-----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, JpJ0DHsW1rkCrfu/arlTXbB8scsuWNIG3GvWmsz/4ZRrVuOYaRKrF3tEh/M8IaZ+ Sa3VaifCI1pw3Eec17Jzlg== 0000089966-96-000019.txt : 19960816 0000089966-96-000019.hdr.sgml : 19960816 ACCESSION NUMBER: 0000089966-96-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHOWBOAT INC CENTRAL INDEX KEY: 0000089966 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880090766 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07123 FILM NUMBER: 96615029 BUSINESS ADDRESS: STREET 1: 2800 FREMONT ST CITY: LAS VEGAS STATE: NV ZIP: 89104 BUSINESS PHONE: 7023859123 FORMER COMPANY: FORMER CONFORMED NAME: NEW HOTEL SHOWBOAT INC DATE OF NAME CHANGE: 19690122 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended --------------------------------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 to For the transition period from ------------ ----------------- Commission file number 1-7123 ------------------------------------------- SHOWBOAT, INC. ----------------------------------------------------------------- (Exact name of registrant as specified in its charter) NEVADA 88-0090766 ------------------------------ --------------------------- (State or other jurisdiction of incorporation or organization) 2800 FREMONT STREET, LAS VEGAS NEVADA 89104-4035 ----------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (702) 385-9123 ----------------------------------------------------------------- (Registrant's telephone number, including area code) NOT APPLICABLE ----------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS --- --- APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of the issuer's classes of common stock, as of the latest practicable date. Common Stock - $1 Par Value, and Preferred Stock Purchase Rights 16,183,950 shares outstanding -------------------------------- ---------------------------------- SHOWBOAT, INC. AND SUBSIDIARIES INDEX PART I FINANCIAL INFORMATION Page No. Item 1. Financial Statements Condensed Consolidated Balance Sheets- June 30, 1996 and December 31, 1995 1-2 Condensed Consolidated Statements of Income- For the three months ended June 30, 1996 and 1995 3-4 Condensed Consolidated Statements of Income- For the six months ended June 30, 1996 and 1995 5-6 Condensed Consolidated Statements of Cash Flows - For the six months ended June 30, 1996 and 1995 7 Notes to the Condensed Consolidated Financial Statements 8-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-23 PART II OTHER INFORMATION ITEMS 1 - 6 24-28 SIGNATURES 29 EXHIBIT INDEX 30 Item Financial Statements SHOWBOAT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 AND DECEMBER 31, 1995 Assets 1996 1995 --------- (unaudited) (In thousands) Current assets: $72,967 $106,927 8,631 8,448 6,418 2,076 2,863 2,808 6,532 4,728 7,524 9,744 ----------- ----------- Total current assets 104,935 134,731 ----------- ----------- 584,772 541,786 and amortization (197,951) (186,872) -------------------------- 386,821 354,914 -------------------------- Other assets: 141,796 128,665 120,090 29,906 28,911 accumulated amortization of $2,401,000 and $1,860,000 at June 30, 1996 and December 31, 1995, respectively 10,208 10,749 -------------------------- 310,575 159,750 -------------------------- $802,331 $649,395 ========================== See accompanying notes to condensed consolidated financial statements. 1 SHOWBOAT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 AND DECEMBER 31, 1995 (continued) LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ 1996 1995 (unaudited) Current liabilities: (In thousands) $24 $22 $12,686 15,143 404 392 40,739 37,524 -------------------------- Total current liabilities 53,853 53,081 -------------------------- Long-term debt, excluding current maturities 532,545 392,369 -------------------------- Other liabilities 6,260 5,662 -------------------------- Deferred income taxes 22,191 22,319 -------------------------- Minority Interest 1,265 2,023 -------------------------- Shareholders' equity: shares authorized; none issued shares authorized; issued 16,182,099 shares at June 30, 1996 and 15,794,578 at December 31, 1995 16,182 15,795 87,781 80,078 79,969 80,434 -------------------------- 183,932 176,307 translation adjustment 4,355 285 -0- shares at June 30, 1996 and 74,333 shares at December 31, 1995 (587) (2,070) (2,064) -------------------------- Total shareholders' equity 186,217 173,941 -------------------------- Total liabilities & shareholders' equity $802,331 $649,395 ========================== See accompanying notes to condensed consolidated financial statements. 