be for the payment of specific Obligations then due and payable (or prepayable) under any provision of this Agreement. (iii) For purposes of the foregoing, "paid in full" means payment of all amounts owing under the Loan Documents according to the terms thereof, including loan fees, service fees, professional fees, interest (and specifically including interest accrued after the commencement of any Insolvency Proceeding), default interest, interest on interest, and expense reimbursements, whether or not the same would be or is allowed or disallowed in whole or in part in any Insolvency Proceeding. (iv) In the event of a direct conflict between the priority provisions of this Section 2.4 and other provisions contained in any other Loan Document, it is the intention of the parties hereto that such priority provisions in such documents shall be read together and construed, to the fullest extent possible, to be in concert with each other. In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this Section 2.4 shall control and govern. 2.5 OVERADVANCES. If, at any time or for any reason, the amount of Obligations (other than the FF&E Obligations) owed by Borrowers to the Lender Group pursuant to Sections 2.1 and 2.12 is greater than either the Dollar or percentage limitations set forth in Sections 2.1 or 2.12 (an "Overadvance"), Borrowers immediately shall pay to Agent, in cash, the amount of such excess, which amount shall be used by Agent to reduce the Obligations (other than the FF&E Obligations) in accordance with the priorities set forth in Section 2.4(b). In addition, (a) Borrowers hereby promise to pay the Obligations (including principal, interest, fees, costs, and expenses, but excluding the FF&E Obligations) in Dollars in full to Agent as and when due and payable under the terms of this Agreement and the other Loan Documents and (b) OED hereby promises to pay the FF&E Obligations in Dollars in full to Agent as and when due and payable under the terms of this Agreement and the other Loan Documents. 2.6 INTEREST: RATES, PAYMENTS, AND CALCULATIONS. (a) INTEREST RATES. Except as provided in clause (c) below, all Obligations (except for undrawn Letters of Credit) that have been charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof, at Borrower's option in 47 accordance with Section 2.16 below, as follows: (i) if the relevant Obligation is an Advance that is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the Applicable Margin, (ii) if the relevant Obligation is the Term Loan, at a per annum rate equal to the Base Rate plus the Base Rate Term Loan Margin and (iii) otherwise, at a per annum rate equal to the Base Rate plus the Applicable Margin. The foregoing notwithstanding, at no time shall (x) any portion of the Obligations (other than the Term Loan) bear interest on the Daily Balance thereof at a per annum rate less than 4% and (y) the Term Loan bear interest on the Daily Balance thereof at a per annum rate less than 6%. To the extent that interest accrued hereunder at the rate set forth herein would be less than the foregoing minimum applicable daily rate, the interest rate chargeable hereunder for such day automatically shall be deemed increased to the minimum rate. (b) LETTER OF CREDIT FEE. Borrowers shall pay Agent (for the ratable benefit of the Revolving Lenders, subject to any letter agreement between Agent and individual Lenders) a Letter of Credit fee (in addition to the charges, commissions, fees, and costs set forth in Section 2.12(e)) which shall accrue at a rate equal to the Applicable Margin with respect to Letters of Credit times the Daily Balance of the undrawn amount of all outstanding Letters of Credit. (c) DEFAULT RATE. Upon the occurrence and during the continuation of an Event of Default (and at the election of Agent or the Required Lenders), (i) all Obligations (except for undrawn Letters of Credit) that have been charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof at a per annum rate equal to 2 percentage points above the per annum rate otherwise applicable hereunder, and the Letter of Credit fee provided for above shall be increased to 2 percentage points above the per annum rate otherwise applicable hereunder. (d) PAYMENT. Interest on Base Rate Loans, Letter of Credit fees, and all other fees payable hereunder shall be due and payable, in arrears, on the first day of each month at any time that Obligations or obligation to extend credit hereunder are outstanding. Interest on LIBOR Rate Loans shall be due and payable, in arrears, on the last day of each Interest Period therefor; provided that, if the Interest Period for such Advance is greater than 3 months, then interest thereon shall be due and payable on each 3 month anniversary of such Advance. Borrowers hereby authorize Agent, from time to time, without prior notice to Borrowers, to charge such interest and fees, all Lender Group Expenses (as and when incurred), the charges, commissions, fees and costs provided for in Section 2.12(e) (as and when accrued or incurred), the fees and costs provided for in Section 2.11 (as and when accrued or incurred), and all other payments as and when due and payable under any Loan Document (including the amounts due and payable with respect to the Term Loan) to Borrowers' Loan Account, which amounts thereafter shall constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances hereunder. Any interest not paid when due shall be compounded by being charged to Borrowers' Loan Account and shall thereafter constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances that are Base Rate Loans hereunder. (e) COMPUTATION. All interest and fees chargeable under the Loan Documents shall be computed on the basis of a 360 day year for the actual number of days elapsed. In the event the Base Rate is changed from time to time hereafter, the rates of interest hereunder based upon the Base Rate automatically and immediately shall be increased or decreased by an amount equal to such change in the Base Rate. 48 (f) INTENT TO LIMIT CHARGES TO MAXIMUM LAWFUL RATE. In no event shall the interest rate or rates payable under this Agreement, plus any other amounts paid in connection herewith, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable. Borrowers and the Lender Group, in executing and delivering this Agreement, intend legally to agree upon the rate or rates of interest and manner of payment stated within it; provided, however, that, anything contained herein to the contrary notwithstanding, if said rate or rates of interest or manner of payment exceeds the maximum allowable under applicable law, then, ipso facto, as of the date of this Agreement, Borrowers are and shall be liable only for the payment of such maximum as allowed by law, and payment received from Borrowers in excess of such legal maximum, whenever received, shall be applied to reduce the principal balance of the Obligations to the extent of such excess. 2.7 [INTENTIONALLY OMITTED]. 2.8 CREDITING PAYMENTS. The receipt of any payment item by Agent shall not be considered a payment on account unless such payment item is a wire transfer of immediately available federal funds made to the Agent's Account or unless and until such payment item is honored when presented for payment. Should any payment item not be honored when presented for payment, then Borrowers shall be deemed not to have made such payment and interest shall be calculated accordingly. Anything to the contrary contained herein notwithstanding, any payment item shall be deemed received by Agent only if it is received into the Agent's Account on a Business Day on or before 11:00 a.m. (California time). If any payment item is received into the Agent's Account on a non-Business Day or after 11:00 a.m. (California time) on a Business Day, it shall be deemed to have been received by Agent as of the opening of business on the immediately following Business Day. 2.9 DESIGNATED ACCOUNT. Agent is authorized to make the Advances and Agent is authorized to issue the Letters of Credit under this Agreement based upon telephonic or other instructions received from anyone purporting to be an Authorized Person, or without instructions if pursuant to Section 2.6(d). Each Borrower agrees to establish and maintain the Designated Account of such Borrower with the Designated Account Bank for the purpose of receiving the proceeds of the Advances requested by such Borrower and made by Agent or the Lenders hereunder. A Borrower may add or replace the Designated Account Bank or the Designated Account on 30 days' prior written notice to Agent; provided, however, that (i) such prospective Designated Account Bank shall be satisfactory to Agent and Agent shall have consented in writing in advance to the opening of such Designated Account with the prospective Designated Account Bank, and (ii) prior to the time of the opening of such Designated Account, Borrowers and such prospective Designated Account Bank shall have executed and delivered to Agent a Control Agreement. Unless otherwise agreed by Agent and Borrowers, any Advance, Agent Advance or Swing Loan requested by Borrowers and made by Agent or the Lenders hereunder shall be made to the applicable Borrower's Designated Account. 2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Agent shall maintain an account on its books in the name of Borrowers (the "Loan Account") on which OED will be charged with the Term Loan and Borrowers will be charged with all Advances (including Agent Advances and Swing Loans) made by Agent, Swing Lender or the Lenders to Borrowers or for Borrowers' account, the Letters of Credit issued by Agent for Borrowers' account, and with all other payment Obligations hereunder or under the other Loan Documents, including, 49 accrued interest, fees and expenses, and Lender Group Expenses. In accordance with Section 2.8, the Loan Account will be credited with all payments received by Agent from Borrowers or for Borrowers' account. Agent shall render statements regarding the Loan Account to Borrower, including principal, interest, fees, and including an itemization of all charges and expenses constituting Lender Group Expenses owing, and such statements shall be conclusively presumed to be correct and accurate and constitute an account stated between Borrowers and the Lender Group unless, within 30 days after receipt thereof by Borrowers, a Borrower shall deliver to Agent written objection thereto describing the error or errors contained in any such statements. 2.11 FEES. Borrowers shall pay to Agent the following fees and charges, which fees and charges shall be non-refundable when paid (irrespective of whether this Agreement is terminated thereafter): (a) FEE LETTER FEES. As and when due and payable under the terms of the Fee Letter, Borrowers shall pay to Agent the fees set forth in the Fee Letter, (b) AUDIT, APPRAISAL, AND VALUATION CHARGES. For the separate account of Agent, audit, appraisal, and valuation fees and charges as follows, (i) a fee of $850 per day, per auditor, plus out-of-pocket expenses for each financial audit of a Borrower performed by personnel employed by Agent, (ii) a fee of $1,500 per day per appraiser, plus out-of-pocket expenses, for each appraisal of the Collateral performed by personnel employed by Agent, and (iii) the actual charges paid or incurred by Agent if it elects to employ the services of one or more third Persons to perform financial audits of Borrowers, to appraise the Collateral, or any portion thereof, or to assess a Borrower's business valuation, provided that so long as no Event of Default has occurred in any 12 consecutive month period, Borrowers shall not be obligated to reimburse Agent for the costs and expenses of more than 16 audit days in any such 12 consecutive month period, and (c) UNUSED LINE FEE. On the first day of each quarter during the term of this Agreement, an unused line fee (for the account of the Revolving Lenders in accordance with their Pro Rata Shares of the Revolver Commitment) in an amount equal to (i) for any preceding quarter in which the average Revolver Usage during such quarter was less than $12,500,000, 0.625% per annum, (ii) for any preceding quarter in which the average Revolver Usage during such quarter was equal to or greater than $12,500,000 but less than $25,000,000, 0.500% per annum and (iii) for any preceding quarter in which the average Revolver Usage during such quarter was equal to or greater than $25,000,000, 0.375% per annum, in each case, times the result of (x) the Maximum Revolver Amount, less (y) the sum of (1) the average Daily Balance of Advances that were outstanding during the immediately preceding quarter, plus (2) the average Daily Balance of the Letter of Credit Usage during the immediately preceding quarter. 2.12 LETTERS OF CREDIT. (a) Subject to the terms and conditions of this Agreement, Agent agrees to issue letters of credit for the account of Borrowers (each, an "L/C") or to purchase participations or execute indemnities or reimbursement obligations (each such undertaking, an "L/C Undertaking") with respect to letters of credit issued by an Underlying Issuer (as of the Closing Date, the prospective Underlying Issuer is to be Wells Fargo) for the account of Borrowers. To request the issuance of an L/C or an L/C Undertaking (or the amendment, renewal, or extension 50 of an outstanding L/C or L/C Undertaking), a Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by Agent) to Agent and Agent (reasonably in advance of the requested date of issuance, amendment, renewal, or extension) a notice requesting the issuance of an L/C or L/C Undertaking, or identifying the L/C or L/C Undertaking to be amended, renewed, or extended, the date of issuance, amendment, renewal, or extension, the date on which such L/C or L/C Undertaking is to expire, the amount of such L/C or L/C Undertaking, the name and address of the beneficiary thereof (or of the Underlying Letter of Credit, as applicable), and such other information as shall be necessary to prepare, amend, renew, or extend such L/C or L/C Undertaking. If requested by Agent, Borrowers also shall be an applicant under the application with respect to any Underlying Letter of Credit that is to be the subject of an L/C Undertaking. Agent shall have no obligation to issue a Letter of Credit if any of the following would result after giving effect to the requested Letter of Credit: (i) the Letter of Credit Usage would exceed the Borrowing Base less the then extant amount of outstanding Advances, or (ii) the Letter of Credit Usage would exceed $10,000,000, or (iii) the Letter of Credit Usage would exceed the Maximum Revolver Amount less the then extant amount of outstanding Advances. Borrowers and Agent acknowledge and agree that certain Underlying Letters of Credit may be issued to support letters of credit that already are outstanding as of the Closing Date. Each Letter of Credit (and corresponding Underlying Letter of Credit) shall be in form and substance acceptable to Agent (in the exercise of its Permitted Discretion), including the requirement that the amounts payable thereunder must be payable in Dollars. If Agent is obligated to advance funds under a Letter of Credit, Borrowers shall immediately reimburse such L/C Disbursement to Agent by paying to Agent an amount equal to such L/C Disbursement not later than 11:00 a.m., California time, on the date that such L/C Disbursement is made, if any Borrower shall have received written or telephonic notice of such L/C Disbursement prior to 10:00 a.m., California time, on such date, or, if such notice has not been received by any Borrower prior to such time on such date, then not later than 11:00 a.m., California time, on the (i) Business Day that any Borrower receives such notice, if such notice is received prior to 10:00 a.m., California time, on the date of receipt, and, in the absence of such reimbursement, the L/C Disbursement immediately and automatically shall be deemed to be an Advance hereunder and, thereafter, shall bear interest at the rate then applicable to Advances under Section 2.6. To the extent an L/C Disbursement is deemed to be an Advance hereunder, Borrowers' obligation to reimburse such L/C Disbursement shall be discharged and replaced by the resulting Advance. (b) Promptly following receipt of a notice of L/C Disbursement pursuant to Section 2.12(a), each Revolving Lender agrees to fund its Pro Rata Share of any Advance deemed made pursuant to the foregoing subsection on the same terms and conditions as if Borrowers had requested such Advance and Agent shall promptly pay to Agent the amounts so received by it from the Revolving Lenders. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of Agent or the Lenders with Revolver Commitment, Agent shall be deemed to have granted to each Revolving Lender, and each Revolving Lender shall be deemed to have 51 purchased, a participation in each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk Participation Liability of such Letter of Credit, and each such Lender agrees to pay to Agent, for the account of Agent, such Lender's Pro Rata Share of any payments made by Agent under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to Agent, for the account of Agent, such Lender's Pro Rata Share of each L/C Disbursement made by Agent and not reimbursed by Borrowers on the date due as provided in clause (a) of this Section, or of any reimbursement payment required to be refunded to Borrowers for any reason. Each Revolving Lender acknowledges and agrees that its obligation to deliver to Agent, for the account of Agent, an amount equal to its respective Pro Rata Share of each L/C Disbursement made by Agent pursuant to this Section 2.12(b) shall be absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuation of an Event of Default or Default or the failure to satisfy any condition set forth in Section 3 hereof. If any such Lender fails to make available to Agent the amount of such Lender's Pro Rata Share of each L/C Disbursement made by Agent in respect of such Letter of Credit as provided in this Section, such Lender shall be deemed to be a Defaulting Lender and Agent (for the account of Agent) shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Defaulting Lender Rate until paid in full. (c) Each Borrower hereby agrees to indemnify, save, defend, and hold Agent harmless from any loss, cost, expense, or liability, and reasonable attorneys fees incurred by Agent arising out of or in connection with any Letter of Credit; provided, however, that no Borrower shall be obligated hereunder to indemnify for any loss, cost, expense, or liability that is caused by the gross negligence or willful misconduct of Agent. Each Borrower agrees to be bound by the Underlying Issuer's regulations and interpretations of any Underlying Letter of Credit or by Agent's interpretations of any L/C issued by Agent to or for such Borrower's account, even though this interpretation may be different from such Borrower's own, and each Borrower understands and agrees that Agent shall not be liable for any error, negligence, or mistake, whether of omission or commission, in following Borrowers' instructions or those contained in the Letter of Credit or any modifications, amendments, or supplements thereto. Each Borrower understands that the L/C Undertakings may require Agent to indemnify the Underlying Issuer for certain costs or liabilities arising out of claims by Borrowers against such Underlying Issuer. Each Borrower hereby agrees to indemnify, save, defend, and hold Agent harmless with respect to any loss, cost, expense (including reasonable attorneys fees), or liability incurred by Agent under any L/C Undertaking as a result of Agent's indemnification of any Underlying Issuer; provided, however, that no Borrower shall be obligated hereunder to indemnify for any loss, cost, expense, or liability that is caused by the gross negligence or willful misconduct of Agent. (d) Each Borrower hereby authorizes and directs any Underlying Issuer to deliver to Agent all instruments, documents, and other writings and property received by such Underlying Issuer pursuant to such Underlying Letter of Credit and to accept and rely upon Agent's instructions with respect to all matters arising in connection with such Underlying Letter of Credit and the related application. (e) Any and all charges, commissions, fees, and costs incurred by Agent relating to Underlying Letters of Credit shall be Agent Expenses for purposes of this Agreement and immediately shall be reimbursable by Borrowers to Agent for the account of Agent; it being 52 acknowledged and agreed by each Borrower that, as of the Closing Date, the issuance charge imposed by the prospective Underlying Issuer is .850% per annum times the face amount of each Underlying Letter of Credit, that such issuance charge may be changed from time to time, and that the Underlying Issuer also imposes a schedule of charges for amendments, extensions, drawings, and renewals. (f) If by reason of (i) any change in any applicable law, treaty, rule, or regulation or any change in the interpretation or application thereof by any Governmental Authority, or (ii) compliance by the Underlying Issuer or Agent with any direction, request, or requirement (irrespective of whether having the force of law) of any Governmental Authority or monetary authority: (i) any reserve, deposit, or similar requirement is or shall be imposed or modified in respect of any Letter of Credit issued hereunder, or (ii) there shall be imposed on the Underlying Issuer or Agent any other condition regarding any Underlying Letter of Credit or any Letter of Credit issued pursuant hereto; and the result of the foregoing is to increase, directly or indirectly, the cost to Agent of issuing, making, guaranteeing, or maintaining any Letter of Credit or to reduce the amount receivable in respect thereof by Agent, then, and in any such case, Agent may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify any Borrower, and Borrowers shall pay on demand such amounts as Agent may specify to be necessary to compensate Agent for such additional cost or reduced receipt, together with interest on such amount from the date of such demand until payment in full thereof at the rate then applicable to Advances that are Base Rate Loans hereunder. The determination by Agent of any amount due pursuant to this Section, as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable error, be final and conclusive and binding on all of the parties hereto. (g) The letters of credit described on Schedule 2.12 hereto shall be deemed Letters of Credit issued pursuant to this Section 2.12. 53 2.13 REGISTERED NOTES. Agent agrees to record each Advance on the Register referenced in Section 14.1(h). Each Advance recorded on the Register (each a "Registered Loan") may not be evidenced by promissory notes other than Registered Notes (as defined below). Upon the registration of any Advance, Borrowers agree at the request of any Lender, to execute and deliver to such Lender a promissory note, in conformity with the terms of this Agreement, in registered form to evidence such Registered Loan, in form and substance reasonably satisfactory to such Lender, and registered as provided in Section 14.1(h) (a "Registered Note"), payable to the order of such Lender and otherwise duly completed, provided that any Registered Note issued to evidence Advances shall be issued in the principal amount of the applicable Lender's Commitment. Once recorded on the Register, each Advance may not be removed from the Register so long as it remains outstanding, and a Registered Note may not be exchanged for a promissory note that it is not a Registered Note. 2.14 CAPITAL REQUIREMENTS. If, after the date hereof, any Lender determines that (i) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements for banks or bank holding companies, or any change in the interpretation or application thereof by any Governmental Authority charged with the administration thereof, or (ii) compliance by such Lender or its parent bank holding company with any guideline, request, or directive of any such entity regarding capital adequacy (whether or not having the force of law), will have the effect of reducing the return on such Lender's or such holding company's capital as a consequence of such Lender's obligations hereunder to a level below that which such Lender or such holding company could have achieved but for such adoption, change, or compliance (taking into consideration such Lender's or such holding company's then existing policies with respect to capital adequacy and assuming the full utilization of such entity's capital) by any amount deemed by such Lender to be material, then such Lender may notify Borrowers and Agent thereof. Following receipt of such notice, Borrowers agree to pay such Lender on demand the amount of such reduction of return of capital as and when such reduction is determined, payable within 90 days after presentation by such Lender of a statement in the amount and setting forth in reasonable detail such Lender's calculation thereof and the assumptions upon which such calculation was based (which statement shall be deemed true and correct absent manifest error). In determining such amount, such Lender may use any reasonable averaging and attribution methods. 2.15 JOINT AND SEVERAL LIABILITY OF BORROWERS. (a) Each Borrower is accepting joint and several liability hereunder and under the other Loan Documents (other than with respect to the FF&E Obligations) in consideration of the financial accommodations to be provided by Agent and the Lenders under this Agreement, for the mutual benefit, directly and indirectly, of each Borrower and in consideration of the undertakings of the other Borrowers to accept joint and several liability for the Obligations (other than the FF&E Obligations). (b) Each Borrower, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers, with respect to the payment and performance of all of the Obligations (other than the FF&E Obligations) (including, without limitation, any Obligations arising under this Section 2.15), it being the intention of the parties hereto that all the Obligations (other than 54 the FF&E Obligations) shall be the joint and several obligations of each Person composing Borrowers without preferences or distinction among them. (c) If and to the extent that any of Borrowers shall fail to make any payment with respect to any of the Obligations (other than the FF&E Obligations) as and when due or to perform any of the Obligations (other than the FF&E Obligations) in accordance with the terms thereof, then in each such event the other Persons composing Borrowers will make such payment with respect to, or perform, such Obligation. (d) The Obligations of each Person composing Borrowers under the provisions of this Section 2.15 constitute the absolute and unconditional, full recourse Obligations of each Person composing Borrowers enforceable against each such Borrower to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement or any other circumstances whatsoever. (e) Except as otherwise expressly provided in this Agreement, each Person composing Borrowers hereby waives notice of acceptance of its joint and several liability, notice of any Advances or Letters of Credit issued under or pursuant to this Agreement, notice of the occurrence of any Default, Event of Default, or of any demand for any payment under this Agreement, notice of any action at any time taken or omitted by Agent or the Lenders under or in respect of any of the Obligations, any requirement of diligence or to mitigate damages and, generally, to the extent permitted by applicable law, all demands, notices and other formalities of every kind in connection with this Agreement (except as otherwise provided in this Agreement). Each Person composing Borrowers hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations, the acceptance of any payment of any of the Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by Agent or the Lenders at any time or times in respect of any default by any Person composing Borrowers in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by Agent or the Lenders in respect of any of the Obligations, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of the Obligations or the addition, substitution or release, in whole or in part, of any Person composing Borrowers. Without limiting the generality of the foregoing, each Borrower assents to any other action or delay in acting or failure to act on the part of Agent or the Lenders with respect to the failure by any Person composing Borrowers to comply with any of its respective Obligations, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder, which might, but for the provisions of this Section 2.15 afford grounds for terminating, discharging or relieving any Person composing Borrowers, in whole or in part, from any of its Obligations under this Section 2.15, it being the intention of each Person composing Borrowers that, so long as any of the Obligations hereunder remain unsatisfied, the Obligations of such Person composing Borrowers under this Section 2.15 shall not be discharged except by performance and then only to the extent of such performance. The Obligations of each Person composing Borrowers under this Section 2.15 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any Person composing Borrowers or any Agent or the Lenders. The joint and several liability of the Persons composing Borrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the 55 name, constitution or place of formation of any of the Persons composing Borrowers or any Agent or the Lenders. (f) Each Person composing Borrowers represents and warrants to Agent and the Lenders that such Borrower is currently informed of the financial condition of Borrowers and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations (other than the FF&E Obligations). Each Person composing Borrowers further represents and warrants to Agent and the Lenders that such Borrower has read and understands the terms and conditions of the Loan Documents. Each Person composing Borrowers hereby covenants that such Borrower will continue to keep informed of Borrowers' financial condition, the financial condition of other guarantors, if any, and of all other circumstances which bear upon the risk of nonpayment or nonperformance of the Obligations (other than the FF&E Obligations). (g) The provisions of this Section 2.15 are made for the benefit of Agent, the Lenders and their respective successors and assigns, and may be enforced by it or them from time to time against any or all of the Persons composing Borrowers as often as occasion therefor may arise and without requirement on the part of any such Agent, the Lenders, successor, or assign first to marshal any of its or their claims or to exercise any of its or their rights against any of the other Persons composing Borrowers or to exhaust any remedies available to it or them against any of the other Persons composing Borrowers or to resort to any other source or means of obtaining payment of any of the Obligations (other than the FF&E Obligations) hereunder or to elect any other remedy. The provisions of this Section 2.15 shall remain in effect until all of the Obligations (other than the FF&E Obligations) shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of the Obligations (other than the FF&E Obligations), is rescinded or must otherwise be restored or returned by any Agent or the Lenders upon the insolvency, bankruptcy or reorganization of any of the Persons composing Borrowers, or otherwise, the provisions of this Section 2.15 will forthwith be reinstated in effect, as though such payment had not been made. (h) Each of the Persons composing Borrowers hereby agrees that it will not enforce any of its rights of contribution or subrogation against the other Persons composing Borrowers with respect to any liability incurred by it hereunder or under any of the other Loan Documents, any payments made by it to Agent or the Lenders with respect to any of the Obligations or any collateral security therefor until such time as all of the Obligations have been paid in full in cash. Any claim which any Borrower may have against any other Borrower with respect to any payments to any Agent or the Lenders hereunder or under any other Loan Documents are hereby expressly made subordinate and junior in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior payment in full in cash of the Obligations and, in the event of any insolvency, bankruptcy, receivership, liquidation, reorganization or other similar proceeding under the laws of any jurisdiction relating to any Borrower, its debts or its assets, whether voluntary or involuntary, all such Obligations shall be paid in full in cash before any payment or distribution of any character, whether in cash, securities or other property, shall be made to any other Borrower therefor. (i) Each of the Persons composing Borrowers hereby agrees that, after the occurrence and during the continuance of any Default or Event of Default, the payment of any amounts due with respect to the indebtedness owing by any Borrower to any other Borrower is 56 hereby subordinated to the prior payment in full in cash of the Obligations. Each Borrower hereby agrees that after the occurrence and during the continuance of any Default or Event of Default, such Borrower will not demand, sue for or otherwise attempt to collect any indebtedness of any other Borrower owing to such Borrower until the Obligations shall have been paid in full in cash. If, notwithstanding the foregoing sentence, such Borrower shall collect, enforce or receive any amounts in respect of such indebtedness, such amounts shall be collected, enforced and received by such Borrower as trustee for Agent, and such Borrower shall deliver any such amounts to Agent for application to the Obligations in accordance with Section 2.4(b). 2.16 LIBOR OPTION. (a) INTEREST AND INTEREST PAYMENT DATES. In lieu of having interest charged at the rate based upon the Base Rate, Borrowers shall have the option (the "LIBOR Option") to have interest on all or a portion of the Advances be charged at a rate of interest based upon the LIBOR Rate. Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the last day of the Interest Period applicable thereto, (ii) the occurrence of an Event of Default in consequence of which Agent has elected to accelerate the maturity of the Obligations, (iii) termination of this Agreement pursuant to the terms hereof, or (iv) as set forth in Section 2.6(d). On the last day of each applicable Interest Period, unless any Borrower properly has exercised the LIBOR Option with respect thereto, the interest rate applicable to such LIBOR Rate Loan automatically shall convert to the rate of interest then applicable to Base Rate Loans of the same type hereunder. At any time that an Event of Default has occurred and is continuing, Borrowers no longer shall have the option to request that Advances bear interest at the LIBOR Rate and Agent shall have the right to convert the interest rate on all outstanding LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder. OED shall not have the option to request that any portion of the Term Loan bear interest at the LIBOR Rate. (b) LIBOR ELECTION. (i) The requesting Borrower may, at any time and from time to time, so long as no Event of Default has occurred and is continuing, elect to exercise the LIBOR Option by notifying Agent prior to 11:00 a.m. (California time) at least 3 Business Days prior to the commencement of the proposed Interest Period (the "LIBOR Deadline"). Notice of such Borrower's election of the LIBOR Option for a permitted portion of the Advances and an Interest Period pursuant to this Section shall be made by delivery to Agent of a LIBOR Notice received by Agent before the LIBOR Deadline, or by telephonic notice received by Agent before the LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice received by Agent prior to 5:00 p.m. (California time) on the same day). (ii) Each LIBOR Notice shall be irrevocable and binding on Borrowers. In connection with each LIBOR Rate Loan, each Borrower shall jointly and severally indemnify, defend, and hold Agent and the Revolving Lenders harmless against any loss, cost, or expense incurred by Agent or the Revolving Lenders as a result of (a) the payment of any principal of any LIBOR Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any LIBOR Rate Loan other than on the last day of the Interest Period applicable thereto, or 57 (c) the failure to borrow, convert, continue or prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered pursuant hereto (such losses, costs, and expenses, collectively, "Funding Losses"). Funding Losses shall be deemed to equal the amount determined by Agent to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that would have been applicable thereto, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert, or continue, for the period that would have been the Interest Period therefor), minus (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate which Agent would be offered were it to be offered, at the commencement of such period, Dollar deposits of a comparable amount and period in the London interbank market. A certificate of any Revolving Lender delivered to any Borrower setting forth any amount or amounts that such Revolving Lender is entitled to receive pursuant to this Section shall be conclusive absent manifest error. (iii) Borrowers shall have not more than 7 LIBOR Rate Loans in effect at any given time. Borrowers only may exercise the LIBOR Option for LIBOR Rate Loans of at least $1,000,000 and integral multiples of $500,000 in excess thereof. (c) PREPAYMENTS. Borrowers may prepay LIBOR Rate Loans at any time; provided, however, that in the event that LIBOR Rate Loans are prepaid on any date that is not the last day of the Interest Period applicable thereto, including as a result of any automatic prepayment through the required application by Agent of proceeds of Collections of Borrowers or their Subsidiaries in accordance with Section 2.4(b) or for any other reason, including early termination of the term of this Agreement or acceleration of the Obligations pursuant to the terms hereof, Borrowers shall indemnify, defend, and hold Agent, the Revolving Lenders and any Revolving Lender's Participants harmless against any and all Funding Losses in accordance with clause (b)(ii) above. (d) SPECIAL PROVISIONS APPLICABLE TO LIBOR RATE. (i) The LIBOR Rate may be adjusted by Agent on a prospective basis to take into account any additional or increased costs to the Revolving Lenders of maintaining or obtaining any eurodollar deposits or increased costs due to changes in applicable law occurring subsequent to the commencement of the then applicable Interest Period, including changes in tax laws (except changes of general applicability in corporate income tax laws) and changes in the reserve requirements imposed by the Board of Governors of the Federal Reserve System (or any successor), excluding the Reserve Percentage, which additional or increased costs would increase the cost of funding loans bearing interest at the LIBOR Rate. In any such event, Agent shall give Borrowers notice of such a determination and adjustment and, upon its receipt of the notice from Agents, Borrowers may, by notice to Agent (y) require Agent to furnish to Borrowers a statement setting forth the basis for adjusting such LIBOR Rate and the method for determining the amount of such adjustment, or (z) repay the LIBOR Rate 58 Loans with respect to which such adjustment is made (together with any amounts due under clause (b)(ii) above). (ii) In the event that any change in market conditions or any law, regulation, treaty, or directive, or any change therein or in the interpretation of application thereof, shall at any time after the date hereof, in the reasonable opinion of Agent, make it unlawful or impractical for the Revolving Lenders to fund or maintain LIBOR Advances or to continue such funding or maintaining, or to determine or charge interest rates at the LIBOR Rate, Agent shall give notice of such changed circumstances to Borrowers and (y) in the case of any LIBOR Rate Loans that are outstanding, the date specified in Agent's notice shall be deemed to be the last day of the Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans thereafter shall accrue interest at the rate then applicable to Base Rate Loans, and (z) Borrowers shall not be entitled to elect the LIBOR Option until Agent determines that it would no longer be unlawful or impractical to do so. (e) NO REQUIREMENT OF MATCHED FUNDING. Anything to the contrary contained herein notwithstanding, none of Agent, any Revolving Lender, nor any Revolving Lender's Participants, is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues at the LIBOR Rate. The provisions of this Section shall apply as if Agent, the Revolving Lenders or their Participants had match funded any Obligation as to which interest is accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest Period in the amount of the LIBOR Rate Loans. 3. CONDITIONS; TERM OF AGREEMENT. 3.1 CONDITIONS PRECEDENT TO INITIAL EXTENSION OF CREDIT. In addition to satisfying each of the conditions precedent set forth in Section 3.3, the obligation of the Lender Group (or any member thereof) to make the initial Advance and the Term Loan (or otherwise extend any credit hereunder) is subject to the prior fulfillment, to the satisfaction of Lender Group, of each of the conditions set forth below: (a) the Closing Date shall occur on or before June ___, 2004; (b) Agent shall have received all financing statements required by Agent, and Agent shall have received searches reflecting the filing of all such financing statements; (c) Agent shall have received each of the following documents, in form and substance satisfactory to Agent, duly executed, and each such document shall be in full force and effect: (i) the Control Agreements, (ii) the Diamond Jo Ship Mortgage, (iii) the Disbursement Letter, (iv) the Fee Letter, 59 (v) the Guaranties executed by Parent and OED Capital and the Guarantor Security Agreement, (vi) the Intercompany Subordination Agreement, (vii) the Intercreditor Agreement and the Subordinations of Mortgage for Iowa and Louisiana, (viii) the Management Fees Subordination Agreement, (ix) the Mortgages, together with any consents required for such Mortgages, (x) the Officers' Certificate, (xi) a solvency certificate with respect to Borrowers and Guarantors, (xii) the Pledge Agreement, together with all certificates representing the shares of Capital Stock pledged thereunder, as well as Capital Stock powers with respect thereto endorsed in blank, and (xiii) the Subordination of Preferred Fleet Mortgage, and (xiv) the Trademark Security Agreement; (d) Agent shall have received a certificate from the Secretary of each Borrower and Guarantor attesting to the resolutions of such Person's board of directors (or comparable manager) authorizing its execution, delivery, and performance of this Agreement and the other Loan Documents to which such Person is a party and authorizing specific officers of such Person to execute the same; (e) Agent shall have received copies of each Borrower's and Guarantor's Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by the Secretary of such Borrower or Guarantor, as applicable, (f) Agent shall have received a certificate of status with respect to each Borrower and Guarantor, dated within 10 days of the Closing Date, such certificate to be issued by the appropriate officer of the jurisdiction of organization of such Borrower or Guarantor, as applicable, which certificate shall indicate that such Borrower or Guarantor, as applicable, is in good standing in such jurisdiction; (g) Agent shall have received certificates of status with respect to each Borrower and Guarantor, each dated within 30 days of the Closing Date, such certificates to be issued by the appropriate officer of the jurisdictions (other than the jurisdiction of organization of such Borrower or Guarantor, as applicable) in which its failure to be duly qualified or licensed would constitute a Material Adverse Change, which certificates shall indicate that such Borrower or Guarantor, as applicable, is in good standing in such jurisdictions; 60 (h) Agent shall have received a certificate of insurance, together with the endorsements thereto, as are required by Section 6.8, the form and substance of which shall be satisfactory to Agent; (i) Agent shall have received Collateral Access Agreements with respect to OED's New Iberia, Louisiana, leased property; (j) Agent shall have received opinions of Borrowers' and Guarantors' counsel (including, without limitation, admiralty counsel, real estate counsel and regulatory counsel) in form and substance satisfactory to Agent; (k) Agent shall have received satisfactory evidence (including a certificate of the chief financial officer of Parent) that all tax returns required to be filed by Borrowers have been timely filed and all taxes upon Borrowers or their properties, assets, income, and franchises (including Real Property taxes and payroll taxes) have been paid prior to delinquency, except such taxes that are the subject of Permitted Protests; (l) Agent shall have completed its business, legal, and collateral due diligence, including a collateral audit and review of Borrowers' Books and verification of Borrowers' representations and warranties to the Lender Group, the results of which shall be satisfactory to Agent; (m) Agent shall have received and reviewed the Closing Date Business Plan and its detailed budget on remaining construction costs at the Racino Project in form and substance satisfactory to Agent; (n) Borrowers shall have paid all Lender Group Expenses incurred in connection with the transactions evidenced by this Agreement; (o) Agent shall have received mortgagee title insurance policies (or marked commitments to issue the same) for the Real Property Collateral issued by a title insurance company satisfactory to Agent (each a "Mortgage Policy" and, collectively, the "Mortgage Policies") in amounts satisfactory to Agent assuring Agent that the Mortgages on such Real Property Collateral are valid and enforceable first priority mortgage Liens on such Real Property Collateral free and clear of all defects and encumbrances except Permitted Liens, and the Mortgage Policies otherwise shall be in form and substance satisfactory to Agent; (p) Agent shall have received copies of each of the following documents, together with a certificate of the Secretary of Parent certifying each document as being true, correct, and complete: (i) the Management Agreements, (ii) the Senior Note Documents, (iii) the Lease, (iv) the Ice Harbor Parking Agreement, and (v) the Fixed Price Contract; (q) Agent shall have received the Senior Note Documents and evidence of Borrowers receipt of net proceeds from the Notes of not less than $220,000,000; (r) Borrowers shall have received all licenses (including the Gaming Licenses), approvals or evidence of other actions required by any Governmental Authority, including the Louisiana Regulatory Authorities and the Iowa Gaming Authorities, in connection 61 with the execution and delivery by Borrowers of this Agreement or any other Loan Document or with the consummation of the transactions contemplated hereby and thereby; (s) Agent shall have received evidence that the aggregate amount of Excess Availability plus cash and Cash Equivalents subject to satisfactory Control Agreements, after giving effect to the initial Advances, is not less than $10,000,000; (t) Agent shall have received evidence that, upon making of initial Advance hereunder, the outstanding obligations under (i) that certain Loan and Security Agreement between DJL and Wells Fargo Foothill, dated as of February 23, 2001, (ii) that certain Loan and Security Agreement, among OED, OED Capital and Wells Fargo Foothill, dated as of June 24, 2003, in each case as amended through the Closing Date, (iii) the Equipment Loan Agreement and (iv) the PGC Indenture, shall be repaid in full and such agreements shall be terminated and all liens thereunder shall be automatically released; (u) Agent shall have received evidence that the outstanding obligations under the OED Indenture shall have been reduced to $6,910,000 and that all liens under the OED Loan Documents shall have been released; (v) the Diamond Jo Ship Mortgage shall have been recorded in the applicable filing office of the United States Coast Guard and such other governmental agency as shall be necessary, and Agent shall have received confirmation, satisfactory to Agent, of such recordation; and (w) all other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered, executed, or recorded and shall be in form and substance satisfactory to Lender Group. Notwithstanding the foregoing, the Lenders are under no obligation to make the initial Advance or the Term Loan (or otherwise to extend any credit provided for hereunder) unless and until all of the conditions set forth in Section 3.3 below are satisfied to the satisfaction of Agent. 3.2 CONDITIONS SUBSEQUENT TO INITIAL EXTENSION OF CREDIT. The obligation of the Lender Group (or any member thereof) to continue to make Advances (or otherwise extend credit hereunder) is subject to the fulfillment, on or before the date applicable thereto, of each of the conditions subsequent set forth below (the failure by Borrowers to so perform or cause to be performed constituting an Event of Default): (a) within 180 days of the Closing Date, deliver to Agent certified copies of the policies of insurance, together with the endorsements thereto, as are required by Section 6.8, the form and substance of which shall be satisfactory to Agent and its counsel. 3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The obligation of the Lender Group (or any member thereof) to make any Advances or issue any Letter of Credit (or to extend any other credit hereunder) shall be subject to the following conditions precedent: (a) the representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the date of 62 such extension of credit, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date); (b) no Default or Event of Default shall have occurred and be continuing on the date of such extension of credit, nor shall either result from the making thereof; (c) no injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the extending of such credit shall have been issued and remain in force by any Governmental Authority against any Borrower, Agent, any Lender, or any of their Affiliates; and (d) no Material Adverse Change shall have occurred. 3.4 TERM. This Agreement shall become effective upon the execution and delivery hereof by Borrowers, Agent, and the Lenders and shall continue in full force and effect for a term ending on June 15, 2008 (the "Maturity Date"). The foregoing notwithstanding, the Lender Group, upon the election of the Required Lenders, shall have the right to terminate its obligations under this Agreement immediately and without notice upon the occurrence and during the continuation of an Event of Default. 3.5 EFFECT OF TERMINATION. On the date of termination of this Agreement, all Obligations (including contingent reimbursement obligations of Borrowers with respect to any outstanding Letters of Credit) immediately shall become due and payable without notice or demand (including either (a) providing cash collateral to be held by Agent for the benefit of the Lenders with a Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit Usage, or (b) causing the original Letters of Credit to be returned to Agent). No termination of this Agreement, however, shall relieve or discharge Borrowers or the Guarantors of their duties, Obligations, or covenants hereunder and the Agent's Liens in the Collateral shall remain in effect until all Obligations have been fully and finally paid in full and the Lender Group's obligations to provide additional credit hereunder have been terminated. When this Agreement has been terminated and all of the Obligations have been fully and finally paid in full and the Lender Group's obligations to provide additional credit under the Loan Documents have been terminated irrevocably, Agent will, at Borrowers' sole expense, execute and deliver any Uniform Commercial Code termination statements, lien releases, mortgage releases, re-assignments of trademarks, discharges of security interests, and other similar discharge or release documents (and, if applicable, in recordable form) as are reasonably necessary to release, as of record, the Agent's Liens and all notices of security interests and liens previously filed by Agent with respect to the Obligations. 3.6 EARLY TERMINATION BY BORROWERS. Borrowers have the option, at any time upon 90 days' prior written notice by Borrowers to Agent, to terminate this Agreement by paying to Agent, for the benefit of the Lender Group, in cash, the Obligations (including either (a) providing cash collateral to be held by Agent for the benefit of the Lenders with a Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit Usage, or (b) causing the original Letters of Credit to be returned to Agent), in full, together with (unless the Obligations are being refinanced with financing provided by or arranged by Wells Fargo or any of its Affiliates) the Applicable Prepayment Premium; provided, however, that such Applicable Prepayment Premium shall be reduced by 50% if the Obligations are repaid in full and this 63 Agreement is terminated as a direct result of the consummation of an initial public offering of Parent's or Borrowers' Capital Stock, a private placement of Parent's or Borrowers' stock or subordinated debt, or a sale (other than a sale that takes place as a consequence of a judicial or nonjudicial foreclosure proceeding or an Insolvency Proceeding) in of all or substantially all the Capital Stock or assets of Parent or Borrowers. If Borrowers have sent a notice of termination pursuant to the provisions of this Section, then the Lenders' obligations to extend credit hereunder shall terminate and Borrowers shall be obligated to repay the Obligations (including either (a) providing cash collateral to be held by Agent for the benefit of the Lenders with a Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit Usage, or (b) causing the original Letters of Credit to be returned to Agent), in full, together with the Applicable Prepayment Premium, on the date set forth as the date of termination of this Agreement in such notice. In the event of the termination of this Agreement and repayment of the Obligations at any time prior to the Maturity Date, for any other reason, including (A) termination upon the election of Agent or the Lenders to terminate after the occurrence and during the continuance of an Event of Default, (B) foreclosure and sale of Collateral, (C) sale of the Collateral in any Insolvency Proceeding, or (D) restructure, reorganization or compromise of the Obligations by the confirmation of a plan of reorganization, or any other plan of compromise, restructure, or arrangement in any Insolvency Proceeding, then, in view of the impracticability and extreme difficulty of ascertaining the actual amount of damages to Agent and the Lenders or profits lost by Agent or the Lenders as a result of such early termination, and by mutual agreement of the parties as to a reasonable estimation and calculation of the lost profits or damages of Agent or the Lenders, Borrowers shall pay the Applicable Prepayment Premium to Agent for the pro rata benefit of the Lenders, measured as of the date of such termination. 