2 SHOWBOAT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995 1996 1995 -------------------------- Revenues: $95,858 $99,250 14,119 14,062 6,632 6,506 855 890 1,898 1,330 -------------------------- 119,362 122,038 10,137 10,174 -------------------------- Net revenues 109,225 111,864 -------------------------- Operating costs and expenses: 47,876 46,370 8,181 8,284 1,870 2,093 630 675 29,407 29,234 2,871 2,827 8,308 8,107 -------------------------- 99,143 97,590 -------------------------- Income from operations 10,082 14,274 -------------------------- 3 SHOWBOAT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995 (continued) 1996 1995 -------------------------- Income from operations $10,082 $14,274 -------------------------- Other (income) expense: (3,016) (1,691) 15,601 10,620 (3,863) (3,321) (18) -------------------------- 8,704 5,608 -------------------------- Income before income taxes 1,378 8,666 Minority interest (income) (828) -------------------------- Income before income 2,206 8,666 -------------------------- Income tax expense 1,070 3,707 -------------------------- Net income $1,136 $4,959 ========================== Weighted average shares outstanding 16,428,966 15,556,514 Net income per common and equivalent share $0.07 $0.32 ========================== See accompanying notes to condensed consolidated financial statements. 4 SHOWBOAT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 1996 1995 -------------------------- Revenues: $185,848 $186,097 27,110 26,368 12,428 12,133 1,903 1,945 190 2,911 2,553 -------------------------- 230,200 229,286 18,385 18,743 -------------------------- Net revenues 211,815 210,543 -------------------------- Operating costs and expenses: 92,101 88,237 16,267 16,050 4,007 4,347 1,451 1,626 57,782 57,127 5,360 5,173 16,326 16,263 -------------------------- 193,294 188,823 -------------------------- Income from operations from 18,521 21,720 Equity in (loss) of (22) -------------------------- Income from operations 18,521 21,698 -------------------------- 5 SHOWBOAT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (continued) 1996 1995 -------------------------- Income from operations $18,521 $21,698 -------------------------- Other (income) expense: (4,346) (2,890) 26,510 21,251 (7,235) (6,567) (2,558) 3,902 (84) -------------------------- 18,747 9,236 -------------------------- Income (loss) before income taxes (226) 12,462 Minority interest (income) (835) -------------------------- Income before income 609 12,462 -------------------------- Income tax expense 274 5,720 -------------------------- Net income $335 $6,742 ========================== Weighted average shares outstanding 16,213,182 15,522,432 Net income per common and equivalent share $0.02 $0.43 ========================== See accompanying notes to condensed consolidated financial statements. 6 SHOWBOAT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 1996 1995 ----------------------- Cash flows from operating activities: (In thousands) Net cash provided by operating activities $20,038 $28,606 -------------------------- Cash flows from investing activities: (39,424) (20,394) 307 130 (5,823) (35,965) (123) (435) - 51,366 (145,639) - other assets 165 (2,665) Development Authority obligation (1,964) (1,773) Other - 146 -------------------------- Net cash used in investing activities (192,501) (9,590) -------------------------- Cash flows from financing activities: $ $ 140,000 - 5,331 127 (6,105) (25) (788) (769) 77 1,509 - (142) -------------------------- Net cash provided (used) by financing activities 138,503 690 -------------------------- Net increase (decrease) in cash and (33,960) 19,706 Cash and cash equivalents at 106,927 90,429 Cash and cash equivalents at -------------------------- $72,967 $110,135 ========================== Supplemental disclosures of cash flow information Cash paid during the period for: Interest, net of amounts capitalized 13,669 13,704 Income taxes 2,524 6,876 Foreign currency translation adjustment 4,070 (5,957) See accompanying notes to condensed consolidated financial statements. 7 SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations The condensed consolidated financial statements include all domestic and foreign subsidiaries which are more than 50% owned and controlled. Investments in unconsolidated affiliates which are at least 20% owned are carried at cost plus equity in undistributed earnings or loss since acquisition. All material intercompany balances have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1995 Annual Report on Form 10-K. The accompanying unaudited condensed consolidated financial statements contain all adjustments which are only of a recurring nature, in the opinion of management, necessary for a fair statement of the results of the interim periods. The results of operations for the interim periods are not indicative of results of operations for an entire year. Certain prior period balances have been reclassified to conform to the current period's presentation. On March 28, 1996 the Company's 55% owned affiliates, Showboat Marina Casino Partnership(SMCP) and Showboat Marina Finance Corporation (SMFC), issued $140.0 million, 13 1/2% First Mortgage Notes due 2003, (the First Mortgage Notes). The net proceeds of the First Mortgage Notes plus cash contributions by the Company are classified as restricted cash and investments in the Company's Condensed Consolidated Balance Sheet. These funds are being used to develop a riverboat casino complex in East Chicago, Indiana to be operated on Lake Michigan. 8 SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 2LONG-TERM DEBT Long-term debt increased by approximately $140.0 million from December 31, 1995 to June 30, 1996. This increase is due to the issuance of $140.0 million, 13 1/2% First Mortgage Notes, by SMCP and SMFC. SMCP and SMFC are effectively owned 55% by the Company and therefore are consolidated for financial reporting purposes. The First Mortgage Notes are due 2003 and pay interest semiannually on March 15, and September 15, of each year commencing September 15, 1996. 3WRITE-DOWN OF INVESTMENT IN AFFILIATE In March 1995, the Company, with an unrelated corporation (the majority member), formed Showboat Mardi Gras, L.L.C. (SMG), to own and operate, subject to licensing, a riverboat casino near Kansas City, Missouri. The Company owns 35% of the equity of SMG. SMG was not selected by the Missouri Gaming Commission for investigation for a license. Due to a decline in the market value of the assets of SMG, principally a riverboat, the Company has recorded a pre-tax write-down of $3,902,000 which is included in the 1996 Condensed Consolidated Statement of Income as write-down of investment in affiliate. This write-down includes the Company's remaining investment in SMG. 9 Item Management's Discussion and Analysis of Financial Condition and Results of Operations GENERAL Showboat, Inc., and subsidiaries, collectively the Company or SBO, is an international gaming company with over 40 years of gaming experience that owns and operates the Atlantic City Showboat Casino and Hotel in Atlantic City, New Jersey, (Atlantic City Showboat), the Las Vegas Showboat, Hotel, Casino and Bowling Center in Las Vegas, Nevada (Las Vegas Showboat), owns an interest in, and manages through subsidiaries, the Sydney Harbour Casino located in Sydney, Australia and owns through subsidiaries a 55% interest in, and will manage, the East Chicago Showboat riverboat casino project in East Chicago, Indiana (East Chicago Showboat), which is under construction and scheduled to open in July 1997. Until March 31, 1995, the Company owned an equity interest in and managed a riverboat casino on Lake Pontchartrain in New Orleans, Louisiana (Star Casino). Information contained in this quarterly report is supplemental to disclosures in the Company's year end financial reports. This management's discussion and analysis of financial condition and results of operations should be read in conjunction with the management's discussion and analysis of financial condition and results of operations included in the Company's December 31, 1995 Annual Report on Form 10-K. As used in this management's discussion and analysis of financial condition and results of operations, amounts in Australian dollars are denoted as "A$". As of June 30, 1996, the exchange rate was approximately $0.7895 for each A$1.00. MATERIAL CHANGES IN RESULTS OF OPERATIONS Quarter Ended June 30, 1996 Compared to Quarter Ended June 30, 1995 Revenues Net revenues for the Company decreased $2.6 million or 2.4% in the second quarter 1996 compared to the same period in 1995. This decrease was principally due to the $3.4 million or 3.4% decline in casino revenues in the quarter ended June 30, 1996. Non casino revenues, which consist principally of food, beverage and room revenues were up $.7 million or 3.1% in the second quarter 1996. Due to the Company's agreement to forgive the first A$19.1 million of management fees due it from Sydney Harbour Casino, the Company has not yet received management fees from Sydney Harbour Casino. For the quarter ended June 30, 1996, approximately A$2.7 million of management fees were forgiven and approximately A$9.7 million in management fees still remain to be forgiven. 