4. CREATION OF SECURITY INTEREST. 4.1 GRANT OF SECURITY INTEREST. (a) Each Borrower hereby grants to Agent, for the benefit of the Lender Group, a continuing security interest in all of its right, title, and interest in all currently existing and hereafter acquired or arising Personal Property Collateral in order to secure prompt repayment of any and all of the Obligations (other than the FF&E Obligations) in accordance with the terms and conditions of the Loan Documents and in order to secure prompt performance by Borrowers of each of their covenants and duties under the Loan Documents. The Agent's Liens in and to the Personal Property Collateral shall attach to all Personal Property Collateral without further act on the part of Agent or Borrowers. (b) OED hereby grants to Agent, for the benefit of the Lender Group, a continuing security interest in all of its right, title, and interest in all currently existing and hereafter acquired or arising FF&E Collateral in order to secure prompt repayment of any and all of the FF&E Obligations in accordance with the terms and conditions of the Loan Documents. The Agent's Liens in and to the FF&E Collateral shall attach to all FF&E Collateral without further act on the part of Agent or OED. (c) Anything contained in this Agreement or any other Loan Document to the contrary notwithstanding, except as permitted by Section 7.4, Borrowers have no authority, express or implied, to dispose of any item or portion of the Personal Property Collateral. 64 4.2 NEGOTIABLE COLLATERAL. (a) In the event that any Personal Property Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral, the applicable Borrower shall immediately notify Agent and, and if and to the extent that perfection of priority of Agent's security interest is dependent on or enhanced by possession, such Borrower, immediately upon the request of Agent, shall endorse and deliver physical possession of such Negotiable Collateral to Agent. (b) Upon request by Agent, the applicable Borrower shall take all steps reasonably necessary to grant Agent control of all electronic chattel paper in accordance with the Code and all "transferable records" as defined in each of the Uniform Electronic Transactions Act and the Electronic Signatures in Global and National Commerce Act; and (c) In the event a Borrower retains possession of any chattel paper or instruments otherwise required to be endorsed and delivered to Agent pursuant to Section 4.2(a), all of such chattel paper and instruments shall be marked with the following legend: "This writing and the obligations evidenced or secured thereby are subject to the security interest of Wells Fargo Foothill, Inc., as Agent". 4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE COLLATERAL. At any time after the occurrence and during the continuation of an Event of Default, Agent or Agent's designee may (a) notify Account Debtors of Borrowers that the Accounts, chattel paper, or General Intangibles have been assigned to Agent or that Agent has a security interest therein, or (b) collect the Accounts, chattel paper, or General Intangibles directly and charge the collection costs and expenses to the Loan Account. Each Borrower agrees that it will hold in trust for Agent, as Agent's trustee, any of its or its Subsidiaries' Collections that it receives and immediately will deliver said Collections to Agent in their original form as received by the applicable Borrower. 4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. (a) Each Borrower authorizes Agent to file, transmit, or communicate, as applicable, Uniform Commercial Code financing statements, original financing statements in-lieu of continuation statements and amendments describing the Collateral as "all personal property of debtor" or "all assets of debtor" or words of similar effect in order to perfect Agent's security interest in the Collateral without such Borrower's signature, to the extent permitted by applicable law; provided, however, that Agent shall clearly identify Excluded Assets as excepted items, as applicable. (b) At any time upon the request of Agent, Borrowers shall execute and deliver, or cause other Persons (including, without limitation, those in possession of any Collateral) to execute and deliver, all further instruments and documents, and take all further action, (i) to perfect and continue perfection of Agent's security interest in the Collateral (whether now owned or hereafter arising or acquired or tangible or intangible), (ii) to create, perfect and insure Liens in favor of Agent in any Real Property acquired after the Closing Date, (iii) in order to consummate fully all of the transactions contemplated hereby and under the other Loan Documents and (iv) to enable Agent to exercise and enforce its rights and remedies 65 hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Borrower shall: (i) execute and deliver, or cause other Persons (including, without limitation, those in possession of any Collateral) to execute and deliver, any and all financing statements, original financing statements in lieu of continuation statements, fixture filings, security agreements, pledges, real property security instruments, assignments, Collateral Access Agreements, instruments, powers of attorney, endorsements of certificates of title, and all other documents (collectively, the "Additional Documents") that Agent may request in its Permitted Discretion, in form and substance reasonably satisfactory to Agent; (ii) at any reasonable time, upon request by Agent, exhibit the Collateral for, and allow inspection of the Collateral by, Agent, or persons designated by Agent; and (iii) at Agent's reasonable request, appear in and defend any action or proceeding that may affect Agent's security interest in all or any part of the Collateral. (c) To the maximum extent permitted by applicable law, each Borrower authorizes Agent to execute any such Additional Documents in the applicable Borrower's name and authorizes Agent to file such executed Additional Documents in any appropriate filing office. Each Borrower also hereby ratifies its authorization for Agent to have filed in any jurisdiction any financing statements or amendments thereto filed prior to the date hereof. No Borrower shall terminate, amend or file a correction statement with respect to any Uniform Commercial Code financing statement filed pursuant to this Section 4 without Agent's prior written consent, which consent shall not be unreasonably withheld. (d) In addition, on such periodic basis as Agent shall require, each Borrower shall (i) provide Agent with a report of all new patentable, copyrightable, or trademarkable materials acquired or generated by such Borrower during the prior period, (ii) cause all patents, copyrights, and trademarks acquired or generated by such Borrower that are not already the subject of a registration with the appropriate filing office (or an application therefor diligently prosecuted) to be registered with such appropriate filing office in a manner sufficient to impart constructive notice of such Borrower's ownership thereof and (iii) cause to be prepared, executed, and delivered to Agent supplemental schedules to the applicable Loan Documents to identify such patents, copyrights, and trademarks as being subject to the security interests created thereunder. (e) In addition, if any Borrower acquires any commercial tort claim or judgment after the date hereof, such Borrower shall promptly (but in any event within 3 Business Days after such acquisition) deliver to Agent a written description of such commercial tort claim or judgment, as applicable, and shall deliver a written agreement, in form and substance satisfactory to Agent, pursuant to which such Borrower shall grant a perfected security interest in all of its right, title and interest in and to such commercial tort claim or judgment, as applicable, to Agent, as security for the Obligations (other than the FF&E Obligations) (each, a "Commercial Tort Claim/Judgment Assignment"). 66 (f) In addition, each Borrower shall furnish to Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Agent may reasonably request, all in reasonable detail. 4.5 POWER OF ATTORNEY. Each Borrower hereby irrevocably makes, constitutes, and appoints Agent (and any of Agent's officers, employees, or agents designated by Agent) as such Borrower's true and lawful attorney, with power to, from time to time in its discretion, take any action and to execute any instrument that it may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, the following: (a) if such Borrower refuses to, or fails timely to execute and deliver any of the documents described in Section 4.4, sign the name of such Borrower on any of the documents described in Section 4.4, (b) at any time that an Event of Default has occurred and is continuing, sign such Borrower's name on any invoice or bill of lading relating to the Collateral, drafts against Account Debtors, or notices to Account Debtors, (c) at any time that an Event of Default has occurred and is continuing, send requests for verification of Accounts, (d) at any time that an Event of Default has occurred and is continuing, endorse such Borrower's name on any Collection item that may come into Agent's possession, (e) at any time that an Event of Default has occurred and is continuing, make, settle, and adjust all claims under such Borrower's policies of insurance and make all determinations and decisions with respect to such policies of insurance, and (f) at any time that an Event of Default has occurred and is continuing, settle and adjust disputes and claims respecting the Accounts, chattel paper, General Intangibles, Real Property or other Collateral directly with Account Debtors or other applicable third parties, for amounts and upon terms that Agent determines to be reasonable, and Agent may cause to be executed and delivered any documents and releases that Agent determines to be necessary. The appointment of Agent as each Borrower's attorney, and each and every one of its rights and powers, being coupled with an interest, is irrevocable until all of the Obligations have been fully and finally repaid and performed and the Lender Group's obligations to extend credit hereunder are terminated. 4.6 RIGHT TO INSPECT. Agent and each Lender (through any of their respective officers, employees, or agents) shall have the right, from time to time and during normal business hours hereafter, to inspect the Books and to check, test, and appraise the Collateral, operations and assets of Borrowers in order to verify Borrowers' financial condition or the amount, quality, value, condition of, or any other matter relating to, the Collateral. 4.7 CONTROL AGREEMENTS. Each Borrower agrees that it will not transfer assets out of any Securities Accounts other than as permitted under Section 7.19 and, if to another securities intermediary, unless each of the applicable Borrower, Agent, and the substitute securities intermediary have entered into a Control Agreement. No arrangement contemplated hereby or by any Control Agreement in respect of any Securities Accounts or other Investment Property shall be modified by Borrowers without the prior written consent of Agent. Upon the occurrence and during the continuance of a Default or Event of Default, Agent may notify any securities intermediary to liquidate the applicable Securities Account or any related Investment Property maintained or held thereby and remit the proceeds thereof to the Agent's Account. 4.8 FF&E LETTER OF CREDIT. As additional credit enhancement for the repayment of the FF&E Obligations to the Lenders, OED has caused the FF&E Letter of Credit to be issued and delivered to Agent. Agent shall have the right to draw upon the FF&E Letter of Credit in accordance with its terms, in full or in part (and to apply the proceeds thereof to the FF&E 67 Obligations or hold as cash collateral, at the option of Agent); provided, however, that, upon written request of OED, so long as (i) no Default or Event of Default shall then exist, and (ii) the aggregate amount of scheduled principal payments (without giving effect to any prepayments required hereunder) made to Agent with respect to the Term Loan equals or exceeds $3,200,000, Agent agrees to promptly deliver and release to OED the FF&E Letter of Credit. 5. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender Group to enter into this Agreement, each Borrower makes the following representations and warranties to the Lender Group which shall be true, correct, and complete, in all material respects, as of the date hereof, and shall be true, correct, and complete, in all material respects, as of the Closing Date, and at and as of the date of the making of each Advance (or other extension of credit) made thereafter, as though made on and as of the date of such Advance (or other extension of credit) (except to the extent that such representations and warranties relate solely to an earlier date) and such representations and warranties shall survive the execution and delivery of this Agreement: 5.1 NO ENCUMBRANCES. Each Borrower and its Subsidiaries has good and indefeasible title to their personal property assets and good and marketable title to their Real Property, including the Diamond Jo Vessels and the Real Property, in each case free and clear of Liens except for Permitted Liens and except for defects in title that do not interfere in any material respect with its ability to conduct its business or to utilize such property for its intended purpose. 5.2 [INTENTIONALLY OMITTED]. 5.3 [INTENTIONALLY OMITTED]. 5.4 EQUIPMENT. All of the Equipment (other than any that may have become obsolete or worn-out) is used or held for use in Borrowers' business and is fit for such purposes. 5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and Equipment are not stored with a bailee, warehouseman, or similar party and are located only at the locations identified on Schedule 5.5. 5.6 INVENTORY RECORDS. Each Borrower keeps correct and accurate records itemizing and describing the type, quality, and quantity of its and its Subsidiaries' Inventory and the book value thereof. 5.7 STATE OF INCORPORATION; LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN; ORGANIZATIONAL ID NUMBER; COMMERCIAL TORT CLAIMS. (a) The jurisdiction of organization of each Borrower and each of its Subsidiaries is set forth on Schedule 5.7. (b) The chief executive office of each Borrower and each of its Subsidiaries is located at the address indicated on Schedule 5.7. 68 (c) Each Borrower's and each of its Subsidiaries' FEIN and organizational identification number, if any, are identified on Schedule 5.7. (d) As of the Closing Date, Borrowers and their Subsidiaries do not hold any commercial tort claims, except as set forth on Schedule 5.7. 5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. (a) Each Borrower is duly organized and existing and in good standing under the laws of the jurisdiction of its organization and qualified to do business in any state where the failure to be so qualified reasonably could be expected to have a Material Adverse Change. (b) Set forth on Schedule 5.8(b), is a complete and accurate description of the authorized Capital Stock of each Borrower, by class, and, as of the Closing Date, a description of the number of shares of each such class that are issued and outstanding. Other than as described on Schedule 5.8(b), there are no subscriptions, options, warrants, or calls relating to any shares of each Borrower's Capital Stock, including any right of conversion or exchange under any outstanding security or other instrument. No Borrower is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its Capital Stock or any security convertible into or exchangeable for any of its Capital Stock. (c) Set forth on Schedule 5.8(c), is a complete and accurate list of each Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of their organization; (ii) the number of shares of each class of common and preferred Capital Stock authorized for each of such Subsidiaries; and (iii) the number and the percentage of the outstanding shares of each such class owned directly or indirectly by the applicable Borrower. All of the outstanding Capital Stock of each such Subsidiary has been validly issued and is fully paid and (if applicable) non-assessable. (d) Except as set forth on Schedule 5.8(c), there are no subscriptions, options, warrants, or calls relating to any shares of any Borrower's Subsidiaries' Capital Stock, including any right of conversion or exchange under any outstanding security or other instrument. No Borrower or any of its respective Subsidiaries is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of any Borrower's Subsidiaries' Capital Stock or any security convertible into or exchangeable for any such Capital Stock. (e) Set forth on Schedule 5.8(e), is a complete and accurate list of each Borrower's Restricted Subsidiaries and Unrestricted Subsidiaries as of the Closing Date. 5.9 DUE AUTHORIZATION; NO CONFLICT. (a) As to each Borrower, the execution, delivery, and performance by such Borrower of this Agreement and the other Loan Documents to which it is a party have been duly authorized by all necessary action on the part of such Borrower. (b) As to each Borrower, the execution, delivery, and performance by such Borrower of this Agreement and the other Loan Documents to which it is a party do not and will not (i) violate any provision of federal, state, or local law or regulation applicable to any 69 Borrower, the Governing Documents of any Borrower, or any order, judgment, or decree of any court or other Governmental Authority binding on any Borrower, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of any Borrower (including any of the Senior Note Documents), (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of any Borrower, other than Permitted Liens, or (iv) require any approval of any Borrower's members or shareholders or any approval or consent of any Person under any material contractual obligation of any Borrower. (c) The execution, delivery, and performance by such Borrower of this Agreement and the Loan Documents to which such Borrower is a party and the exercise by Agent of any rights or remedies in respect of any Collateral (whether specifically granted or created hereunder or created or provided for by applicable law) do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any Governmental Authority or other Person, other than (i) the filing of financing statements, the Diamond Jo Ship Mortgage, fixture filings, and Mortgages and the execution and delivery by the applicable securities intermediary or bank of each Control Agreement, (ii) any consent or approval that has been obtained and remains in full force and effect and (iii) with respect to the exercise by Agent of any rights or remedies in respect of any Collateral, to the extent authorizations, consents or approvals are required by the applicable Gaming Authority or under any intellectual property license, contract or agreement and to the extent any actions are required to be performed by Agent. (d) As to each Borrower, this Agreement and the other Loan Documents to which such Borrower is a party, and all other documents contemplated hereby and thereby, when executed and delivered by such Borrower, will be the legally valid and binding obligations of such Borrower, enforceable against such Borrower in accordance with their respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors' rights generally. (e) The Agent's Liens are validly created, perfected, and first priority Liens, subject only to Permitted Liens. 5.10 LITIGATION. Other than those matters disclosed on Schedule 5.10, there are no actions, suits, or proceedings pending or, to the best knowledge of Borrowers, threatened against Borrowers, or any of their Subsidiaries, as applicable, except for (a) matters that are fully covered by insurance (subject to customary deductibles), and (b) matters arising after the Closing Date that, if decided adversely to Borrowers, or any of their Subsidiaries, as applicable, reasonably could not be expected to result in a Material Adverse Change. 5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating to Borrowers and the Guarantors that have been delivered by Borrowers to the Lender Group have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and present fairly in all material respects, Borrowers' and Guarantors' financial condition as of the date thereof and results of operations for the period then ended. There has not been a Material Adverse Change with respect to Borrowers or Guarantors since the date of the latest financial statements submitted to the Lender Group on or before the Closing Date. 70 5.12 FRAUDULENT TRANSFER. (a) Borrowers and their Subsidiaries, on a consolidated basis, are Solvent. (b) No transfer of property is being made by any Borrower or any Subsidiary of a Borrower and no obligation is being incurred by any Borrower or any Subsidiary of a Borrower in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of Borrowers or their Subsidiaries. 5.13 EMPLOYEE BENEFITS. None of Borrowers, any of their Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any Benefit Plan. 5.14 ENVIRONMENTAL CONDITION. Except as set forth on Schedule 5.14, (a) to Borrowers' knowledge, none of Borrowers' or their Subsidiaries' properties or assets has ever been used by Borrowers, their Subsidiaries or by previous owners or operators in the disposal of, or to produce, store, handle, treat, release, or transport, any Hazardous Materials, where such production, storage, handling, treatment, release or transport was in violation, in any material respect, of applicable Environmental Law, (b) to Borrowers' knowledge, none of Borrowers' nor their Subsidiaries' properties or assets has ever been designated or identified in any manner pursuant to any Environmental Law as a Hazardous Materials disposal site, (c) none of Borrowers nor any of their Subsidiaries have received notice that a Lien arising under any Environmental Law has attached to any revenues or to any Real Property owned or operated by Borrowers or their Subsidiaries, and (d) none of Borrowers nor any of their Subsidiaries have received a summons, citation, notice, or directive from the Environmental Protection Agency or any other federal or state governmental agency concerning any action or omission by any Borrower or any Subsidiary of a Borrower resulting in the releasing or disposing of Hazardous Materials into the environment. 5.15 BROKERAGE FEES. Borrowers and their Subsidiaries have not utilized the services of any broker or finder in connection with Borrowers' obtaining financing from the Lender Group under this Agreement and no brokerage commission or finders fee is payable by Borrowers in connection herewith. 5.16 INTELLECTUAL PROPERTY. Each Borrower and each Subsidiary of a Borrower owns, or holds licenses in, all trademarks, trade names, copyrights, patents, patent rights, and licenses that are necessary to the conduct of its business as currently conducted. Attached hereto as Schedule 5.16 is a true, correct, and complete listing of all material patents, patent applications, trademarks, trademark applications, copyrights, and copyright registrations as to which each Borrower or one of its Subsidiaries is the owner or is an exclusive licensee. 5.17 LEASES. Borrowers and their Subsidiaries enjoy peaceful and undisturbed possession under all leases material to their business and to which they are parties or under which they are operating. All of such leases are valid and subsisting and no material default (after giving effect to any applicable notice and cure periods) by Borrowers or their Subsidiaries exists under any of them. 71 5.18 DEPOSIT ACCOUNTS. Set forth on Schedule 5.18 are all of the Deposit Accounts of each Borrower and each of its Subsidiaries, including, with respect to each depository (i) the name and address of such depository, and (ii) the account numbers of the accounts maintained with such depository. 5.19 COMPLETE DISCLOSURE. All factual information (taken as a whole) furnished by or on behalf of Borrowers or their Subsidiaries in writing to Agent or any Lender (including all information contained in the Schedules hereto or in the other Loan Documents) for purposes of or in connection with this Agreement, the other Loan Documents, or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of Borrowers or their Subsidiaries in writing to Agent or any Lender will be, true and accurate, in all material respects, on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided. On the Closing Date, the Closing Date Projections represent, and as of the date on which any other Projections are delivered to Agent, such additional Projections represent Borrowers' good faith best estimate of their and their Subsidiaries' its future performance for the periods covered thereby. 5.20 INDEBTEDNESS. Set forth on Schedule 5.20 is a true and complete list of all Indebtedness of each Borrower and each Subsidiary of a Borrower outstanding immediately prior to the Closing Date that is to remain outstanding after the Closing Date and such Schedule accurately reflects the aggregate principal amount of such Indebtedness and the principal terms thereof. 5.21 LICENSES AND PERMITS. (a) (i) All material licenses (including all necessary Gaming Licenses), permits, and consents and similar rights required from any federal, state, or local governmental body (including the Gaming Authorities), for the ownership, use, or operation of the businesses or properties now owned or operated by each Borrower and each Subsidiary of a Borrower, have been validly issued and are in full force and effect; (ii) each Borrower and each Subsidiary of a Borrower is in compliance, in all material respects, with all of the provisions thereof applicable to it; and (iii) none of such licenses, permits, or consents is the subject of any pending or, to any Borrower's knowledge, threatened proceeding for the revocation, cancellation, suspension, or non-renewal thereof. As of the Closing Date (and as of each subsequent date on which a Borrower delivers to Agent an updated schedule pursuant to Section 6.17 below), set forth on Schedule 5.21 is a complete and accurate list of all such licenses, permits, and consents that are necessary and appropriate for the operation of the businesses of each Borrower and each Subsidiary of a Borrower and such schedule identifies the date by which an application for the renewal of such license, permit, or consent must be filed and describes the status of each such pending application. (b) Each Borrower and each Subsidiary of a Borrower has obtained (i) all material licenses, permits, and consents necessary or appropriate to conduct its business and operations and (ii) as of the Closing Date, all required approvals from the Gaming Authorities of the transactions contemplated hereby and by the other Loan Documents. 72 (c) Each Borrower and each Subsidiary of a Borrower owns or possesses all patents, trademarks, trade names, copyrights, and other similar rights necessary for the conduct of business as now carried on or proposed to be conducted, without any known conflict of the rights of others. 5.22 SENIOR DEBT. (a) This Agreement is the New Revolving Agreement (as defined in the Intercreditor Agreement), (b) the Term Loan is a refinancing of the obligations under the FF&E Credit Agreement (as defined in the Intercreditor Agreement) and (c) all Obligations constitute Credit Facility Indebtedness (as defined in the Intercreditor Agreement). 6. AFFIRMATIVE COVENANTS. Each Borrower covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Borrowers shall and shall cause each of their respective Subsidiaries to do all of the following: 6.1 ACCOUNTING SYSTEM. Maintain a system of accounting that enables Borrowers to produce financial statements in accordance with GAAP and maintain records pertaining to the Borrower Collateral that contain information as from time to time reasonably may be requested by Agent. 6.2 REPORTING. Provide Agent and each Lender with the following documents at the following times in form satisfactory to the Required Lenders: ================================================================================ Monthly (not later than the (a) a detailed itemized report reflecting the 15th day of each month) prior months and year-to-date revenues from the Vessels, racetrack, off-track betting parlors (including video poker revenues) and out-of-state satellite operations, (b) a detailed itemized report reflecting tax payments (including real estate, ad valorem and gaming taxes) made during the prior month, 73 (c) a detailed itemized report showing actual and estimated Fixed Construction Costs and a statement reflecting the construction related costs incurred or reasonably expected to be incurred by Borrowers in connection with the Racino Project prior to or through the construction completion date and any variances thereof, (d) a detailed itemized report showing the following items by Gaming Property: (i) the average daily dollar amount of winnings for all Gaming Equipment for such month, (ii) the average daily number of customers admitted into such Gaming Property for such month, and (iii) the average daily dollar amount of winnings per customer admitted for such month, - -------------------------------------------------------------------------------- Monthly (not later than (e) a Borrowing Base Certificate setting forth the 30th day of each Combined EBITDA for each Borrower and Gaming month) Property, - -------------------------------------------------------------------------------- As prepared or received (f) copies of each report in respect of any Borrower's business issued by a Gaming Authority or made by Borrower to a Gaming Authority within 15 days of their respective issuance or filing date, and - -------------------------------------------------------------------------------- Upon request by Agent (g) such other reports as to the Collateral, or the financial condition of Borrowers and their Subsidiaries, as Agent may request. ================================================================================ In addition, each Borrower agrees to cooperate fully with Agent to facilitate and implement a system of electronic collateral reporting in order to provide electronic reporting of each of the items set forth above. 6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to Agent and each Lender: (a) as soon as available, but in any event within 30 days (45 days in the case of a month that is the end of one of the first 3 fiscal quarters in a fiscal year or 90 days in the case of a month that is the end of the fiscal year) after the end of each month during each of Parent's fiscal years (the "Monthly Financial Report"), (i) a company prepared consolidated balance sheet, income statement, and statement of cash flow covering Parent's and its Subsidiaries' operations during such period, (ii) a certificate signed by the chief financial officer of Parent to the effect that: (A) the financial statements delivered hereunder have been prepared in accordance with GAAP (except for the lack of footnotes and being subject to year-end audit adjustments) and fairly present in all material respects the financial condition of Parent and its Subsidiaries, (B) the representations and warranties of Borrowers contained in this Agreement and the other Loan Documents are true and correct in 74 all material respects on and as of the date of such certificate, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date), (C) there does not exist any condition or event that constitutes a Default or Event of Default (or, to the extent of any non-compliance, describing such non-compliance as to which he or she may have knowledge and what action Borrowers have taken, are taking, or propose to take with respect thereto), (D) each Borrower is in compliance with its obligations (including, without limitation, rental payment obligations) under each lease agreement relating to real property leased by such Borrower (except for such defaults described as required pursuant to Section 6.3(a)(ii)(C)), and (iii) for each month that is the date on which a financial covenant in Section 7.20 is to be tested, a Compliance Certificate demonstrating, in reasonable detail, compliance at the end of such period with the applicable financial covenants contained in Section 7.20, (b) as soon as available, but in any event within 90 days after the end of each of Parent's fiscal years, (i) financial statements of Parent and its Subsidiaries for each such fiscal year, audited by independent certified public accountants reasonably acceptable to Agent and certified, without any qualifications, by such accountants to have been prepared in accordance with GAAP (such audited financial statements to include a balance sheet, income statement, and statement of cash flow and, if prepared, such accountants' letter to management), (ii) a certificate of such accountants addressed to Agent and the Lender stating that such accountants do not have knowledge of the existence of any Default or Event of Default under Section 7.20, (c) as soon as available, but in any event no later than 30 days after the end of each of Parent's fiscal years, copies of Borrowers' Projections, in form and substance (including as to scope and underlying assumptions) satisfactory to Agent, in its sole discretion, for the forthcoming fiscal year, month by month, certified by the chief financial officer of Parent as being such officer's good faith best estimate of the financial performance of Borrowers and their Subsidiaries during the period covered thereby, (d) if and when filed by any Borrower, (i) any filings or monthly reports submitted by any Borrower to the Louisiana Regulatory Authorities, the Iowa Regulatory Authorities or any other Gaming Authority other than such filings or monthly reports submitted in the ordinary course of business, 75 (ii) any filings made by any Borrower with the SEC, (iii) copies of Borrowers' federal income tax returns, and any amendments thereto, filed with the Internal Revenue Service, and (iv) any other information that is provided by Parent to its shareholders in their capacities as shareholders generally, (e) if and when filed by any Borrower or any Subsidiary of a Borrower and as requested by Agent, satisfactory evidence of payment of applicable excise taxes in each jurisdiction in which (i) any Borrower or any Subsidiary of a Borrower conducts business or is required to pay any such excise tax, (ii) where any Borrower's or any Subsidiary of a Borrower's failure to pay any such applicable excise tax would result in a Lien on the properties or assets of any Borrower or any Subsidiary of a Borrower, or (iii) where any Borrower's or any Subsidiary of a Borrower's failure to pay any such applicable excise tax reasonably could be expected to result in a Material Adverse Change, (f) as soon as a Borrower has knowledge of any event or condition that constitutes a Default or an Event of Default, notice thereof and a statement of the curative action that Borrowers propose to take with respect thereto, (g) as soon as any Borrower has knowledge that the construction of the Racino Project cannot be completed by Contractor, or has knowledge that such Borrower cannot meet its obligations under the Fixed Price Contract or any other construction documents, notice thereof and a statement of the curative action that Borrowers propose to take with respect thereto, (h) as soon as any Borrower has knowledge thereof, notice of any proposed legislation or administrative action specifically affecting any Borrower's or any Subsidiary of a Borrower's gaming activities or the Racino Project submitted to the floor for business before any Governmental Authority in the state of Louisiana or Iowa (including the state legislature or any committee thereof), (i) promptly following the end of each fiscal quarter during which any Restricted Payment was made pursuant to Section 7.11(3), Borrowers shall deliver to Agent a certificate signed by the chief financial officer of each Borrower stating that each such Restricted Payment was permitted and setting forth the basis upon which the calculations required by Section 7.11 were computed, which calculations may be based upon the Company's latest available internal financial statements, and (j) upon the request of Agent, any other report reasonably requested relating to the financial condition of Borrowers or their Subsidiaries. In addition to the financial statements referred to above, Borrowers agree (a) to deliver (i) financial statements for Borrowers and their Subsidiaries prepared on both a consolidated and consolidating basis (except for audited financial statements) and (ii) audited financial statements for Borrowers and their Subsidiaries to the extent available and (b) that no Borrower, or any Subsidiary of a Borrower, will have a fiscal year different from that of Parent. Borrowers agree that their independent certified public accountants are authorized to communicate with Agent and to release to Agent whatever financial information concerning 76 Borrowers or their Subsidiaries that Agent reasonably may request. Each Borrower waives the right to assert a confidential relationship, if any, it may have with any accounting firm or service bureau in connection with any information requested by Agent pursuant to or in accordance with this Agreement, and agree that Agent may contact directly any such accounting firm or service bureau in order to obtain such information. 6.4 [INTENTIONALLY OMITTED]. 6.5 [INTENTIONALLY OMITTED]. 6.6 MAINTENANCE OF PROPERTIES. Cause all material properties which are owned or leased by Borrowers and their Subsidiaries and used in the conduct of their business and the business of each of their Subsidiaries to be maintained and kept in good condition, repair and working order (reasonable wear and tear excepted) and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in their reasonable judgment may be necessary, so that the business carried on in connection therewith may be properly conducted at all times; provided, however, that nothing in this Section 6.6 shall prevent Borrowers from discontinuing any operation or maintenance of any of such properties, or disposing of any of them if such discontinuance or disposal is (a) (i) in the judgment of the Managers of Borrowers, desirable in the conduct of the business of such entity and (ii) would not have a material adverse effect on the ability of Borrowers and their Subsidiaries to satisfy their obligations under this Agreement and other Loan Documents, and, to the extent applicable, (b) as otherwise permitted under Section 7.4 hereof. 6.7 TAXES. Cause all assessments and taxes, whether real, personal, or otherwise, due or payable by, or imposed, levied, or assessed against Borrowers, their Subsidiaries or any of their respective assets to be paid in full, before delinquency or before the expiration of any extension period, except to the extent that the validity of such assessment or tax shall be the subject of a Permitted Protest. Borrowers will and will cause their Subsidiaries to make timely payment or deposit of all tax payments and withholding taxes required of them by applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon request, furnish Agent with proof satisfactory to Agent indicating that the applicable Borrower or Subsidiary of a Borrower has made such payments or deposits. Borrowers shall deliver satisfactory evidence of payment of applicable excise taxes in each jurisdictions in which any Borrower is required to pay any such excise tax. 6.8 INSURANCE. (a) At Borrowers' expense, maintain insurance respecting their and their Subsidiaries assets wherever located, covering loss or damage by fire, theft, explosion, and all other hazards and risks as ordinarily are insured against by other Persons engaged in the same or similar businesses. Borrowers also shall maintain business interruption and comprehensive general liability insurance, as well as insurance against larceny, embezzlement, and criminal misappropriation. In addition to the foregoing, Borrowers shall maintain the following insurance with respect to the Real Property: (i) special causes of loss insurance (formerly known as all-risk insurance), flood and sprinkler leakage, if applicable, in an amount sufficient to prevent any Borrower or any Subsidiary of a Borrower from being or becoming a co-insurer within the terms 77 of the policy or policies providing such insurance, and in any event for not less than the full replacement value of the improvements and the fixtures to the Real Property, as reasonably determined by Agent; (ii) business interruption insurance for loss occasioned by the perils commonly insured in a special causes of loss policy for a period ending no earlier than the Maturity Date and in an aggregate amount not less than the real estate taxes, additional interest and other assessments for the Real Property and all other continuing expenses of the Real Property including, without limitation, all payments required to be made by any Borrower or any Subsidiary of a Borrower under the Leases; (iii) worker's compensation and employer's liability insurance, subject to statutory limits or better, in respect of any work or other operations on, about or in connection with the Real Property; and (iv) such other insurance with respect to the Real Property in such amounts as Agent, from time to time, may reasonably request against such other insurable hazards which are commonly insured against in respect of property similar to the Real Property. (b) All such policies of insurance shall be in such amounts and with such insurance companies as are reasonably satisfactory to Agent. All such policies of insurance relating to FF&E Collateral shall cover the full replacement cost of such Equipment. The deductible under all insurance policies covering FF&E Collateral shall not exceed $100,000 per occurrence in the case of fire loss, and shall be the lowest commercially available and reasonably priced deductible in case of all other losses. Borrowers shall deliver copies of all such policies, any renewals thereof and evidence of payment of the premiums therefor to Agent, together with a satisfactory lender's loss payable endorsement naming Agent as loss payee as its interests may appear with respect to property insurance or additional insured with respect to liability policies and, if appropriate, a standard noncontributory endorsement in favor of Agent. Each policy of insurance or endorsement shall contain a clause requiring the insurer to give not less than 10 days' prior written notice to Agent in the event of cancellation, material change or reduction in the coverage or amounts of the policy for any reason whatsoever. In the event of any casualty loss of assets of any Borrower constituting FF&E Collateral and assets not constituting FF&E Collateral, Borrowers shall allocate any deductible for such loss to the assets not constituting FF&E Collateral, to the extent practicable under the circumstances. (c) Borrowers shall give Agent prompt notice of the occurrence of any loss covered by such insurance policies or of any loss relating to a condemnation or taking by eminent domain. Borrowers and Agent agree that the right to make any adjustment of any losses covered by insurance and the distribution and application of monies received for such losses, condemnation or eminent domain shall be as follows: (i) In the absence of a Default or Event of Default, Agent shall have the exclusive right to adjust any losses payable with respect to the Collateral under any such insurance policies in excess of $2,000,000 in the aggregate, without any liability to Borrowers whatsoever in respect of such adjustments, and any monies received as payment for any loss under any insurance policy mentioned above with respect to the Collateral (other than liability insurance policies) or as payment of any award or compensation for condemnation or taking by eminent domain with respect to the Collateral, may be retained by the applicable Borrower for application to the cost of repairs, replacements, or restorations. Any such repairs, replacements, or restorations shall be effected with reasonable promptness and shall be of a value at least equal to the value of 78 the items of property destroyed prior to such damage or destruction. Borrowers shall consult with Agent in connection with adjusting any losses payable with respect to the Collateral not in excess of $2,000,000. (ii) During the existence of a Default or Event of Default, Agent shall have the exclusive right to adjust any losses payable with respect to the Collateral under any such insurance policies in excess of $150,000 without any liability to Borrower whatsoever in respect of such adjustments, and any monies in excess of $150,000 received as payment for any loss under any insurance policy mentioned above with respect to the Collateral (other than liability insurance policies) or as payment of any award or compensation for condemnation or taking by eminent domain with respect to the Collateral, shall be paid over to Agent to be applied at the election of the Required Lenders either to the prepayment of the Obligations or shall be disbursed to Borrowers under staged payment terms reasonably satisfactory to Agent for application to the cost of repairs, replacements, or restorations. (d) Borrowers shall not, and shall not suffer or permit their Subsidiaries to, take out separate or additional insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 6.8, unless Agent is included thereon as named insured with the loss payable to Agent under a lender's loss payable endorsement or its equivalent and such insurance designates that such insurance is providing coverage secondary to the insurance required to be carried hereunder. Nothing contained herein shall prohibit any Borrower or any Subsidiary of a Borrower from holding or obtaining an owner's policy of title insurance covering any Real Property. Borrowers immediately shall notify Agent whenever such separate insurance is taken out, specifying the insurer thereunder and full particulars as to the policies evidencing the same, and copies of such policies promptly shall be provided to Agent. 6.9 LOCATION OF INVENTORY AND EQUIPMENT. Keep Borrowers' and their Subsidiaries' Inventory and Equipment only at the locations identified on Schedule 5.5; provided, however, that Borrowers may amend Schedule 5.5 so long as such amendment occurs by written notice to Agent not less than 30 days prior to the date on which the Inventory or Equipment is moved to such new location, so long as such new location is within the continental United States, and so long as, at the time of such written notification, the applicable Borrower provides any financing statements or fixture filings necessary to perfect and continue perfected the Agent's Liens on such assets and, if requested by Required Lenders, also provides to Agent a Collateral Access Agreement. 6.10 COMPLIANCE WITH LAWS. Comply with the requirements of all applicable laws, rules, regulations, and orders of any Governmental Authority, including the Fair Labor Standards Act and the Americans With Disabilities Act, other than laws, rules, regulations, and orders the non-compliance with which, individually or in the aggregate, would not result in and reasonably could not be expected to result in a Material Adverse Change. 6.11 LEASES. Pay when due all rents and other amounts payable under any leases to which any Borrower or any Subsidiary of a Borrower is a party or by which any Borrower's or any Subsidiary of a Borrower's properties and assets are bound, unless such payments are the subject of a Permitted Protest. 79 6.12 BROKERAGE COMMISSIONS. Pay any and all brokerage commission or finders fees incurred in connection with or as a result of Borrowers' obtaining financing from the Lender Group under this Agreement. Borrowers agree and acknowledge that payment of all such brokerage commissions or finders fees shall be the sole responsibility of Borrowers, and each Borrower agrees to indemnify, defend, and hold Agent and the Lender Group harmless from and against any claim of any broker or finder arising out of Borrowers' obtaining financing from the Lender Group under this Agreement. 6.13 EXISTENCE. At all times preserve and keep in full force and effect each Borrower's and each Subsidiary of a Borrower's valid existence and good standing and any rights and franchises material to their respective businesses. 6.14 ENVIRONMENTAL. (a) Keep any property either owned or operated by any Borrower or any Subsidiary of a Borrower free of any Environmental Liens or post bonds or other financial assurances sufficient to satisfy the obligations or liability evidenced by such Environmental Liens, (b) comply, in all material respects, with Environmental Laws and provide to Agent documentation of such compliance which Agent reasonably requests, (c) promptly notify Agent of any release of a Hazardous Material in any reportable quantity from or onto property owned or operated by any Borrower or any Subsidiary of a Borrower and take any Remedial Actions required under any applicable Environmental Law to abate said release or otherwise to come into compliance with applicable Environmental Law, and (d) promptly provide Agent with written notice within 10 days of the receipt of any of the following: (i) notice that an Environmental Lien has been filed against any of the real or personal property of any Borrower or any Subsidiary of a Borrower, (ii) commencement of any Environmental Action or notice that an Environmental Action will be filed against any Borrower or any Subsidiary of a Borrower, and (iii) notice of a violation, citation, or other administrative order which reasonably could be expected to result in a Material Adverse Change. 6.15 DISCLOSURE UPDATES. Promptly and in no event later than 5 Business Days after obtaining knowledge thereof, (a) notify Agent if any written information, exhibit, or report furnished to the Lender Group contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements contained therein not misleading in light of the circumstances in which made, and (b) correct any defect or error that may be discovered therein or in any Loan Document or in the execution, acknowledgement, filing, or recordation thereof. 6.16 GOVERNMENT AUTHORIZATION. Deliver to Agent, as soon as practicable, and in any event within 10 days after the receipt by such Borrower from any Gaming Authority or other Governmental Authority having jurisdiction over the operations of such Borrower or any Subsidiary of such Borrower or filing or receipt thereof by such Borrower or any Subsidiary of such Borrower (a) copies of any order or notice of such Gaming Authority or such other Governmental Authority or court of competent jurisdiction which designates any Gaming License or other material franchise, permit, or other governmental operating authorization of such Borrower or any Subsidiary of such Borrower or any application therefor, for a hearing or which refuses renewal or extension of, or revokes or suspends the authority of such Borrower or any Subsidiary of such Borrower to construct, own, manage, or operate its businesses, and (b) a 80 copy of any competing application filed with respect to any such Gaming License or other authorization, or application therefor, of such Borrower or any Subsidiary of such Borrower, or any citation, notice of violation, or order to show cause issued by any Gaming Authority or other governmental authority or any complaint filed by any Gaming Authority or other governmental authority which is available to such Borrower or any Subsidiary of such Borrower. 6.17 LICENSE RENEWALS. Commencing on the date 6 months following the Closing Date and continuing every 6 months thereafter, deliver to Agent an updated Schedule 5.21 reflecting thereon, as of the date of such delivery, the information described in Section 5.21. 6.18 LICENSES AND PERMITS. (a) Ensure that all material licenses (including all necessary Gaming Licenses), permits, and consents and similar rights required from any federal, state, or local governmental body (including the Gaming Authorities) for the ownership, use, or operation of the businesses or properties now owned or operated by each Borrower and each Subsidiary of a Borrower have been validly issued and are in full force and effect, and (b) comply, in all material respects, with all of the provisions thereof applicable to it. 6.19 SUBSIDIARY GUARANTEES. Cause (a) each Subsidiary of a Borrower that is formed or acquired after the date hereof (other than any CFC) or is determined to be a Restricted Subsidiary, concurrently therewith, to (i) become a Guarantor hereunder and execute and deliver to Agent a supplement to the Subsidiary Guaranty pursuant to which such Subsidiary shall unconditionally guarantee all of the Obligations in form and substance acceptable to Agent and (ii) execute a supplement to the Guarantor Security Agreement in form and substance acceptable to Agent and such other agreements or documents necessary or requested by Agent, including, without limitation, Mortgages with respect to any Real Property of such Subsidiary, to grant Agent a valid, enforceable, perfected Lien on the collateral described therein, subject only to Permitted Liens; and (b) cause such Subsidiary to deliver to Agent an opinion of counsel, in form reasonably satisfactory to Agent, that (i) such guaranty, security agreement, and other agreements and documents have been duly authorized, executed and delivered by such Subsidiary and (ii) such guaranty, security agreement, and such other agreements and documents constitute a legal, valid, binding and enforceable obligation of such Subsidiary, subject to customary assumptions and exceptions, including for bankruptcy, fraudulent transfer and equitable principles. Concurrently with such formation, acquisition or determination, such Borrower will provide to Agent a pledge agreement and appropriate certificates and powers or Uniform Commercial Code financing statements, hypothecating all of the direct or beneficial ownership interest in such Subsidiary, in form and substance satisfactory to Agent, and all other documentation, in form and substance satisfactory to Agent, including one or more opinions of counsel satisfactory to Agent, which in Agent's opinion is appropriate with respect to the execution and delivery of the applicable documentation referred to above. Any document, agreement, or instrument executed or issued subject to this Section 6.19 shall be a Loan Document. 