10 Revenues Quarter ended June 30, (Unaudited) (in thousands) 1996 1995 Variance Percent -------------------------------------------------- Casino revenues $ 95,8 $ 99,2 $ (3 -3.4% Non casino revenues 23, 22, 3.1% Less complimentaries 10, 10, -0.4% -------------------------------------------------- $ 109,22 $ 111,86 $ (2 -2.4% -------------------------------------------------- Table game revenues $ 19,2 $21,715 $ (2 -11.5% Slot revenues 65, 64,207 2.3% Other gaming revenues 768 -36.6% -------------------------------------------------- $ 85,3 $ 86,6 $ (1 -1.5% -------------------------------------------------- 17, 17,329 0.3% 9 9,024 0.5% -------------------------------------------------- $ 93,6 $ 94,9 $ (1 -1.4% -------------------------------------------------- Table game revenues $ 1, $1,244 $ -0.7% Slot revenues 9 10,654 ( -15.4% Other gaming revenues 662 -67.5% -------------------------------------------------- 10, 12, ( -16.7% -------------------------------------------------- 6 5,459 12.3% 1 1,150 -7.1% -------------------------------------------------- $ 15,5 $ 16,8 $ (1 -7.9% -------------------------------------------------- 11 Revenues The Atlantic City Showboat's net revenues declined $1.3 million or 1.4% in the second quarter 1996 compared to the second quarter of 1995. This decline was principally due to a $2.5 million or 11.5% decrease in table game revenues. The decline in table game revenues is attributable to a decline in drop and the lower hold percent experienced of 15.3% in the second quarter of 1996 compared to 16.2% in the same period in 1995. The decline in table game revenues was partially offset by the $1.5 million increase in slot revenues in the second quarter 1996. The increase in slot revenues is attributable to approximately 450 additional slot units, an industry growth rate of 4.6% and an increase in slot marketing in the second quarter 1996 compared to the second quarter 1995. The decline in other gaming revenues of $.3 million or 36.6% is principally due to the decline in keno revenues during the quarter ended June 30, 1996. The Las Vegas Showboat's net revenues declined $1.3 million or 7.9% in the second quarter 1996 compared to the second quarter of 1995. This decline was principally due to a decline in slot revenue of $1.6 million or 15.4%. Management believes the decline is partially due to the loss of slot customers due to the increased competition for the local market and customers lost during the renovation project from July to December 1995. The Company is continuing to focus its efforts on the establishment of viable marketing programs to reestablish the customer base lost during the construction period and to attract new customers. Other gaming revenues declined $.4 million or 67.5% in the second quarter 1996, principally due to the decrease in bingo revenues resulting from increased competition added by a local casino during the second quarter of 1996. Non casino revenues, consisting principally of room, food, beverage and bowling increased $.7 million or 12.3%. This was primarily due to increased food and beverage revenues which coincided with new marketing programs implemented to attract patrons. Income From Operations The Company's income from operations declined $4.2 million or 29.4% in the quarter ended June 30, 1996 compared to the same period in the prior year. The decrease was due principally to a decline in income from operations at both the Atlantic City Showboat and Las Vegas Showboat. These declines were partially offset by lower operating costs for the Company's corporate and development functions. 12 Income From Operations Quarter ended June 30, (Unaudited) (in thousands) 1996 1995 Variance Percent -------------------------------------------------- Atlantic City $ 16,7 $ 19,1 $ (2 -12.6% Las Vegas (2 355 ( -794.9% Corporate and development (4 (5,213) -20.9% Other 11 -436.4% -------------------------------------------------- Consolidated $ 10,0 $14,274 $ (4 -29.4% -------------------------------------------------- Atlantic City $ 23,3 $ 26,1 $ (2 -10.6% Las Vegas 1,398 ( -163.7% Corporate and development (4 (5,154) -21.5% Other 11 -436.4% -------------------------------------------------- Consolidated $ 18,3 $22,381 $ (3 -17.8% -------------------------------------------------- *EBITDA is defined as income from operations before depreciation and amortization. EBITDA should not be construed as a substitute for income from operations, net earnings (loss) and cash flows from operating activities determined in accordance with Generally Accepted Accounting Principles ("GAAP"). The Company has included EBITDA because it believes it is commonly used by certain investors and analysts to analyze and compare gaming companies on the basis of operating performance, leverage and liquidity and to determine a company's ability to service debt. The Atlantic City Showboat's income from operations, before management fees, decrease of $2.4 million or 12.6% is attributable to the decline in table game revenues and increased marketing expenditures during the quarter ended June 30, 1996 as compared to the quarter ended June 30, 1995. Operating expenses increased $1.1 million or 1.4% to $77.0 million for the June 30, 1996 quarter up from $75.9 million for the same period in the prior year. The increase in operating expenses is primarily attributed to increased marketing costs of $2.0 million in response to aggressive competition for slot patrons in the Atlantic City market during the second quarter of 1996. 