6.20 COLLATERAL FOR FF&E OBLIGATIONS. Use commercially reasonable efforts to obtain the approval of the necessary Gaming Authorities, no later than September 15, 2004, of (a) the guaranty by Guarantors and DJL of the FF&E Obligations and (b) the grant by Guarantors and DJL of a security interest in the Collateral to secure prompt repayment of the FF&E Obligations. In the event Borrowers deliver, in form and substance satisfactory to Agent, (a) amendments to this Agreement, the Guarantor Security Agreement, the Mortgages, the Diamond 81 Jo Ship Mortgage and, as requested by Agent, any other Loan Documents, duly executed by Borrowers and Guarantors, as applicable, providing for the guaranty of the FF&E Obligations by Guarantors and DJL and the granting by Guarantors and DJL of a security interest in the Collateral to secure prompt repayment of the FF&E Obligations, and (b) opinions of counsel (including, without limitation, admiralty counsel, real estate counsel and regulatory counsel) with respect to such amendments, Agent and Required Lenders will enter into an amendment to this Agreement deleting Section 7.20(c). 7. NEGATIVE COVENANTS Each Borrower covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Borrowers will not and will not permit any of their respective Restricted Subsidiaries to do any of the following: 7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness, except: (a) Indebtedness evidenced by this Agreement and the other Loan Documents, together with Indebtedness owed to Underlying Issuers with respect to Underlying Letters of Credit; (b) Indebtedness set forth on Schedule 5.20; (c) Indebtedness represented by Capitalized Lease Obligations or Purchase Money Obligations; provided, that (x) no Advances hereunder are utilized for the purchase or lease of FF&E financed with such Indebtedness, and (y) the aggregate principal amount of such Indebtedness outstanding at any time does not exceed $7,500,000 for each Gaming Property; (d) Indebtedness solely in respect of appeal bonds, surety bonds, insurance obligations or bonds, and performance bonds, and similar bonds or obligations, all incurred in the ordinary course of business (including, without limitation, to maintain any license or permits) in accordance with customary industry practices; (e) Hedging Obligations incurred to fix or hedge interest rate risk with respect to any fixed or variable rate Indebtedness otherwise permitted by this Agreement; provided, that the notional principal amount of each such Hedging Obligation does not exceed the principal amount of the Indebtedness to which such Hedging Obligation relates; (f) Indebtedness of any Borrower or any Restricted Subsidiary owed to and held by a Borrower that is unsecured and subordinated in right of payment to the Obligations; provided, that any subsequent issuance or transfer of any Capital Stock that results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary, or any transfer of such Indebtedness (other than to a Borrower) shall be deemed, in each case, to constitute the incurrence of such Indebtedness by such Borrower or such Restricted Subsidiary, as the case may be; (g) Indebtedness outstanding under (i) the Senior Note Documents in an aggregate principal amount outstanding not to exceed $233,000,000 at anytime and (ii) the OED Note Documents in an aggregate principal amount outstanding not to exceed $6,910,000 at anytime; 82 (h) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided such obligation shall not continue to exist more than 2 Business Days after the date the applicable Borrower or Subsidiary of a Borrower receives written notification; (i) the accrual of interest, the accretion or amortization of original issue discount and the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms; (j) Indebtedness arising from agreements for indemnification, adjustment of purchase price or similar obligations, in each case incurred in connection with the disposition of any business or assets of Borrowers or any of the Restricted Subsidiaries; provided that the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by Borrowers or the applicable Restricted Subsidiary in connection with such disposition; (k) Indebtedness issued in exchange for, or the proceeds of which are substantially contemporaneously used to extend, repay, redeem, discharge, refinance, renew, replace, or refund (collectively, "Refinance"), Indebtedness incurred pursuant clause (b) or (g) above, clause (l) below or this clause (k) (the "Refinancing Indebtedness"); provided, that (i) the principal amount of such refinancing Indebtedness does not exceed the principal amount of Indebtedness so Refinanced (plus any required premiums and out-of-pocket expenses reasonably incurred in connection therewith), (ii) the Refinancing Indebtedness has a final scheduled maturity that equals or exceeds the final stated maturity, and a weighted average life to maturity that is equal to or greater than the weighted average life to maturity, of the Indebtedness being refinanced, (iii) the Refinancing Indebtedness ranks, in right of payment, no more favorable to the Obligations or applicable Guaranty, as the case may be, than the Indebtedness being Refinanced and any subordination terms of the Refinancing Indebtedness must be at least as favorable to the Lenders as those in the Indebtedness being refinanced, and (iv) the Refinancing Indebtedness is not secured by a Lien on any asset that did not so secure the Indebtedness being refinanced; (l) Indebtedness (including, without limitation, Acquired Debt) to acquire one or more Gaming Properties if: (i) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a pro forma basis to such incurrence; (ii) the Interest Coverage Ratio for Borrowers' most recently ended 4 full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is to be incurred (the "Four Quarter Reference Period") would have been greater than (x) 1.5 to 1.0 if the last fiscal quarter in the Four Quarter Reference Period is either the first or second fiscal quarter of 2004, (y) 1.75 to 1.0 if the last fiscal quarter in the Four Quarter Reference Period is either in the third or fourth fiscal quarter of 2004 and (z) 2.0 to 1.0 otherwise, in each case determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as set forth in the definition of Interest Coverage Ratio, as if such additional Indebtedness had been incurred at the beginning of such 4-quarter period; and (iii) the final stated maturity of such Indebtedness is after the Maturity Date (except for Purchase Money Obligations, Capitalized Lease Obligations, or Acquired Debt); 83 (m) unsecured Indebtedness not otherwise permitted by clauses (a) through (l) above in an aggregate principal amount (or accreted value, as applicable) at any time outstanding pursuant to this clause (m), including all Refinancing Indebtedness incurred to repay, redeem, discharge, retire, defease, refund, refinance or replace any Indebtedness incurred pursuant to this clause (m), not to exceed $10,000,000; (n) Indebtedness permitted by Section 7.6; and (o) Indebtedness incurred in connection with a Gaming Property Financing in an aggregate principal amount not to exceed $15,000,000; provided that (i) Agent consents in writing prior to the incurrence of such Indebtedness and (ii) such $15,000,000 amount shall be reduced dollar-for-dollar by the amount of Acquired Debt secured by the assets of any Gaming Property (unless such Acquired Debt could have been incurred under, and reduces the amount available under, clause (c) above). 7.2 LIENS. Create, incur, assume, or permit to exist, directly or indirectly, any Lien on or with respect to any of its assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for Permitted Liens (for purposes of this Section, Permitted Liens shall include Liens that are replacements of Permitted Liens to the extent that the original Indebtedness is refinanced, renewed, or extended under Section 7.1(k) and so long as the replacement Liens only encumber those assets that secured the refinanced, renewed, or extended Indebtedness). 7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. (a) Enter into any merger, consolidation, reorganization, or recapitalization, or reclassify its Capital Stock; or (b) Liquidate, wind up, or dissolve itself (or suffer any liquidation or dissolution). Notwithstanding the foregoing, nothing in this Section 7.3 shall prohibit (i) the ability of Restricted Subsidiaries to enter into any merger with another Restricted Subsidiary, (ii) the ability of a Restricted Subsidiary to enter into any merger with a Borrower, so long as (A) such Borrower shall survive any such merger and (B) such Borrower shall assume, in a manner satisfactory to Agent, the obligations of such Restricted Subsidiary under the Loan Documents to which such Restricted Subsidiary was a party, (iii) the ability of a Borrower to enter into any merger with another Borrower, so long as the surviving Borrower shall assume, in a manner satisfactory to Agent, the obligations of such other Borrower under the Loan Documents to which such other Borrower was a party and (iv) the liquidation of Peninsula Gaming Capital Corporation. 7.4 DISPOSAL OF ASSETS. (a) Make any sale, lease, exchange, or other disposition, in one or a series of related transactions, of all or any portion of the assets of Borrowers (other than the sale or other disposition of Equipment that is a Permitted Disposition) that compose the Ice Harbor Facility or the Racino Project; 84 (b) Make any Asset Sale other than Permitted Dispositions, provided, however, that an Asset Sale (other than Permitted Dispositions) may be made (other than an Asset Sale comprised of any assets that compose the Ice Harbor Facility or the Racino Project) if: (i) no Default or Event of Default shall have occurred and be continuing or would result therefrom (other than a Default or Event of Default arising from an Asset Sale that is a consequence of an Event of Loss); (ii) such Borrower or such Restricted Subsidiary, as applicable, receives consideration of not less than the fair market value, as of the time of such Asset Sale (as determined by the Manager of such Borrower or Restricted Subsidiary in good faith), of the assets that are the subject of such Asset Sale (other than an Asset Sale that is a consequence of an Event of Loss); (iii) such Borrower or such Restricted Subsidiary, as applicable, receives 75% of the consideration for such Asset Sale (other than an Asset Sale that is a consequence of an Event of Loss) in the form of either (A) cash or Cash Equivalents or the assumption by the transferee of liabilities (other than liabilities that, by their terms, are subordinated to the Obligations) of such Borrower or such Restricted Subsidiary, as applicable (provided, that following such Asset Sale there is no further recourse to such Borrower or its Restricted Subsidiaries with respect to such liabilities and provided, further, that the 75% limitation set forth in this clause (b)(iii) of this paragraph shall not apply to any proposed Asset Sale for which an independent certified accounting firm has certified to the Managers of the applicable Borrower and Agent that the after-tax cash portion of the consideration to be received by such Borrower or such Restricted Subsidiary in such proposed Asset Sale is equal to or greater than what the net after-tax cash proceeds would have been had such proposed Asset Sale complied with the 75% limitation set forth in this clause (b) of this paragraph) or (B) assets of the type described in Section 7.4(b)(iv)(A); (iv) within 360 days of such Asset Sale, the Net Proceeds thereof are (A) invested in assets related to the business of such Borrower or its Restricted Subsidiaries (which, in the case of a sale of a Gaming Vessel (as that term is defined in the Indenture) must be a Gaming Vessel having a fair market value, as determined by an independent appraisal, at least equal to the fair market value of the Gaming Vessel being replaced immediately preceding the Asset Sale), (B) applied to repay Indebtedness under Purchase Money Obligations secured by the assets sold, (C) applied to repay Indebtedness under this Agreement and to permanently reduce the Maximum Revolver Amount by the amount of Indebtedness so repaid, or (D) any combination of clauses (A), (B), or (C); and (v) the Net Proceeds of any Asset Sale involving an Event of Loss are paid over to Agent in conformance with the requirements of Section 6.8(c) hereof; (c) Pending the final application of any Net Proceeds of any Asset Sale in accordance with Section 7.4(b), Borrowers shall apply such Net Proceeds to the outstanding 85 Obligations or retain such Net Proceeds (including, without limitation, for the purpose of investing such Net Proceeds in Cash Equivalents), in each case, in accordance with the terms hereof. 7.5 CHANGE NAME. Change any Borrower's or any Subsidiary of a Borrower's name, FEIN, corporate structure, or identity, or add any new fictitious name; provided, however, that a Borrower or a Subsidiary of a Borrower may change its name upon at least 30 days' prior written notice by such Borrower to Agent of such change and so long as, at the time of such written notification, such Borrower or such Subsidiary provides any financing statements or fixture filings necessary to perfect and continue perfected Agent's Liens. 7.6 GUARANTEE. Guarantee or otherwise become in any way liable with respect to the obligations of any third Person except (a) by endorsement of instruments or items of payment for deposit to the account of Borrowers or which are transmitted or turned over to Agent, (b) guarantees constituting Investments permitted under Section 7.13, (c) guarantees of obligations arising under the Senior Note Documents by Borrowers and their Restricted Subsidiaries; provided that (i) any such Restricted Subsidiary shall have guaranteed the Obligations in accordance with Section 6.19; and (ii) any lien securing such guarantee of the obligations under the Senior Note Documents shall be subordinate to any lien securing such guarantee of the Obligations on the terms set forth in the Intercreditor Agreement, (d) guarantees constituting Indebtedness permitted under Section 7.1 and (e) guarantees of Subsidiaries of Indebtedness of a Borrower or Restricted Subsidiary permitted under Section 7.1. 7.7 NATURE OF BUSINESS. Directly or indirectly engage to any material extent in any line or lines of business activity other than that which, in the reasonable good faith judgment of the Managers of Borrowers, is a Related Business. 7.8 PREPAYMENTS AND AMENDMENTS. (a) Except in connection with a refinancing permitted by Section 7.1(k), make any principal payment on, or purchase, redeem, defease or otherwise acquire or retire for value, any Indebtedness of a Borrower or a Subsidiary prior to any scheduled principal payment, sinking fund payment or other payment at the stated maturity thereof; other than (i) the Obligations, (ii) the obligations secured by the mortgage granted by OED to the seller of the parcels of Warner Land encumbering such parcels and (iii) the obligations of OED evidenced by that certain note payable to International Game Technology in the principal amount outstanding as of December 31, 2003, of $548,940, and (b) (i) Directly or indirectly, amend, modify, alter, increase, or change any of the terms or conditions of any of the Senior Note Documents in any manner that would (A) have the effect of (1) increasing principal, interest, fee or other payment obligations thereunder, (2) adding additional collateral or other guarantors (other than as contemplated as of the Closing Date), (3) shortening the maturity or increasing the amortization of the obligations thereunder, (4) making the covenants, defaults or other provisions thereof more burdensome, or (5) altering the subordination provisions thereof or (B) otherwise have a material adverse effect on the interests of the Lender Group or (ii) directly or indirectly, amend, modify, alter, increase or change any of the terms or conditions of the Management Agreements, the Fixed Price Contract, the Lease, the Ice Harbor Parking Agreement or any Governing Documents of a Borrower or its 86 Subsidiary in any manner that would make the covenants, defaults or other provisions thereof more burdensome on any Borrower or any Guarantor or otherwise have a material adverse effect on the interests of the Lender Group. 7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or indirectly, any Change of Control. 7.10 OPERATION OF DIAMOND JO VESSELS. At any time operate the Diamond Jo Vessels outside the navigation limits of the insurance carried pursuant to the Diamond Jo Ship Mortgage. 7.11 RESTRICTED PAYMENTS. Make any Restricted Payment unless: (a) no Default or Event of Default has occurred and is continuing or would occur as a consequence thereof, and (b) immediately after giving effect to such Restricted Payment on a pro forma basis, the Interest Coverage Ratio for the immediately preceding 4 fiscal quarter period for which internal financial statements have been delivered to Agent would not have been less than 2.0:1.0, and (c) such Restricted Payment (the value of any such payment, if other than cash, being determined in good faith by the Managers of Borrowers and evidenced by a resolution set forth in a certificate signed by the chief financial officer of Borrowers delivered to Agent), together with the aggregate of all other Restricted Payments made after the Closing Date, is less than the sum of: (i) 50% of the sum of Combined Net Income plus the Combined Non-Cash Charges described in clauses (ii) and (iv) of the definition of Combined Non-Cash Charges of Borrowers and their Restricted Subsidiaries to the extent deducted in computed Net Income of the applicable Borrower for the period (taken as one accounting period) from the beginning of the first full fiscal quarter immediately following the Closing Date to the end of such Borrower's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Combined Net Income for such period is a deficit, 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds (or of the net cash proceeds received upon the conversion of non-cash proceeds into cash) received by the applicable Borrower from (x) the issuance or sale, other than to a Subsidiary, of Equity Interests of such Borrower (other than Disqualified Capital Stock) and (y) any equity contribution from a holder of such Borrower's Capital Stock (other than a Subsidiary), in each case, after the Closing Date and on or prior to the time of such Restricted Payment, plus (iii) 100% of the aggregate net cash proceeds (or of the net cash proceeds received upon the conversion of non-cash proceeds into cash) received by the applicable Borrower from the issuance or sale, other than to a Subsidiary, of any convertible or exchangeable debt security of such Borrower that has been converted or exchanged into Equity Interests of the applicable Borrower (other 87 than Disqualified Capital Stock) pursuant to the terms thereof after the Closing Date and on or prior to the time of such Restricted Payment (including any additional net cash proceeds received by such Borrower upon such conversion or exchange), plus (iv) the aggregate Return from Unrestricted Subsidiaries after the Closing Date and on or prior to the time of such Restricted Payment. Notwithstanding the foregoing, nothing in this Section will prohibit: (1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would not have been prohibited by the provisions of this Agreement; (2) the redemption, purchase, retirement or other acquisition of any Equity Interests of any Borrower in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Subsidiary) of, other Equity Interests of such Borrower (other than Disqualified Capital Stock); (3) with respect to each tax year or portion thereof that a Borrower qualifies as a Flow Through Entity and so long as clause (a) above is satisfied, the payment of Permitted Tax Distributions (whether paid in such tax year or portion thereof, or any subsequent tax year); provided, that (A) prior to the first payment of Permitted Tax Distributions during any particular calendar year such Borrower provides a certificate signed by the chief financial officer of such Borrower and an Opinion of Counsel to the effect that it and each other Flow Through Entity in respect of which such distributions are being made qualify as Flow Through Entities for Federal income tax purposes and for the states in respect of which such distributions are being made for such tax year or portion thereof, (B) at the time of such distribution, the most recent audited financial statements of the applicable Borrower for periods including such tax year or portion thereof provided to Agent provide that such Borrower and each Subsidiary of the applicable Borrower in respect of which such distributions are being made was treated as a Flow Through Entity for the period of such financial statements, and (C) in the case of the portion, if any, of any Permitted Tax Distribution that is proposed to be distributed for a particular taxable period or portion thereof, which portion of such Permitted Tax Distribution is attributable to a Flow Through Entity that is not a Restricted Subsidiary, such portion of such proposed Permitted Tax Distribution shall be limited to the Excess Cash Distribution Amount for Taxes; (4) distributions or payments to any Excluded Person for or in respect of (i) tax preparation, accounting, licensure, legal and administrative fees and expenses, including travel and similar reasonable expenses, incurred on behalf of Borrowers or their respective Restricted Subsidiaries or in connection with PGP's ownership of Borrowers or their respective Restricted Subsidiaries, consistent with industry practice, (ii) so long as clause (a) above is satisfied, distributions pursuant to, and in accordance with, the Management Agreements as permitted by the Management Fees Subordination Agreement, and (iii) so long as clause (a) above is satisfied, the payment of reasonable and customary directors' or managers' fees to, and indemnity provided on behalf of, the 88 Managers of PGP, Parent and Borrowers, and reimbursement of customary and reasonable travel and similar expenses incurred on behalf of Parent or Borrowers in the ordinary course of business; provided, that the aggregate amount payable to PGP or any other Excluded Person or Affiliate, excluding any payments permitted by Section 7.16, pursuant to the Management Agreements or any employment, consulting or similar agreements or arrangements for any fiscal year shall not exceed the lesser of (A) 4.00% of Combined EBITDA for the immediately preceding fiscal year, or (B) $4,000,000; (5) so long as clause (a) above is satisfied, (i) the repurchase, redemption or other retirement or acquisition of Equity Interests of Borrowers or any Restricted Subsidiary from its employees, members or managers (or their heirs or estates) or employees, members or managers (or their heirs or estates) of the Restricted Subsidiaries or (ii) any dividend, distribution or other payment to PGP to enable PGP to repurchase, redeem, or otherwise retire or acquire Equity Interests of PGP from any of its employees, members or managers (or their heirs or estates) or employees, members or managers (or their heirs or estates) of any of their respective subsidiaries, in the case of each of the preceding clauses (i) and (ii) upon the death, disability or termination of employment or pursuant to the terms of any subscription, stock option, stockholder or other agreement or plan in effect on the Closing Date in an aggregate amount pursuant to this clause (5) to all such employees, members or managers (or their heirs or estates) not to exceed $750,000 in any twelve month period on and after the Closing Date (provided, however, that any amounts not used in any such twelve month period may be carried forward to the next succeeding twelve month period until used); (6) the redemption and repurchase of any Equity Interests of Borrowers or any of the Restricted Subsidiaries to the extent required by any Gaming Authority; (7) so long as clause (a) above is satisfied, Borrower may redeem, purchase, retire, or otherwise acquire for value up to $4,000,000 of its Seller Preferred, plus interest accrued thereon; (8) so long as clause (a) above is satisfied, any dividend, distribution or other payment by any of the Restricted Subsidiaries on its Equity Interests that is paid pro rata to all holders of such Equity Interests; and (9) so long as clause (a) above is satisfied and the aggregate amount of Excess Availability plus cash and Cash Equivalents subject to satisfactory Control Agreements, after giving effect to each such Restricted Payment, is at least $10,000,000, Restricted Payments not otherwise permitted by this Section 7.11 in an aggregate amount during each fiscal year not to exceed for the fiscal year ending (i) 2004, $7,500,000, (ii) 2005, $3,750,000 plus the unused portion of the amount available under clause (9)(i), if any, (iii) 2006, $3,750,000 plus the unused portion of the available under clause (9)(ii), if any, (iv) 2007, the unused portion of the amount available under clause (9)(iii), if any, and (v) 2008, the unused portion of the amount available under clause (9)(iv), if any. 7.12 ACCOUNTING METHODS. Modify or change their fiscal year or their method of accounting (other than as may be required to conform to GAAP) or enter into, modify, or terminate any agreement currently existing, or at any time hereafter entered into with any third 89 party accounting firm or service bureau for the preparation or storage of Borrowers' or their Subsidiaries' accounting records without said accounting firm or service bureau agreeing to provide Agent information regarding the Collateral or Borrowers' and their Subsidiaries' financial condition. 7.13 INVESTMENTS. Except for Permitted Investments or for Securities Accounts, directly or indirectly, make or acquire any Investment, or incur any liabilities (including contingent obligations) for or in connection with any Investment; provided, however, that Borrowers and their Restricted Subsidiaries shall not have Permitted Investments in deposit accounts or Securities Accounts in excess of $250,000 outstanding at any one time unless such Borrower or Restricted Subsidiary, as applicable, and the applicable securities intermediary or bank have entered into Control Agreements or similar arrangements governing such Permitted Investments, as Agent shall determine in its Permitted Discretion, to perfect (and further establish) the Agent's Liens in such Permitted Investments. 7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into any contract, agreement, understanding, loan, advance or guaranty with, or for the benefit of, any Affiliate of Borrowers or any of the Restricted Subsidiaries (each of the foregoing, an "Affiliate Transaction"), except for: (a) Except as provided in clause (d) below, Affiliate Transactions entered into in the ordinary course of business that, together with all related Affiliate Transactions, have an aggregate value of not more than $1,000,000; provided, that such transactions are conducted in good faith and on terms that are no less favorable to such Borrower or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time by such Borrower or such Restricted Subsidiary on an arm's-length basis from a Person that is not an Affiliate of such Borrower or such Restricted Subsidiary; (b) Except as provided in clause (d) below, Affiliate Transactions entered into in the ordinary course of business that, together with all related Affiliate Transactions, have an aggregate value of not more than $5,000,000; provided, that (i) a majority of the disinterested Managers of such Borrower or, if none, a disinterested committee appointed by the Managers of such Borrower for such purpose, determine that such transactions are conducted in good faith and on terms that are no less favorable to such Borrower or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time by such Borrower or such Restricted Subsidiary on an arm's-length basis from a Person that is not an Affiliate of such Borrower or such Restricted Subsidiary and (ii) prior to entering into such transaction the applicable Borrower shall have delivered to Agent a certificate signed by the chief financial officer of such Borrower certifying to such effect; (c) Except as provided in clause (d) below, Affiliate Transactions entered into in the ordinary course of business for which a Borrower delivers to Agent an opinion issued by an accounting, appraisal or investment banking firm of national standing (other than Jefferies & Company, Inc. or any of its Affiliates) as to the fairness of such transaction to such Borrower or such Restricted Subsidiary from a financial point of view; or 90 (d) Affiliate Transactions entered into with Jeffries & Co., Inc.; provided, that (i) a majority of the Managers of such Borrower determine that such transactions are conducted in good faith and on terms that are no less favorable to such Borrower or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time by such Borrower or such Restricted Subsidiary on an arm's-length basis from a Person that is not an Affiliate of such Borrower or such Restricted Subsidiary, (ii) such terms are fully disclosed to Agent, and (iii) prior to entering into such transaction the applicable Borrower shall have delivered to Agent a certificate signed by the chief financial officer of such Borrower certifying to the foregoing. Notwithstanding the foregoing, the following will be deemed not to be Affiliate Transactions: (i) transactions between or among Borrowers and/or any or all of the Restricted Subsidiaries, (ii) Restricted Payments permitted by Section 7.11, (iii) reasonable and customary compensation (including directors' fees) paid to, and indemnity and customary employee benefit arrangements (including directors' and officer's liability insurance) provided for the benefit of, any director, officer, employee or consultant of Borrowers or any Restricted Subsidiary, or Manager of PGP, in each case entered into in the ordinary course of business and for services provided to Borrowers, such Restricted Subsidiary or PGP, respectively, as determined in good faith by the Managers of the applicable Borrower, (iv) any agreement or arrangement as in effect on the Closing Date among Borrowers and/or one or more Restricted Subsidiaries, on the one hand, and any officers or Managers thereof and/or any Affiliates of such Borrower, on the other hand, as set forth on Schedule 7.14, as amended, supplemented or otherwise modified with the prior written consent of Agent, and any transactions contemplated thereby and (v) Permitted Investments. 7.15 SUSPENSION. Suspend or go out of a substantial portion of their business. 7.16 COMPENSATION. Pay annual fees and meeting fees (a) to M. Brent Stevens in excess of $175,000 in the aggregate for each Gaming Property in fiscal year 2004 or increase any such fees paid during any fiscal year thereafter by more than 15% over such fees paid in the preceding fiscal year and (b) in any fiscal year to any other director in excess of $100,000 in the aggregate or, once such fees paid to any such director equal $100,000 in the aggregate for a fiscal year, increase any such fees paid to such director during any fiscal year thereafter by more than 15% over such fees paid in the preceding fiscal year. 7.17 USE OF PROCEEDS. Use the proceeds of the Advances and the Term Loan for any purpose other than (a) on the Closing Date, to (i) repay in full (w) DJL's obligations under the Loan and Security Agreement dated February 23, 2001 between DJL and Wells Fargo Foothill, (x) OED's obligation under the Loan and Security Agreement dated June 24, 2003, among OED, OED Capital and Wells Fargo Foothill, (y) OED and OED Capital's obligations under the Equipment Loan Agreement and (z) certain other Indebtedness of OED and DJL, and (ii) pay transactional fees, costs, and expenses incurred in connection with this Agreement and such refinancings, the other Loan Documents, and the transactions contemplated hereby and thereby, and (b) thereafter, for working capital needs and capital expenditures of Borrowers consistent with the terms and conditions hereof, for its lawful and permitted purposes. 7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location without such Borrower 91 providing to Agent (a) 5 days' prior written notification thereof and (b) upon request of Agent, a Collateral Access Agreement with respect to such new location. The Inventory and Equipment shall not at any time now or hereafter be stored with a bailee, warehouseman, or similar party without Agent's prior written consent. 7.19 SECURITIES ACCOUNTS. Except as otherwise permitted by Section 7.13, establish or maintain any Securities Account unless Agent shall have received a Control Agreement in respect of such Securities Account. Borrowers agree not to, and shall not permit any of the Restricted Subsidiaries to, transfer assets out of any Securities Account; provided, however, that, so long as no Event of Default has occurred and is continuing or would result therefrom, Borrowers and the Restricted Subsidiaries may use such assets (and the proceeds thereof) to the extent not prohibited by this Agreement. 7.20 FINANCIAL COVENANTS. (a) MINIMUM COMBINED EBITDA. Fail to maintain an aggregate amount of Combined EBITDA plus, for the relevant period, the premiums paid in connection with the April 2004 repurchase of a portion of the notes issued pursuant to the OED Indenture and the April 2004 redemption of the notes issued pursuant to the PGC Indenture, measured on a fiscal quarter-end basis, of at least the required amount set forth in the following table for the period set forth opposite thereto; - -------------------------------------------------------------------------------- APPLICABLE AMOUNT PERIOD ================================================================================ $10,000,000 6 fiscal month period ended June 30, 2004 - -------------------------------------------------------------------------------- $20,000,000 9 fiscal month period ended September 30, 2004 - -------------------------------------------------------------------------------- $32,500,000 12 fiscal month period ended December 31, 2004 - -------------------------------------------------------------------------------- $35,000,000 12 fiscal month period ended March 31, 2005, and each fiscal quarter ended thereafter - -------------------------------------------------------------------------------- (b) CAPITAL EXPENDITURES. (i) Except as provided in Section 7.20(b)(ii), make capital expenditures (other than capital expenditures incurred to complete construction of the Racino Project) in any fiscal year in excess of the amount set forth in the following table for the period set forth opposite thereto: - -------------------------------------------------------------------------------- APPLICABLE AMOUNT PERIOD ================================================================================ $7,000,000 Fiscal year 2004 - -------------------------------------------------------------------------------- $6,000,000 plus the Capital Fiscal year 2005 and each fiscal year thereafter Expenditure Carry Forward Amount - -------------------------------------------------------------------------------- (ii) However, in addition to the capital expenditures permitted by Section 7.20(b)(i), so long as the aggregate amount of Excess Availability plus cash and Cash Equivalents subject to satisfactory Control Agreements, after 92 giving effect to each such capital expenditure, is at least $10,000,000, Borrowers may make capital expenditures in the amount set forth below for the projects described with respect thereto: (A) $3,000,000 to purchase the building adjacent to the Ice Harbor Facility currently owned by a third party; (B) $3,000,000 to develop a recreational vehicle park at the Racino Project racetrack; and (C) $7,000,000 to develop an outdoor event venue at the Racino Project racetrack. (c) OED EBITDA. OED shall fail to maintain an aggregate amount of OED EBITDA plus, for the relevant period, the premium paid in connection with the April 2004 repurchase of a portion of the notes issued pursuant to the OED Indenture, measured on a fiscal quarter-end basis, of at least the required amount set forth in the following table for the period set forth opposite thereto: - -------------------------------------------------------------------------------- APPLICABLE AMOUNT PERIOD ================================================================================ $4,168,000 4 fiscal month period ended June 30, 2004 - -------------------------------------------------------------------------------- $7,294,000 7 fiscal month period ended September 30, 2004 - -------------------------------------------------------------------------------- $12,504,000 10 fiscal month period ended December 31, 2004 - -------------------------------------------------------------------------------- $20,006,400 12 fiscal month period ended March 31, 2005 - -------------------------------------------------------------------------------- $20,044,800 12 fiscal month period ended June 30, 2005 - -------------------------------------------------------------------------------- $20,083,200 12 fiscal month period ended September 30, 2005 - -------------------------------------------------------------------------------- $20,121,600 12 fiscal month period ended December 31, 2005 - -------------------------------------------------------------------------------- $20,160,000 12 fiscal month period ended March 31, 2006 - -------------------------------------------------------------------------------- 7.21 MANAGEMENT AGREEMENTS. Enter into any Management Agreement without delivering to Agent (a) a subordination agreement, in form and substance satisfactory to Agent, executed by the parties to such Management Agreement and (b) a copy of such fully executed Management Agreement. 8. EVENTS OF DEFAULT. Any one or more of the following events shall constitute an event of default (each, an "Event of Default") under this Agreement: 8.1. If Borrowers fail to pay (a) Obligations constituting principal when due and payable, or when declared due and payable, or (b) any other portion of the Obligations (including interest (including any interest which, but for the provisions of the Bankruptcy Code, would have 93 accrued on such amounts), fees and charges due the Lender Group, reimbursement of Lender Group Expenses, or other amounts constituting Obligations) within 3 days of the date such Obligation described in this clause (b) is due and payable, or when declared due and payable; 8.2. (a) If Borrowers fail or neglect to perform, keep, or observe any term, provision, condition, covenant, or agreement: (i) contained in Sections 6.2 (Reporting), 6.3 (Financial Statements, Reports, Certificates), 6.7 (Taxes), 6.10 (Compliance with Laws), 6.11 (Leases), 6.12 (Brokerage Commissions), or 6.13 (Existence) of this Agreement and such failure continues for a period of 5 Business Days from the earlier of (A) notice by Agent to Borrowers or (B) the date Borrowers knew or should have known of its occurrence; or (ii) contained in Sections 6.1 (Accounting System), 6.6 (Maintenance of Properties), 6.9 (Location of Inventory and Equipment), or 6.14 (exclusive of clause (d) thereof) (Environmental) of this Agreement and such failure continues for a period of 15 Business Days from the earlier of (A) notice by Agent to Borrowers or (B) the date Borrowers knew or should have known of its occurrence; or (b) if Borrowers or their Subsidiaries or the Guarantors fail or neglect to perform, keep, or observe any other term, provision, condition, covenant, or agreement contained in this Agreement or any material term, provision, condition, covenant or agreement contained in any of the other Loan Documents (giving effect to any grace periods, cure periods, or required notices, if any, expressly provided for in such other Loan Documents); in each case, other than any term, provision, condition, covenant, or agreement that is the subject of another provision of this Section 8, in which event such other provision of this Section 8 shall govern; 8.3. If any material portion of any Borrower's or any of its Subsidiaries' assets is attached, seized, subjected to a writ or distress warrant, levied upon, or comes into the possession of any third Person; 8.4. If an Insolvency Proceeding is commenced by Parent, any other Guarantor, any Borrower or any of its Subsidiaries; 8.5. If an Insolvency Proceeding is commenced against Parent, any other Guarantor, any Borrower, or any of its Subsidiaries, and any of the following events occur: (a) Parent, the applicable Borrower or the Subsidiary consents to the institution of the Insolvency Proceeding against it, (b) the petition commencing the Insolvency Proceeding is not timely controverted, (c) the petition commencing the Insolvency Proceeding is not dismissed within 60 days of the date of the filing thereof; provided, however, that, during the pendency of such period, Agent (including any successor agent) and each other member of the Lender Group shall be relieved of their obligation to extend credit hereunder, (d) an interim trustee is appointed to take possession of all or any substantial portion of the properties or assets of, or to operate all or any substantial portion of the business of, Parent, any Borrower or any of its Subsidiaries, or (e) an order for relief shall have been entered therein; 8.6. If any Borrower or any of its Subsidiaries is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs for a period of 5 consecutive Business Days; 8.7. If notices of Lien, levy, or assessment in an aggregate amount in excess of $750,000 are filed of record with respect to any Borrower's or any of its Subsidiaries' properties or assets by the United States, or any department, agency, or instrumentality thereof, or by any 94 state, county, municipal, or governmental agency, or if any taxes or debts owing at any time hereafter to any one or more of such entities becomes a Lien exceeding the foregoing aggregate limitation, whether choate or otherwise, upon any Borrower's or any of its Subsidiaries' properties or assets and the same is not paid before the earlier of 30 days after the date it first arises or 15 days prior to the date on which such asset is subject to being forfeited; 8.8. If a judgment or judgments for the payment of money (other than judgments as to which a reputable insurance company has accepted full liability) is or are entered by a court of competent jurisdiction against any Borrower or any of its Subsidiaries and such judgment or judgments remain undischarged, unbonded, or unstayed for a period of 60 days after entry; provided, that the aggregate amount of all such judgments exceeds $1,000,000; 8.9. If there is a default under any Indebtedness of any Borrower or any of its Subsidiaries in excess of $1,000,000 and such default (a) occurs at the final maturity of the obligations thereunder, or (b) results in a right by the other party thereto, irrespective of whether exercised, to accelerate the maturity of the applicable Borrower's or its Subsidiaries' obligations thereunder, to terminate such agreement, or to refuse to renew such agreement pursuant to an automatic renewal right therein; 8.10. If any Borrower or any of its Subsidiaries makes any payment on account of Indebtedness that has been contractually subordinated in right of payment to the payment of the Obligations, except to the extent such payment is permitted by the terms of the subordination provisions applicable to such Indebtedness; 8.11. If any misstatement or misrepresentation exists now or hereafter in any warranty, representation, statement, or Record made to the Lender Group by any Borrower, its Subsidiaries, or any officer, employee, agent, or director of any Borrower or any of its Subsidiaries; 8.12. If the obligation of any Guarantor under any guaranty of the Obligations or other third Person under any Loan Document is rendered or declared unenforceable or terminated by operation of law or by such Guarantor or third Person thereunder; 8.13. If this Agreement or any other Loan Document that purports to create a Lien, shall, for any reason, fail or cease to create a valid and perfected and, except to the extent permitted by the terms hereof or thereof, first priority Lien on or security interest in the Collateral covered hereby or thereby; 8.14. Any provision of any Loan Document shall at any time for any reason be declared to be null and void, or the validity or enforceability thereof shall be contested by any Borrower or any Subsidiary of a Borrower, or a proceeding shall be commenced by any Borrower or any Subsidiary of a Borrower, or by any Governmental Authority having jurisdiction over any Borrower or any Subsidiary of a Borrower, seeking to establish the invalidity or unenforceability thereof, or any Borrower shall deny that any Borrower or any Subsidiary of a Borrower has any liability or obligation purported to be created under any Loan Document; 8.15. If there is an "Event of Default" under (and as defined in) the Indenture; or if there is an event of default under any of the other Senior Note Documents, the OED Note 95 Documents or any Management Agreement (other than as a result of a restriction herein or under any other Loan Document); 8.16. If any Governmental Authority (including the Louisiana state legislature) restricts the ability of any Borrower to operate, or restricts, limits or prohibits any Borrower from operating, its gaming business as conducted on the Closing Date or operating the Racino Project or the Ice Harbor Facility in the manner contemplated on the Closing Date and such restriction results in a Material Adverse Change; 8.17. If Agent fails to receive evidence of, on or prior to December 31, 2004, the completion of construction of the facility for the conduct of live horse racing at the Racino Project location and the establishment of a schedule of live race meetings at the Racino Project location; 8.18. If, for a period of 5 consecutive Business Days, any Borrower fails to keep in full force and effect, suffers the termination, revocation, forfeiture, nonrenewal or suspension of, or suffers a material adverse amendment to, any material Gaming License, franchise, registration, qualification, finding of suitability or other approval or authorization required to enable such Borrower to own, operate, or otherwise conduct or manage its gaming businesses, including the riverboat, dockside or land based gaming activities at Borrower's Ice Harbor Facility or the gaming activities at the Racino Project, and any other location where a Borrower conducts such gaming business (other than in connection with a voluntary surrender of DJL's certificate of inspection to cruise in exchange for a permit for permanently moored status of dockside gaming); 8.19. If, for a period of 5 consecutive Business Days, any Governmental Authority terminates, suspends, amends, revokes, repeals or fails to renew any law, license, franchise, registration, qualification, finding of suitability or other approval or authorization required to enable any Borrower or any of its Subsidiaries to own, operate, or otherwise conduct or manage its gaming businesses, including the riverboat, dockside or land based gaming activities at Borrower's Ice Harbor Facility or the gaming activities at the Racino Project, and any other location where a Borrower conducts such gaming business; or 8.20. If the FF&E Letter of Credit expires or is not renewed at least 30 days prior to its expiry date prior to release by Agent pursuant to Section 4.8 hereof. 9. AGENT'S RIGHTS AND REMEDIES. 9.1 RIGHTS AND REMEDIES. (a) Upon the occurrence, and during the continuation, of an Event of Default, the Required Lenders (at their election but without notice of their election and without demand) may authorize and instruct Agent to do any one or more of the following on behalf of the Lender Group (and Agent, acting upon the instructions of the Required Lenders, shall do the same on behalf of the Lender Group), all of which are authorized by Borrowers: (i) Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable; 96 (ii) Cease advancing money or extending credit to or for the benefit of Borrowers under this Agreement, under any of the Loan Documents, or under any other agreement between Borrowers and the Lender Group; (iii) Terminate this Agreement and any of the other Loan Documents as to any future liability or obligation of the Lender Group, but without affecting any of the Agent's Liens in the Collateral and without affecting the Obligations; (iv) Settle or adjust disputes and claims directly with Account Debtors for amounts and upon terms which Agent considers advisable, and in such cases, Agent will credit the Loan Account with only the net amounts received by Agent in payment of such disputed Accounts after deducting all Lender Group Expenses incurred or expended in connection therewith; (v) Cause Borrowers to hold all returned Inventory in trust for Agent, segregate all returned Inventory from all other assets of Borrowers or in Borrowers' possession and conspicuously label said returned Inventory as the property of Agent; (vi) Without notice to or demand upon any Borrower, make such payments and do such acts as Agent considers necessary or reasonable to protect its security interests in the Collateral. Each Borrower agrees to assemble the Personal Property Collateral if Agent so requires, and to make the Personal Property Collateral available to Agent at a place that Agent may designate which is reasonably convenient to both parties. Each Borrower authorizes Agent to enter the premises where the Personal Property Collateral is located, to take and maintain possession of the Personal Property Collateral, or any part of it, and to pay, purchase, contest, or compromise any Lien that in Agent's determination appears to conflict with the Agent's Liens and to pay all expenses incurred in connection therewith and to charge Borrowers' Loan Account therefor. With respect to any of Borrowers' owned or leased premises, each Borrower hereby grants Agent a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of the Lender Group's rights or remedies provided herein, at law, in equity, or otherwise; (vii) Without notice to any Borrower (such notice being expressly waived), and without constituting a retention of any collateral in satisfaction of an obligation (within the meaning of the Code), set off and apply to the Obligations any and all (i) balances and deposits of any Borrower held by the Lender Group, or (ii) Indebtedness at any time owing to or for the credit or the account of any Borrower held by the Lender Group; (viii) Hold, as cash collateral, any and all balances and deposits of any Borrower held by the Lender Group to secure the full and final repayment of all of the Obligations; (ix) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Personal 97 Property Collateral. Each Borrower hereby grants to Agent a license or other right to use, without charge, such Borrower's labels, patents, copyrights, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Personal Property Collateral, in completing production of, advertising for sale, and selling any Personal Property Collateral and such Borrower's rights under all licenses and all franchise agreements shall inure to the Lender Group's benefit; (x) Sell the Personal Property Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Borrowers' premises) as Agent determines is commercially reasonable. It is not necessary that the Personal Property Collateral be present at any such sale; (xi) Give notice of the disposition of the Personal Property Collateral as follows: (A) Agent shall give Borrowers (for the benefit of the applicable Borrower) a notice in writing of the time and place of public sale, or, if the sale is a private sale or some other disposition other than a public sale is to be made of the Personal Property Collateral, then the time on or after which the private sale or other disposition is to be made; and (B) The notice shall be personally delivered or mailed, postage prepaid, to Borrowers as provided in Section 12, at least 10 days before the earliest time of disposition set forth in the notice; no notice needs to be given prior to the disposition of any portion of the Personal Property Collateral that is perishable or threatens to decline speedily in value or that is of a type customarily sold on a recognized market; (xii) On behalf of the Lender Group, credit bid and purchase at any public sale; and (xiii) Seek the appointment of a receiver or keeper to take possession of all or any portion of the Collateral or to operate same and, to the maximum extent permitted by law, may seek the appointment of such a receiver without the requirement of prior notice or a hearing. (b) The Lender Group shall have all other rights and remedies available to it at law or in equity or pursuant to any other Loan Documents (including the right to draw, in full or in part, under the FF&E Letter of Credit). (c) Borrowers hereby acknowledge and agree that the notice described in Section 9.1(a)(xi)(B), when given, shall constitute a reasonable "authenticated notification of disposition" within the meaning of Section 9-611 of the Uniform Commercial Code, as in effect from time to time in any applicable jurisdiction. (d) Agent or any other member of the Lender Group may be a purchaser of any or all of the Collateral at any public or, to the extent permitted under the Code, private sale 98 in accordance with the Code and Agent, as secured party for and representative of the Lender Group, shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such sale made in accordance with the Code, to use and apply any of the Obligations of such Borrower as a credit on account of the purchase price for any Collateral payable by Agent at such sale. To the extent provided under the Code or other applicable law, each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Borrower and Borrower hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted until payment in full of the Obligations. Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor and by notice to the applicable Borrower, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Borrower hereby waives any claims against Agent arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Agent accepts the first offer received and does not offer such Collateral to more than one offeree. Each Borrower further agrees that a breach of any of the covenants contained in this Section 9.1 will cause irreparable injury to Agent, that Agent has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 9.1 shall be specifically enforceable against such Borrower, and such Borrower hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Obligations becoming due and payable prior to their stated maturities. Nothing in this Section 9.1 shall in any way alter the rights of Agent under this Agreement. (e) Agent may sell the Collateral following the occurrence and during the continuance of an Event of Default without giving any warranties as to the Collateral. Agent may specifically disclaim or modify, in its sole discretion, any warranties of title or the like as to any Collateral. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of any of the Collateral. Agent may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. Leasing and licensing of Collateral by Agent to third Persons are types of sales permitted hereunder. (f) If Agent sells any of the Collateral of any Borrower on credit, the Obligations of such Borrower will be credited only with payments actually made by the purchaser and received by Agent and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, Agent may resell the Collateral. (g) Agent shall have no obligation to marshal any of the Collateral. (h) All amounts and proceeds (including checks and other instruments) received by any Borrower in respect of amounts due to such Borrower in respect of the Collateral or any portion thereof following the occurrence and during the continuance of an Event of Default shall be received in trust for the benefit of Agent hereunder, shall be segregated from other funds of such Borrower and shall be forthwith paid over or delivered (subject to the 99 Intercreditor Agreement to the extent then in effect) to Agent in the same form as so received (with any necessary endorsement) to be held as cash Collateral and applied as provided by Section 2.4(b) following the occurrence and during the continuance of an Event of Default. Upon demand from Agent following the occurrence and during the continuance of an Event of Default, Borrowers shall not adjust, settle or compromise the amount or payment of any such amount or release wholly or partly any obligor with respect thereto or allow any credit or discount thereon. (i) Each Borrower agrees that, upon the occurrence of and during the continuance of an Event of Default and at Agent's request, such Borrower will, and will cause each Restricted Subsidiary of such Borrower to (and, by its execution and delivery of a Subsidiary Guaranty or a joinder thereto, each of such Borrower's Restricted Subsidiaries agrees to), immediately file such applications for approval and shall take all other and further actions required by Agent to obtain such approvals or consents of regulatory authorities as are necessary to transfer ownership and control to Agent, of the Gaming Licenses held by it, or its interest in any Person holding any such Gaming License. To enforce the provisions of this Section 9.1(i), Agent is empowered to request the appointment of a receiver from any court of competent jurisdiction. Such receiver shall be instructed to seek from the applicable Gaming Authority an involuntary transfer of control of any Gaming License for the purpose of seeking a bona fide purchaser to whom control will ultimately be transferred. Each Borrower hereby agrees to authorize, and to cause each Restricted Subsidiary of such Borrower to authorize (and, by its execution and delivery of a Subsidiary Guaranty or a joinder thereto, each Restricted Subsidiary of such Borrower agrees to authorize) such an involuntary transfer of control upon the request of the receiver so appointed and, if any Borrower or any such Restricted Subsidiary shall refuse to authorize the transfer, its approval may be required by the court. Upon the occurrence and continuance of an Event of Default, each Borrower shall further use its reasonable best efforts to assist in obtaining approval of the applicable Gaming Authority, if required, for any action or transactions contemplated by this Agreement or the Loan Documents, including, preparation, execution, and filing with the applicable Gaming Authority of the assignor's or transferor's portion of any application or applications for consent to the assignment of any Gaming License or transfer of control necessary or appropriate under the applicable Gaming Authority's rules and regulations for approval of the transfer or assignment of any portion of the Collateral, together with any Gaming License or other authorization. Each Borrower acknowledges that the assignment or transfer of Gaming Licenses is integral to Agent's realization of the value of the Collateral, that there is no adequate remedy at law for failure by any Borrower to comply with the provisions of this Section 9.1(i) and that such failure would not be adequately compensable in damages, and therefore agrees that the agreements contained in this Section 9.1(i) may be specifically enforced; (j) Any deficiency in the payment of the Obligations that exists after disposition of the Personal Property Collateral as provided above will be paid immediately by Borrowers. Any deficiency in the payment of the FF&E Obligations that exists after disposition of the FF&E Collateral as provided above will be paid immediately by OED. Any excess that exists after disposition of the Personal Property Collateral will be returned, without interest and subject to the rights of third Persons, by Agent to Borrowers; and (k) In the event Agent elects to commence foreclosure proceeding under Louisiana law, Agent may cause such Personal Property Collateral, or any part or parts thereof, 100 to be immediately seized and sold, whether in term of court or in vacation, under ordinary or executory process, in accordance with applicable Louisiana law, to the highest bidder for cash, with or without appraisement, and without the necessity of making additional demand upon or notifying Borrowers or any Person or placing Borrowers or any Person in default, all of which are expressly waived. For purposes of foreclosure under Louisiana executory process procedures, each Borrower confesses judgment and acknowledges to be indebted unto and in favor of Agent up to the full amount of the Obligations, in principal, interest, costs, expenses, attorneys' fees and other fees and charges. To the extent permitted under applicable Louisiana law, each Borrower additionally waives: (a) the benefit of appraisal as provided in Articles 2332, 2336, 2723 and 2724 of the Louisiana Code of Civil Procedure, and all other laws with regard to appraisal upon judicial sale; (b) the demand and 3 days' delay as provided under Articles 2639 and 2721 of the Louisiana Code of Civil Procedure; (c) the notice of seizure as provided under Articles 2293 and 2721 of the Louisiana Code of Civil Procedure; (d) the 3 days' delay provided under Articles 2331 and 2722 of the Louisiana Code of Civil Procedure; and (e) all other benefits provided under Articles 2331, 2722 and 2723 of the Louisiana Code of Civil Procedure and all other articles not specifically mentioned above. Should it become necessary for Agent to foreclose under this Agreement, all declarations of fact, which are made under an authentic act before a Notary Public in the presence of 2 witnesses, by a Person declaring such facts to lie within his or her knowledge, shall constitute authentic evidence for purposes of executory process and also for purposes of La. R.S. 9:3509.1, La. R.S. 9:3504(D)(6) and La. R.S. 10:9-629, as applicable. In addition to the foregoing rights and remedies, Agent may elect to effect the seizure and disposition of the Personal Property Collateral pursuant to any procedures as may be authorized by Louisiana law from time to time. All rights, remedies, and powers provided in this Agreement relative to the Collateral may be exercised only to the extent that the exercise thereof does not violate any applicable mandatory provision of the applicable gaming laws, rules, and regulations enacted by the applicable Gaming Authority (the "Applicable Gaming Laws") and all provisions of this Agreement relative to the Collateral are intended to be subject to all applicable mandatory provisions of the Applicable Gaming Laws and to be limited solely to the extent necessary to not render the provisions of this Agreement invalid or unenforceable, in whole or in part. Agent will timely apply for and receive all required approvals of the applicable Gaming Authority for the sale or other disposition of Gaming Equipment regulated by Applicable Gaming Laws (including any such sale or disposition of Gaming Equipment consisting of slot machines, gaming tables, cards, dice, gaming chips, player tracking systems, and all other "gaming devices" (as such term or words of like import referring thereto are defined in the Applicable Gaming Laws), and "associated equipment" (as such term or words of like import referring thereto are defined in the Applicable Gaming Laws). 9.2 REMEDIES CUMULATIVE. The rights and remedies of the Lender Group under this Agreement, the other Loan Documents, and all other agreements shall be cumulative. The Lender Group shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by the Lender Group of one right or remedy shall be deemed an election, and no waiver by the Lender Group of any Event of Default shall be deemed a continuing waiver. No delay by the Lender Group shall constitute a waiver, election, or acquiescence by it. 101 10. TAXES AND EXPENSES. If any Borrower fails to pay any monies (whether taxes, assessments, insurance premiums, or, in the case of leased properties or assets, rents or other amounts payable under such leases) due to third Persons, or fails to make any deposits or furnish any required proof of payment or deposit, all as required under the terms of this Agreement, then, Agent, in its sole discretion and without prior notice to any Borrower, may do any or all of the following: (a) make payment of the same or any part thereof, (b) set up such reserves in Borrowers' Loan Account as Agent deems necessary to protect the Lender Group from the exposure created by such failure, or (c) in the case of the failure to comply with Section 6.8 hereof, obtain and maintain insurance policies of the type described in Section 6.8 and take any action with respect to such policies as Agent deems prudent. Any such amounts paid by Agent shall constitute Lender Group Expenses and any such payments shall not constitute an agreement by the Lender Group to make similar payments in the future or a waiver by the Lender Group of any Event of Default under this Agreement. Agent need not inquire as to, or contest the validity of, any such expense, tax, or Lien and the receipt of the usual official notice for the payment thereof shall be conclusive evidence that the same was validly due and owing. 11. WAIVERS; INDEMNIFICATION. 11.1 DEMAND; PROTEST. Each Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, nonpayment at maturity, release, compromise, settlement, extension, or renewal of documents, instruments, chattel paper, and guarantees at any time held by the Lender Group on which any such Borrower may in any way be liable. 11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. Each Borrower hereby agrees that: (a) so long as the Lender Group complies with its obligations, if any, under the Code, Agent shall not in any way or manner be liable or responsible for: (i) the safekeeping of the Collateral, (ii) any loss or damage thereto occurring or arising in any manner or fashion from any cause, (iii) any diminution in the value thereof, or (iv) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of loss, damage, or destruction of the Collateral shall be borne by Borrowers. 11.3 INDEMNIFICATION. Each Borrower shall pay, indemnify, defend, and hold the Agent-Related Persons, the Lender-Related Persons with respect to each Lender, each Participant, and each of their respective officers, directors, employees, agents, and attorneys-in-fact (each, an "Indemnified Person") harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, and damages, and all reasonable attorneys fees and disbursements and other costs and expenses actually incurred in connection therewith (as and when they are incurred and irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them (a) in connection with or as a result of or related to the execution, delivery, enforcement, performance, or administration of this Agreement, any of the other Loan Documents, or the transactions contemplated hereby or thereby, and (b) with respect to any investigation, litigation, or proceeding related to this Agreement, any other Loan Document, or the use of the proceeds of the credit provided hereunder (irrespective of whether any Indemnified Person is a party thereto), or any act, omission, event, or circumstance in any manner related thereto (all the foregoing, 102 collectively, the "Indemnified Liabilities"). The foregoing to the contrary notwithstanding, Borrowers shall have no obligation to any Indemnified Person under this Section 11.3 with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of such Indemnified Person. This provision shall survive the termination of this Agreement and the repayment of the Obligations. If any Indemnified Person makes any payment to any other Indemnified Person with respect to an Indemnified Liability as to which Borrowers were required to indemnify the Indemnified Person receiving such payment, the Indemnified Person making such payment is entitled to be indemnified and reimbursed by Borrowers with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON. 12. NOTICES. Unless otherwise provided in this Agreement, all notices or demands by Borrowers or Agent to the other relating to this Agreement or any other Loan Document shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested), overnight courier, electronic mail (at such email addresses as such Borrower or Agent, as applicable, may designate to each other in accordance herewith), or telefacsimile to Borrowers or to Agent, as the case may be, at its address set forth below: If to any Borrower: DIAMOND JO, LLC c/o Peninsula Gaming Partners, LLC 400 E. Third Street, P.O. Box 1750 Dubuque, Iowa 52004 Attn: Natalie Schramm Fax No. (563) 690-2190 and THE OLD EVANGELINE DOWNS, L.L.C. c/o Peninsula Gaming Partners, LLC 11100 Santa Monica Boulevard, 10th Floor Los Angeles, California 90025 Attn: M. Brent Stevens Fax No. (310) 914-6476 with copies to: MAYER, BROWN, ROWE & MAW LLP 1675 Broadway New York, New York 10019 Attn: Ron Brody, Esq. Fax No. (212) 262-1910 103 If to Agent: WELLS FARGO FOOTHILL, INC. 2450 Colorado Avenue, Suite 3000W Santa Monica, California 90404 Attn: Business Finance Division Manager Fax No. (310) 453-7413 with copies to: PAUL, HASTINGS, JANOFSKY & WALKER, LLP 600 Peachtree Street, NE, Suite 2400 Atlanta, Georgia 30308-2222 Attn: Cindy J. K. Davis, Esq. Fax No. (404) 815-2424 Agent and Borrowers may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other party. All notices or demands sent in accordance with this Section 12, other than notices by Agent in connection with enforcement rights against the Collateral under the provisions of the Code, shall be deemed received on the earlier of the date of actual receipt or 3 Business Days after the deposit thereof in the mail. Each Borrower acknowledges and agrees that notices sent by the Lender Group in connection with the exercise of enforcement rights against Collateral under the provisions of the Code shall be deemed sent when deposited in the mail or personally delivered, or, where permitted by law, transmitted by telefacsimile or any other method set forth above. 13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. (a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW. (b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND EACH SUCH PARTY HERETO HERBY SUBMITS TO THE JURISDICTION OF EACH SUCH COURT, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWERS AND THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER 104 APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b). (c) BORROWERS AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWERS AND THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS. 14.1 ASSIGNMENTS AND PARTICIPATIONS. (a) Any Lender may, with the written consent of Agent (provided that no written consent of Agent shall be required in connection with any assignment and delegation by a Lender to an Eligible Transferee), and, so long as no Event of Default then exists, Borrowers, assign and delegate to one or more assignees (each an "Assignee") all, or any ratable part of all, of the Obligations, the Commitments and the other rights and obligations of such Lender hereunder and under the other Loan Documents, in a minimum amount of $5,000,000 (except that such minimum amount shall not apply to an Affiliate of a Lender); provided, however, that Borrowers' consent shall not be unreasonably withheld, conditioned or delayed; and provided further that that Borrowers and Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses, and related information with respect to the Assignee, have been given to Borrowers and Agent by such Lender and the Assignee, (ii) such Lender and its Assignee have delivered to Borrowers and Agent an Assignment and Acceptance in form and substance satisfactory to Agent, and (iii) the assignor Lender or Assignee has paid to Agent for Agent's separate account a processing fee in the amount of $5,000. Anything contained herein to the contrary notwithstanding, the consent of Agent shall not be required and payments of any fees shall not be required if (x) such assignment is in connection with any merger, consolidation, sale, transfer, or other disposition of all or any substantial portion of the business or loan portfolio of such Lender or (y) the assignee is an Affiliate (other than individual(s)) of a Lender. Anything contained herein to the contrary notwithstanding, Wells Fargo Foothill agrees for the benefit of Borrowers that, so long as no Event of Default has occurred and is continuing, Wells Fargo Foothill shall retain more than fifty percent (50%) of the Obligations and commitment to make Advances under Section 2.1 of this Agreement, provided, however, that, the minimum retention of Obligations and commitment to make Advances shall not be applicable if such assignment is in connection with any merger, consolidation, sale, transfer, or other disposition of all or any substantial portion of the business or loan portfolio of Wells Fargo Foothill. 105 (b) From and after the date that Agent notifies the assignor Lender (with a copy to Borrowers) that it has received an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Lender under the Loan Documents, and (ii) the assignor Lender shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except with respect to Section 11.3 hereof) and be released from its obligations under this Agreement (and in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement and the other Loan Documents, such Lender shall cease to be a party hereto and thereto), and such assignment shall affect a novation between Borrowers and the Assignee. (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (1) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document furnished pursuant hereto, (2) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrowers or the performance or observance by Borrowers of any of their obligations under this Agreement or any other Loan Document furnished pursuant hereto, (3) such Assignee confirms that it has received a copy of this Agreement, together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance, (4) such Assignee will, independently and without reliance upon Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement, (5) such Assignee appoints and authorizes Agent to take such actions and to exercise such powers under this Agreement as are delegated to Agent, by the terms hereof, together with such powers as are reasonably incidental thereto, and (6) such Assignee agrees that it will perform all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) Immediately upon each Assignee's making its processing fee payment under the Assignment and Acceptance and receipt and acknowledgment by Agent of such fully executed Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitments allocated to each Assignee shall reduce such Commitments of the assigning Lender pro tanto. (e) Any Lender may at any time, with the written consent of Agent, sell to one or more commercial banks, financial institutions, or other Persons not Affiliates of such Lender (a "Participant") participating interests in its Obligations, the Commitments, and the other rights and interests of that Lender (the "Originating Lender") hereunder and under the other Loan Documents (provided that no written consent of Agent shall be required in connection with any sale of any such participating interests by a Lender to an Eligible Transferee); provided, however, that (i) the Originating Lender shall remain a "Lender" for all purposes of this 106 Agreement and the other Loan Documents and the Participant receiving the participating interest in the Obligations, the Commitments, and the other rights and interests of the Originating Lender hereunder shall not constitute a "Lender" hereunder or under the other Loan Documents and the Originating Lender's obligations under this Agreement shall remain unchanged, (ii) the Originating Lender shall remain solely responsible for the performance of such obligations, (iii) Borrowers, Agent, and the Lenders shall continue to deal solely and directly with the Originating Lender in connection with the Originating Lender's rights and obligations under this Agreement and the other Loan Documents, (iv) no Lender shall transfer or grant any participating interest under which the Participant has the right to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment to, or consent or waiver with respect to this Agreement or of any other Loan Document would (A) extend the final maturity date of the Obligations hereunder in which such Participant is participating, (B) reduce the interest rate applicable to the Obligations hereunder in which such Participant is participating, (C) release all or a material portion of the Collateral, the FF&E Letter of Credit or guaranties (except to the extent expressly provided herein or in any of the Loan Documents) supporting the Obligations hereunder in which such Participant is participating, (D) postpone the payment of, or reduce the amount of, the interest or fees payable to such Participant through such Lender, or (E) change the amount or due dates of scheduled principal repayments or prepayments or premiums, and (v) all amounts payable by Borrowers hereunder shall be determined as if such Lender had not sold such participation, except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement. The rights of any Participant only shall be derivative through the Originating Lender with whom such Participant participates and no Participant shall have any rights under this Agreement or the other Loan Documents or any direct rights as to the other Lenders, Agent, Borrowers, the Collateral, the FF&E Letter of Credit or otherwise in respect of the Obligations. No Participant shall have the right to participate directly in the making of decisions by the Lenders among themselves. (f) In connection with any such assignment or participation or proposed assignment or participation, a Lender may disclose all documents and information which it now or hereafter may have relating to Borrowers or Borrowers' business. (g) Any other provision in this Agreement notwithstanding, any Lender may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement in favor of any Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. (h) Subject to the last sentence of this Section 14.1(h), Agent shall maintain, or cause to be maintained, a register (the "Register") on which it enters the name of a Lender as the registered owner of each Advance, as the case may be, held by such Lender. A Registered Loan (and the Registered Note, if any, evidencing the same) may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register (and each Registered Note shall expressly so provide). Subject to the last sentence of this Section 14.1(h), any assignment 107 or sale of all or part of such Registered Loan (and the Registered Note, if any, evidencing the same) may be effected only by registration of such assignment or sale on the Register, together with the surrender of the Registered Note, if any, evidencing the same duly endorsed by (or accompanied by a written instrument of assignment or sale duly executed by) the holder of such Registered Note, whereupon, at the request of the designated assignee(s) or transferee(s), one or more new Registered Notes in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s). Prior to the registration of an assignment or sale of any Registered Loan (and the Registered Note, if any, evidencing the same), Borrowers, Agent and the Lenders shall treat the Person in whose name such Registered Loan (and the Registered Note, if any, evidencing the same) is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding notice to the contrary. In the case of an assignment or delegation covered by Section 14.1(a)(y), the assigning Lender shall maintain a register comparable to the Register on behalf of Agent. (i) In the event that a Lender sells participations in a Registered Loan, such Lender shall maintain a register on which it enters the name of all participants in the Registered Loans held by it (the "Participant Register"). A Registered Loan (and the Registered Note, if any, evidencing the same) may be participated in whole or in part only by registration of such participation on the Participant Register (and each Registered Note shall expressly so provide). Any participation of such Registered Loan (and the Registered Note, if any, evidencing the same) may be effected only by the registration of such participation on the Participant Register. Notwithstanding the foregoing, to the extent required by applicable law, (a) each Assignee or Participant shall be an "Institutional Lender" (as defined in La. R.S. 27:3 (13)) or otherwise suitable to the Louisiana Regulatory Authorities, and (b) each assignment or participation pursuant to this Section 14.1 shall be subject to the provisions of La. R.S. 42:2507 et seq., La. R.S. 27:27 and page 2 of the "Conditions for Approval" for OED set forth by the Louisiana State Racing Commission on December 19, 2002, including, without limitation, the notice requirements thereof. 14.2 SUCCESSORS. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, however, that Borrowers may not assign this Agreement or any rights or duties hereunder without the Lenders' prior written consent and any prohibited assignment shall be absolutely void ab initio. No consent to assignment by the Lenders shall release any Borrower from its Obligations. Each Lender may assign this Agreement and the other Loan Documents and its rights and duties hereunder and thereunder pursuant to Section 14.1 hereof and, except as expressly required pursuant to Section 14.1 hereof, no consent or approval by any Borrower is required in connection with any such assignment. 15. AMENDMENTS; WAIVERS. 15.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by Borrowers therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by Agent at the written request of the Required Lenders) and Borrowers and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or 108 consent shall, unless in writing and signed by all the Lenders affected thereby and Borrowers and acknowledged by Agent, do any of the following: (a) increase or extend any Commitment of any Lender, (b) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees, or other amounts due hereunder or under any other Loan Document, (c) reduce the principal of, or the rate of interest on, any loan or other extension of credit hereunder, or reduce any fees or other amounts payable hereunder or under any other Loan Document, (d) change the percentage of the Commitments that is required to take any action hereunder, (e) amend this Section or any provision of the Agreement providing for consent or other action by all Lenders, (f) release Collateral other than as permitted by Section 16.12 or release the FF&E Letter of Credit other than as permitted by Section 4.8, (g) change the definition of "Required Lenders", (h) contractually subordinate any of the Agent's Liens, (i) release any Borrower from any obligation for the payment of money, or (j) amend any of the provisions of Section 16. and, provided further, however, that no amendment, waiver or consent shall, unless in writing and signed by Agent or Swing Lender, affect the rights or duties of Agent or Swing Lender, as applicable, under this Agreement or any other Loan Document. The foregoing notwithstanding, any amendment, modification, waiver, consent, termination, or release of, or with respect to, any provision of this Agreement or any other Loan Document that relates only to the relationship of the Lender Group among themselves, and that does not affect the rights or obligations of Borrowers, shall not require consent by or the agreement of Borrowers. Notwithstanding the foregoing, to the extent required by applicable law, amendments pursuant to this Section 15.1 shall be subject to the consent and/or approval of the relevant Gaming Authorities. 15.2 REPLACEMENT OF HOLDOUT LENDER. If any action to be taken by the Lender Group or Agent hereunder requires the unanimous consent, authorization, or agreement of all Lenders, and a Lender ("Holdout Lender") fails to give its consent, authorization, or agreement, then Agent, upon at least 5 Business Days' prior irrevocable notice to the Holdout Lender, may permanently replace the Holdout Lender with one or more substitute Lenders (each, a "Replacement Lender"), and the Holdout Lender 109 shall have not right to refuse to be replaced hereunder. Such notice to replace the Holdout Lender shall specify an effective date for such replacement, which date shall not be later than 15 Business Days after the date such notice is given. Prior to the effective date of such replacement, the Holdout Lender and each Replacement Lender shall execute and deliver an Assignment and Acceptance Agreement, subject only to the Holdout Lender being repaid its share of the outstanding Obligations (including an assumption of its Pro Rata Share of the Risk Participation Liability) without any premium or penalty of any kind whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver any such Assignment and Acceptance prior to the effective date of such replacement, the Holdout Lender shall be deemed to have executed and delivered such Assignment and Acceptance. The replacement of any Holdout Lender shall be made in accordance with the terms of Section 14.1. Until such time as the Replacement Lenders shall have acquired all of the Obligations, the Commitments, and the other rights and obligations of the Holdout Lender hereunder and under the other Loan Documents, the Holdout Lender shall remain obligated to make the Holdout Lender's Pro Rata Share of Advances and to purchase a participation in each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk Participation Liability of such Letter of Credit. 15.3 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agent or any Lender to exercise any right, remedy, or option under this Agreement or any other Loan Document, or delay by Agent or any Lender in exercising the same, will operate as a waiver thereof. No waiver by Agent or any Lender will be effective unless it is in writing, and then only to the extent specifically stated. No waiver by Agent or any Lender on any occasion shall affect or diminish Agent's and each Lender's rights thereafter to require strict performance by Borrowers of any provision of this Agreement. Agent's and each Lender's rights under this Agreement and the other Loan Documents will be cumulative and not exclusive of any other right or remedy that Agent or any Lender may have. 16. AGENT; THE LENDER GROUP. 16.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby designates and appoints Wells Fargo Foothill as its representative under this Agreement and the other Loan Documents and each Lender hereby irrevocably authorizes Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to Agent by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Agent agrees to act as such on the express conditions contained in this Section 16. The provisions of this Section 16 are solely for the benefit of Agent, and the Lenders, and Borrowers shall have no rights as a third party beneficiary of any of the provisions contained herein. Any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against Agent; it being expressly understood and agreed that the use of the word "Agent" is for convenience only, that Wells Fargo Foothill is merely the representative of the Lenders, and only has the contractual duties set forth herein. Except as expressly otherwise provided in this Agreement, 110 Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions that Agent expressly is entitled to take or assert under or pursuant to this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, or of any other provision of the Loan Documents that provides rights or powers to Agent, the Lenders agree that Agent shall have the right to exercise the following powers as long as this Agreement remains in effect: (a) maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the Obligations, the Collateral, the Collections of Borrowers and their Subsidiaries, and related matters, (b) execute or file any and all financing or similar statements or notices, amendments, renewals, supplements, documents, instruments, proofs of claim, notices and other written agreements with respect to the Loan Documents, (c) make Advances, for itself or on behalf of the Lenders as provided in the Loan Documents, (d) exclusively receive, apply, and distribute the Collections of Borrowers and their Subsidiaries as provided in the Loan Documents, (e) open and maintain such bank accounts and cash management accounts as Agent deems necessary and appropriate in accordance with the Loan Documents for the foregoing purposes with respect to the Collateral and the Collections of Borrowers and their Subsidiaries, (f) perform, exercise, and enforce any and all other rights and remedies of the Lender Group with respect to Borrowers, the Obligations, the Collateral, the FF&E Letter of Credit, the Collections of Borrowers and their Subsidiaries or otherwise related to any of same as provided in the Loan Documents, and (g) incur and pay such Lender Group Expenses as Agent may deem necessary or appropriate for the performance and fulfillment of its functions and powers pursuant to the Loan Documents. 16.2 DELEGATION OF DUTIES. Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects as long as such selection was made without gross negligence or willful misconduct. 16.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by any Borrower or any Subsidiary or Affiliate of any Borrower, or any officer or director thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the Books or properties of Borrowers or the books or records or properties of any of Borrowers' Subsidiaries or Affiliates. 16.4 RELIANCE BY AGENT. Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by 111 it to be genuine and correct and to have been signed, sent, or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Borrowers or counsel to any Lender), independent accountants and other experts selected by Agent. Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless Agent shall first receive such advice or concurrence of the Lenders as it deems appropriate and until such instructions are received, Agent shall act, or refrain from acting, as it deems advisable. If Agent so requests, it shall first be indemnified to its reasonable satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. 16.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest, fees, and expenses required to be paid to Agent for the account of the Lenders, except with respect to Events of Default of which Agent has actual knowledge, unless Agent shall have received written notice from a Lender or Borrower referring to this Agreement, describing such Default or Event of Default, and stating that such notice is a "notice of default." Agent promptly will notify the Lenders of its receipt of any such notice or of any Event of Default of which Agent has actual knowledge. If any Lender obtains actual knowledge of any Event of Default, such Lender promptly shall notify the other Lenders and Agent of such Event of Default. Each Lender shall be solely responsible for giving any notices to its Participants, if any. Subject to Section 16.4, Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Section 9. 16.6 CREDIT DECISION. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by Agent hereinafter taken, including any review of the affairs of Borrowers and their Subsidiaries or Affiliates, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of Borrowers and any other Person (other than the Lender Group) party to a Loan Document, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Borrowers. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Borrowers and any other Person (other than the Lender Group) party to a Loan Document. Except for notices, reports, and other documents expressly herein required to be furnished to the Lenders by Agent, Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other 112 condition or creditworthiness of Borrowers and any other Person party to a Loan Document that may come into the possession of any of the Agent-Related Persons. 16.7 COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur and pay Lender Group Expenses to the extent Agent reasonably deems necessary or appropriate for the performance and fulfillment of its functions, powers, and obligations pursuant to the Loan Documents, including court costs, reasonable attorneys fees and expenses, costs of collection by outside collection agencies and auctioneer fees and costs of security guards or insurance premiums paid to maintain the Collateral, whether or not Borrowers are obligated to reimburse Agent or the Lenders for such expenses pursuant to the Loan Agreement or otherwise. Agent is authorized and directed to deduct and retain sufficient amounts from the Collections of Borrowers and their Subsidiaries received by Agent to reimburse Agent for such out-of-pocket costs and expenses prior to the distribution of any amounts to the Lenders. In the event Agent is not reimbursed for such costs and expenses from the Collections of Borrowers and their Subsidiaries received by Agent, each Lender hereby agrees that it is and shall be obligated to pay to or reimburse Agent for the amount of such Lender's Pro Rata Share thereof. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of Borrowers and without limiting the obligation of Borrowers to do so), according to their Pro Rata Shares, from and against any and all Indemnified Liabilities; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities resulting solely from such Person's gross negligence or willful misconduct nor shall any Lender be liable for the obligations of any Defaulting Lender in failing to make an Advance or other extension of credit hereunder. Without limitation of the foregoing, each Lender shall reimburse Agent upon demand for such Lender's ratable share of any costs or out-of-pocket expenses (including attorneys fees and expenses) incurred by Agent in connection with the preparation, execution, delivery, administration, modification, amendment, or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that Agent is not reimbursed for such expenses by or on behalf of Borrowers. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of Agent. 16.8 AGENT IN INDIVIDUAL CAPACITY. Wells Fargo Foothill and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in, and generally engage in any kind of banking, trust, financial advisory, underwriting, or other business with Borrowers and their Subsidiaries and Affiliates and any other Person (other than the Lender Group) party to any Loan Documents as though Wells Fargo Foothill were not Agent hereunder, and, in each case, without notice to or consent of the other members of the Lender Group. The other members of the Lender Group acknowledge that, pursuant to such activities, Wells Fargo Foothill or its Affiliates may receive information regarding Borrowers or their Affiliates and any other Person (other than the Lender Group) party to any Loan Documents that is subject to confidentiality obligations in favor of Borrowers or such other Person and that prohibit the disclosure of such information to the Lenders, and the Lenders acknowledge that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver Agent will use its reasonable best efforts to obtain), Agent shall not be under any obligation to provide such information to them. The terms "Lender" and "Lenders" include Wells Fargo Foothill in its individual capacity. 113 16.9 SUCCESSOR AGENT. Agent may resign as Agent upon 45 days' notice to the Lenders. If Agent resigns under this Agreement, the Required Lenders shall appoint a successor Agent for the Lenders. If no successor Agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with the Lenders, a successor Agent. If Agent has materially breached or failed to perform any material provision of this Agreement or of applicable law, the Required Lenders may agree in writing to remove and replace Agent with a successor Agent from among the Lenders. In any such event, upon the acceptance of its appointment as successor Agent hereunder, such successor Agent shall succeed to all the rights, powers, and duties of the retiring Agent and the term "Agent" shall mean such successor Agent and the retiring Agent's appointment, powers, and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 16 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor Agent has accepted appointment as Agent by the date which is 45 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Lenders appoint a successor Agent as provided for above. 16.10 LENDER IN INDIVIDUAL CAPACITY. Any Lender and its respective Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with Borrowers and their Subsidiaries and Affiliates and any other Person (other than the Lender Group) party to any Loan Documents as though such Lender were not a Lender hereunder without notice to or consent of the other members of the Lender Group. The other members of the Lender Group acknowledge that, pursuant to such activities, such Lender and its respective Affiliates may receive information regarding Borrowers or their Affiliates and any other Person (other than the Lender Group) party to any Loan Documents that is subject to confidentiality obligations in favor of Borrowers or such other Person and that prohibit the disclosure of such information to the Lenders, and the Lenders acknowledge that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver such Lender will use its reasonable best efforts to obtain), such Lender not shall be under any obligation to provide such information to them. With respect to the Swing Loans and Agent Advances, Swing Lender shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the sub-agent of Agent. 16.11 WITHHOLDING TAXES. (a) If any Lender is a "foreign corporation, partnership or trust" within the meaning of the IRC and such Lender claims exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such Lender agrees with and in favor of Agent and Borrowers, to deliver to Agent and Borrowers: (i) if such Lender claims an exemption from withholding tax pursuant to its portfolio interest exception, (a) a statement of the Lender, signed under penalty of perjury, that it is not a (I) a "bank" as described in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder (within the meaning of Section 881(c)(3)(B) of the IRC), or (III) a controlled foreign corporation described in Section 881(c)(3)(C) of the IRC, and (B) a properly completed IRS Form W-8BEN, 114 before the first payment of any interest under this Agreement and at any other time reasonably requested by Agent or any Borrower; (ii) if such Lender claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, a properly completed IRS Form W-8BEN before the first payment of any interest under this Agreement and at any other time reasonably requested by Agent or any Borrower; (iii) if such Lender claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender, 2 properly completed and executed copies of IRS Form W-8ECI before the first payment of any interest is due under this Agreement and at any other time reasonably requested by Agent or any Borrower; (iv) such other form or forms as may be required under the IRC or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax. Such Lender agrees promptly to notify Agent and Borrowers of any change in circumstances which would modify or render invalid any claimed exemption or reduction. (b) If any Lender claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form W-8BEN and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of Borrowers to such Lender, such Lender agrees to notify Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of Borrowers to such Lender. To the extent of such percentage amount, Agent will treat such Lender's IRS Form W-8BEN as no longer valid. (c) If any Lender is entitled to a reduction in the applicable withholding tax, Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by subsection (a) of this Section are not delivered to Agent, then Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax. (d) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify and hold Agent harmless for all amounts paid, directly or indirectly, by Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to Agent under this Section, together with all costs and expenses (including attorneys fees and expenses). The obligation of the Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of Agent. 115 (e) All payments made by Borrowers hereunder or under any note or other Loan Document will be made without setoff, counterclaim, or other defense, except as required by applicable law other than for Taxes (as defined below). All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction (other than the United States) or by any political subdivision or taxing authority thereof or therein (other than of the United States) with respect to such payments (but excluding, any tax imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein (i) measured by or based on the net income or net profits of a Lender, or (ii) to the extent that such tax results from a change in the circumstances of the Lender, including a change in the residence, place of organization, or principal place of business of the Lender, or a change in the branch or lending office of Lender participating in the transactions set forth herein) and all interest, penalties or similar liabilities with respect thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as "Taxes"). If any Taxes are so levied or imposed, each Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any note, including any amount paid pursuant to this Section 16.11 after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein; provided, however, that Borrowers shall not be required to increase any such amounts payable to Agent or any Lender (i) that is not organized under the laws of the United States if such Person fails to comply with the other requirements of this Section 16.11, or (ii) if the increase in such amount payable results from Agent's or such Lender's own willful misconduct or gross negligence. Borrowers will furnish to Agent as promptly as possible after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by Borrowers. 16.12 COLLATERAL MATTERS. (a) The Lenders hereby irrevocably authorize Agent, at its option and in its sole discretion, to release any Lien on any Collateral (i) upon the termination of the Commitments and payment and satisfaction in full by Borrowers of all Obligations, (ii) constituting property being sold or disposed of if a release is required or desirable in connection therewith and if each Borrower certifies to Agent that the sale or disposition is permitted under Section 7.4 of this Agreement or the other Loan Documents (and Agent may rely conclusively on any such certificate, without further inquiry), (iii) constituting property in which no Borrower or its Subsidiaries owned any interest at the time the Agent's Lien was granted or at any time thereafter, or (iv) constituting property leased to a Borrower or its Subsidiaries under a lease that has expired or is terminated in a transaction permitted under this Agreement. Except as provided above, Agent will not execute and deliver a release of any Lien on any Collateral without the prior written authorization of (y) if the release is of all or substantially all of the Collateral, all of the Lenders, or (z) otherwise, the Required Lenders. Upon request by Agent or any Borrower at any time, the Lenders will confirm in writing Agent's authority to release any such Liens on particular types or items of Collateral pursuant to this Section 16.12; provided, however, that (1) Agent shall not be required to execute any document necessary to evidence such release on terms that, in Agent's opinion, would expose Agent to liability or create any obligation or entail any consequence other than the release of such Lien without recourse, representation, or warranty, and (2) such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of Borrowers in respect of) 116 all interests retained by Borrowers, including, the proceeds of any sale, all of which shall continue to constitute part of the Collateral. (b) Agent shall have no obligation whatsoever to any of the Lenders to assure that the Collateral exists or is owned by Borrowers or is cared for, protected, or insured or has been encumbered, or that the Agent's Liens have been properly or sufficiently or lawfully created, perfected, protected, or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent pursuant to any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, subject to the terms and conditions contained herein, Agent may act in any manner it may deem appropriate, in its sole discretion given Agent's own interest in the Collateral in its capacity as one of the Lenders and that Agent shall have no other duty or liability whatsoever to any Lender as to any of the foregoing, except as otherwise provided herein. 16.13 RESTRICTIONS ON ACTIONS BY THE LENDERS; SHARING OF PAYMENTS. (a) Each of the Lenders agrees that it shall not, without the express consent of Agent, and that it shall, to the extent it is lawfully entitled to do so, upon the request of Agent, set off against the Obligations, any amounts owing by such Lender to Borrowers or any deposit accounts of Borrowers now or hereafter maintained with such Lender. Each of the Lenders further agrees that it shall not, unless specifically requested to do so by Agent, take or cause to be taken any action, including, the commencement of any legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce any security interest in, any of the Collateral the purpose of which is, or could be, to give such Lender any preference or priority against the other Lenders with respect to the Collateral. (b) If, at any time or times any Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments with respect to the Obligations arising under, or relating to, this Agreement or the other Loan Documents, except for any such proceeds or payments received by such Lender from Agent pursuant to the terms of this Agreement, or (ii) payments from Agent in excess of such Lender's ratable portion of all such distributions by Agent, such Lender promptly shall (1) turn the same over to Agent, in kind, and with such endorsements as may be required to negotiate the same to Agent, or in immediately available funds, as applicable, for the account of all of the Lenders and for application to the Obligations in accordance with the applicable provisions of this Agreement, or (2) purchase, without recourse or warranty, an undivided interest and participation in the Obligations owed to the other Lenders so that such excess payment received shall be applied ratably as among the Lenders in accordance with their Pro Rata Shares; provided, however, that if all or part of such excess payment received by the purchasing party is thereafter recovered from it, those purchases of participations shall be rescinded in whole or in part, as applicable, and the applicable portion of the purchase price paid therefor shall be returned to such purchasing party, but without interest except to the extent that such purchasing party is required to pay interest in connection with the recovery of the excess payment. 16.14 AGENCY FOR PERFECTION. Agent hereby appoints each other Lender as its agent (and each Lender hereby accepts such appointment) for the purpose of perfecting the Agent's 117 Liens in assets which, in accordance with Article 9 of the Code can be perfected only by possession. Should any Lender obtain possession of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's request therefor shall deliver such Collateral to Agent or in accordance with Agent's instructions. 16.15 PAYMENTS BY AGENT TO THE LENDERS. All payments to be made by Agent to the Lenders shall be made by bank wire transfer or internal transfer of immediately available funds pursuant to such wire transfer instructions as each party may designate for itself by written notice to Agent. Concurrently with each such payment, Agent shall identify whether such payment (or any portion thereof) represents principal, premium, or interest of the Obligations. 16.16 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS. Each member of the Lender Group authorizes and directs Agent to enter into this Agreement and the other Loan Documents relating to the Collateral, for the benefit of the Lender Group. Each member of the Lender Group agrees that any action taken by Agent in accordance with the terms of this Agreement or the other Loan Documents relating to the Collateral and the exercise by Agent of its powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders. 16.17 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY; DISCLAIMERS BY THE LENDERS; OTHER REPORTS AND INFORMATION. By becoming a party to this Agreement, each Lender: (a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a copy of each field audit or examination report (each a "Report" and collectively, "Reports") prepared by Agent, and Agent shall so furnish each Lender with such Reports, (b) expressly agrees and acknowledges that Agent does not (i) make any representation or warranty as to the accuracy of any Report, and (ii) shall not be liable for any information contained in any Report, (c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agent or other party performing any audit or examination will inspect only specific information regarding Borrowers and will rely significantly upon the Books, as well as on representations of Borrowers' personnel, (d) agrees to keep all Reports and other material, non-public information regarding Borrowers and their Subsidiaries and their operations, assets, and existing and contemplated business plans in a confidential manner; it being understood and agreed by Borrowers that in any event such Lender may make disclosures (a) to counsel for and other advisors, accountants, and auditors to such Lender, (b) reasonably required by any bona fide potential or actual Assignee or Participant in connection with any contemplated or actual assignment or transfer by such Lender of an interest herein or any participation interest in such Lender's rights hereunder, (c) of information that has become public by disclosures made by Persons other than such Lender, its Affiliates, assignees, transferees, or Participants, or (d) as required or requested by any court, governmental or administrative agency, pursuant to any subpoena or other legal process, or by any law, statute, regulation, or court order; provided, 118 however, that, unless prohibited by applicable law, statute, regulation, or court order, such Lender shall notify Borrowers of any request by any court, governmental or administrative agency, or pursuant to any subpoena or other legal process for disclosure of any such non-public material information concurrent with, or where practicable, prior to the disclosure thereof, and (e) without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold Agent and any such other Lender preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any loans or other credit accommodations that the indemnifying Lender has made or may make to Borrowers, or the indemnifying Lender's participation in, or the indemnifying Lender's purchase of, a loan or loans of Borrowers; and (ii) to pay and protect, and indemnify, defend and hold Agent, and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including, attorneys fees and costs) incurred by Agent and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender. In addition to the foregoing: (x) any Lender may from time to time request of Agent in writing that Agent provide to such Lender a copy of any report or document provided by Borrowers to Agent that has not been contemporaneously provided by Borrowers to such Lender, and, upon receipt of such request, Agent shall provide a copy of same to such Lender, (y) to the extent that Agent is entitled, under any provision of the Loan Documents, to request additional reports or information from Borrowers, any Lender may, from time to time, reasonably request Agent to exercise such right as specified in such Lender's notice to Agent, whereupon Agent promptly shall request of Borrowers the additional reports or information reasonably specified by such Lender, and, upon receipt thereof from Borrowers, Agent promptly shall provide a copy of same to such Lender, and (z) any time that Agent renders to Borrowers a statement regarding the Loan Account, Agent shall send a copy of such statement to each Lender. 16.18 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that certain of the Loan Documents now or hereafter may have been or will be executed only by or in favor of Agent in its capacity as such, and not by or in favor of the Lenders, any and all obligations on the part of Agent (if any) to make any credit available hereunder shall constitute the several (and not joint) obligations of the respective Lenders on a ratable basis, according to their respective Commitments, to make an amount of such credit not to exceed, in principal amount, at any one time outstanding, the amount of their respective Commitments. Nothing contained herein shall confer upon any Lender any interest in, or subject any Lender to any liability for, or in respect of, the business, assets, profits, losses, or liabilities of any other Lender. Each Lender shall be solely responsible for notifying its Participants of any matters relating to the Loan Documents to the extent any such notice may be required, and no Lender shall have any obligation, duty, or liability to any Participant of any other Lender. Except as provided in Section 16.7, no member of the Lender Group shall have any liability for the acts or any other member of the Lender Group. No Lender shall be responsible to any Borrower or any other Person for any failure by any other Lender to fulfill its obligations to make credit available hereunder, nor to advance for it or on its behalf in connection with its Commitment, nor to take any other action on its behalf hereunder or in connection with the financing contemplated herein. 119 17. GENERAL PROVISIONS. 17.1 EFFECTIVENESS. This Agreement shall be binding and deemed effective when executed by Borrowers, Agent, and each Lender whose signature is provided for on the signature pages hereof. 17.2 SECTION HEADINGS. Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Agreement. 17.3 INTERPRETATION. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed against Agent, any Lender or Borrowers, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to accomplish fairly the purposes and intentions of all parties hereto. 17.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision. 17.5 AMENDMENTS IN WRITING. This Agreement only can be amended by a writing in accordance with Section 15.1. 17.6 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed counterpart of this Agreement by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement. The foregoing shall apply to each other Loan Document mutatis mutandis. 17.7 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or payment of the Obligations by any Borrower or any Guarantor or the transfer to Agent or any Lender of any property should for any reason subsequently be declared to be void or voidable under any state or federal law relating to creditors' rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, or other voidable or recoverable payments of money or transfers of property (collectively, a "Voidable Transfer"), and if the Lender Group is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that the Lender Group is required or elects to repay or restore, and as to all reasonable costs, expenses, and attorneys fees of the Lender Group related thereto, the liability of Borrowers and Guarantors automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made. 120 17.8 INTEGRATION. This Agreement, together with the other Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof. 17.9 COMBINED ADMINISTRATION. Each Borrower hereby irrevocably authorizes Agent to rely on any notices, information or instructions given by any Borrower hereunder purportedly on behalf of all Borrowers. It is understood that the handling of the Loan Account and Collateral of Borrowers in a combined fashion, as more fully set forth herein, is done solely as an accommodation to Borrowers in order to utilize the collective borrowing powers of Borrowers in the most efficient and economical manner and at their request, and that Lender Group shall not incur liability to any Borrower as a result hereof. Each Borrower expects to derive benefit, directly or indirectly, from the handling of the Loan Account and the Collateral in a combined fashion since the successful operation of each Borrower is dependent on the continued successful performance of the integrated group. To induce the Lender Group to do so, and in consideration thereof, each Borrower hereby jointly and severally agrees to indemnify each member of the Lender Group and hold each member of the Lender Group harmless against any and all liability, expense, loss or claim of damage or injury, made against the Lender Group by any Borrower or by any third party whosoever, arising from or incurred by reason of (a) the handling of the Loan Account and Collateral of Borrowers as herein provided, (b) the Lender Group's relying on any instructions of any Borrower, or (c) any other action taken by the Lender Group hereunder or under the other Loan Documents, except that Borrowers will have no liability to the relevant Agent Related Person or Lender-Related Person under this Section 17.9 with respect to any liability that has been finally determined by a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of such Agent-Related Person or Lender-Related Person, as the case may be. [SIGNATURE PAGE TO FOLLOW] 121 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written. DIAMOND JO, LLC., a Delaware limited liability company By: /s/ Natalie A. Schramm --------------------------------------- Title: Chief Financial Officer THE OLD EVANGELINE DOWNS, L.L.C., a Louisiana limited liability company By: /s/ Natalie A. Schramm --------------------------------------- Title: Chief Financial Officer WELLS FARGO FOOTHILL, INC., a California corporation, as Agent and as Lender By: /s/ Todd R. Nakamoto --------------------------------------- Title: Vice President HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P., as a Lender By: Highbridge/Zwirn Partners, LLC, its general partner By: /s/ Perry A. Gruss --------------------------------------- Title: Chief Financial Officer EX-10.20 25 forms4_ex10-20wfb071404.txt EX. 10.20 - GUARANTOR SEC. AGMT EXHIBIT 10.20 GUARANTOR SECURITY AGREEMENT This GUARANTOR SECURITY AGREEMENT (this "Agreement") is as of June 16, 2004, by each of the parties listed on the signature page hereof, and those additional entities that hereafter become parties hereto by executing the form of Supplement attached hereto as Annex 1, as Pledgors (each a "Pledgor", and collectively, the "Pledgors"), and Wells Fargo Foothill, Inc., a California corporation, as agent for the Lenders (as defined in the hereinafter defined Loan Agreement) ("Agent"). W I T N E S S E T H: WHEREAS, The Old Evangeline Downs, L.L.C., a Louisiana limited liability company, and Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC), a Delaware limited liability company, as borrowers (each, a "Borrower" and collectively, the "Borrowers"), Agent, and the Lenders are parties to that certain Loan and Security Agreement dated as of even date herewith (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement"; capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Loan Agreement), pursuant to which the Lender Group has agreed to extend credit to the Borrowers from time to time pursuant to the terms and conditions thereof; and WHEREAS, Pledgors are Affiliates of the Borrowers, and each Pledgor has determined that it will realize substantial direct and indirect benefits as a result of the extension of credit to the Borrowers pursuant to the Loan Agreement, and such Pledgor's execution, delivery and performance of this Agreement are within such Pledgor's corporate or other purposes and are in the best interests of such Pledgor; and WHEREAS, it is a condition precedent to the execution and delivery of the Loan Agreement by the Lender Group and the extension of credit to the Borrowers thereunder that each Pledgor execute and deliver this Agreement to Agent and grant a security interest to Agent, for the benefit of the Lender Group, in order to ensure and secure the prompt performance of all covenants, agreements and liabilities of the Borrowers and the Guarantors (each, a "Loan Party", and collectively, the "Loan Parties") under the Loan Documents and the prompt repayment of any and all now existing or hereafter arising Obligations and other obligations of the Loan Parties under the Loan Documents (including, without limitation, any interest, fees or other charges in respect of the Loan Agreement and the other Loan Documents that would accrue but for the filing of an Insolvency Proceeding with respect to any Borrower, whether or not such claim is allowed in such Insolvency Proceeding) (other than the FF&E Obligations); NOW, THEREFORE, for and in consideration of the recitals made above and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Defined Terms. As used in this Agreement, "Books" means all of Pledgors' now owned or hereafter acquired books and records (including all of its Records indicating, summarizing, or evidencing its assets (including the Collateral) or liabilities, all of each Pledgor's Records relating to its or their business operations or financial condition, and all of its or their goods or General Intangibles related to such information). 2. Grant of Security. Each Pledgor hereby unconditionally grants, assigns and pledges to Agent, for the benefit of the Lender Group, a continuing first priority security interest in and security title to (together with a right of setoff) all personal property of such Pledgor (hereinafter referred to as the "Security Interest"), including, without limitation, all of such Pledgor's right, title and interest in and to each of the following, whether now owned or hereafter acquired (collectively, the "Collateral"): (a) all of its Accounts; (b) all of its Books; (c) all of its commercial tort claims described on Schedule 1; (d) all of its deposit accounts, including all DDAs; (e) all of its Equipment; (f) all of its General Intangibles; (g) all of its Inventory; (h) all of its Investment Property; (i) all of its judgments; (j) all of its Negotiable Collateral; (k) all of such Pledgor's money or other assets that now or hereafter come into the possession, custody, or control of Agent or any other member of the Lender Group; and (l) all of the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the foregoing, and any and all Accounts, Books, Equipment, General Intangibles, Inventory, Investment Property, Negotiable Collateral, Real Property, money, deposit accounts, or other tangible or intangible property resulting from the sale, exchange, collection, or other disposition of any of the foregoing, or any portion thereof or interest therein, and the proceeds thereof. Notwithstanding the foregoing, "Collateral" shall not include any of the Excluded Assets. This Agreement and the Security Interest created hereby secure the full and prompt payment, performance and satisfaction of (a) all covenants, agreements and liabilities of the Borrowers under the Loan Documents and all now existing or hereafter arising Obligations (including, without limitation, any interest, fees and other charges in respect of the Loan Agreement and the other Loan Documents that would accrue but for the filing of an Insolvency Proceeding with respect to any Borrower, regardless of whether such claim is allowed in such 2 Insolvency Proceeding but excluding the FF&E Obligations), and (b) the obligations of each Guarantor arising from the Loan Documents to which such Guarantor is a party, whether direct or indirect, absolute or contingent, now or hereafter existing, joint or several, due or to become due, primary or secondary, liquidated or unliquidated, or secured or unsecured, and however acquired by Agent or any other member of the Lender Group, together with all other now existing or hereafter arising Guaranteed Obligations (as that term is defined in the Guaranties) (all of the foregoing now existing or hereafter arising obligations being referred to, collectively, as the "Secured Obligations"). Agent's Liens in and to the Collateral shall attach to all Collateral without further act on the part of Agent or Pledgors. 3. Uniform Commercial Code Financing Statements; Further Assurances. (a) Each Pledgor authorizes Agent to file, transmit, or communicate, as applicable, Uniform Commercial Code financing statements, original financing statements in-lieu of continuation statements and amendments describing the Collateral as "all personal property of debtor" or "all assets of debtor" or words of similar effect in order to perfect Agent's Security Interest in the Collateral without such Pledgor's signature, to the extent permitted by applicable law; provided, however, that Agent shall, in each case, clearly identify Excluded Assets as excepted items, as applicable. (b) At any time upon the request of Agent, Pledgors shall execute and deliver, or cause other Persons (including, without limitation, those in possession of any Collateral) to execute and deliver, all further instruments and documents, and take all further action, (i) to perfect and continue perfection of Agent's Security Interest in the Collateral (whether now owned or hereafter arising or acquired or tangible or intangible), (ii) to create, perfect and insure Liens in favor of Agent in any Real Property acquired after the Closing Date, (iii) in order to consummate fully all of the transactions contemplated hereby and under the other Loan Documents and (iv) to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Pledgor shall: (i) execute and deliver, or cause other Persons (including, without limitation, those in possession of any Collateral) to execute and deliver, any and all financing statements, original financing statements in lieu of continuation statements, fixture filings, security agreements, pledges, real property security instruments, assignments, Collateral Access Agreements, instruments, powers of attorney, endorsements of certificates of title, and all other documents (collectively, the "Additional Documents") that Agent may request in its Permitted Discretion, in form and substance reasonably satisfactory to Agent; (ii) at any reasonable time, upon request by Agent, exhibit the Collateral for, and allow inspection of the Collateral by, Agent, or persons designated by Agent; and (iii) at Agent's reasonable request, appear in and defend any action or proceeding that may affect Agent's security interest in all or any part of the Collateral. 3 (c) To the maximum extent permitted by applicable law, each Pledgor authorizes Agent to execute any such Additional Documents in the applicable Pledgor's name and authorizes Agent to file such executed Additional Documents in any appropriate filing office. Each Pledgor also hereby ratifies its authorization for Agent to have filed in any jurisdiction any financing statements or amendments thereto filed prior to the date hereof. No Pledgor shall terminate, amend or file a correction statement with respect to any Uniform Commercial Code financing statement filed pursuant to this Section 3 without Agent's prior written consent, which consent shall not be unreasonably withheld. (d) In addition, on such periodic basis as Agent shall require, each Pledgor shall (i) provide Agent with a report of all new patentable, copyrightable, or trademarkable materials acquired or generated by such Pledgor during the prior period, (ii) cause all patents, copyrights, and trademarks acquired or generated by such Pledgor that are not already the subject of a registration with the appropriate filing office (or an application therefor diligently prosecuted) to be registered with such appropriate filing office in a manner sufficient to impart constructive notice of such Pledgor's ownership thereof and (iii) cause to be prepared, executed, and delivered to Agent supplemental schedules to the applicable Loan Documents to identify such patents, copyrights, and trademarks as being subject to the security interests created thereunder. (e) In addition, if any Pledgor acquires any commercial tort claim or judgment after the date hereof, such Pledgor shall promptly (but in any event within 3 Business Days after such acquisition) deliver to Agent a written description of such commercial tort claim or judgment, as applicable, and shall deliver a written agreement, in form and substance satisfactory to Agent, pursuant to which such Pledgor shall grant a perfected security interest in all of its right, title and interest in and to such commercial tort claim or judgment, as applicable, to Agent, as security for the Secured Obligations. (f) In addition, each Pledgor shall furnish to Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Agent may reasonably request, all in reasonable detail. 4. Negotiable Collateral and Chattel Paper. Each Pledgor covenants and agrees with Agent that from and after the Closing Date and until the date of termination of this Agreement in accordance with Section 24: (a) In the event that any Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral, such Pledgor shall immediately notify Agent and, if and to the extent that perfection or priority of Agent's security interest with respect to such Collateral is dependent on or enhanced by possession, such Pledgor, immediately upon the request of Agent, shall endorse and deliver physical possession of such Negotiable Collateral to Agent; (b) Upon request by Agent, such Pledgor shall take all steps reasonably necessary to grant Agent control of all electronic Chattel Paper in accordance with the Code and all "transferable records" as defined in each of the Uniform Electronic Transactions Act and the Electronic Signatures in Global and National Commerce Act; and 4 (c) In the event such Pledgor, with Agent's consent, retains possession of any Chattel Paper or instruments otherwise required to be endorsed and delivered to Agent pursuant to Section 4(a), all of such Chattel Paper and instruments shall be marked with the following legend: "This writing and the obligations evidenced or secured thereby are subject to the security interest of Wells Fargo Foothill, Inc., as Agent". 5. Right to Inspect. Agent and each Lender (through any of their respective officers, employees, or agents) shall have the right, from time to time and during normal business hours hereafter, to inspect the Books and to check, test, and appraise the Collateral in order to verify Pledgors' financial condition or the amount, quality, value, condition of, or any other matter relating to, the Collateral. 6. Control Agreements. Each Pledgor agrees that it will not transfer assets out of any Securities Accounts other than as permitted under Section 7.19 of the Loan Agreement and, if to another securities intermediary, unless such Pledgor, Agent, and the substitute securities intermediary have entered into a Control Agreement. No arrangement contemplated hereby or by any Control Agreement in respect of any Securities Accounts or other Investment Property shall be modified by any Pledgor without the prior written consent of Agent. Upon the occurrence and during the continuance of Event of Default, Agent may notify any securities intermediary to liquidate the applicable Securities Account or any related Investment Property maintained or held thereby and remit the proceeds thereof to the Loan Account. 7. Representations and Warranties. Each Pledgor represents and warrants to Agent and the other members of the Lender Group as follows: (a) Such Pledgor is duly organized and existing and in good standing under the laws of the jurisdiction of its organization and qualified to do business in any state where the failure to be so qualified reasonably could be expected to have a Material Adverse Change; (b) The execution, delivery, and performance by such Pledgor of this Agreement and the Loan Documents to which it is a party have been duly authorized by all necessary action on the part of such Pledgor; (c) The execution, delivery, and performance by such Pledgor of this Agreement and the Loan Documents to which it is a party do not and will not (i) violate any provision of federal, state, or local law or regulation applicable to any Pledgor, the Governing Documents of any Pledgor, or any order, judgment, or decree of any court or other Governmental Authority binding on any Pledgor, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of any Pledgor (including any of the Senior Note Documents or the OED Note Documents), (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of any Pledgor, other than Permitted Liens, or (iv) require any approval of any Pledgor's members or shareholders or any approval or consent of any Person under any material contractual obligation of any Pledgor; (d) (i) The execution, delivery, and performance by each Pledgor of this Agreement and the Loan Documents to which such Pledgor is a party and the exercise by Agent 5 of any rights or remedies in respect of any Collateral (whether specifically granted or created hereunder or created or provided for by applicable law) do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any Governmental Authority or other Person, other than (i) the filing of financing statements and the execution and delivery by the applicable securities intermediary or bank of each Control Agreement, (ii) any consent or approval that has been obtained and remains in full force and effect and (iii) with respect to the exercise by Agent of any rights or remedies in respect of any Collateral, to the extent authorizations, consents or approvals are required by the applicable Gaming Authority or under any intellectual property license, contract or agreement and to the extent any actions are required to be performed by Agent; (e) This Agreement and the other Loan Documents to which such Pledgor is a party, and all other documents contemplated hereby and thereby, when executed and delivered by such Pledgor, will be the legally valid and binding obligations of such Pledgor, enforceable against such Pledgor, in accordance with their respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors' rights generally; (f) Each Pledgor has good and indefeasible title to the Collateral, free and clear of Liens except for Permitted Liens and except for defects in title that do not interfere in any material respect with its ability to conduct its business or to utilize such property for its intended purpose; (g) Upon the filing of Uniform Commercial Code financing statements in the jurisdictions set forth on Schedule 2 attached hereto, the Security Interest in the Collateral granted hereunder shall constitute at all times a valid first priority security interest, perfected with respect to all Collateral for which the filing of the Uniform Commercial Code financing statements is a valid method of perfection, and, assuming timely filing of continuation statements, vested in Agent, in and upon the Collateral, free of any Liens except for Permitted Liens; (h) Each Pledgor's (i) legal name as set forth on the public records of such Pledgor's jurisdiction of organization is as set forth on the signature page hereof for such Pledgor, (ii) Organizational I.D. Number and FEIN are as set forth on Schedule 3 for such Pledgor, and (iii) chief executive office and all other locations of such Pledgor are as set forth on Schedule 4, and (iv) as of the Closing Date, no Pledgor holds any commercial tort claim, except as disclosed on Schedule 1; (i) All written information supplied by any Pledgor with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects; (j) All of the Equipment (other than any that may have become obsolete or worn-out) is used or held for use in Pledgors' business and is fit for such purposes; (k) The Inventory and Equipment are not stored with a bailee, warehouseman, or similar party and are located only at the locations identified on Schedule 4; 6 (l) Each Pledgor keeps correct and accurate records itemizing and describing the type, quality, and quantity of its Inventory and the book value thereof; (m) Peninsula Gaming, LLC ("Parent") does not (i) own or lease, directly or indirectly, any real, personal, intangible or tangible property of any nature other than the Equity Interests of the Borrowers, (ii) conduct, transact or otherwise engage in any business or operations other than those incidental to the ownership of such Equity Interests of the Borrowers or (iii) have any material obligations or liabilities other than under (1) the Loan Documents and (2) the Senior Note Documents; and (n) The Old Evangeline Downs Capital Corp. ("OED Capital") does not (i) own or lease, directly or indirectly, any real, personal, intangible or tangible property of any nature, (ii) conduct, transact or otherwise engage in any business or operations other than in connection with and as required by the OED Note Documents or (iii) have any material obligations or liabilities other than under (1) the Loan Documents, (2) the OED Note Documents and (3) the Senior Note Documents. The warranties, representations, and agreements set forth in this Agreement and the other Loan Documents to which each Pledgor is a party shall be conclusively presumed to have been relied upon by Agent and the other members of the Lender Group and shall be cumulative and in addition to any and all other warranties, representations, and agreements which each Pledgor shall now or hereinafter give, or cause to be given, to Agent. The representations and warranties herein shall be deemed to have been made by each Pledgor on each date of each borrowing under the Loan Agreement on and as of such date of borrowing as though made hereunder on and as of such date. 8. Incorporation of Representations, Warranties and Covenants. Each Pledgor that is a Subsidiary of a Borrower agrees that, for purposes of this Agreement, all of the representations, warranties and covenants made by Borrowers on behalf of or relating to each "Subsidiary" in Sections 4, 5, 6 and 7 of the Loan Agreement shall be deemed incorporated by reference into and made an express part of this Agreement, as fully and completely as if set forth expressly herein, and such Pledgor shall comply herewith and be bound thereby. Each Pledgor ratifies and affirms each representation and warranty made with respect to it or on its behalf by any Borrower in the Loan Agreement. 9. Agent's Perfected First Priority Security Interest. Each Pledgor shall take or cause to be taken such acts and actions as shall be necessary or appropriate to ensure that the Security Interest in the Collateral shall not become subordinate or junior to the security interests, liens or claims of any other Person other than Permitted Liens, and that the Collateral shall not otherwise be or become subject to any Lien, except for Permitted Liens, it being understood that the foregoing shall not obligate any Pledgor to file any continuation statement. 10. Parent and OED Capital. (a) Parent hereby covenants and agrees not to incur any Indebtedness, grant any Liens or conduct, transact or otherwise engage in any business or operations other than in 7 connection with and as required by the Loan Documents and the Senior Note Documents and those incidental to the ownership of the Equity Interests of the Borrowers. (b) OED Capital hereby covenants and agrees not to incur any Indebtedness, grant any Liens or conduct, transact or otherwise engage in any business or operations other than in connection with and as required by the Loan Documents, the Senior Note Documents and the OED Note Documents. 11. Negative Covenants. Each Pledgor covenants and agrees that until payment in full of the Secured Obligations, it will not do any of the following: (a) Change its name, FEIN, corporate structure, or identity, or add any new fictitious name; provided, however, that a Pledgor may change its name upon at least 30 days' prior written notice by such Pledgor to Agent of such change and so long as, at the time of such written notification, such Pledgor provides any financing statements or fixture filings necessary to perfect and continue perfected Agent's security interests; (b) Relocate its chief executive office to a new location, in each case without providing to Agent (i) at least 5 days' prior written notification thereof and (ii) upon request of Agent, a Collateral Access Agreement with respect to such new location. The Inventory and Equipment shall not at any time now or hereafter be stored with a bailee, warehouseman, or similar party without Agent's prior written consent; (c) deliver any document evidencing any Equipment or Inventory to any Person other than the issuer of such document to claim the goods evidenced therefor, Agent or any other holder or representative of a holder of a Permitted Lien; (d) except for Permitted Dispositions, dispose of any item or portion of the Collateral; or (e) acquire by purchase or otherwise any Real Property without providing to Agent, at or prior to the time of such acquisition, such Pledgor provides such documents as requested by Agent pursuant to Section 3(b), including, without limitation, mortgagee title insurance policies, legal descriptions and, as applicable, Collateral Access Agreements with respect to such Real Property and an opinion from counsel to such Pledgor with respect to real estate matters in form and substance reasonably satisfactory to Agent. 12. Personal Property. The parties intend that, to the extent permitted by applicable law, the Collateral shall remain personal property irrespective of the manner of its attachment or affixation to realty. 13. [Intentionally omitted.] 14. Agent's Rights and Remedies. (a) Upon the occurrence and during the continuation of an Event of Default, Agent, at the request of the Required Lenders, is hereby authorized to: 8 (i) Settle or adjust disputes and claims directly with Pledgors' Account Debtors of Accounts constituting Collateral for amounts and upon terms which Agent considers advisable, and, in such cases, Agent will credit the Loan Account with only the net amounts received by Agent in payment of such disputed Accounts after deducting all Lender Group Expenses incurred or expended in connection therewith; (ii) Cause each Pledgor to hold all returned Inventory constituting Collateral in trust for the Lender Group, segregate all returned Inventory constituting Collateral from all other assets of such Pledgor or in such Pledgor's possession and conspicuously label said returned Inventory as the property of the Lender Group; (iii) Without notice to or demand upon each Pledgor, make such payments and do such acts as Agent considers necessary or reasonable to protect its security interests in the Collateral. Each Pledgor agrees to assemble the Collateral if Agent so requires, and to make the Collateral available to Agent at a place that Agent may designate that is reasonably convenient to both parties. Each Pledgor authorizes Agent to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any Lien that in Agent's determination appears to conflict with the Liens of Agent and to pay all expenses incurred in connection therewith and to charge the Borrowers' Loan Account therefor. With respect to any of any Pledgor's owned or leased premises, each Pledgor hereby grants Agent a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of the Lender Group's rights or remedies provided herein, at law, in equity, or otherwise; (iv) Without notice to any Pledgor (such notice being expressly waived), and without constituting a retention of any collateral in full or partial satisfaction of an obligation (within the meaning of the Code), set off and apply to the Secured Obligations any and all (i) balances and deposits of such Pledgor held by the Lender Group, or (ii) Indebtedness at any time owing to or for the credit or the account of such Pledgor held by the Lender Group; (v) Hold, as cash collateral, any and all balances and deposits of any Pledgor held by the Lender Group to secure the full and final repayment of all of the Secured Obligations; (vi) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral. Each Pledgor hereby grants to Agent a license or other right to use, without charge, such Pledgor's labels, patents, copyrights, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Security Interest, in completing production of, advertising for sale, and selling any Collateral and such Pledgor's rights under all licenses and all franchise agreements shall inure to the Lender Group's benefit; (vii) Sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including each Pledgor's or each Borrower's premises) as Agent determines is commercially reasonable and it is not necessary that the Collateral be present at any such sale; 9 (viii) Give notice of the disposition of the Collateral as follows: (A) Agent shall give Pledgors (for the benefit of the applicable Pledgor) a notice in writing of the time and place of public sale, or, if the sale is a private sale or some other disposition other than a public sale is to be made of the Collateral, the time on or after which the private sale or other disposition is to be made; and (B) the notice shall be personally delivered or mailed, postage prepaid, to each Pledgor as provided in Section 26, at least 10 days before the earliest time of disposition set forth in the notice; no notice needs to be given prior to the disposition of any portion of the Collateral that is perishable or threatens to decline speedily in value or that is of a type customarily sold on a recognized market; (ix) Credit bid and purchase at any public sale; (x) Seek the appointment of a receiver or keeper to take possession of all or any portion of the Collateral or to operate same and, to the maximum extent permitted by law, may seek the appointment of such a receiver without the requirement of prior notice or a hearing; and (xi) Have all other rights and remedies available at law or in equity or pursuant to any other Loan Document. (b) Pledgors hereby acknowledge and agree that the notice described in Section 14(a)(viii)(B), when given, shall constitute a reasonable "authenticated notification of disposition" within the meaning of Section 9-611 of the Uniform Commercial Code, as in effect from time to time in any applicable jurisdiction. (c) Agent or any other member of the Lender Group may be a purchaser of any or all of the Collateral at any public or, to the extent permitted under the Code, private sale in accordance with the Code and Agent, as secured party for and representative of the Lender Group, shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such sale made in accordance with the Code, to use and apply any of the Secured Obligations of such Pledgor as a credit on account of the purchase price for any Collateral payable by Agent at such sale. To the extent provided under the Code or other applicable law, each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Pledgor and Pledgor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted until payment in full of the Secured Obligations. Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor and by notice to the applicable Pledgor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Pledgor hereby waives any claims against Agent arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Agent accepts the first offer received and does not offer such Collateral to 10 more than one offeree. Each Pledgor further agrees that a breach of any of the covenants contained in this Section 14 will cause irreparable injury to Agent, that Agent has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 14 shall be specifically enforceable against such Pledgor, and such Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. Nothing in this Section 14 shall in any way alter the rights of Agent under this Agreement. (d) Agent may sell the Collateral following the occurrence and during the continuance of an Event of Default without giving any warranties as to the Collateral. Agent may specifically disclaim or modify, in its sole discretion, any warranties of title or the like as to any Collateral. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of any of the Collateral. Agent may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. Leasing and licensing of Collateral by Agent to third Persons are types of sales permitted hereunder. (e) If Agent sells any of the Collateral of any Pledgor on credit, the Secured Obligations of such Pledgor will be credited only with payments actually made by the purchaser and received by Agent and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, Agent may resell the Collateral. (f) Agent shall have no obligation to marshal any of the Collateral. (g) All amounts and proceeds (including checks and other instruments) received by any Pledgor in respect of amounts due to such Pledgor in respect of the Collateral or any portion thereof following the occurrence and during the continuance of an Event of Default shall be received in trust for the benefit of Agent hereunder, shall be segregated from other funds of such Pledgor and shall be forthwith paid over or delivered to Agent in the same form as so received (with any necessary endorsement) to be held as cash Collateral and applied as provided by Section 19 following the occurrence and during the continuance of an Event of Default. Upon demand from Agent following the occurrence and during the continuance of an Event of Default, Pledgors shall not adjust, settle or compromise the amount or payment of any such amount or release wholly or partly any obligor with respect thereto or allow any credit or discount thereon. (h) Each Pledgor agrees that, upon the occurrence of and during the continuance of an Event of Default and at Agent's request, such Pledgor will immediately file such applications for approval and shall take all other and further actions required by Agent to obtain such approvals or consents of regulatory authorities as are necessary to transfer ownership and control to Agent of the Gaming Licenses held by it, or its interest in any Person holding any such Gaming License. To enforce the provisions of this Section 14(h), Agent is empowered to request the appointment of a receiver from any court of competent jurisdiction. Such receiver shall be instructed to seek from the applicable Gaming Authority an involuntary transfer of control of any Gaming License for the purpose of seeking a bona fide purchaser to whom control 11 will ultimately be transferred. Each Pledgor hereby agrees to authorize such an involuntary transfer of control upon the request of the receiver so appointed and, if any Pledgor or any such Restricted Subsidiary shall refuse to authorize the transfer, its approval may be required by the court. Upon the occurrence and continuance of an Event of Default, each Pledgor shall further use its reasonable best efforts to assist in obtaining approval of the applicable Gaming Authority, if required, for any action or transactions contemplated by this Agreement or the Loan Documents, including, without limitation, preparation, execution, and filing with the applicable Gaming Authority of the assignor's or transferor's portion of any application or applications for consent to the assignment of any Gaming License or transfer of control necessary or appropriate under the applicable Gaming Authority's rules and regulations for approval of the transfer or assignment of any portion of the Collateral, together with any Gaming License or other authorization. Each Pledgor acknowledges that the assignment or transfer of Gaming Licenses is integral to Agent's realization of the value of the Collateral, that there is no adequate remedy at law for failure by any Pledgor to comply with the provisions of this Section 14(h) and that such failure would not be adequately compensable in damages, and therefore agrees that the agreements contained in this Section 14(h) may be specifically enforced. (i) Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Pledgors. Any excess that exists after disposition of the Collateral will be returned, without interest and subject to the rights of third Persons, by Agent to Pledgors. (j) In the event Agent elects to commence foreclosure proceeding under Louisiana law, Agent may cause such Collateral, or any part or parts thereof, to be immediately seized and sold, whether in term of court or in vacation, under ordinary or executory process, in accordance with applicable Louisiana law, to the highest bidder for cash, with or without appraisement, and without the necessity of making additional demand upon or notifying Pledgors or any Person or placing Pledgors or any Person in default, all of which are expressly waived. For purposes of foreclosure under Louisiana executory process procedures, each Pledgor confesses judgment and acknowledges to be indebted unto and in favor of Agent up to the full amount of the Secured Obligations, in principal, interest, costs, expenses, attorneys' fees and other fees and charges. To the extent permitted under applicable Louisiana law, each Pledgor additionally waives: (i) the benefit of appraisal as provided in Articles 2332, 2336, 2723 and 2724 of the Louisiana Code of Civil Procedure, and all other laws with regard to appraisal upon judicial sale; (ii) the demand and 3 days' delay as provided under Articles 2639 and 2721 of the Louisiana Code of Civil Procedure; (iii) the notice of seizure as provided under Articles 2293 and 2721 of the Louisiana Code of Civil Procedure; (iv) the 3 days' delay provided under Articles 2331 and 2722 of the Louisiana Code of Civil Procedure; and (v) all other benefits provided under Articles 2331, 2722 and 2723 of the Louisiana Code of Civil Procedure and all other articles not specifically mentioned above. Should it become necessary for Agent to foreclose under this Agreement, all declarations of fact, which are made under an authentic act before a Notary Public in the presence of 2 witnesses, by a Person declaring such facts to lie within his or her knowledge, shall constitute authentic evidence for purposes of executory process and also for purposes of La. R.S. 9:3509.1, La. R.S. 9:3504(D)(6) and La. R.S. 10:9-629, as applicable. In addition to the foregoing rights and remedies, Agent may elect to effect the seizure and disposition of the Collateral pursuant to any procedures as may be authorized by Louisiana law from time to time. 12 (k) All rights, remedies, and powers provided in this Agreement relative to the Collateral may be exercised only to the extent that the exercise thereof does not violate any applicable mandatory provision of the Applicable Gaming Laws and all provisions of this Agreement relative to the Collateral are intended to be subject to all applicable mandatory provisions of the Applicable Gaming Laws and to be limited solely to the extent necessary to not render the provisions of this Agreement invalid or unenforceable, in whole or in part. Agent will timely apply for and receive all required approvals of the applicable Gaming Authority for the sale or other disposition of Gaming Equipment regulated by Applicable Gaming Laws (including any such sale or disposition of Gaming Equipment consisting of slot machines, gaming tables, cards, dice, gaming chips, player tracking systems, and all other "gaming devices" (as such term or words of like import referring thereto are defined in the Applicable Gaming Laws), and "associated equipment" (as such term or words of like import referring thereto are defined in the Applicable Gaming Laws). 15. Remedies Cumulative. Each Pledgor agrees that the rights and remedies of the Lender Group under this Agreement, the other Loan Documents, and all other agreements shall be cumulative. Agent and the other members of the Lender Group shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. Each Pledgor further expressly agrees that Agent shall in no event be under any obligation to resort to any Collateral secured hereby prior to exercising any other rights that Agent may have against such Pledgor or its property, nor shall Agent be obliged to resort to any other collateral or security for the Secured Obligations prior to any exercise of Agent's rights against such Pledgor and its property hereunder. No exercise by Agent of one right or remedy shall be deemed an election, and no waiver by Agent of any Event of Default shall be deemed a continuing waiver. No delay by Agent shall constitute a waiver, election, or acquiescence by it. 16. Agent's Right to Perform Contracts. Upon the occurrence and during the continuation of an Event of Default, Agent (or its designee) may proceed to perform any and all of the obligations of any Pledgor contained in any contract, lease or other agreement and exercise any and all rights of any Pledgor therein contained as fully as such Pledgor itself could. 17. Collection of Accounts, General Intangibles, and Negotiable Collateral. At any time after the occurrence and during the continuation of an Event of Default, Agent or Agent's designee may (a) notify Account Debtors of Accounts constituting Collateral of any and all Pledgors that the Accounts, Chattel Paper, or General Intangibles (other than the Excluded Assets) have been assigned to Agent or that Agent has a security interest therein, or (b) collect the Accounts, Chattel Paper, or General Intangibles (other than the Excluded Assets) directly and charge the collection costs and expenses to the Loan Account. Each Pledgor agrees that it will hold in trust for the Lender Group, as the Lender Group's trustee, any Collections constituting Collateral that it receives and immediately will deliver said Collections to Agent in their original form as received by the applicable Pledgor. 18. Power of Attorney. Each Pledgor hereby irrevocably makes, constitutes, and appoints Agent (and any of Agent's officers, employees, or agents designated by Agent) as such Pledgor's true and lawful attorney, with power to, from time to time in its discretion, take any action and to execute any instrument that it may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, the following: (a) if 13 such Pledgor refuses to, or fails timely to execute and deliver any of the documents described in Section 3, sign the name of such Pledgor on any of the documents described in Section 3; and (b) at any time that an Event of Default has occurred and is continuing, (i) sign such Pledgor's name on any invoice or bill of lading relating to the Collateral, drafts against Account Debtors of Accounts constituting Collateral, or notices to Account Debtors of Accounts constituting Collateral, (ii) send requests for verification of Accounts to the applicable Account Debtors, (iii) endorse such Pledgor's name on any Collection item that may come into the Lender Group's possession, (iv) make, settle, and adjust all claims under such Pledgor's policies of insurance and make all determinations and decisions with respect to such policies of insurance and (v) settle and adjust disputes and claims respecting Accounts, Chattel Paper or General Intangibles (other than the Excluded Assets) directly with Account Debtors or other applicable third parties, for amounts and upon terms that Agent determines to be reasonable, and Agent may cause to be executed and delivered any documents and releases that Agent determines to be necessary. The appointment of Agent as each Pledgor's attorney, and each and every one of its rights and powers, being coupled with an interest, is irrevocable until the date of termination of this Agreement in accordance with Section 24. 19. Application of Proceeds. After deducting all reasonable expenses and charges (including Agent's attorneys' fees) of retaking, keeping, storing and selling the Collateral, Agent shall apply the proceeds in payment of any of the Secured Obligations in the order of application set forth in the Loan Agreement. Each Pledgor agrees that if steps are taken by Agent to enforce its rights hereunder, or to realize upon any of the Collateral, such Pledgor shall pay to Agent the amount of Agent's costs, including reasonable attorneys' fees, and each Pledgor's obligation to pay such amounts shall be deemed to be a part of the Secured Obligations secured hereunder. 20. The Lender Group's Liability for Collateral. Each Pledgor hereby agrees that: (a) so long as Agent complies with its obligations, if any, under the Code, the Lender Group shall not in any way or manner be liable or responsible for: (i) the safekeeping of the Collateral, (ii) any loss or damage thereto occurring or arising in any manner or fashion from any cause, (iii) any diminution in the value thereof, or (iv) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other Person; and (b) all risk of loss, damage, or destruction of the Collateral shall be borne by such Pledgor and any loss, damage or destruction of the Collateral shall not release any Pledgor from its obligations hereunder. 21. Indemnification. Each Pledgor shall indemnify and hold harmless Agent and each other member of the Lender Group and any other Person acting hereunder for all losses, costs, damages, fees and expenses whatsoever associated with the exercise of the powers of attorney granted herein and shall release Agent, each other member of the Lender Group and any other Person acting hereunder from all liability whatsoever for the exercise of the foregoing powers of attorney and all actions taken pursuant thereto, except, in either event, in the case of gross negligence or willful misconduct by the Person seeking indemnification. This provision shall survive the termination of this Agreement and the Loan Agreement and the repayment of the Secured Obligations. 22. Agent's Right to Immediate Possession of Collateral. Each Pledgor hereby acknowledges that the Secured Obligations arise out of a commercial transaction and agrees that if an Event of Default shall occur, Agent shall have the right to immediate possession without 14 notice or a hearing, and hereby knowingly and intelligently waives any and all rights it may have to any notice and posting of a bond by Agent, prior to seizure by Agent, or any of its transferees, assigns or successors in interest, of the Collateral or any portion thereof. 23. No Release or Waiver. No transfer or renewal, extension, assignment or termination of this Agreement or of the Loan Agreement or of any other Loan Document, or of any instrument or document executed and delivered by any Pledgor or any other obligor to Agent, nor additional advances made by the Lenders to the Borrowers, nor the taking of further security, nor the retaking or re-delivery of the Collateral to any Pledgor by Agent nor any other act of Agent or any other member of the Lender Group shall release any Pledgor from any Secured Obligation, except a release or discharge executed in writing by Agent in accordance with the Loan Agreement with respect to such Secured Obligation or upon full payment and satisfaction of all Secured Obligations as described in Section 24 and termination of the Loan Agreement and the Commitments. Agent shall not, by any act, delay, omission or otherwise, be deemed to have waived any of its rights or remedies hereunder, unless such waiver is in writing and signed by Agent in accordance with the Loan Agreement and then only to the extent therein set forth. A waiver by Agent of any right or remedy on any occasion shall not be construed as a bar to the exercise of any such right or remedy that it would otherwise have had on any other occasion. 24. Termination. This Agreement shall create a continuing security interest in the Collateral and shall terminate only upon the final payment in full in cash of the Secured Obligations (including either (a) providing cash collateral to be held by Agent for the benefit of the Lenders with a Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit Usage, or (b) causing the original Letters of Credit to be returned to Agent), termination of the Loan Agreement and termination of the Commitments. 25. Successors. (a) This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties hereto including, without limitation, any receiver or trustee of a Pledgor; provided, however, that no Pledgor may assign this Agreement or any rights or duties hereunder without Agent's prior written consent and any prohibited assignment shall be absolutely void ab initio. No consent to assignment by Agent shall release any Pledgor from its obligations to the Lender Group. (b) Agent and the other members of the Lender Group may, to the extent permitted under the Loan Agreement or any other Loan Documents, and pursuant to the notice provisions, as applicable, thereunder, sell, assign or transfer all or any part of the Secured Obligations, and in such event each and every permitted assignee, transferee, or holder of all or any of the Secured Obligations shall have the right to enforce this Agreement, by suit or otherwise, for the benefit of such permitted assignee, transferee or holder as fully as if such assignee, transferee or holder were herein by name specifically given such rights, powers and benefits. In the event this Agreement or the rights hereunder are so assigned by Agent, the term "Agent", wherever used herein, shall be deemed to refer to and include any such assignee. 26. Notices. Any notice, demand or other communication that Agent may wish to give shall be served upon any Pledgor in the fashion prescribed for notices and at the address for such Pledgor in Section 14 of the Guaranty to which such Pledgor is a party and the notice so 15 sent shall be deemed to be served as set forth in the Loan Agreement. All notices or other communication to Agent shall be served upon Agent at its address set forth in Section 12 of the Loan Agreement and in the fashion prescribed under Section 12 of the Loan Agreement. 27. New Subsidiaries. Pursuant to, and subject to the terms of, Section 6.19 of the Loan Agreement, the Borrowers may form any new Subsidiary or acquire any direct or indirect Subsidiary after the Closing Date so long as at the time of such formation or acquisition, such new Subsidiary (other than any CFC) enters into this Agreement by executing and delivering in favor of Agent an instrument in the form of Annex 1 attached hereto. Upon the execution and delivery of Annex 1 by such new Subsidiary, such new Subsidiary shall become a Pledgor hereunder with the same force and effect as if originally named as a Pledgor herein. The execution and delivery of any instrument adding an additional Pledgor as a party to this Agreement shall not require the consent of any Pledgor hereunder. The rights and obligations of each Pledgor hereunder shall remain in full force and effect notwithstanding the addition of any new Pledgor hereunder. 28. Governing Law. The validity of this Agreement, the construction, interpretation, and enforcement hereof and the rights of the parties hereto and the beneficiaries hereof with respect to all matters arising hereunder or related hereto shall be determined under, governed by, and construed in accordance with the laws of the State of New York. 29. Rights to Collateral; Change in Law. The parties acknowledge their intent that, upon the occurrence and during the continuance of an Event of Default, Agent shall receive, to the fullest extent permitted by applicable law and governmental policy, all rights necessary or desirable to access, obtain, use or sell the Collateral, and to exercise all remedies available to it under this Agreement, the Code, or other applicable law. The parties further acknowledge and agree that, in the event of changes in law or governmental policy occurring subsequent to the date hereof that affect in any manner Agent's rights of access to, or use or sale of, the Collateral, or the procedures necessary to enable Agent to obtain such rights of access, use or sale, Agent and Pledgors shall amend this Agreement in such manner as Agent shall request in order to provide Agent such rights to the greatest extent possible consistent with applicable law and governmental policy. 30. Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision. 31. Counterparts; Telefacsimile Execution. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same agreement. Delivery of an executed counterpart of this Agreement by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Agreement. 32. Modification. Neither this Agreement nor any of its terms, provisions or conditions may be altered, amended or modified in any way, except as specifically provided in a written instrument signed by an authorized officer of Agent and Pledgors. 16 33. Survival of Provisions. All representations, warranties and covenants of each Pledgor contained herein shall survive the execution and delivery of this Agreement. 34. Integration. This Agreement, together with the other Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof. 35. Section Headings. Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Agreement. 36. Agent. The powers conferred on Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon Agent to exercise any such powers. Except for the safe custody of any Collateral in its actual possession and the accounting for moneys actually received by Agent pursuant hereto, Agent shall have no duty with respect to the Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any of the Collateral. Each reference herein to any right granted to, benefit conferred upon or power exercisable, exercised, or action taken by Agent shall be deemed to be a reference to, or be deemed to have been so taken, as the case may be, by Agent in its capacity as Agent pursuant to the Loan Agreement for the benefit of the Lender Group, all as more fully set forth in the Loan Agreement. [Remainder of this page intentionally left blank.] 17 IN WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement by and through their duly authorized officers, as of the day and year first above written. PLEDGOR: PENINSULA GAMING, LLC, a Delaware limited liability company By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer THE OLD EVANGELINE DOWNS CAPITAL CORP., a Delaware corporation By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer AGENT: WELLS FARGO FOOTHILL, INC., a California corporation, as agent By: /s/ Todd R. Nakamoto -------------------------------------- Name: Todd R. Nakamoto Title: Vice President ANNEX 1 to GUARANTOR SECURITY AGREEMENT FORM OF SUPPLEMENT THIS SUPPLEMENT NO. __ (this "Supplement") dated as of __________ to the Guarantor Security Agreement dated as of June ___, 2004 (as amended, restated, supplemented or otherwise modified from time to time, the "Security Agreement"), by each of the parties listed on the signature pages thereto and those additional entities that thereafter become parties thereto (each a "Pledgor" and collectively, the "Pledgors") and Wells Fargo Foothill, Inc., a California corporation, as agent for the Lenders (as defined below) ("Agent"). WITNESSETH: WHEREAS, pursuant to that certain Loan and Security Agreement dated as of June __, 2004 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement"), among Agent, the lenders from time to time party thereto (the "Lenders") and The Old Evangeline Downs, L.L.C., a Louisiana limited liability company, and Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC), a Delaware limited liability company (each, a "Borrower" and collectively, the "Borrowers"), the Lenders have agreed to extend credit to the Borrowers from time to time pursuant to the terms and conditions thereof; and WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement, and if not defined therein, in the Loan Agreement; and WHEREAS, Pledgors have entered into the Security Agreement in order to induce the Lenders to make the Loans and other financial accommodations contained in the Loan Agreement and the other Loan Documents; and WHEREAS, pursuant to Section 27 of the Security Agreement, each new Subsidiary of a Borrower (whether by acquisition or creation) (other than any CFC) must execute and deliver the Security Agreement, and the execution of the Security Agreement by the undersigned new Pledgor or Pledgors (collectively, the "New Pledgor") may be accomplished by the execution of this Supplement in favor of Agent; and WHEREAS, New Pledgor is a direct or indirect Subsidiary of a Borrower, and New Pledgor has determined that it will realize substantial direct and indirect benefits as a result of the loans and other financial accommodations extended to Borrowers pursuant to the Loan Agreement, and New Pledgor's execution, delivery and performance of this Guaranty is within New Pledgor's corporate or other purposes; NOW, THEREFORE, for and in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the New Pledgor hereby agrees as follows: SECTION 1. In accordance with Section 27 of the Security Agreement, the New Pledgor, by its signature below, becomes a "Pledgor" under the Security Agreement with the same force and effect as if originally named therein as a "Pledgor" and the New Pledgor hereby (a) agrees to all of the terms and provisions of the Security Agreement applicable to it as a "Pledgor" thereunder and (b) represents and warrants that the representations and warranties made by it as a "Pledgor" thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Pledgor, as security for the payment and performance in full of the Guaranteed Obligations, does hereby grant, assign, and pledge to Agent, for the benefit of the Lender Group, a security interest in all Collateral of New Pledgor, and all additions thereto and replacements thereof and all other property of New Pledgor whether now or hereafter created, acquired or reacquired, to secure the full and prompt payment of the Secured Obligations, including, without limitation, any interest thereon, plus attorneys' fees and expenses if the Secured Obligations represented by the Security Agreement are collected by law, through an attorney-at-law, or under advice therefrom. Each reference to a "Pledgor" in the Security Agreement shall be deemed to include the New Pledgor. The Security Agreement is incorporated herein by reference. SECTION 2. The New Pledgor represents and warrants to Agent that this Supplement has been duly executed and delivered by the New Pledgor and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as enforceability thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws affecting creditors' rights generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). SECTION 3. This Supplement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same agreement. Delivery of an executed counterpart of this Supplement by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Supplement. Any party delivering an executed counterpart of this Supplement by telefacsimile also shall deliver an original executed counterpart of this Supplement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Security Agreement shall remain in full force and effect. SECTION 5. The validity of this Supplement, the construction, interpretation, and enforcement hereof and the rights of the parties hereto and the beneficiaries hereof with respect to all matters arising hereunder or related hereto shall be determined under, governed by, and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the New Pledgor has duly executed this Supplement to the Security Agreement as of the day and year first above written. NEW PLEDGOR: [Name of New Pledgor] Address: ________________________ By:_____________________________ ________________________ Name:___________________________ ________________________ Title:__________________________ EX-10.21 26 forms4_ex10-21wfb071404.txt EX. 10.21 - INTERCO SUBORD AGMT EXHIBIT 10.21 INTERCOMPANY SUBORDINATION AGREEMENT THIS INTERCOMPANY SUBORDINATION AGREEMENT (this "Agreement") dated as of June 16, 2004, is made and entered into by and among THE OLD EVANGELINE DOWNS, L.L.C., a Louisiana limited liability company ("OED"), DIAMOND JO, LLC (formerly known as Peninsula Gaming Company, LLC), a Delaware limited liability company ("DJO"; together with OED, hereinafter collectively referred to as the "Borrowers" and each individually, a "Borrower"), THE OLD EVANGELINE DOWNS CAPITAL CORP., a Delaware corporation ("OED Capital"), PENINSULA GAMING, LLC, a Delaware limited liability company ("Peninsula Gaming"; together with the Borrowers and OED Capital, hereinafter collectively referred to as the "Debtors" and each individually, a "Debtor") OED ACQUISITION LLC, a Delaware limited liability company ("OEDA"; together, in their respective capacity as a creditor to a Debtor, each of OED, DJO, OED Capital and Peninsula Gaming, hereinafter collectively referred to as the "Subordinated Lenders" and each individually, a "Subordinated Lender"), and WELLS FARGO FOOTHILL, INC., a California corporation, as agent for the Lenders (as defined in the Senior Loan Agreement defined below) (the "Agent"). W I T N E S S E T H: WHEREAS, the Debtors are indebted and may from time to time in the future become indebted to a Subordinated Lender in respect of advances, loans and other extensions of credit or other financial accommodations made from time to time by the Subordinated Lenders to the Debtors (such indebtedness, together with all other indebtedness and obligations of the Debtors, or any of them, to each Subordinated Lender, however evidenced and whether now existing or hereafter arising, is referred to herein as the "Subordinated Debt"; provided that "Subordinated Debt" shall not include payments to OEDA and DJO set forth in that certain Management Fees Subordination Agreement, dated as of June , 2004, among OED, the Agent, DJO and OEDA); and WHEREAS, the Borrowers, the Agent and the Lenders are parties to that certain Loan and Security Agreement dated as of even date herewith (collectively, as amended, restated, supplemented or otherwise modified from time to time, the "Senior Loan Agreement"), whereby the Borrowers may be indebted to the Lender Group (as defined in the Senior Loan Agreement) for certain extensions of credit outstanding from time to time (all such indebtedness, including, without limitation, principal, interest, fees, costs, expenses and other sums chargeable to the Borrowers by the Agent or the other members of the Lender Group (including interest, fees, costs and expenses accruing after an Insolvency Proceeding (as hereafter defined) commences regardless of whether such interest, fees, costs and expenses are deemed allowed or recoverable in any Insolvency Proceeding (as hereinafter defined), and the Secured Obligations (as defined below), together with any modification, amendment, refinancing or supplement thereto, and any other obligations of the Debtors to the Agent or the other members of the Lender Group are hereinafter referred to as the "Senior Debt"); and WHEREAS, as an inducement to the Lender Group to enter into the Loan Agreement and to extend the credit therein, each of OED Capital and Peninsula Gaming has entered into a Guaranty dated as of the date hereof in favor of the Agent, for the benefit of the Lender Group, whereby each of OED Capital and Peninsula Gaming has guaranteed the Secured Obligations (as defined in the Guaranty to which such Person is a party); WHEREAS, as security for the payment of all liabilities and obligations due under the Senior Debt, the Debtors, pursuant to the Loan Documents (as defined in the Senior Loan Agreement), have granted to the Agent, for the benefit of the Lender Group, a first priority lien on and unconditional security interest in and to certain personal and real property assets of the Debtors as set forth in the Loan Documents (collectively, said interests in and assets of the Debtors are referred to herein as the "Collateral;" and, collectively said liens and security interests of the Agent are referred to herein as the "Senior Lien"); and WHEREAS, as part of the consideration for the Lender Group's extension of credit to the Borrowers, each Subordinated Lenders has agreed, among other things, subject to the terms and provisions of this Agreement, (i) to subordinate the Subordinated Debt to the Senior Debt, (ii) to subordinate any lien which each Subordinated Lender has or may have in the future in the assets or property of any Debtor or any Subsidiary or Affiliate of the Debtors (the "Subordinated Lien") to the Senior Lien, and (iii) to forebear from exercising any creditor's remedy or taking any action against the Debtors upon any of their obligations to each Subordinated Lender. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that each capitalized term used herein and not defined herein shall have the meaning ascribed thereto in the Senior Loan Agreement, and further agree as follows: 1. Priority of Liens; Subordinated Debt. Notwithstanding anything contained in this Agreement to the contrary including, without limitation, the date, time, manner or order of perfection or attachment of the security interests and liens on the Collateral granted by the Debtors to the Agent or any Subordinated Lender, and notwithstanding the usual application of the priority provisions of the Uniform Commercial Code as in effect in any jurisdiction or any other applicable law or judicial decision of any jurisdiction, or whether such Subordinated Lender holds possession of all or any part of the Collateral, or if the Agent or such Subordinated Lender is perfected without filing or possession in any part of the Collateral, the Senior Lien shall be a first, senior and prior security interest in and lien on the Collateral, prior in interest and superior to any Subordinated Lien. The priority of liens set forth in the previous sentence states the relative priority of liens of the parties to this Agreement, and no party hereto represents or warrants to any other party that such other party's liens are prior to any lien on the Collateral of any person who is not a party to this Agreement (except that the each Debtor represents and warrants to the Agent that the Senior Lien has been granted in accordance with the terms and provisions of the Senior Loan Agreement and the other Loan Documents). Each Subordinated Lender agrees that if at any time such Subordinated Lender shall be in possession of any assets or properties of the Debtors, then such Subordinated Lender shall hold such assets or properties in trust for the Agent, for the benefit of the Lender Group, so long as any Senior Debt remains outstanding and until all obligations of the Lenders to make loans and other financial 2 accommodations to the Borrowers pursuant to the Senior Loan Agreement (the "Commitments") are terminated. 2. Subordination of Subordinated Debt. (a) Each Subordinated Lender hereby subordinates any and all claims now or hereafter owing to it by the Debtors, or any of them, under all or any portion of the Subordinated Debt to any and all Senior Debt (including, without limitation, interest, fees, costs or other payments on the Senior Debt paid or accrued after the commencement of an Insolvency Proceeding and whether or not such claims are deemed allowed or recoverable in any Insolvency Proceeding, and payment of or for adequate protection pursuant to any Insolvency Proceeding), and agrees that all Senior Debt shall be paid in full in cash to the satisfaction of the Lender Group and the Commitments shall be terminated before any payment may be made on the Subordinated Debt, whether of principal or interest or other indebtedness or other obligations. (b) Each Subordinated Lender agrees not to accept, and waives any and all rights to, any payment of any kind or form of the Subordinated Debt (from the Debtors or otherwise) nor make any transfer to third parties not party to this Agreement or take any other action, in any case, designed to secure indirectly from the Debtors any payment on account of the Subordinated Debt without the express, prior written consent of the Agent, and each Subordinated Lender agrees to pay over to the Agent any funds that may be received by it from the Debtors (i) as a prepayment at any time or (ii) as a payment on account of the Subordinated Debt at any time until the Senior Debt has been paid in full in cash to the satisfaction of the Lender Group and the Commitments have been terminated. In case any funds shall be paid or delivered to a Subordinated Lender under the circumstances described in clause (i) or (ii) of the preceding sentence before the Senior Debt shall have been paid in full in cash to the satisfaction of the Lender Group and the Commitments have been terminated, such funds shall be held in trust by such Subordinated Lender for and immediately paid and delivered to the Agent (in the form received endorsed over to the Agent). Each Subordinated Lender further agrees not to sell, assign, transfer or endorse any Subordinated Debt to any other Person except subject to the terms and conditions of this Agreement. (c) Each Subordinated Lender agrees that the priority of the Senior Debt set forth above shall continue during any insolvency, receivership, bankruptcy, dissolution, liquidation, or reorganization proceeding, or in any other proceeding, whether voluntary or involuntary, by or against the Debtors, or any of them, under any bankruptcy or insolvency law or laws, federal or state, relating to the relief of debtors of any jurisdiction, whether now or hereafter in effect, and in any out-of-court composition, assignment for the benefit of creditors, readjustment of indebtedness, reorganization, extension or other debt arrangement of any kind (collectively, an "Insolvency Proceeding"). In the event of any payment, distribution, division or application, partial or complete, voluntary or involuntary, by operation of law or otherwise, of all or any part of the property, assets or business of the Debtors, or the proceeds thereof, or any securities of the Debtors, to any Subordinated Lender, by reason of any liquidation, dissolution or other winding up of any Debtor or its business or by reason of any sale or Insolvency Proceeding, then any such payment or distribution of any kind or character, whether in cash, property or securities, that, but for the subordination provisions of this Section 2, would 3 otherwise be payable or deliverable upon or in respect of the Subordinated Debt, shall instead be paid over or delivered directly to the Agent to be applied as payment of the Senior Debt, to the extent necessary to repay the Senior Debt remaining unpaid after giving effect to any concurrent payment or distribution to the Agent. Furthermore, no holder of the Subordinated Debt shall receive any such payment or distribution or any benefit therefrom until the Senior Debt has been fully paid in cash to the satisfaction of the Lender Group and the Commitments have been terminated, after which time such payments or distributions may be applied to payment of the Subordinated Debt. (d) Subject to the provisions of this Agreement, the Agent shall have the sole right to control all aspects of liquidation of the Collateral and disposition of the proceeds thereof, including all proceedings pertaining thereto under any Insolvency Proceeding and the approval of any plan of reorganization of the Debtors, or any of them, thereunder. 3. Forbearance from Exercise of Certain Remedies. Until the Senior Debt has been paid in full in cash and the Commitments have been terminated, no Subordinated Lender shall (a) take any action or exercise any remedy against the Debtors, or any of them, to enforce all or any portion of the Subordinated Debt; (b) take any action or exercise any remedy against any guarantor of or pledgor securing the Senior Debt in order to collect any of the Subordinated Debt; (c) commence, or join with any other creditor of the Debtors, or any of them, in commencing any Insolvency Proceeding against the Debtors, or any of them; or (d) take any action or exercise any remedy against any property or assets of any guarantor of or pledgor securing the Senior Debt. The parties hereto understand and agree that the Agent shall have the right, but shall have no obligation, to cure any default under the Subordinated Debt without the prior written consent of each Subordinated Lender. Notwithstanding anything contained in this Agreement to the contrary, in no event shall any Subordinated Lender be entitled to receive and retain any securities, equity or otherwise, or other consideration provided for in (i) a plan of reorganization or otherwise in connection with any bankruptcy or Insolvency Proceeding or (ii) any other judicial or nonjudicial proceeding for the liquidation, dissolution or winding up of the Debtors, or any of them, or the assets or properties of the Debtors, or any of them, in any case unless and until the Senior Debt is paid in full in cash to the satisfaction of the Lender Group and the Commitments are terminated. 4. Agent's Authority to Act. For so long as any of the Senior Debt shall remain unpaid, the Agent shall have the right to act as attorney-in-fact for each Subordinated Lender and other holders of the Subordinated Debt for the purposes specified herein and each Subordinated Lender hereby irrevocably appoints the Agent as such Subordinated Lender's true and lawful attorney, with full power of substitution, in the name of such Subordinated Lender or in the name of holders of the Subordinated Debt, for the use and benefit of the holders of the Senior Debt without notice to the holders of Subordinated Debt or any of their representatives, successors or assigns, to perform the following acts, at the option of the holders of the Senior Debt, at any meeting of creditors of the Debtors or in connection with any Insolvency Proceeding: (a) if a proper claim or proof of debt in respect of the Subordinated Debt has not been filed in the form required in any such Insolvency Proceeding at least ten (10) Business 4 Days prior to the expiration of the time for filing such claims, to file an appropriate claim for and on behalf of the holders of Subordinated Debt; (b) to collect any assets of the Debtors distributed, divided or applied by way of dividend or payment, or any securities issued, on account of the Subordinated Debt and to apply the same, or the proceeds of any realization upon the same that the Agent in its discretion elects to effect, to the Senior Debt until all of the Senior Debt (including, without limitation, all interest and other payments accruing or paid on the Senior Debt after the commencement of any Insolvency Proceeding at the rate specified in the Senior Debt) has been paid in full in cash to the satisfaction of the Lender Group, rendering any surplus to the holders of Subordinated Debt if and to the extent permitted by law; and (c) generally to take any action in connection with any such Insolvency Proceeding either in its own name or in the name of each Subordinated Lender (including without limitation voting on any plan of reorganization) that the holders of Subordinated Debt would be authorized to take, but for this Agreement, in the event that the Agent believes such action is necessary to protect its interests in the Senior Debt and under this Agreement and after first giving each Subordinated Lender five (5) days' written notice of its intent to take such action (to the extent such notice is practicable), provided that the Agent agrees to permit such Subordinated Lender to take action on such Subordinated Lender's own behalf in connection with any such Insolvency Proceeding as may be necessary to reasonably protect such Subordinated Lender's interests, as long as such action is not contrary to or in conflict with the actions and interests of the Agent and such Subordinated Lender's interests are always in second position to the Senior Debt and the Senior Lien. In no event shall the holder or holders of the Senior Debt be liable to any Subordinated Lender or any other holders of the Subordinated Debt for any failure to prove the Subordinated Debt, to exercise any right with respect thereto or to collect any sums payable thereon. A distribution made under this Agreement to holders of Senior Debt that otherwise would have been made to holder or holders of Subordinated Debt is not, as between the Debtors, or any of them, its other creditors and holder or holders of Subordinated Debt, a payment by the Debtors on the Senior Debt, it being understood that the provisions of this Agreement are solely for the purpose of defining the relative rights of the holders of Subordinated Debt, on the one hand, and the holders of Senior Debt on the other hand. Each Subordinated Lender represents that the Subordinated Lenders are the sole holders of the Subordinated Debt and, except upon satisfaction of the conditions set forth in Section 16 hereof, shall not assign, participate, pledge, encumber or transfer any of the Subordinated Debt or any interest therein until the Senior Debt is repaid in full in cash and the Commitments are terminated. The power-of-attorney granted hereby is coupled with an interest and shall be irrevocable. 5. Duration and Termination. This Agreement shall constitute a continuing agreement of subordination and shall remain in effect until indefeasible payment in full in cash to the satisfaction of the Lender Group of the Senior Debt and termination of the Commitments. The holder or holders of Senior Debt may, without notice to any Subordinated Lender or the other holders of the Subordinated Debt, extend or continue credit and make other financial accommodations to or for the account of the Borrowers in reliance upon this Agreement. The 5 obligations of each Subordinated Lender and the other holders of Subordinated Debt under this Agreement shall continue to be effective, or be reinstated, as the case may be, if at any time any payment in respect of any Senior Debt is rescinded or must otherwise be restored or returned by a holder of Senior Debt by reason of any Insolvency Proceeding or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Debtors or any substantial part of any Debtor's property, or otherwise, all as though such payment had not been made. 6. Subordinated Lender's Waivers. All of the Senior Debt shall be deemed to have been made or incurred in reliance upon this Agreement. Each Subordinated Lender expressly waives all notice of the acceptance by the Agent of the subordination and other provisions of this Agreement and all other notices not specifically required pursuant to the terms of this Agreement whatsoever, and each Subordinated Lender expressly consents to reliance by the Agent upon the subordination and other agreements as herein provided. Each Subordinated Lender agrees that the Agent has not made warranties or representations with respect to the due execution, legality, validity, completeness or enforceability of the Senior Loan Agreement and other Loan Documents or the collectibility of the obligations thereunder, that Agent shall be entitled to manage and supervise its loans in accordance with applicable law and its usual practices, modified from time to time as it deems appropriate under the circumstances, and that the Agent shall not have any liability to such Subordinated Lender for, and such Subordinated Lender waives any claim (except with respect to willful misconduct) that such Subordinated Lender may now or hereafter have against Agent arising out of (i) any and all actions that the Agent takes or omits to take (including, without limitation, actions with respect to the creation, perfection or continuation of liens or security interests in the Senior Debt or the Senior Lien, actions with respect to the occurrence of an Event of Default, actions with respect to the foreclosure upon, sale, release, or depreciation of, or failure to realize upon, the Collateral and actions with respect to the collection of any claim for all or any part of the Senior Debt from any account debtor, guarantor or any other party) with respect to the documents regarding the Senior Debt or any other agreement related thereto or to the collection of the Senior Debt or the valuation, use, protection or release of the Collateral and/or other security for the Senior Debt, (ii) the Agent's election, in any proceeding instituted under Chapter 11 of Title 11 of the United States Code (11 U.S.C. ss. 101 et seq.) (the "Bankruptcy Code"), of the application of Section 1111 (b)(2) of the Bankruptcy Code, and/or (iii) any making of loans to, or grant of a security interest under Section 364 of the Bankruptcy Code by, the Debtors as debtors-in-possession. 7. Waiver of Marshaling; No Offset. Each Subordinated Lender agrees that the Agent shall have no obligation to marshal any part of the Collateral or any such other property, instruments, documents, agreements or guaranties before enforcing its rights against any other part of the Collateral or its rights herein as against such Subordinated Lender. In the event such Subordinated Lender is or becomes indebted to any Debtor, including, without limitation, under any documents or instruments evidencing the Subordinated Debt, each Subordinated Lender agrees that it shall pay such indebtedness in accordance with its terms and shall not deduct from or set off against any amounts owed to such Debtor any amounts such Debtor claims are due to it with respect to the Subordinated Debt. 6 8. No Contest of Security Interest. No Subordinated Lender shall contest the validity, perfection or enforceability of any lien or security interest granted to the Agent by any Debtor in connection with the Senior Debt, and each Subordinated Lender agrees to cooperate in the defense of any action contesting the validity, perfection or enforceability of such liens or security interests. 9. Subordination Not Affected, Etc. Nothing in this Agreement shall be construed as affecting or in any way limiting the extension of new or additional financial accommodation by the Lender Group to the Borrowers and the terms and conditions hereof shall apply to such new and additional financial accommodations. Notwithstanding the preceding sentence or anything contained in this Agreement to the contrary, none of the provisions of this Agreement shall be deemed or construed to constitute a commitment or an obligation on the part of the Lender Group to make any future loans, advances or other extensions of credit or financial accommodation to the Borrowers. Each Subordinated Lender understands and agrees that all accrued interest, charges, expenses, attorneys' fees and other liabilities and obligations under the Senior Loan Agreement shall constitute part of the Senior Debt, and nothing in this Agreement shall be construed as affecting or in any way limiting any indulgence granted by the Lender Group with respect to any existing financial accommodation to the Borrowers. The subordinations effected, and the rights created, hereby shall not be affected by (a) any amendment of or any addition of or supplement to any instrument, document or agreement relating to the Senior Debt, (b) any exercise or non-exercise of any right, power or remedy under or in respect of the Senior Debt or any instrument, document or agreement relating thereto, (c) the release, sale, exchange or surrender, in whole or in part, of any part of the Collateral or any additional collateral to which the Agent may become entitled, (d) any release of any guarantor of or pledgor securing the Senior Debt or any security for such pledge or guaranty, or (e) any waiver, consent, release, indulgence, extension, renewal, modification, delay or other action, inaction or omission in respect of the Senior Debt or any instrument, document or agreement relating thereto or any security therefor or pledge or guaranty thereof, whether or not each Subordinated Lender shall have had notice or knowledge of any of the foregoing and regardless of whether such Subordinated Lender shall have consented or objected thereto. Any provision of any document, instrument or agreement evidencing, securing or otherwise relating to the Subordinated Debt purporting to limit or restrict in any way any Debtor's ability to enter into any agreement with the Agent to amend or modify any document, instrument or agreement evidencing, securing or otherwise relating to the Senior Debt shall be deemed of no force or effect until the Senior Debt has been repaid in full in cash to the satisfaction of the Lender Group and the Commitments have been terminated. 10. Voided Payments. Notwithstanding anything herein that may be construed to the contrary, to the extent that any Debtor makes any payment on the Senior Debt which, within twelve (12) months of the date of such payment, is subsequently invalidated, declared to be fraudulent, avoidable or preferential, set aside or is required to be repaid to a trustee, receiver, the estate of such Debtor or any other party under any bankruptcy act, state or Federal law, common law or equitable cause (such payment being hereinafter referred to as a "Voided Payment"), then, to the extent of such Voided Payment, that portion of the Senior Debt that had been previously satisfied by such Voided Payment shall be revived and continue in full force and effect as if such Voided Payment had never been made. In the event that a Voided Payment is sought to be 7 recovered from the Agent or any other member of the Lender Group under the Senior Loan Agreement, an "Event of Default" under the Senior Loan Agreement shall be deemed to have occurred and to be continuing from the date of such recovery from the Agent or any such other member of the Lender Group of such Voided Payment until the full amount of such Voided Payment is fully and finally restored to the Agent or such other member of the Lender Group and until such time the provisions of this Agreement shall be in full force and effect. 11. Violation of Agreement by Debtors. Each Debtor hereby consents to this Agreement, agrees to abide by the terms hereof, agrees to make no payments or distributions contrary to the terms and provisions hereof and to do every act and thing necessary to carry out such terms and provisions. Each Debtor agrees that should it make any payment in contravention of any provision of this Agreement the maturity of said Senior Debt may be accelerated in accordance with the terms of the Senior Loan Agreement. 12. Waiver. Irrespective of the due date of any of the Subordinated Debt, each Subordinated Lender hereby expressly waives any and all rights to payment by any Debtor of the Subordinated Debt prior to repayment in full in cash of the Senior Debt and termination of the Commitments. 13. Immediate Effect. This Agreement shall be effective immediately upon its execution by each of the parties hereto, and there are no conditions precedent or subsequent to the effectiveness of this Agreement. 14. Inducement. As an inducement to, and part of the consideration for, the Lender Group's extension of credit to the Borrowers, which each Subordinated Lender and the Debtors acknowledge that the Agent and the other members of the Lender Group would be unwilling to do without this Agreement, each Subordinated Lender agrees, among other things, (i) to subordinate the Subordinated Lien to the Senior Lien, (ii) to subordinate the Subordinated Debt to the Senior Debt, and (iii) to forebear from exercising any creditor's remedy or taking any action against any Debtor upon any of its obligations to each Subordinated Lender until the Senior Debt has been paid in full in cash to the satisfaction of the Lender Group and termination of the Commitments. 15. Successors and Assigns; Continuing Effect, etc. This Agreement is being entered into for the benefit of, and shall be binding upon, the Agent, each Subordinated Lender, the Debtors and their respective successors and assigns. The Agent or any other member of the Lender Group under the Senior Loan Agreement may assign or participate out to other parties any portion of its interest under the Senior Debt and no such assignee or participant shall be required to become a signatory hereto. Any assignee or transferee of each Subordinated Lender shall execute and deliver to the other parties hereto an agreement pursuant to which they will become parties hereto as fully as if they were signatories hereto and providing for the effectiveness of this Agreement as to such transferee or assignee and other parties. This Agreement shall be a continuing agreement, shall be irrevocable and shall remain in full force and effect so long as any of the Senior Debt or the Subordinated Debt is outstanding and so long as the Senior Loan Agreement has not been terminated and the Commitments remain in place. 8 16. Notification of Defaults. Each Subordinated Lender shall immediately give written notice to the Agent of a default or an event of default by the Debtors under the Subordinated Debt. Each Subordinated Lender understands that, subject to any grace or cure period under such Subordinated Lender's agreements with the Debtors, any default by the Debtors under the Subordinated Debt is, automatically, an event of default of the Debtors under the Senior Debt. Nothing in this Agreement shall be interpreted to limit or restrict the right of the Agent and each Subordinated Lender to waive any default under their respective documents, and each Subordinated Lender agrees that any waiver by each Subordinated Lender will be in writing and provided to the Agent. 17. Notices. Any notices, consents, requests, demands and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to be given to any party or parties (a) upon delivery to the address of the party or parties set forth below if delivered in person or by courier or if sent by certified or registered mail (return receipt requested), or (b) upon dispatch if transmitted by telecopy or other means of facsimile transmission, in any case to the party or parties at the telecopy numbers set forth below: If to a Debtor: THE OLD EVANGELINE DOWNS, L.L.C. c/o Peninsula Gaming Partners, LLC P.O. Box 1750 400 E. Third Street Dubuque, Iowa 52004 Attention: Natalie Schramm Fax No. (563) 690-2190 and THE OLD EVANGELINE DOWNS, L.L.C. c/o Peninsula Gaming Partners, LLC 11100 Santa Monica Boulevard, 10th Floor Los Angeles, California 90025 Attention: M. Brent Stevens Fax No. (310)914-6476 with copies to: MAYER, BROWN, ROWE & MAW LLP 1675 Broadway New York, New York 10019 Attn: Ron Brody, Esq. Fax No. (212) 262-1910 9 If to a Subordinated Lender: PENINSULA GAMING, LLC c/o Peninsula Gaming Partners, LLC 400 E. Third Street, P.O. Box 1750 Dubuque, Iowa 52004 Attention: Natalie Schramm Fax No. (563) 690-2190 and PENINSULA GAMING, LLC c/o Peninsula Gaming Partners, LLC 11100 Santa Monica Boulevard, 10th Floor Los Angeles, California 90025 Attention: M. Brent Stevens Fax No. (310)914-6476 with copies to: MAYER, BROWN, ROWE & MAW LLP 1675 Broadway New York, New York 10019 Attn: Ron Brody, Esq. Fax No. (212) 262-1910 If to Senior Lender: WELLS FARGO FOOTHILL, INC. 2450 Colorado Avenue, Suite 3000 West Santa Monica, California 90404 Attention: Business Finance Division Manager Fax No. (310) 453-7413 with copies to: PAUL, HASTINGS, JANOFSKY & WALKER LLP 600 Peachtree Street, NE, Suite 2400 Atlanta, Georgia 30308 Attention: Cindy J. K. Davis, Esq. Fax No. (404) 815-2424 Any party hereto may designate any other address or telecopy number, as applicable, to which any notices or other communications shall be given by notice duly given hereunder; provided, however, that any such notice of other address or telecopy number shall be deemed to have been given hereunder only when actually received by the party to which it is addressed. 18. Amendments; Modifications. This Agreement may not be modified, altered or amended except by an agreement in writing executed by all of the parties hereto. 19. Amendment of Loan Documents. Each Subordinated Lender and the Debtors agree to forbear from (a) modifying, altering or amending any payment term of any loan document or any other document, instrument or agreement evidencing the Subordinated Debt, (b) modifying, altering or amending any other term of any loan document or any other document, 10 instrument or agreement evidencing the Subordinated Debt in any manner adverse to either the Debtors or the Agent, and (c) from granting (in the case of the Debtors) and receiving (in the case of any Subordinated Lender) any collateral or other security of any nature to secure the Subordinated Debt. 20. Cost and Expenses of Enforcement. Each Subordinated Lender agrees to pay all costs and expenses including, without limitation, reasonable attorneys', paralegals' and other professionals' fees of every kind, paid or incurred by the Agent in enforcing its rights hereunder against each Subordinated Lender, including, but not limited to, litigation instituted in a state or federal court, as hereinafter provided (including proceedings under the Bankruptcy Code) in endeavoring to collect the Senior Debt or in so enforcing this Agreement, or in defending against any defense, cause of action, counterclaim, setoff or cross claim based on any act of commission or omission by the Agent with respect to the Senior Debt promptly on demand of the Agent or other person paying or incurring the same. 21. TO INDUCE THE AGENT AND THE OTHER MEMBERS OF THE LENDER GROUP TO AFFORD FINANCIAL ACCOMMODATIONS TO THE BORROWERS, EACH SUBORDINATED LENDER IRREVOCABLY AGREES THAT ALL ACTIONS ARISING DIRECTLY OR INDIRECTLY AS A RESULT OR IN CONSEQUENCE OF THIS AGREEMENT SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS HAVING SITUS IN THE CITY OF NEW YORK, NEW YORK AND EACH SUBORDINATED LENDER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT LOCATED AND HAVING ITS SITUS IN SAID CITY AND STATE. EACH SUBORDINATED LENDER HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND EACH SUBORDINATED LENDER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS. THE PARTIES CONSENT THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE AGENT OR EACH SUBORDINATED LENDER AT THE RESPECTIVE ADDRESSES SET FORTH HEREIN IN THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF COURT, OR OTHERWISE. 22. Waiver of Claims; Trial by Jury. EACH SUBORDINATED LENDER WAIVES EVERY DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF, THAT SUCH SUBORDINATED LENDER MAY NOW HAVE, OR HEREAFTER MAY HAVE, TO ANY ACTION BY THE AGENT IN ENFORCING THIS AGREEMENT AND RATIFIES AND CONFIRMS WHATEVER THE AGENT MAY DO PURSUANT TO THE TERMS HEREOF AND AGREES THAT THE AGENT SHALL NOT BE LIABLE FOR ANY ERRORS OF JUDGMENT OR MISTAKE OF FACT OR LAW EXCEPT FOR WILLFUL MISCONDUCT OF AGENT. THE AGENT AND EACH SUBORDINATED LENDER, AND EACH ONE OF THEM, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT ANY ONE OF THEM MAY HAVE TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH OR ANY COURSE OF CONDUCT OR 11 COURSE OF DEALING, IN WHICH THE AGENT AND EACH SUBORDINATED LENDER ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER GROUP TO MAKE LOANS AND OTHER FINANCIAL ACCOMMODATIONS TO THE BORROWERS. 23. Governing Law; Benefit of Agreement. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to the conflict of law, principles thereof other than Sections 5-1401 and 5-1402 of the New York General Obligations Law. All of the understandings, agreements, covenants and representations contained herein are solely for the benefit of the Agent, the other members of the Lender Group and each Subordinated Lender, and there are no other persons who are intended to be benefited in any way whatsoever by this Agreement. 24. Severability. In the event any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 25. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. 26. Perfection and Release of Liens. Upon the Agent's reasonable request (which request shall be in writing), each Subordinated Lender hereby agrees to execute and deliver such documents, instruments, lien releases, assignments and financing statements and do such acts as may be necessary in order for the Agent to establish and maintain a first, valid, prior and perfected security interest in the Collateral. In the event of any sale or other disposition of all or any part of the Collateral prior to payment in full of the Senior Debt, upon request by the Agent, each Subordinated Lender shall execute releases, assignments, UCC terminations and other similar agreements that are reasonably requested by the Agent from time to time. Until payment and satisfaction in full of the Senior Debt, each Subordinated Lender shall cooperate fully in releasing the Subordinated Lien, if in existence at such time, as soon as practicable upon the reasonable request of the Agent. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 12 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. THE OLD EVANGELINE DOWNS, L.L.C., a Louisiana limited liability company By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer DIAMOND JO, LLC, (formerly known as Peninsula Gaming Company, LLC), a Delaware limited liability company By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer THE OLD EVANGELINE DOWNS CAPITAL CORP., a Delaware corporation By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer OED ACQUISITION LLC, a Delaware limited liability company By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer PENINSULA GAMING, LLC, a Delaware limited liability company By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer WELLS FARGO FOOTHILL, INC., a California corporation, as administrative agent By: /s/ Todd R. Nakamoto -------------------------------------- Name: Todd R. Nakamoto Title: Vice President EX-10.22 27 forms4_ex10-22wfb071404.txt EX. 10.22 - MANAGEMENT FEES SUB AGMT EXHIBIT 10.22 MANAGEMENT FEES SUBORDINATION AGREEMENT THIS MANAGEMENT FEES SUBORDINATION AGREEMENT (this "Agreement") dated as, June 16, 2004, is made and entered into by and among THE OLD EVANGELINE DOWNS, L.L.C., a Louisiana limited liability company ("OED"), and DIAMOND JO, LLC (formerly known as Peninsula Gaming Company, LLC), a Delaware limited liability company ("DJO"; together with OED, hereinafter collectively referred to as, the "Borrowers" and each individually, a "Borrower"), The Old Evangeline Downs Capital Corp., a Delaware corporation ("Guarantor"; together with OED, hereinafter collectively referred to as the "Debtors" and each individually, a "Debtor"), OED ACQUISITION, LLC, a Delaware limited liability company ("OEDA"; together with DJO, hereinafter collectively referred to as the "Subordinated Parties" and each individually, a "Subordinated Party"), and WELLS FARGO FOOTHILL, INC., a California corporation, as agent for the Lenders (as defined in the Senior Loan Agreement defined below) (the "Agent"). W I T N E S S E T H: WHEREAS, the Debtors are indebted and may from time to time in the future become indebted to a Subordinated Party in respect of certain amounts owing to the Subordinated Parties pursuant to that certain Amended and Restated Management Services Agreement (the "Management Agreement"), by and among OED, OEDA and DJO, dated as of February 25, 2003 (such amounts, together with all other obligations of the Debtors, or either of them, to each Subordinated Party arising under the Management Agreement, however evidenced and whether now existing or hereafter arising, are referred to herein as the "Subordinated Fees"; and WHEREAS, the Borrowers, the Agent and the Lenders are parties to that certain Loan and Security Agreement dated as of even date herewith (collectively, as amended, restated, supplemented or otherwise modified from time to time, the "Senior Loan Agreement"), whereby the Borrowers may be indebted to the Lender Group (as defined in the Senior Loan Agreement) for certain extensions of credit outstanding from time to time (all such indebtedness, including, without limitation, principal, interest, fees, costs, expenses and other sums chargeable to the Borrowers by the Agent or the other members of the Lender Group (including interest, fees, costs and expenses accruing after an Insolvency Proceeding (as hereafter defined) commences regardless of whether such interest, fees, costs and expenses are deemed allowed or recoverable in any Insolvency Proceeding (as hereinafter defined), and the Guaranteed Obligations (as defined below), together with any modification, amendment, refinancing or supplement thereto, and any other obligations of the Debtors to the Agent or the other members of the Lender Group are hereinafter referred to as the "Senior Debt"); and WHEREAS, as an inducement to the Lender Group to enter into the Loan Agreement and to extend the credit therein, Guarantor has entered into that certain Guaranty dated as of the date hereof in favor of the Agent, for the benefit of the Lender Group (the "Guaranty"), whereby Guarantor has guaranteed the Secured Obligations (as defined in the Guaranty); WHEREAS, as security for the payment of all liabilities and obligations due under the Senior Debt, the Debtors, pursuant to the Loan Documents (as defined in the Senior Loan Agreement), have granted to the Agent, for the benefit of the Lender Group, a first priority lien on and unconditional security interest in and to certain personal and real property assets of the Debtors as set forth in the Loan Documents (collectively, said interests in and assets of the Debtors are referred to herein as the "Collateral"; and, collectively said liens and security interests of the Agent are referred to herein as the "Senior Lien"); and WHEREAS, as part of the consideration for the Lender Group's extension of credit to the Borrowers, each Subordinated Party has agreed, among other things, subject to the terms and provisions of this Agreement, (i) to subordinate the Subordinated Fees to the Senior Debt, (ii) to subordinate any lien which each Subordinated Party has or may have in the future in the assets or property of any Debtor or any Subsidiary or Affiliate of the Debtors (the "Subordinated Lien") to the Senior Lien, and (iii) to forebear from exercising any creditor's remedy or taking any action against the Debtors upon any of their obligations to each Subordinated Party. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that each capitalized term used herein and not defined herein shall have the meaning ascribed thereto in the Senior Loan Agreement, and further agree as follows: 1. Priority of Liens; Subordinated Fees. Notwithstanding anything to the contrary, including, without limitation, the date, time, manner or order of perfection or attachment of the security interests and liens on the Collateral granted by the Debtors to the Agent or any Subordinated Party, and notwithstanding the usual application of the priority provisions of the Uniform Commercial Code as in effect in any jurisdiction or any other applicable law or judicial decision of any jurisdiction, or whether such Subordinated Party holds possession of all or any part of the Collateral, or if the Agent or such Subordinated Party is perfected without filing or possession in any part of the Collateral, the Senior Lien shall be a first, senior and prior security interest in and lien on the Collateral, prior in interest and superior to any Subordinated Lien. The priority of liens set forth in the previous sentence states the relative priority of liens of the parties to this Agreement, and no party hereto represents or warrants to any other party that such other party's liens are prior to any lien on the Collateral of any person who is not a party to this Agreement (except that each Debtor represents and warrants to the Agent that the Senior Lien has been granted in accordance with the terms and provisions of the Senior Loan Agreement and other Loan Documents). Each Subordinated Party agrees that if at any time such Subordinated Party shall be in possession of any assets or properties of the Debtors, then such Subordinated Party shall hold such assets or properties in trust for the Agent for the benefit of the Lender Group, so long as any Senior Debt remains outstanding and until all obligations of the Lenders to make loans and other financial accommodations to the Borrowers pursuant to the Senior Loan Agreement (the "Commitments") are terminated. Each Subordinated Party represents that, as of the date hereof, it does not have a lien on or security interest in any assets of any Debtor, and agrees that it will not take any such lien or security interest without the prior written consent of the Agent. Nothing in this Agreement shall be deemed a consent by the Agent to any such Subordinated Lien. 2 2. Subordination of Subordinated Fees. (a) Each Subordinated Party hereby subordinates any and all claims now or hereafter owing to it by the Debtors, or either of them, under all or any portion of the Subordinated Fees to any and all Senior Debt (including, without limitation, interest, fees, costs or other payments on the Senior Debt paid or accrued after the commencement of an Insolvency Proceeding and whether or not such claims are deemed allowed or recoverable in any Insolvency Proceeding, and payment of or for adequate protection pursuant to any Insolvency Proceeding), and agrees, except as provided in Section 2(b) hereof, that all Senior Debt shall be paid in full in cash to the satisfaction of the Lender Group and the Commitments shall be terminated before any payment may be made on the Subordinated Fees. (b) Except as set forth below in this paragraph (b), each Subordinated Party agrees not to accept any payment of the Subordinated Fees nor make any transfer to third parties not party to this Agreement, or take any other action, designed to secure directly or indirectly from any Debtor or any other Person any payment on account of the Subordinated Fees, without the express, prior written consent of the Agent, and, except as set forth below in this paragraph (b), each Subordinated Party agrees that any funds that may be received by it as a payment on account of the Subordinated Fees at any time prior to the termination of this Agreement shall be held in trust for the benefit of, and shall be immediately paid over and delivered to, the Agent. Notwithstanding anything contained herein to the contrary, (i) any Debtor may reimburse Subordinated Parties for "Reimbursables" (as defined in the Management Agreement) at any time in accordance with the terms of the Management Agreement provided no Event of Default (as that term is defined in the Indenture) then exists or would be caused thereby, and (ii) on the date that payment of any fees or other sums (other than Reimbursables) are owing to Subordinated Parties under the Management Agreement, any Debtor may pay and each Subordinated Party may receive payments of, all other Subordinated Fees payable on such date provided no Event of Default then exists or would be caused thereby. (c) Each Subordinated Party agrees that the priority of the Senior Debt set forth above shall continue during any insolvency, receivership, bankruptcy, dissolution, liquidation, or reorganization proceeding, or in any other proceeding, whether voluntary or involuntary, by or against the Debtors, or either of them, under any bankruptcy or insolvency law or laws, federal or state relating to the relief of debtors of any jurisdiction, whether now or hereafter in effect, and in any out-of-court composition, assignment for the benefit of creditors, readjustment of indebtedness, reorganization, extension or other debt arrangement of any kind (collectively, an "Insolvency Proceeding"). In the event of any payment, distribution, division or application, partial or complete, voluntary or involuntary, by operation of law or otherwise, of all or any part of the property, assets or business of the Debtors, or the proceeds thereof, or any securities of the Debtors, to any Subordinated Party, by reason of any liquidation, dissolution or other winding up of any Debtor or its business or by reason of any sale or Insolvency Proceeding, then any such payment or distribution of any kind or character, whether in cash, property or securities, that, but for the subordination provisions of this Section 2, would otherwise be payable or deliverable upon or in respect of the Subordinated Fees, shall instead be paid over or delivered directly to the Agent to be applied as payment of the Senior Debt, to the 3 extent necessary to repay the Senior Debt remaining unpaid after giving effect to any concurrent payment or distribution to the Agent. (d) Subject to the provisions of this Agreement, the Agent shall have the sole right to control all aspects of liquidation of the Collateral and disposition of the proceeds thereof, including all proceedings pertaining thereto under any Insolvency Proceeding and the approval of any plan of reorganization of the Debtors, or either of them, thereunder. 3. Forbearance from Exercise of Certain Remedies. Until the Senior Debt has been paid in full in cash and the Commitments have been terminated, no Subordinated Party shall (a) take any action or exercise any remedy against the Debtors, or either of them, to enforce all or any portion of the Subordinated Fees; (b) take any action or exercise any remedy against any guarantor of or pledgor securing the Senior Debt in order to collect any of the Subordinated Fees; (c) commence, or join with any other creditor of the Debtors, or either of them, in commencing any Insolvency Proceeding against the Debtors, or either of them; or (d) take any action or exercise any remedy against any property or assets of any guarantor of or pledgor securing the Senior Debt or acquire or take any lien on or security interest in any of the Collateral. The parties hereto understand and agree that the Agent shall have the right, but shall have no obligation, to cure any default with respect to the Subordinated Fees without the prior written consent of each Subordinated Party. Notwithstanding anything contained in this Agreement to the contrary, in no event shall any Subordinated Party be entitled to receive and retain any securities, equity or otherwise, or other consideration provided for in (i) a plan of reorganization or otherwise in connection with any bankruptcy or Insolvency Proceeding or (ii) any other judicial or nonjudicial proceeding for the liquidation, dissolution or winding up of the Debtors, or any of them, or the assets or properties of the Debtors, or any of them, in any case unless and until the Senior Debt is paid in full in cash to the satisfaction of the Lender Group and the Commitments are terminated. 4. Agent's Authority to Act. For so long as any of the Senior Debt shall remain unpaid, the Agent shall have the right to act as attorney-in-fact for each Subordinated Party for the purposes specified herein and each Subordinated Party hereby irrevocably appoints the Agent as such Subordinated Party's true and lawful attorney, with full power of substitution, in the name of such Subordinated Party for the use and benefit of the holders of the Senior Debt without notice to the Subordinated Parties or any of their representatives, successors or assigns, to perform the following acts, at the option of the holders of the Senior Debt, at any meeting of creditors of the Debtors or in connection with any Insolvency Proceeding: (a) if a proper claim or proof of debt in respect of the Subordinated Fees has not been filed in the form required in any such Insolvency Proceeding at least ten (10) Business Days prior to the expiration of the time for filing such claims, to file an appropriate claim for and on behalf of the holders of any Subordinated Fees; (b) to collect any assets of the Debtors distributed, divided or applied by way of dividend or payment, or any securities issued, on account of the Subordinated Fees and to apply the same, or the proceeds of any realization upon the same that the Agent in its discretion elects to effect, to the Senior Debt until all of the Senior Debt has been paid in full in cash to the 4 satisfaction of the Lender Group and any commitment of the Agent to extend credit or make other financial accommodations to any Debtor is terminated, rendering any surplus to the Subordinated Parties if and to the extent permitted by law; and (c) generally to take any action in connection with any such Insolvency Proceeding either in its own name or in the name of each Subordinated Party (including without limitation, voting on any plan of reorganization) that the Subordinated Parties would be authorized to take, but for this Agreement, in the event that the Agent believes such action is necessary to protect its interests in the Senior Debt and under this Agreement and after first giving each Subordinated Party five (5) days' written notice of its intent to take such action (to the extent such notice is practicable), provided that the Agent agrees to permit such Subordinated Party to take action on such Subordinated Party's own behalf in connection with any such Insolvency Proceeding as may be necessary to reasonably protect such Subordinated Party's interests, as long as such action is not contrary to or in conflict with the actions and interests of the Agent and such Subordinated Party's interests are always in second position to the Senior Debt and the Senior Lien. In no event shall the holder or holders of the Senior Debt be liable to any Subordinated Party for any failure to prove the Subordinated Fees, to exercise any right with respect thereto or to collect any sums payable thereon. A distribution made under this Agreement to holders of Senior Debt that otherwise would have been made to Subordinated Parties is not, as between the Debtors, or either of them, its other creditors and any Subordinated Party, a payment by the Debtors on the Agent, it being understood that the provisions of this Agreement are solely for the purpose of defining the relative rights of the Subordinated Parties, on the one hand, and the Senior Debt on the other hand. Each Subordinated Party represents that such Subordinated Party shall not assign, participate, pledge, encumber or transfer any of the Subordinated Fees or any interest therein until the Senior Debt is repaid in full in cash and the Commitments are terminated. The power-of-attorney granted hereby is coupled with an interest and shall be irrevocable. 5. Duration and Termination. This Agreement shall constitute a continuing agreement of subordination, and shall remain in effect until indefeasible payment in full in cash to the satisfaction of the Lender Group of the Senior Debt and termination of the Commitments. The holder or holders of Senior Debt may, without notice to any Subordinated Party extend or continue credit and make other financial accommodations to or for the account of the Borrowers in reliance upon this Agreement. The obligations of each Subordinated Party under this Agreement shall continue to be effective, or be reinstated, as the case may be, if at any time any payment in respect of any Senior Debt is rescinded or must otherwise be restored or returned by a holder of Senior Debt by reason of any Insolvency Proceeding or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Debtors or any substantial part of any Debtor's property, or otherwise, all as though such payment had not been made. 6. Subordinated Party's Waivers. All of the Senior Debt shall be deemed to have been made or incurred in reliance upon this Agreement. Each Subordinated Party expressly waives all notice of the acceptance by the Agent of the subordination and other provisions of this Agreement and all other notices not specifically required pursuant to the terms of this Agreement 5 whatsoever, and each Subordinated Party expressly consents to reliance by the Agent upon the subordination and other agreements as herein provided. Each Subordinated Party agrees that the Agent has not made warranties or representations with respect to the due execution, legality, validity, completeness or enforceability of the Senior Loan Agreement and other Loan Documents or the collectibility of the obligations thereunder, that Agent shall be entitled to manage and supervise its loans in accordance with applicable law and its usual practices, modified from time to time as it deems appropriate under the circumstances, and that the Agent shall not have any liability to such Subordinated Party for, and such Subordinated Party waives any claim (except with respect to willful misconduct) that such Subordinated Party may now or hereafter have against Agent arising out of (i) any and all actions that the Agent takes or omits to take (including, without limitation, actions with respect to the creation, perfection or continuation of liens or security interests in the Senior Debt or the Senior Lien, actions with respect to the occurrence of an Event of Default, actions with respect to the foreclosure upon, sale, release, or depreciation of, or failure to realize upon, the Collateral and actions with respect to the collection of any claim for all or any part of the Senior Debt from any account debtor, guarantor or any other party) with respect to the documents regarding the Senior Debt or any other agreement related thereto or to the collection of the Senior Debt or the valuation, use, protection or release of the Collateral and/or other security for the Senior Debt, (ii) the Agent's election, in any proceeding instituted under Chapter 11 of Title 11 of the United States Code (11 U.S.C. ss. 101 et seq.) (the "Bankruptcy Code"), of the application of Section 1111 (b)(2) of the Bankruptcy Code, and/or (iii) any making of loans to, or grant of a security interest under Section 364 of the Bankruptcy Code by, the Debtors as debtors-in-possession. 7. Waiver of Marshaling; No Offset. Each Subordinated Party agrees that the Agent shall have no obligation to marshal any part of the Collateral or any such other property, instruments, documents, agreements or guaranties before enforcing its rights against any other part of the Collateral or its rights herein as against such Subordinated Party. In the event such Subordinated Party is or becomes indebted to any Debtor, including, without limitation, under any documents or instruments evidencing the Subordinated Fees, each Subordinated Party agrees that it shall pay such indebtedness in accordance with its terms and shall not deduct from or set off against any amounts owed to such Debtor any amounts such Debtor claims are due to it with respect to the Subordinated Fees. 8. No Contest of Security Interest. No Subordinated Party shall contest the validity, perfection or enforceability of any lien or security interest granted to the Agent by any Debtor, and each Subordinated Party agrees to cooperate in the defense of any action contesting the validity, perfection or enforceability of such liens or security interests. 9. Subordination Not Affected, Etc. Nothing in this Agreement shall be construed as affecting or in any way limiting the extension of new or additional financial accommodation by the Lender Group to the Borrowers and the terms and conditions hereof shall apply to such new and additional financial accommodations. Notwithstanding the preceding sentence or anything contained in this Agreement to the contrary, none of the provisions of this Agreement shall be deemed or construed to constitute a commitment or an obligation on the part of the Lender Group to make any future loans, advances or other extensions of credit or financial accommodation to the Borrowers. Each Subordinated Party understands and agrees that all 6 accrued interest, charges, expenses, attorneys' fees and other liabilities and obligations under the Senior Loan Agreement shall constitute part of the Senior Debt, and nothing in this Agreement shall be construed as affecting or in any way limiting any indulgence granted by the Lender Group with respect to any existing financial accommodation to the Borrowers. The subordinations effected, and the rights created, hereby shall not be affected by (a) any amendment of or any addition of or supplement to any instrument, document or agreement relating to the Senior Debt, (b) any exercise or non-exercise of any right, power or remedy under or in respect of the Senior Debt or any instrument, document or agreement relating thereto, (c) the release, sale, exchange or surrender, in whole or in part, of any part of the Collateral or any additional collateral to which the Agent may become entitled, (d) any release of any guarantor of or pledgor securing the Senior Debt or any security for such pledge or guaranty, or (e) any waiver, consent, release, indulgence, extension, renewal, modification, delay or other action, inaction or omission in respect of the Senior Debt or any instrument, document or agreement relating thereto or any security therefor or pledge or guaranty thereof, whether or not each Subordinated Party shall have had notice or knowledge of any of the foregoing and regardless of whether each Subordinated Party shall have consented or objected thereto. Any provision of any document, instrument or agreement evidencing, securing or otherwise relating to the Subordinated Fees purporting to limit or restrict in any way any Debtor's ability to enter into any agreement with the Agent to amend or modify any document, instrument or agreement evidencing, securing or otherwise relating to the Senior Debt shall be deemed of no force or effect until the Senior Debt has been repaid in full in cash to the satisfaction of the Lender Group and the Commitments have been terminated. 10. Voided Payments. Notwithstanding anything herein that may be construed to the contrary, to the extent that any Debtor makes any payment on the Senior Debt which, within twelve (12) months of the date of such payment, is subsequently invalidated, declared to be fraudulent, avoidable or preferential, set aside or is required to be repaid to a trustee, receiver, the estate of such Debtor or any other party under any bankruptcy act, state or Federal law, common law or equitable cause (such payment being hereinafter referred to as a "Voided Payment"), then, to the extent of such Voided Payment, that portion of the Senior Debt that had been previously satisfied by such Voided Payment shall be revived and continue in full force and effect as if such Voided Payment had never been made. In the event that a Voided Payment is sought to be recovered from the Agent or any other member of the Lender Group under the Senior Loan Agreement, an "Event of Default" under the Senior Loan Agreement shall be deemed to have occurred and to be continuing from the date of such recovery from the Agent or any such other member of the Lender Group of such Voided Payment until the full amount of such Voided Payment is fully and finally restored to the Agent or such other member of the Lender Group and until such time the provisions of this Agreement shall be in full force and effect. 11. Violation of Agreement by Debtors. Each Debtor hereby consents to this Agreement, agrees to abide by the terms hereof, agrees to make no payments or distributions contrary to the terms and provisions hereof and to do every act and thing necessary to carry out such terms and provisions. Each Debtor agrees that should it make any payment in contravention of any provision of this Agreement the maturity of said Senior Debt may be accelerated in accordance with the terms of the Senior Loan Agreement. 7 12. Waiver. Irrespective of the due date of any of the Subordinated Fees, each Subordinated Party hereby expressly waives (except as expressly provided by Section 2(b) hereof) any and all rights to payment by any Debtor of the Subordinated Fees prior to repayment in full in cash of the Senior Debt and termination of the Commitments. 13. Immediate Effect. This Agreement shall be effective immediately upon its execution by each of the parties hereto, and there are no conditions precedent or subsequent to the effectiveness of this Agreement. 14. Inducement. As an inducement to, and part of the consideration for, the Lender Group's extension of credit to the Borrowers, which each Subordinated Party and the Debtors acknowledge that the Agent and the other members of the Lender Group would be unwilling to do without this Agreement, each Subordinated Party agrees, among other things, (i) to subordinate the Subordinated Lien, if any, to the Senior Lien, (ii) to subordinate the Subordinated Fees to the Senior Debt, and (iii) to forebear from exercising any creditor's remedy or taking any action against any Debtor upon any of its obligations to each Subordinated Party until the Senior Debt has been paid in full in cash to the satisfaction of the Lender Group and termination of the Commitments. 15. Successors and Assigns; Continuing Effect, etc. This Agreement is being entered into for the benefit of, and shall be binding upon, the Agent, each Subordinated Party, the Debtors and their respective successors and assigns. The Agent or any other member of the Lender Group under the Senior Loan Agreement may assign or participate out to other parties any portion of its interest under the Senior Debt and no such assignee or participant shall be required to become a signatory hereto. Any assignee or transferee of each Subordinated Party shall execute and deliver to the other parties hereto an agreement pursuant to which they will become parties hereto as fully as if they were signatories hereto and providing for the effectiveness of this Agreement as to such transferee or assignee and other parties. 16. Notification of Defaults. Each Subordinated Party shall immediately give written notice to the Agent of a default or an event of default by the Debtors under the Management Agreement or with respect to the Subordinated Fees. Each Subordinated Party understands that, subject to any grace or cure period under such Subordinated Party's agreements with the Debtors, any default by the Debtors under the Management Agreement is, automatically, an "Event of Default" of the Debtors under the Senior Debt. Nothing in this Agreement shall be interpreted to limit or restrict the right of the Agent and each Subordinated Party to waive any default under their respective documents, and each Subordinated Party agrees that any waiver by each Subordinated Party will be in writing and provided to the Agent. 17. Notices. Any notices, consents, requests, demands and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to be given to any party or parties (a) upon delivery to the address of the party or parties set forth below if delivered in person or by courier or if sent by certified or registered mail (return receipt requested), or (b) upon dispatch if transmitted by telecopy or other means of facsimile transmission, in any case to the party or parties at the telecopy numbers set forth below: 8 If to the Debtors: THE OLD EVANGELINE DOWNS, L.L.C. c/o Peninsula Gaming Partners, LLC P.O. Box 1750 400 E. Third Street Dubuque, Iowa 52004 Attention: Natalie Schramm Fax No. (563) 690-2190 and THE OLD EVANGELINE DOWNS, L.L.C. c/o Peninsula Gaming Partners, LLC 11100 Santa Monica Boulevard, 10th Floor Los Angeles, California 90025 Attention: M. Brent Stevens Fax No. (310)914-6476 with copies to: MAYER, BROWN, ROWE & MAW LLP 1675 Broadway New York, New York 10019 Attn: Ron Brody, Esq. Fax No. (212) 262-1910, Esq. Fax No. (504) 596-2800 If to the Subordinated Parties: OED ACQUISITION, LLC c/o Peninsula Gaming Partners, LLC P.O. Box 1750 400 E. Third Street Dubuque, Iowa 52004 Attention: Natalie Schramm Fax No. (563) 690-2190 and OED ACQUISITION, LLC c/o Peninsula Gaming Partners, LLC 11100 Santa Monica Boulevard, 10th Floor Los Angeles, California 90025 Attention: M. Brent Stevens Fax No. (310) 914-6476 9 with copies to: MAYER, BROWN, ROWE & MAW LLP 1675 Broadway New York, New York 10019 Attn: Ron Brody, Esq. Fax No. (212) 262-1910 If to Agent: WELLS FARGO FOOTHILL, INC. 2450 Colorado Avenue, Suite 3000 West Santa Monica, California 90404 Attention: Business Finance Division Manager Fax No. (310) 453-7413 with copies to: PAUL, HASTINGS, JANOFSKY & WALKER LLP 600 Peachtree Street, NE, Suite 2400 Atlanta, Georgia 30308 Attention: Cindy J. K. Davis, Esq. Fax No. (404) 815-2424 Any party hereto may designate any other address or telecopy number, as applicable, to which any notices or other communications shall be given by notice duly given hereunder; provided, however, that any such notice of other address or telecopy number shall be deemed to have been given hereunder only when actually received by the party to which it is addressed. 18. Amendments; Modifications. This Agreement may not be modified, altered or amended except by an agreement in writing executed by all of the parties hereto. 19. Amendment of Management Agreement. Except to the extent expressly provided in the Senior Loan Agreement, each Subordinated Party and the Debtors agree to forbear from (a) modifying, altering or amending any term of the Management Agreement, and (b) from granting (in the case of the Debtors) and receiving (in the case of any Subordinated Party) any collateral or other security of any nature to secure the Subordinated Fees. 20. Cost and Expenses of Enforcement. Each Subordinated Party agrees to pay all costs and expenses including, without limitation, attorneys', paralegals' and other professionals' fees of every kind, paid or incurred by the Agent in enforcing its rights hereunder against each Subordinated Party, including, but not limited to, litigation instituted in a state or federal court, as hereinafter provided (including proceedings under the Bankruptcy Code) in endeavoring to collect the Senior Debt or in so enforcing this Agreement, or in defending against any defense, cause of action, counterclaim, setoff or cross claim based on any act of commission or omission by the Agent with respect to the Senior Debt promptly on demand of the Agent or other person paying or incurring the same. 21. Jurisdiction. TO INDUCE THE AGENT AND THE OTHER MEMBERS OF THE LENDER GROUP TO AFFORD FINANCIAL ACCOMMODATIONS TO THE BORROWERS, EACH SUBORDINATED PARTY IRREVOCABLY AGREES THAT ALL ACTIONS ARISING DIRECTLY OR INDIRECTLY AS A RESULT OR IN CONSEQUENCE 10 OF THIS AGREEMENT SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS HAVING SITUS IN THE CITY OF NEW YORK, NEW YORK AND EACH SUBORDINATED PARTY HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT LOCATED AND HAVING ITS SITUS IN SAID CITY AND STATE. EACH SUBORDINATED PARTY HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND EACH SUBORDINATED PARTY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS. THE PARTIES CONSENT THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE AGENT OR EACH SUBORDINATED PARTY AT THE ADDRESS OF OEDA SET FORTH HEREIN IN THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF COURT, OR OTHERWISE. 22. Waiver of Claims; Trial by Jury. EACH SUBORDINATED PARTY WAIVES EVERY DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF, THAT EACH SUBORDINATED PARTY MAY NOW HAVE, OR HEREAFTER MAY HAVE, TO ANY ACTION BY THE AGENT IN ENFORCING THIS AGREEMENT AND RATIFIES AND CONFIRMS WHATEVER THE AGENT MAY DO PURSUANT TO THE TERMS HEREOF AND AGREES THAT THE AGENT SHALL NOT BE LIABLE FOR ANY ERRORS OF JUDGMENT OR MISTAKE OF FACT OR LAW EXCEPT FOR WILLFUL MISCONDUCT OF AGENT. THE AGENT AND EACH SUBORDINATED PARTY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT ANY ONE OF THEM MAY HAVE TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH OR ANY COURSE OF CONDUCT OR COURSE OF DEALING, IN WHICH THE AGENT AND EACH SUBORDINATED PARTY ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER GROUP TO MAKE LOANS AND OTHER FINANCIAL ACCOMMODATIONS TO THE BORROWERS. 23. Governing Law; Benefit of Agreement. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to the conflict of law, principles thereof other than Sections 5-1401 and 5-1402 of the New York General Obligations Law. All of the understandings, agreements, covenants and representations contained herein are solely for the benefit of the Agent and each Subordinated Party, and there are no other persons who are intended to be benefited in any way whatsoever by this Agreement. 24. Severability. In the event any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 11 25. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. 26. Perfection and Release of Liens. Upon the Agent's reasonable request (which request shall be in writing), each Subordinated Party hereby agrees to execute and deliver such documents, instruments, lien releases, assignments and financing statements and do such acts as may be necessary in order for the Agent to establish and maintain a first, valid, prior and perfected security interest in the Collateral. In the event of any sale or other disposition of all or any part of the Collateral prior to payment in full of the Senior Debt, upon request by the Agent, each Subordinated Party shall execute releases, assignments, UCC terminations and other similar agreements that are reasonably requested by the Agent from time to time. Until payment and satisfaction in full of the Senior Debt, each Subordinated Party shall cooperate fully in releasing the Subordinated Lien, if in existence at such time, as soon as practicable upon the reasonable request of the Agent. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 12 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. DEBTORS: THE OLD EVANGELINE DOWNS, L.L.C., a Louisiana limited liability company By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer THE OLD EVANGELINE DOWNS CAPITAL CORP., a Delaware corporation By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer SUBORDINATED PARTIES: OED ACQUISITION LLC, a Delaware limited liability company By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer DIAMOND JO, LLC (FORMERLY KNOWN AS PENINSULA GAMING COMPANY, LLC), a Delaware limited liability company By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer AGENT: WELLS FARGO FOOTHILL, INC., a California corporation By: /s/ Todd R. Nakamoto --------------------------------------- Name: Todd R. Nakamoto Title: Vice President EX-10.23 28 forms4_ex10-23wfb071404.txt EX. 10.23 - POST CLOSING LETTER EXHIBIT 10.23 POST CLOSING LETTER THE OLD EVANGELINE DOWNS, L.L.C. AND DIAMOND JO, LLC June 16, 2004 Wells Fargo Foothill, Inc., as Agent 2450 Colorado Avenue Suite 3000 West Santa Monica, California 90404 Ladies and Gentlemen: Reference is hereby made to that certain Loan and Security Agreement, dated as of June 16, 2004 (as amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement"), by and among The Old Evangeline Downs, L.L.C., a Louisiana limited liability company ("OED"), and Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC), a Delaware limited liability company ("DJO"), as borrowers ("Borrowers"), the lenders identified on the signature pages thereof (together with their respective successors and assigns, the "Lenders"), and Wells Fargo Foothill, Inc., a California corporation, as the arranger and agent for the Lenders ("Agent"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement. This letter confirms our agreement regarding the following post-closing items: 1. Not later than June 23, 2004, Borrowers shall deliver to Agent all original certificates representing the shares of Capital Stock pledged under the Pledge Agreement, as well as original Capital Stock powers with respect thereto endorsed in blank; and 2. Not later than June 30, 2004 (or such longer period as Agent approves in writing), DJO shall deliver to Agent an amendment to that certain Multi-Party Blocked Account Agreement dated as of April 16, 2004, by and among DJO, Wells Fargo Foothill, Inc., as First-Lien Agent, U.S. Bank National Association, as Second-Lien Agent, and American Trust and Savings Bank, in form and substance satisfactory to Agent, with respect to account number 2012474 at American Trust and Savings Bank. Borrowers acknowledge that the failure of Borrowers to comply with the items above (the "Post-Closing Items") shall constitute an Event of Default under the Loan Agreement. All such items shall be in form and substance acceptable to Agent. Borrowers and Guarantors acknowledge and agree that Borrowers and Guarantors shall remain responsible for all costs and expenses incurred by Agent in connection with the completion of the matters described above, which expenses shall include the fees and expenses of counsel to Agent. This letter agreement may be signed in multiple counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same agreement. Delivery of an executed counterpart of this letter agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. This letter agreement shall be deemed to be a Loan Document for all purposes. [Remainder of page intentionally left blank.] Very truly yours, BORROWERS: THE OLD EVANGELINE DOWNS, L.L.C., a Louisiana limited liability company By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer DIAMOND JO, LLC (formerly known as Peninsula Gaming Company, LLC), a Delaware limited liability company By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer GUARANTORS: PENINSULA GAMING, LLC, a Delaware limited liability company By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer THE OLD EVANGELINE DOWNS CAPITAL CORP., a Delaware corporation By: /s/ Natalie A. Schramm -------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer POST CLOSING LETTER Acknowledged and consented to as of the date first above written: WELLS FARGO FOOTHILL, INC., a California corporation, as Agent By: /s/ Todd R. Nakamoto ---------------------------------- Title: Vice President POST CLOSING LETTER EX-10.25 29 forms4_ex10-25wfb071404.txt GUARANTY EXHIBIT 10.25 GUARANTY This GUARANTY (this "Guaranty") is made this 16 day of June, 2004, by PENINSULA CAPITAL CORP. (formerly known as The Old Evangeline Downs Capital Corp.), a Delaware corporation, together with those additional entities that hereafter become parties hereto by executing the Form of Supplement attached hereto as Annex 1 (each, a "Guarantor", and collectively, the "Guarantors") in favor of Wells Fargo Foothill, Inc., a California corporation, as agent for the Lenders (as defined in the hereinafter defined Loan Agreement) (the "Agent"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, pursuant to that certain Loan and Security Agreement as of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement"; capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Loan Agreement), by and among The Old Evangeline Downs, L.L.C., a Louisiana limited liability company ("OED"), and Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC), a Delaware limited liability company ("DJO"; together with OED, hereinafter collectively referred to as "Borrowers" and each individually as a "Borrower"), the Lenders party thereto from time to time and the Agent, the Lender Group has agreed to extend credit to the Borrowers from time to time pursuant to the terms and conditions thereof; and WHEREAS, each Guarantor is an Affiliate of the Borrowers and each Guarantor has determined that its execution, delivery and performance of this Guaranty directly or indirectly benefits such Guarantor, and is within such Guarantor's corporate, partnership or limited liability company purposes, as applicable; and WHEREAS, it is a condition precedent to the extension of credit under the Loan Agreement that each Guarantor execute and deliver this Guaranty to the Agent; and WHEREAS, the obligations of each Guarantor hereunder are secured by the other Loan Documents to which such Guarantor is a party; NOW, THEREFORE, for and in consideration of the recitals made above, and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, each Guarantor hereby agrees as follows: 1. Each Guarantor hereby guarantees to the Agent, for the benefit of the Lender Group, the full and prompt payment and performance of (a) all covenants, agreements and liabilities of the Borrowers under the Loan Documents and all now existing or hereafter arising Obligations (including, without limitation, any interest, fees and other charges in respect of the Loan Agreement and the other Loan Documents that would accrue but for the filing of an Insolvency Proceeding with respect to any Borrower, regardless of whether such claim is allowed in such Insolvency Proceeding), and (b) the obligations of each Guarantor and the other Guarantors (as defined in the Loan Agreement) arising from this Guaranty and any other Loan Document, plus reasonable attorneys' fees for which a written invoice has been presented to the Agent and expenses if the obligations represented by this Guaranty are collected by law, through an attorney-at-law, or under advice therefrom (all of the foregoing now existing or hereinafter arising obligations being referred to, collectively, as the "Secured Obligations"). 2. Regardless of whether any proposed guarantor or any other Person shall become in any other way responsible to the Lender Group, or any of them, for or in respect of the Secured Obligations or any part thereof, and regardless of whether or not any Person now or hereafter responsible to the Lender Group, or any of them, for the Secured Obligations or any part thereof, whether under this Guaranty or otherwise, shall cease to be so liable, each Guarantor hereby declares and agrees that this Guaranty shall be a joint and several obligation, shall be a continuing guaranty and shall be operative and binding until the Secured Obligations shall have been indefeasibly paid or performed in full, the Loan Agreement and the other Loan Documents have been terminated and the Lender Group shall be under no further obligation to extend any additional credit under the Loan Agreement. 3. Upon execution of this Guaranty and delivery thereof to the Agent, this Guaranty shall be deemed to be finally executed and delivered by the Guarantors and shall not be subject to or affected by any promise or condition affecting or limiting any Guarantor's liability, except as stated in the Loan Agreement, and no statement, representation, agreement or promise on the part of the Lender Group and the Borrowers, or any of them, or any officer, employee or agent thereof, unless contained herein, forms any part of this Guaranty or has induced the making thereof or shall be deemed in any way to affect any Guarantor's liability hereunder. Each of the Guarantors absolutely, unconditionally and irrevocably waives any and all right to assert any defense (other than the defense of payment in cash in full), set-off, counterclaim or cross-claim of any nature whatsoever with respect to this Guaranty, or the obligations of such Guarantor under this Guaranty or the obligations of any other Person or party (including, without limitation, the Borrowers or any of them) relating to this Guaranty or the obligations of any of the Guarantors under this Guaranty or otherwise with respect to the Secured Obligations in any action or proceeding brought by the Agent hereof to collect the Secured Obligations or any portion thereof, or to enforce the obligations of any of the Guarantors under this Guaranty. 4. The Agent may from time to time, without exonerating or releasing any Guarantor in any way under this Guaranty, (i) take such further or other security or collateral for the Secured Obligations or any part thereof as it may deem proper, or (ii) release, discharge, abandon or otherwise deal with or fail to deal with any other Guarantor or other guarantor of the Secured Obligations or any security or collateral therefor or any part thereof now or hereafter held by the Agent, or (iii) amend, modify, extend, accelerate or waive in any manner any of the provisions, terms, or conditions of the Loan Documents, all as it may consider expedient or appropriate in its sole discretion. Without limiting the generality of the foregoing, or of Section 5 hereof, it is understood that the Agent may, without exonerating or releasing any Guarantor, give up, or modify or abstain from perfecting or taking advantage of any security for the Secured Obligations and accept or make any compositions or arrangements, and realize upon any security or collateral for the Secured Obligations when, and in such manner, and with or without notice, all as the Agent may deem expedient. 5. Each Guarantor acknowledges and agrees that no change in the nature or terms of the Secured Obligations or any of the Loan Documents, or other agreements, instruments or contracts evidencing, related to or attendant upon the Secured Obligations (including any novation), shall discharge all or any part of the liabilities and obligations of such Guarantor pursuant to this Guaranty; it being the purpose and intent of each Guarantor and the Agent that the covenants, agreements and all liabilities and obligations of such Guarantor hereunder are absolute, unconditional and irrevocable under any and all circumstances. Without limiting the generality of the foregoing, each Guarantor agrees that until all of the covenants and agreements of this Guaranty are fully performed, and without possibility of recourse, whether by operation of law or otherwise, such Guarantor's undertakings hereunder shall not be released, in whole or in part, by any action or thing which might, but for this paragraph of this Guaranty, be deemed a legal or equitable discharge of a surety or guarantor, or by reason of any waiver, omission of the Agent or any other member of the Lender Group, or its failure to proceed promptly or otherwise, or by reason of any action taken or omitted by the Agent or any member of the Lender Group, whether or not such action or failure to act varies or increases the risk of, or affects the rights or remedies of, such Guarantor or by reason of any further dealings between the Borrowers on the one hand and the Agent or the Lender Group or any member thereof, on the other hand or any other guarantor or surety, and such Guarantor hereby expressly waives and surrenders any defense to its liability hereunder, or any right of counterclaim or offset of any nature or description which it may have or may exist based upon, and shall be deemed to have consented to, any of the foregoing acts, omissions, things, agreements or waivers. 6. The Agent and the Lenders or any of them may, without demand or notice of any kind upon or to any Guarantor, at any time or from time to time when any amount shall be due and payable hereunder by any Guarantor, upon the occurrence and during the continuation of an Event of Default, setoff, appropriate and apply to any portion of the Secured Obligations hereby guaranteed, and in such order of application as set forth in the Loan Agreement, any deposits, property, balances, credit accounts or moneys of any Guarantor in the possession of the Agent or any other member of the Lender Group under their respective control for any purpose. If and to the extent that any Guarantor makes any payment to the Agent or any other Person pursuant to or in respect of this Guaranty, any claim which such Guarantor may have against any Borrower by reason thereof shall be subject and subordinate to the prior payment in full in cash of the Secured Obligations. 7. The creation or existence from time to time of Secured Obligations in excess of the amount committed to or outstanding on the date of this Guaranty is hereby authorized, without notice to any Guarantor, and shall in no way impair or affect this Guaranty or the rights of the Agent or any other member of the Lender Group herein. Anything herein to the contrary notwithstanding, the liability of any Guarantor hereunder shall not exceed the amount which would be enforceable in a bankruptcy, insolvency or other similar proceeding giving effect to fraudulent conveyance and other similar laws relating to the insolvency of debtors. 8. Upon the bankruptcy or winding up or other distribution of assets of any Borrower or of any surety or guarantor (other than a Guarantor) for any Obligations of the Borrowers to the Lender Group, the rights of the Agent against any Guarantor shall not be affected or impaired by the omission of the Agent or any other member of the Lender Group to prove its claim, or to prove the full claim, as appropriate, against the Borrowers or any such other guarantor or surety and the Agent may prove such claims as it sees fit and may refrain from proving any claim and in its discretion may value as it sees fit or refrain from valuing any security held by it without in any way releasing, reducing or otherwise affecting the liability to the Agent and the other members of the Lender Group of each of the Guarantors. 9. Any amount received by the Agent from whatsoever source and applied toward the payment of the Secured Obligations shall be applied in accordance with the terms of the Loan Agreement. 10. Each Guarantor hereby absolutely, unconditionally and irrevocably expressly waives, except to the extent such waiver would be expressly prohibited by applicable law, the following: (a) notice of acceptance of this Guaranty, (b) notice of the existence or creation of all or any of the Secured Obligations, (c) presentment, demand, notice of dishonor, protest and all other notices whatsoever (other than the notices expressly required hereunder or under any other Loan Document to which such Guarantor is a party), (d) all diligence in collection or protection of or realization upon the Secured Obligations or any part thereof, any obligation hereunder, or any security for any of the foregoing, (e) all rights to enforce any remedy which Agent or any other member of the Lender Group may have against the Borrowers, and (f) until all of the Secured Obligations shall have been indefeasibly paid or satisfied in full, all rights of subrogation, indemnification, contribution and reimbursement from any Borrower, and (g) any benefit of, or right to participate in, any collateral or security now or hereinafter held by the Agent or any other member of the Lender Group in respect of the Secured Obligations. If a claim is ever made upon the Agent or any other member of the Lender Group for the repayment or recovery of any amount or amounts received by such Person in payment of any of the Secured Obligations and such Person repays all or part of such amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such Person or any of its property, or (ii) any settlement or compromise of any such claim effected by such Person with any such claimant, including any Borrower, then in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon such Guarantor, notwithstanding any revocation hereof or the cancellation of any promissory note or other instrument evidencing any of the Secured Obligations, and such Guarantor shall be and remain obligated to such Person hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by such Person. 11. Agent and the other members of the Lender Group may, to the extent permitted under the Loan Agreement, sell, assign or transfer all or any part of the Secured Obligations, and in such event each and every permitted assignee, transferee, or holder of all or any of the Secured Obligations shall have the right to enforce this Guaranty, by suit or otherwise, for the benefit of such permitted assignee, transferee or holder as fully as if such assignee, transferee or holder were herein by name specifically given such rights, powers and benefits. 12. This Guaranty is a continuing guaranty of the Secured Obligations and all liabilities to which it applies or may apply under the terms hereof, and such Secured Obligation and liabilities shall be conclusively presumed to have been created in reliance hereon. No failure or delay by the Agent or any other member of the Lender Group in the exercise of any right, power, privilege or remedy shall operate as a waiver thereof, and no single or partial exercise by the Agent or any other member of the Lender Group of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy and no course of dealing between any Guarantor, the Agent or any other member of the Lender Group shall operate as a waiver thereof. No action by the Agent or any other member of the Lender Group permitted hereunder shall in any way impair or affect this Guaranty. For the purpose of this Guaranty, the Secured Obligations shall include, without limitation, all Obligations (other than the FF&E Obligations) of the Borrowers to the Agent and the other members of the Lender Group, notwithstanding any right or power of any third party, individually or in the name of the Borrowers and the Lender Group, or any of them, to assert any claim or defense as to the invalidity or unenforceability of any such Obligation, and no such claim or defense shall impair or affect the obligations of any Guarantor hereunder. 13. This Guaranty shall be binding upon the Guarantors, their respective successors and assigns and inure to the benefit of the Agent and the other members of the Lender Group and their respective successors and assigns. No Guarantor may assign its rights or obligations under this Guaranty without the prior written consent of the Agent. No alteration or waiver of this Guaranty or of any of its terms, provisions or conditions shall be binding upon the parties against whom enforcement is sought unless made in writing and signed by an authorized officer of such party. If at any time all or any part of any payment theretofore applied by Agent or any other member of the Lender Group to any of the Secured Obligations is or must be rescinded or returned by Agent or any other member of the Lender Group for any reason whatsoever (including the insolvency, bankruptcy or reorganization of any Guarantor or any Borrower), such Secured Obligations shall, for the purposes of this Guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by Agent or such other member of the Lender Group, and this Guaranty shall continue to be effective or be reinstated, as the case may be, as to such Secured Obligations, all as though such application by Agent or such other member of the Lender Group had not been made. 14. This is a guaranty of payment and not of collection. In the event the Agent makes a demand upon any Guarantor under this Guaranty, such Guarantor shall be held and bound to the Agent directly as debtor in respect of the payment of the amounts hereby guaranteed. The Guarantors shall be jointly and severally liable for the payment and performance of their obligations hereunder. All costs and expenses, including reasonable and documented attorneys' fees and expenses, incurred by the Agent in obtaining performance of or collecting payments due under this Guaranty to the extent permitted by the Loan Agreement, shall be deemed part of the Secured Obligations guaranteed hereby. Any notice or, demand which the Agent may wish to give shall be served upon any Guarantor in the fashion prescribed for notices in the Loan Agreement in care of Peninsula Gaming Partners, LLC at the following address (or at such other address as Guarantors may designate in written notice to Agent) and the notice so sent shall be deemed to be served as set forth in the Loan Agreement: [NAME OF APPLICABLE GUARANTOR] c/o Peninsula Gaming Partners, LLC 400 E. Third Street, P.O. Box 1750 Dubuque, Iowa 52004 Attn: Natalie Schramm Fax No. (563) 690-2190 and [NAME OF APPLICABLE GUARANTOR] c/o Peninsula Gaming Partners, LLC 11100 Santa Monica Boulevard, 10th Floor Los Angeles, California 90025 Attn: M. Brent Stevens Fax No. (310)914-6476 with copies to: MAYER, BROWN, ROWE & MAW LLP 1675 Broadway New York, New York 10019 Attn: Ron Brody, Esq. Fax No. (212) 262-1910 15. Each Guarantor expressly represents and acknowledges that any financial accommodations by the Lender Group to the Borrowers, including, without limitation, the extension of credit under the Loan Agreement, are and will be of direct interest, benefit and advantage to such Guarantor. 16. [Intentionally Omitted.] 17. Each Guarantor hereby represents and warrants that: (a) such Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the corporate or company power and authority and the legal right to own and operate property, to lease the property such Guarantor operates under lease and to conduct the business in which such Guarantor is currently engaged; (b) such Guarantor has the corporate or company power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guaranty and the other Loan Documents to which it is a party, and has taken all necessary company action to authorize the execution, delivery and performance of this Guaranty and each of the other Loan Documents to which it is a party; (c) this Guaranty and each of the other Loan Documents to which it is a party constitutes a legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and general equitable principles (whether enforcement is sought by proceedings in equity or at law); (d) the execution, delivery and performance of this Guaranty and the other Loan Documents to which it is a party will not violate any provision of any governmental requirement or material contractual obligation of such Guarantor and will not result in or require the creation or imposition of any Lien on any of the properties or revenues of such Guarantor pursuant to any governmental requirement or contractual obligation of such Guarantor; (e) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or governmental authority and no consent of any other Person (including, without limitation, stockholder or creditor of such Guarantor) is required in connection with the execution, delivery, performance, validity or enforceability of this such Guaranty or any other Loan Document to which it is a party; and (f) no litigation, investigation or proceeding of or before any arbitrator or governmental authority is pending or, to the knowledge of such Guarantor, threatened by or against such Guarantor or against such Guarantor's properties or revenues (1) with respect to this Guaranty or any other Loan Document to which it is a party or any of the transactions contemplated hereby or thereby or (2) which could reasonably be expected to cause a Material Adverse Change. The foregoing representations and warranties shall be deemed to have been made by each Guarantor on each date of each borrowing under the Loan Agreement on and as of such date of borrowing as though made hereunder on and as of such date. 18. Each Guarantor hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Guaranty and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the jurisdiction set forth in Section 13(b) of the Loan Agreement; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Guarantor at its address set forth in Section 14 hereof; and (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law. 19. EACH GUARANTOR HEREBY KNOWINGLY, INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. 20. This Guaranty shall be construed and interpreted in accordance with the internal laws of the State of New York, without regard to the conflict of laws principles thereof other than Sections 5-1401 and 5-1402 of the New York General Obligations Law. 21. Upon payment in full of all Secured Obligations as provided herein, this Guaranty shall terminate and the Agent shall take all action reasonably requested by Guarantors (at the expense of the Borrower or Guarantors) to evidence the termination of this Guaranty. 22. This Guaranty may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. Delivery of a counterpart hereof via facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. 23. Each reference herein to any right granted to, benefit conferred upon or power exercisable by the "Agent" shall be a reference to Agent for itself and for the other members of the Lender Group, and each action taken or right exercised hereunder shall be deemed to have been so taken or exercised by Agent for the benefit of and on behalf of the Lender Group. 24. Any new Subsidiary (whether by acquisition or creation) of a Borrower (other than a CFC) is required to enter into a Guaranty. Upon the execution and delivery of Annex 1 by such new Subsidiary, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any instrument adding an additional Guarantor as a party to this Guaranty shall not require the consent of any Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor hereunder. 25. Each provision of this Guaranty shall be severable from every other provision of this Guaranty for the purpose of determining the legal enforceability of any specific provision. 26. All representations, warranties and covenants of each Guarantor contained herein shall survive the execution and delivery of this Guaranty. 27. This Guaranty, together with the other Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof. 28. Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Guaranty. 29. Notwithstanding anything herein to the contrary, to the extent that any Guarantor or any other party makes any payment on the Secured Obligations that is subsequently invalidated, declared to be fraudulent, avoidable or preferential, set aside or is required to be repaid to a trustee, receiver, the estate of such Guarantor or any other party under any bankruptcy act, state or Federal law, common law or equitable cause (such payment being hereinafter referred to as a "Voided Payment"), then, to the extent of such Voided Payment, that portion of the Secured Obligations that had been previously satisfied by such Voided Payment shall be revived and continue in full force and effect as if such Voided Payment had never been made. In the event that a Voided Payment is sought to be recovered from the Agent or any other member of the Lender Group, an "Event of Default" under the Loan Agreement shall be deemed to have occurred and to be continuing from the date of such recovery from the Agent or such other member of the Lender Group of such Voided Payment until the full amount of such Voided Payment is fully and finally restored to the Agent or such other member of the Lender Group and until such time the provisions of this Guaranty, and the guaranty provided herein, shall be in full force and effect. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have executed this Guaranty as of the date first above written. GUARANTORS: THE OLD EVANGELINE DOWNS CAPITAL CORP., a Delaware corporation By: /S/ NATALIE A. SCHRAMM ----------------------------------------- Name: Natalie A. Schramm Title: Chief Financial Officer Guaranty ANNEX 1 to GUARANTY FORM OF SUPPLEMENT THIS SUPPLEMENT NO. __ (this "Supplement") dated as of __________ to the Guaranty dated as of June ___, 2004 (as amended, restated, supplemented or otherwise modified from time to time, the "Guaranty"), by Peninsula Capital Corp. (formerly known as The Old Evangeline Downs Capital Corp.), a Delaware corporation, and those additional entities that thereafter become parties thereto (each a "Guarantor" and collectively, the "Guarantors") and Wells Fargo Foothill, Inc., a California corporation, as agent for the Lenders (as defined in the hereinafter defined Loan Agreement) (the "Agent"). WITNESSETH: WHEREAS, pursuant to that certain Loan and Security Agreement dated as of June ___, 2004 (as amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement"), by and among The Old Evangeline Downs, L.L.C., a Louisiana limited liability company ("OED"), and Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC), a Delaware limited liability company ("DJO"; together with OED, hereinafter collectively referred to as "Borrowers" and each individually as a "Borrower"), the Lenders party thereto from time to time and the Agent, the Lender Group has agreed to extend credit to the Borrowers from time to time pursuant to the terms and conditions thereof; and WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Guaranty, and if not defined therein, in the Loan Agreement; and WHEREAS, the Guarantors have entered into the Guaranty in order to induce the extension of credit under the Loan Agreement; and WHEREAS, pursuant to Section 24 of the Guaranty, each new Subsidiary (whether by acquisition or creation) of a Borrower (other than a CFC) must execute and deliver the Guaranty, and the execution of the Guaranty by the undersigned new Guarantor or Guarantors (collectively, the "New Guarantor") may be accomplished by the execution of this Supplement in favor of the Agent for the benefit of the Lender Group; and WHEREAS, New Guarantor is a direct or indirect Subsidiary of a Borrower, and New Guarantor has determined that it will realize substantial direct and indirect benefits as a result of the loans and other financial accommodations extended to the Borrowers pursuant to the Loan Agreement, and New Guarantor's execution, delivery and performance of this Guaranty is within New Guarantor's corporate or other purposes; NOW, THEREFORE, for and in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the New Guarantor hereby agrees as follows: SECTION 1. In accordance with Section 24 of the Guaranty, the New Guarantor, by its signature below, becomes a "Guarantor" under the Guaranty with the same force and effect as if originally named therein as a "Guarantor" and the New Guarantor hereby (a) agrees to all of the terms and provisions of the Guaranty applicable to it as a "Guarantor" thereunder and (b) represents and warrants that the representations and warranties made by it as a "Guarantor" thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Guarantor, as security for the payment and performance in full in cash of the Secured Obligations, does hereby guarantee, subject to the limitations set forth in Section 7 of the Guaranty, to the Agent, for the benefit of the Lender Group, the full and prompt payment of the Secured Obligations, including, without limitation, any interest thereon, plus reasonable attorneys' fees and expenses if the Secured Obligations represented by the Guaranty are collected by law, through an attorney-at-law, or under advice therefrom. Each reference to a "Guarantor" in the Guaranty shall be deemed to include the New Guarantor. The Guaranty is incorporated herein by reference. SECTION 2. The New Guarantor represents and warrants to the Agent that this Supplement has been duly executed and delivered by the New Guarantor and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as enforceability thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws affecting creditors' rights generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). SECTION 3. This Supplement may be executed in multiple counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. Delivery of a counterpart hereof via facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. SECTION 4. Except as expressly supplemented hereby, the Guaranty shall remain in full force and effect. SECTION 5. This Supplement shall be construed and enforced and the rights and duties of the parties shall be governed by in all respects in accordance with the laws and decisions of the State of New York without reference to the conflicts or choice of law principles thereof other than Sections 5-1401 and 5-1402 of the New York General Obligations Law. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the New Guarantor has duly executed this Supplement to the Guaranty as of the day and year first above written. NEW GUARANTOR: [Name of New Guarantor] Address: By: ------------------------------- ----------------------------- Name: ------------------------------- --------------------------- Title: ------------------------------- -------------------------- EX-12.1 30 forms4_ex12-1wfb071404.txt COMPUTATION OF RATIO EARINGS TO FIXED CHARGES EXHIBIT 12.1 PENINSULA GAMING, LLC Computation of Ratio of Earnings to Fixed Charges (amounts in thousands except ratio information) THREE MONTHS ENDED EARNINGS: MARCH 31, 2004 - ---------------------------------------------------------- ------------------ Total earnings $(2,621) Fixed charges: Interest charges (including capitalized interest and interest expense related to preferred members' interest 7,177 Amortization of deferred financing costs and bond discount 810 Total fixed charges 7,987 Capitalized interest (204) Earnings as adjusted $5,162 Ratio of earnings to fixed charges 0.6x* ======== __________ * Earnings were insufficient to cover fixed charges for the three months ended March 31, 2004 by $2.8 million. EX-21.1 31 forms4_ex21-1wfb071404.txt EX. 21.1 - SUBSIDIARIES OF THE REGISTRANTS EXHIBIT 21.1 SUBSIDIARIES (A) PENINSULA GAMING, LLC NAME DOMESTIC JURISDICTION - ---- --------------------- Peninsula Gaming Corp. Delaware Diamond Jo, LLC Delaware The Old Evangeline Downs, L.L.C. Louisiana (B) PENINSULA GAMING CORP. None (C) DIAMOND JO, LLC None EX-23.1 32 forms4_ex23-1wfb071404.txt EX. 23.1 - CONSENTS OF D&T LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the use in this Registration Statement of Peninsula Gaming, LLC and subsidiaries on Form S-4 of our report dated March 10, 2004 (June 16, 2004 as to Note 1), with respect to The Old Evangeline Downs, L.L.C. (a wholly owned subsidiary of Peninsula Gaming, LLC), appearing in the Prospectus, which is a part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ DELOITTE & TOUCHE LLP July 27, 2004 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the use in this Registration Statement of Peninsula Gaming, LLC and subsidiaries on Form S-4 of our report dated March 10, 2004 (June 16, 2004 as to Note 1), with respect to The Old Evangeline Downs, L.C. (the "Predecessor Company"), which report expresses an unqualified opinion and includes an explanatory paragraph relating to the Predecessor Company changing its method of accounting for goodwill and intangible assets to conform to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, appearing in the Prospectus, which is a part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ DELOITTE & TOUCHE LLP July 27, 2004 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the use in this Registration Statement of Peninsula Gaming, LLC and subsidiaries (the "Company") on Form S-4 of our report dated March 10, 2004 (June 16, 2004 as to Note 1), which report expresses an unqualified opinion and includes an explanatory paragraph relating to the Company's changing its method of accounting for goodwill and intangible assets to conform to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, appearing in the Prospectus, which is a part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ DELOITTE & TOUCHE LLP July 27, 2004 EX-25 33 forms4_ex25-1wfb071404.txt EX 25 - FORM T-1 Exhibit 25.1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) ------------------------------------------------------- U.S. BANK NATIONAL ASSOCIATION (Exact name of Trustee as specified in its charter) 31-0841368 I.R.S. Employer Identification No. 800 Nicollet Mall Minneapolis, Minnesota 55402 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Frank Leslie U.S. Bank National Association 60 Livingston Avenue St. Paul, MN 55107 (651) 495-3913 (Name, address and telephone number of agent for service) Diamond Jo, LLC. Peninsula Gaming, LLC Peninsula Gaming Corp. (Issuer with respect to the Securities) Delaware 42-1483875 Delaware 20-0800583 Delaware 25-1902805 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) P.O. Box 90270 Lafayette, Louisiana 70509-0270 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) 8.75% SENIOR SECURED NOTES DUE 2012 (TITLE OF THE INDENTURE SECURITIES) FORM T-1 ITEM 12. GENERAL INFORMATION. Furnish the following information as to the Trustee. a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency Washington, D.C. b) Whether it is authorized to exercise corporate trust powers. Yes ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the Trustee, describe each such affiliation. None ITEMS 3-15 Items 3-15 are not applicable because to the best of the Trustee's knowledge, the obligor is not in default under any Indenture for which the Trustee acts as Trustee. ITEM 16. LIST OF EXHIBITS: List below all exhibits filed as a part of this statement of eligibility and qualification. 1. A copy of the Articles of Association of the Trustee.* 2. A copy of the certificate of authority of the Trustee to commence business.* 3. A copy of the certificate of authority of the Trustee to exercise corporate trust powers.* 4. A copy of the existing bylaws of the Trustee.* 5. A copy of each Indenture referred to in Item 4. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939, attached as Exhibit 6. 7. Report of Condition of the Trustee as of March 31, 2004, published pursuant to law or the requirements of its supervising or examining authority, attached as Exhibit 7. * Incorporated by reference to Registration Number 333-67188. 2 NOTE The answers to this statement insofar as such answers relate to what persons have been underwriters for any securities of the obligors within three years prior to the date of filing this statement, or what persons are owners of 10% or more of the voting securities of the obligors, or affiliates, are based upon information furnished to the Trustee by the obligors. While the Trustee has no reason to doubt the accuracy of any such information, it cannot accept any responsibility therefor. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of St. Paul, State of Minnesota on the 13th of July, 2004. U.S. BANK NATIONAL ASSOCIATION By: /s/ Frank P. Leslie III ------------------------------------ Frank P. Leslie III Vice President By: /s/ Richard H. Prokosch ------------------------------ Richard H. Prokosch Vice President 3 EXHIBIT 6 CONSENT In accordance with Section 321(b) of the Trust Indenture Act of 1939, the undersigned, U.S. BANK NATIONAL ASSOCIATION hereby consents that reports of examination of the undersigned by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Dated: July 13, 2004 U.S. BANK NATIONAL ASSOCIATION By: /s/ Frank P. Leslie III ------------------------------------ Frank P. Leslie III Vice President By: /s/ Richard H. Prokosch ------------------------------ Richard H. Prokosch Vice President 4 EXHIBIT 7 U.S. BANK NATIONAL ASSOCIATION STATEMENT OF FINANCIAL CONDITION AS OF 3/31/2004 ($000'S) 3/31/2004 --------- ASSETS Cash and Due From Depository Institutions $ 7,180,778 Federal Reserve Stock 0 Securities 45,038,794 Federal Funds 2,593,702 Loans & Lease Financing Receivables 116,474,594 Fixed Assets 1,789,213 Intangible Assets 10,532,022 Other Assets 7,996,466 ------------ TOTAL ASSETS $191,605,569 LIABILITIES Deposits $126,605,087 Fed Funds 5,698,785 Treasury Demand Notes 3,981,328 Trading Liabilities 252,912 Other Borrowed Money 23,295,560 Acceptances 148,067 Subordinated Notes and Debentures 5,807,310 Other Liabilities 5,587,914 ------------ TOTAL LIABILITIES $171,376,963 EQUITY Minority Interest in Subsidiaries $ 1,005,645 Common and Preferred Stock 18,200 Surplus 11,677,397 Undivided Profits 7,527,364 ------------ TOTAL EQUITY CAPITAL $ 20,228,606 TOTAL LIABILITIES AND EQUITY CAPITAL $191,605,569 - -------------------------------------------------------------------------------- To the best of the undersigned's determination, as of the date hereof, the above financial information is true and correct. U.S. BANK NATIONAL ASSOCIATION By: /s/ Frank P. Leslie III ---------------------------------- Vice President Date: June 13, 2004 5 EX-99.1 34 forms4_ex99-1wfb071404.txt EX. 99.1 - FORM OF LETTER OF TRANSMITTAL EXHIBIT 99.1 LETTER OF TRANSMITTAL DIAMOND JO, LLC PENINSULA GAMING CORP. PENINSULA GAMING, LLC Offer to Exchange all Outstanding 8 3/4% Senior Secured Notes due 2012 for 8 3/4% Senior Secured Notes due 2012 That Have Been Registered Under the Securities Act of 1933, as amended, Pursuant to the Prospectus, dated July [___], 2004 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON ___________, 2004, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. - -------------------------------------------------------------------------------- THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: U.S. BANK NATIONAL ASSOCIATION BY MAIL, HAND DELIVERY OR OVERNIGHT COURIER: 60 Livingston Avenue St. Paul, MN 55107 Attention: Specialized Finance Corp. By Facsimile Transmission: (FOR ELIGIBLE INSTITUTIONS ONLY) (651) 495-8158 Confirm by Telephone: (800) 934-6802 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY OF THIS LETTER OF TRANSMITTAL. The undersigned acknowledges that he or she has received and reviewed the Prospectus, dated ___________, 2004 (the "Prospectus"), of Diamond Jo, LLC ("DJL"), a Delaware limited liability company, Peninsula Gaming Corp. ("PGC", formerly named The Old Evangeline Downs Capital Corp.), a Delaware corporation, and Peninsula Gaming, LLC ("PGL" and together with DJL and PGC, the "Issuers") and this Letter of Transmittal (the "Letter of Transmittal" or the "Letter"), which together constitute the Issuers' offer (the "Exchange Offer") to exchange an aggregate principal amount of up to $233,000,000 of the Issuers' 8 3/4% Senior Secured Notes due 2012 that have been registered under the Securities Act of 1933, as amended (the "New Notes"), for a like principal amount denominated in dollars, in the aggregate, of the Issuers' issued and outstanding 8 3/4% Senior Secured Notes due 2012 (the "Old Notes") from the registered holders thereof. For each Old Note accepted for exchange, the holder of such Old Note will receive a New Note having a principal amount equal to that of the surrendered Old Note. The New Notes will bear interest from the most recent date to which interest has been paid. Accordingly, registered holders of New Notes on the relevant record date for the first interest payment date following the consummation of the Exchange Offer will receive interest accruing from the most recent date to which interest has been paid. Old Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of accrued interest on such Old Notes otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer. This Letter is to be completed by a holder of Old Notes either if certificates for such Old Notes are to be forwarded herewith or if a tender is to be made by book-entry transfer to the account maintained by U.S. Bank National Association, as Exchange Agent for the Exchange Offer (the "Exchange Agent"), at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Exchange Offer--Book-Entry Transfers" section of the Prospectus and an Agent's Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation (as defined below), which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by this Letter and that the Issuer may enforce this Letter against such participant. Holders of Old Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other documents required by this Letter to the Exchange Agent on or prior to the Expiration Date, must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. See Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. 2 The undersigned has completed the appropriate boxes below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer. List below the Old Notes to which this Letter relates. If the space provided below is inadequate, the certificate numbers and principal amount of Old Notes should be listed on a separate signed schedule affixed hereto.
- -------------------------------------------------------------------------------------------------------- DESCRIPTION OF OLD NOTES 1 2 3 - -------------------------------------------------------------------------------------------------------- Aggregate Name(s) and Address(es) of Registered holder(s) Certificate Principal Amount Principal Amount (Please fill in, if blank) Number(s)* of Old Note(s) Tendered** - -------------------------------------------------------------------------------------------------------- --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- - -------------------------------------------------------------------------------------------------------- Total - -------------------------------------------------------------------------------------------------------- * Need not be completed if Old Notes are being tendered by book-entry transfer. ** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Notes represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1. - --------------------------------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution ____________________________________________ Account Number___________________ Transaction Code Number ____________ By crediting the Old Notes to the Exchange Agent's account at the Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the Exchange Offer, including transmitting to the Exchange Agent a computer-generated Agent's Message in which the holder of the Old Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, the Letter, the participant in the Book-Entry Transfer Facility confirms on behalf of itself and the beneficial owners of such Old Notes all provisions of this Letter (including all representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter to the Exchange Agent. 3 [ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered holder(s)___________________________________________ Window Ticket Number (if any)_____________________________________________ Date of Execution of Notice of Guaranteed Delivery________________________ Name of Institution Which Guaranteed Delivery_____________________________ If Delivered by Book-entry Transfer, Complete the Following: Account Number____________________________________________________________ Transaction Code Number___________________________________________________ Name of Tendering Institution_____________________________________________ [ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH. [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name:___________________________________________________________________________ Address:________________________________________________________________________ ________________________________________________________________________ If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of marketmaking activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act of 1933, as amended, in connection with any resale of such New Notes; however, by so acknowledging and by delivering such a prospectus the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended. If the undersigned is a broker-dealer that will receive New Notes, it represents that the Old Notes to be exchanged for the New Notes were acquired as a result of market-making activities or other trading activities. 4 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Issuers the aggregate principal amount of Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Issuers all right, title and interest in and to such Old Notes as are being tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the undersigned's true and lawful agent and attorney-in-fact with respect to such tendered Old Notes, with full power of substitution, among other things, to cause the Old Notes to be assigned, transferred and exchanged. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Notes, and to acquire New Notes issuable upon the exchange of such tendered Old Notes, and that, when the same are accepted for exchange, the Issuers will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Issuers. The undersigned hereby further represents that any New Notes acquired in exchange for Old Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the undersigned, that neither the holder of such Old Notes nor such other person has any arrangement or understanding with any person to participate in the distribution of such New Notes and that neither the holder of such Old Notes nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"), of the Issuers. The undersigned acknowledges that this Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "SEC"), as set forth in no-action letters issued to third parties, that the New Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be offered for resale, resold and otherwise transferred by holders or other persons receiving the New Notes thereof (other than any such holder or other person that is an "affiliate" of the Issuers within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder, and neither the holder nor such other person has any arrangement or understanding with any person to participate in the distribution of such New Notes. However, the SEC has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in other circumstances. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes and has no arrangement or understanding to participate in a distribution of New Notes. If any holder is an affiliate of the Issuers, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the 5 Securities Act in connection with any resale transaction. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes, it represents that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus meeting the requirements of the Securities Act, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Issuers to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section of the Prospectus. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, please deliver the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Old Notes, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Old Notes." THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX ABOVE. 6 - ------------------------------------------------------- ----------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (See Instructions 3 and 4) (See Instructions 3 and 4) - ------------------------------------------------------- ----------------------------------------------------- To be completed ONLY if certificates for Old Notes To be completed ONLY if certificates for Old Notes not exchanged and/or New Notes are to be issued in not exchanged and/or New Notes are to be sent to the name of someone other than the person or persons someone other than the person or persons whose whose signature(s) appear(s) on this Letter above, or signature(s) appear(s) on this Letter above or to if Old Notes delivered by book-entry transfer which such person or persons at an address other than are not accepted for exchange are to be returned by shown in the box entitled "Description of Old credit to an account maintained at the Book-Entry Notes" on this Letter above. Transfer Facility other than the account indicated above. Issue: New Notes and/or Old Notes to: Mail: New Notes and/or Old Notes to: Name(s)............................................ (Please Type or Print) .................................................... (Please Type or Print) Name(s)............................................ (Please Type or Print) Address............................................ .................................................... (Zip Code) ................................................... (Complete Substitute Form W-9) (Please Type or Print) Credit unexchanged Old Notes delivered by book-entry Address............................................ transfer to the Book-Entry Transfer Facility account set forth below. .................................................... ................................................... (Book-Entry Transfer Facility (Zip Code) Account Number, if applicable) - ------------------------------------------------------- -----------------------------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU THEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE. 7 - -------------------------------------------------------------------------------- (TO BE COMPLETED BY ALL TENDERING HOLDERS) (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE) Dated:.........................................................., 2004 x .............................................................., 2004 x .............................................................., 2004 Signature(s) of Owner Date Area Code and Telephone Number.................................. This Letter must be signed by the registered Holder(s) as the name(s) appear(s) on the certificate(s) for the Old Notes hereby tendered or on a security position, on listing or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3. Name(s):............................................................. ..................................................................... (Please Type or Print) Capacity:............................................................ Address:............................................................. ..................................................................... (Including Zip Code) SIGNATURE GUARANTEE (If required by Instruction 3) Signature(s) Guaranteed by an Eligible Institution: ......................................... (Authorized Signature) ..................................................................... (Title) ..................................................................... (Name And Firm) Dated: .............................................................., 2004 - -------------------------------------------------------------------------------- 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES. This Letter is to be completed by holders of Old Notes either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer--Book-Entry Transfers" section of the Prospectus and an Agent's Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal and that the Issuers may enforce the Letter of Transmittal against such participant. Certificates for all physically tendered Old Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter (or manually signed facsimile hereof or Agent's Message in lieu thereof) and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. Holders whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution, (ii) prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Issuers (by telegram, telex, facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within three (3) New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and any other documents required by this Letter will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and all other documents required by this Letter, are received by the Exchange Agent within three (3) NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. An "Eligible 9 Institution" is a firm which is a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program. The method of delivery of this Letter, the Old Notes and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Old Notes are sent by mail, it is suggested that the mailing be registered mail, properly insured, with return receipt requested, made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. No Letters of Transmittal or Old Notes should be sent directly to the Issuers. See "The Exchange Offer" section of the Prospectus. 2. Partial Tenders (not applicable to holders who tender by book-entry transfer). If less than all of the Old Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Old Notes to be tendered in the box above entitled "Description of Old Notes--Principal Amount Tendered." A reissued certificate representing the balance of nontendered Old Notes will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter, promptly after the Expiration Date. ALL OF THE OLD NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED. 3. Signatures on this Letter; Bond Powers and Endorsements; Guarantee of Signatures. If this Letter is signed by the holder of the Old Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates or on the Book-Entry Transfer Facility's security position listing as the holder of such Old Notes without any change whatsoever. If any tendered Old Notes are owned of record by two or more joint owners, all of such owners must sign this Letter. If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates. When this Letter is signed by the registered holder or holders of the Old Notes specified herein and tendered hereby, no endorsements of certificates or written instrument or instruments of transfer or exchange are required. If, however, the Old Notes are registered in the name of a person other than a signer of the Letter, the Old Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Issuers in their sole discretion, duly executed by the registered national securities exchange with the signature thereon guaranteed by an Eligible Institution. 10 If this Letter is signed by a person or persons other than the registered holder or holders of Old Notes, such Old Notes must be endorsed or accompanied by appropriate powers of attorney, in either case signed exactly as the name or names of the registered holder or holders that appear on the Old Notes. If this Letter or any Old Notes or powers of attorneys are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Issuers, proper evidence satisfactory to the Issuers of their authority to so act must be submitted with the Letter. Endorsements on certificates for Old Notes or signatures on powers of attorneys required by this instruction 3 must be guaranteed by an Eligible Institution. Signatures on this Letter need not be guaranteed by an Eligible Institution, provided the Old Notes are tendered: (i) by a registered holder of Old Notes (which term, for purposes of the Exchange Offer, includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the holder of such Old Notes) who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this letter, or (ii) for the account of an Eligible Institution. 4. Special Issuance and Delivery Instructions Tendering holders of Old Notes should indicate in the applicable box the name and address to which New Notes issued pursuant to the Exchange Offer and or substitute certificates evidencing Old Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. Holders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such holder may designate hereon. If no such instructions are given, such Old Notes not exchanged will be returned to the name and address of the person signing this Letter. 5. Taxpayer Identification Number. Federal income tax law generally requires that a tendering holder whose Old Notes are accepted for exchange must provide the Issuer (as payor) with such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below, which in the case of a tendering holder who is an individual, is his or her social security number. If the Issuer is not provided with the current TIN or an adequate basis for an exemption, such tendering holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery to such tendering holder of New Notes may be subject to backup withholding in an amount equal to 31% of all reportable payments made after the exchange. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt holders of Old Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See 11 the enclosed Guidelines of Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for additional instructions. To prevent backup withholding, each tendering holder of Old Notes must provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying that the TIN provided is correct (or that such holder is awaiting a TIN) and that (i) the holder is exempt from backup withholding, or (ii) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of a failure to report all interest or dividends or (iii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the tendering holder of Old Notes is a nonresident alien or foreign entity not subject to backup withholding, such holder must give the Exchange Agent a completed Form W-8, Certificate of Foreign Status. If the Old Notes are in more than one name or are not in the name of the actual owner, such holder should consult the W-9 Guidelines for information on which TIN to report. If such holder does not have a TIN, such holder should consult the W-9 Guidelines for instructions on applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note: Checking this box and writing "applied for" on the form means that such holder has already applied for a TIN or that such holder intends to apply for one in the near future. Checking this box also requires that the holder complete the Certificate of Awaiting Taxpayer Identification Number form attached to the Substitute Form W-9. If such holder does not provide its TIN to the Exchange Agent within 60 days, backup withholding will begin and continue until such holder furnishes its TIN to the Exchange Agent. The information requested above should be directed to the Exchange Agent at the following address: Delivery To: U.S. Bank National Association, Exchange Agent By Mail, Hand Delivery or Overnight Courier: 60 Livingston Avenue St. Paul, MN 55107 Attention: Specialized Finance Corp. By Facsimile Transmission: (for Eligible Institutions Only) (651) 495-8158 Confirm by Telephone: (800) 934-6802 6. Transfer Taxes. Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, New Notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Old Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Old Notes in connection with the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory 12 evidence of payment of such taxes or exemption therefrom is not submitted with this Letter, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Old Notes specified in this Letter. 7. Waiver of Conditions. The Issuers reserve the absolute right to waive any defects or irregularities or conditions of the Exchange Offer as to any particular Old Note prior to the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Old Notes in the Exchange Offer). 8. No Conditional Tenders. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this Letter or an Agent's Message in lieu thereof, shall waive any right to receive notice of the acceptance of their Old Notes for exchange. Neither the Issuers, the Exchange Agent nor any other person are/is obligated to give notice of any defect or irregularity with respect to any tender of Old Notes nor shall any of them. 9. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 10. Withdrawal Rights Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at the address set forth above prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must: (i) specify the name of the person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the principal amount of such Old Notes), and (iii) (where certificates for Old Notes have been transmitted) specify the name in which such Old Notes are registered, if different from that of the Depositor. If certificates for Old Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the release of such certificates the Depositor must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such Depositor is an Eligible Institution. If Old Notes have been tendered pursuant to the procedure for book-entry transfer set forth in "The Exchange Offer--Book-Entry Transfers" section of the Prospectus, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Issuers, whose 13 determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes that have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures set forth in "The Exchange Offer--Book-Entry Transfers" section of the Prospectus, such Old Notes will be credited to an account maintained with the Book-Entry Transfer Facility for the Old Notes) promptly after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following the procedures described above at any time on or prior to 5:00 p.m., New York City time, on the Expiration Date. 11. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, and requests for Notices of Guaranteed Delivery and other related documents may be directed to the Exchange Agent, at the address and telephone number indicated above. 14 TO BE COMPLETED BY ALL TENDERING HOLDERS (See Instruction 5) PAYOR'S NAME: U.S. BANK NATIONAL ASSOCIATION - ---------------------------------------------------------------------------------------------------------------------- Part 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. TIN: _____________________________ SUBSTITUTE Social Security Number Or FORM W-9 Employer Identification Number - ---------------------------------------------------------------------------------------------------------------------- Part 2--TIN Applied For [_] - ---------------------------------------------------------------------------------------------------------------------- Department of the Treasury Internal Payor's Request For Taxpayer Identification Number ("TIN") and Certification Revenue Service Payor's Request for TIN CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT: and Certification (1) the number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to (2) I am not subject to backup withholding either because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) any other information provided on this form is true and correct. SIGNATURE................................................................... DATE........................................................................ - ---------------------------------------------------------------------------------------------------------------------- You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to backup withholding because of underreporting of interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding. - ---------------------------------------------------------------------------------------------------------------------- YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 - ---------------------------------------------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. Signature Date - ----------------------------------------------------------------------------------------------------------------------
15 EX-99.2 35 forms4_ex99-2wfb071404.txt EX. 99.2 - FORM OF NOTICE OF GUAR. DELIVERY EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR TENDER FOR EXCHANGE OF 8 3/4% SENIOR SECURED NOTES DUE 2012 OF DIAMOND JO, LLC PENINSULA GAMING CORP. PENINSULA GAMING, LLC As set forth in the Prospectus dated July [___], 2004 (the "Prospectus") of Diamond Jo, LLC ("DJL"), a Delaware limited liability company, Peninsula Gaming Corp. ("PGC", formerly named The Old Evangeline Downs Capital Corp.), a Delaware corporation, and Peninsula Gaming, LLC ("PGL" and together with DJL and PGC, the "Issuers"), and in the accompanying Letter of Transmittal and instructions thereto (the "Letter of Transmittal"), this form or one substantially equivalent hereto must be used to accept the Issuers' exchange offer (the "Exchange Offer") to exchange all of its outstanding 8 3/4% Senior Secured Notes due 2012 (the "Old Notes") if (i) certificates representing the Old Notes to be tendered for purchase and payment are not lost but are not immediately available, (ii) time will not permit the Letter of Transmittal, certificates representing such Old Notes or other required documents to reach U.S. Bank National Association (the "Exchange Agent") on or prior to 5:00 p.m., New York City time, on the Expiration Date (as defined below) or (iii) the procedures for book-entry transfer cannot be completed prior to the Expiration Date (as defined below). This form may be delivered by an Eligible Institution by mail or hand delivery or transmitted, via telegram, telex or facsimile, to the Exchange Agent as set forth below. In addition, in order to utilize the guaranteed delivery procedures to tender the Old Notes pursuant to the Exchange Offer, a properly completed and duly executed Letter of Transmittal, any other required documents and tendered Old Notes in proper form for transfer (or confirmation of a book-entry transfer of such Old Notes into the Exchange Agent's account at The Depository Trust Company) must also be received by the Exchange Agent prior to 5:00 p.m., New York City time, within four business days after the Expiration Date. All capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Prospectus. - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________, 2004 (THE "EXPIRATION DATE") UNLESS OTHERWISE EXTENDED. TENDERS OF OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. - -------------------------------------------------------------------------------- TO: U.S. BANK NATIONAL ASSOCIATION, EXCHANGE AGENT, EXCHANGE AGENT By Mail, Hand or Overnight Courier: 60 LIVINGSTON AVENUE ST. PAUL, MN 55107 ATTENTION: SPECIALIZED FINANCE CORP. By Facsimile Transmission: (651) 495-8158 Confirm By Telephone: (800) 934-6802 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA TELEGRAM, TELEX OR FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. LADIES AND GENTLEMEN: The undersigned hereby tender(s) to the Issuers, upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal, receipt of which is hereby acknowledged, the aggregate principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus. The undersigned understands that tenders of Old Notes will be accepted only in authorized denominations. The undersigned understands that tenders of Old Notes pursuant to the Exchange Offer may not be withdrawn after 5:00 p.m., New York City time, on the Expiration Date. Tenders of Old Notes may also be withdrawn if the Exchange Offer is terminated without any such Old Notes being purchased thereunder or as otherwise provided in the Prospectus. All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death or incapacity of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. Name(s) of Registered Holder(s):________________________________________________ (Please Print or Type) Principal Amount of Old Notes Tendered:* Certificate No(s). (if available): $_______________________________________________________________________________ $_______________________________________________________________________________ $_______________________________________________________________________________ * Must be in denominations of principal amount of $1,000 and any integral multiple thereof. If Old Notes will be delivered by book-entry transfer to The Depository Trust Company ("DTC"), provide the DTC account number. Depository Account Number:_________________________ PLEASE SIGN HERE Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on certificates for Old Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. ________________________________________________________________________________ ________________________________________________________________________________ Signature(s) of Holder(s) or Authorized Signatory Date Area Code and Telephone Number:________________________________ If signature is by attorney-in-fact, trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. Please print name(s) and address(es) Name(s) of Holder(s)____________________________________________________________ ________________________________________________________________________________ Title/Capacity:_________________________________________________________________ Address(es):____________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or a correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees that the undersigned will deliver to the Exchange Agent the certificate(s) representing the Old Notes being tendered by this Notice of Guaranteed Delivery in proper form for transfer (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at the book-entry transfer facility of DTC) with a properly completed and duly executed Letter of Transmittal and any other required documents, all within four (4) business days after the Expiration Date. Name of Firm____________________________________________________________________ (Authorized Signature) Address_________________________________________________________________________ Please Print or Type ________________________________________________________________________________ City, State Zip Code Dated___________________ Telephone Number______________________ The institution that completes this form must communicate the guarantee to the Exchange Agent by the Expiration Date and must deliver the certificates representing any Old Notes (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at DTC), the Letter of Transmittal and any other required documents to the Exchange Agent within the time period shown in this Notice of Guaranteed Delivery. Failure to do so could result in a financial loss to such institution. NOTE: DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES FOR OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.3 36 forms4_ex99-3wfb071404.txt EX. 99.3 - FORM OF LETTER TO CLIENTS EXHIBIT 99.3 DIAMOND JO, LLC PENINSULA GAMING CORP. PENINSULA GAMING, LLC Offer to Exchange All Outstanding 8 3/4% Senior Secured Notes due 2012 in Exchange for 8 3/4% Senior Secured Notes due 2012 That Have Been Registered Under the Securities Act of 1933, As Amended To Our Clients: Enclosed for your consideration is a prospectus dated July [__], 2004 (the "Prospectus"), and the letter of transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of Diamond Jo, LLC ("DJL"), a Delaware limited liability company, Peninsula Gaming Corp. ("PGC", formerly named The Old Evangeline Downs Capital Corp.), a Delaware corporation, and Peninsula Gaming, LLC ("PGL", and together with DJL, the "Issuers") to exchange their 8 3/4% Senior Secured Notes due 2012 that have been registered under the Securities Act of 1933, as amended, for their outstanding 8 3/4% Senior Secured Notes due 2012 (the "Old Notes"), upon the terms and subject to the conditions described in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Issuers contained in the exchange and registration rights agreement in respect of the Old Notes, dated April 16, 2004, by and among the Issuers and the initial purchasers referred to therein. This material is being forwarded to you as the beneficial owner of the Old Notes held by us for your account but not registered in your name. A tender of such Old Notes may only be made by us as the holder of record and pursuant to your instructions. Accordingly, we request instructions as to whether you wish us to tender on your behalf the Old Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Old Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on __________, 2004 (the "Expiration Date"), unless extended by the Issuers. Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for any and all Old Notes. 2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offer--Conditions of the Exchange Offer." 3. Subject to the terms and conditions in the Prospectus and the Letter of Transmittal, any transfer taxes incident to the transfer of Old Notes from the Holder to the Issuers will be paid by the Issuers. 4. The Exchange Offer expires at 5:00, New York City time, on _________, 2004, unless extended by the Issuers. If you wish to have us tender your Old Notes, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. The Letter of Transmittal is furnished to you for information only and may not be used directly by you to tender Old Notes. -2- INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by Diamond Jo, LLC ("DJL"), a Delaware limited liability company, Peninsula Gaming Corp. ("PGC", formerly named The Old Evangeline Downs Capital Corp.) and Peninsula Gaming, LLC ("PGL", and together with DJL and PCG, the "Issuers") with respect to their Old Notes. This will instruct you to tender the Old Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal. The undersigned expressly agrees to be bound by the enclosed Letter of Transmittal and that such Letter of Transmittal may be enforced against the undersigned. Please tender the Old Notes held by you for my account as indicated below: Aggregate Principal Amount of Old Notes --------------------------------------- 8 3/4% Senior Secured Notes due 2012.......... $_______________________________ ________________________________ Dated:___________________________, 2004 ________________________________ Signature(s) ________________________________ ________________________________ Please print name(s) here ________________________________ ________________________________ ________________________________ Address(es) ________________________________ Area Code and Telephone Number ________________________________ Tax Identification or Social Security No(s). None of the Old Notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Old Notes held by us for your account. EX-99.4 37 forms4_ex99-4wfb071404.txt EX. 99.4 - FORM OF LETTER TO DTC PARTICIPANTS EXHIBIT 99.4 DIAMOND JO, LLC PENINSULA GAMING CORP. PENINSULA GAMING, LLC Offer to Exchange All Outstanding 8 3/4% Senior Secured Notes due 2012 in Exchange for 8 3/4% Senior Secured Notes due 2012 That Have Been Registered Under the Securities Act of 1933, As Amended To: DTC Participants, including Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: Diamond Jo, LLC ("DJL"), a Delaware limited liability company, Peninsula Gaming Corp. ("PGC", formerly named The Old Evangeline Downs Capital Corp.), a Delaware corporation and Peninsula Gaming, LLC ("PGL" and together with DJL and PGC, the "Issuers") are offering, upon and subject to the terms and conditions set forth in the prospectus dated __________, 2004 (the "Prospectus"), and the enclosed letter of transmittal (the "Letter of Transmittal"), to exchange (the "Exchange Offer") their 8 3/4% Senior Secured Notes due 2012 that have been registered under the Securities Act of 1933, as amended, for their outstanding 8 3/4% Senior Secured Notes due 2012 (the "Old Notes"). The Exchange Offer is being made in order to satisfy certain obligations of the Issuers contained in the exchange and registration rights agreement in respect of the Old Notes, dated April 16, 2004, by and among the Issuers and the initial purchasers referred to therein. We are requesting that you contact your clients for whom you hold Old Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Old Notes registered in your name or in the name of your nominee, or who hold Old Notes registered in their own names, we are enclosing the following documents: 1. Prospectus dated __________, 2004; 2. A Letter of Transmittal relating to the Old Notes for your use and for the information of your clients; 3. A Notice of Guaranteed Delivery relating to the Old Notes, which is to be used to accept the Exchange Offer if certificates for Old Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book-entry transfer cannot be completed on a timely basis; 4. A form of letter which may be sent to your clients for whose account you hold Old Notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; and 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. Your prompt action is requested. The Exchange Offer will expire at 5:00 p.m., New York City time, on __________, 2004, unless extended by the Issuers (each, an "Expiration Date"). Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the relevant Expiration Date. To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal relating to the proper denomination of Old Notes (or facsimile thereof or Agent's Message in lieu thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and certificates representing the Old Notes, or a timely confirmation of a book-entry transfer of such Old Notes, should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus. If a registered holder of Old Notes desires to tender, but such Old Notes are not immediately available, or time will not permit such holder's Old Notes or other required documents to reach the Exchange Agent before the relevant Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." The Issuers will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Old Notes held by them as nominee or in a fiduciary capacity. The Issuers will not make any payments to brokers, dealers, or others soliciting acceptances of the Exchange Offer. The Holders will not be obligated to pay or cause to be paid all stock transfer taxes applicable to the exchange of Old Notes pursuant to the Exchange Offer. Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to U.S. Bank National Association, the Exchange Agent for the Exchange Offer, at its address and telephone number set forth on the front of the Letter of Transmittal. Very truly yours, Diamond Jo, LLC Peninsula Gaming Corp. Peninsula Gaming, LLC 2 NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE ISSUERS OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL. Enclosures 3 -----END PRIVACY-ENHANCED MESSAGE-----