13 Income From Operations The $2.8 million decline in income from operations at the Las Vegas Showboat before management fees and inter-company rent, was due principally to the decline in slot revenues and other gaming revenues during the second quarter 1996. Operating expenses increased $.9 million during the second quarter 1996 to $16.4 million compared to $15.5 million for the same period in 1995. The increased operating expense is due primarily to increases in advertising and marketing promotions for the casino, and an increase in depreciation due to the completion of the construction project. The $1.1 million decline in operating expenses for corporate and development is attributed to a reduction in the scope of development activities in the second quarter of 1996 compared to 1995. The Company capitalized $.4 million of costs related to the Company's St. Louis project in the second quarter of 1996 compared to $2.1 million capitalized for the Company's East Chicago and Randolph riverboat projects in the same quarter of 1995. The decrease in other income from operations for the quarter ended June 30, 1996 compared to the same period in 1995 is attributed to administrative expenses incurred for the Company's wholly owned subsidiary in Australia. The Company realized no earnings during the quarter ended June 30, 1996, from its investment in the Sydney Harbour Caisno as a result of the write-off of preopening costs related to the interim casino. Approximately A$11.5 million of preopening costs were written-off in the three months ended June 30, 1996 and all preopening costs have been written-off as of June 30, 1996. 14 Net income In the quarter ended June 30, 1996 the Company recorded net income of $1.1 million or $.07 per share compared to net income of $5.0 million or $.32 per share for the quarter ended June 30, 1995. The second quarter 1996 results reflect net interest expense for the East Chicago, Indiana project of $.6 million or $.03 per share and a reduction of interest income of $.4 million or $.02 per share due to the investment of corporate cash in the East Chicago subsidiary. Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995 Revenues Net revenues for the Company increased $1.3 million or .6% in the first six months of 1996 compared to the same period in 1995. This increase was principally due to the $1.4 million or 3.1% increase in non casino revenues, which consist principally of food, beverage and room revenues, in the six months ended June 30, 1996 compared to the same period in 1995. The $.2 million decline in management fees in the first six months of 1996 is attributed to the sale of the Star Casino in March, 1995 which paid management fees to the Company. Due to the Company's agreement to forgive the first A$19.1 million of management fees due it from Sydney Harbour Casino, the Company has not yet received management fees from the Sydney Harbour Casino. For the six months ended June 30, 1996, approximately A$5.4 million of management fees were forgiven and approximately A$9.7 million in management fees still remain to be forgiven. 15 Revenues Six months ended June 30, (Unaudited) (in thousands) 1996 1995 Variance Percent -------------------------------------------------- Casino revenues $ 185,84 $186,097 $ -0.1% Non casino revenues 44, 42,999 3.1% Management fees 190 -100.0% Less complimentaries 18, 18,743 -1.9% -------------------------------------------------- $ 211,81 $210,543 $ 1 0.6% -------------------------------------------------- $ 37,5 $40,378 $ (2 -7.1% 125,0 118,723 5.3% 1 1,517 -33.9% -------------------------------------------------- 163,5 160,618 1.8% -------------------------------------------------- 31, 31,644 0.8% 16, 16,355 -1.2% -------------------------------------------------- $ 179,28 $175,907 $ 3 1.9% -------------------------------------------------- $ 2, $2,651 $ 1.0% 18, 21,433 ( -13.6% 1 1,395 -19.6% -------------------------------------------------- 22, 25,479 ( -12.4% -------------------------------------------------- 12, 11,355 9.6% 2 2,388 -6.7% -------------------------------------------------- $ 32,5 $34,446 $ (1 -5.6% -------------------------------------------------- 16 Revenues The Atlantic City Showboat's net revenues were up $3.4 million or 1.9%, principally due to a $6.3 million or 5.3% increase in slot revenue in the six months ended June 30, 1996 over the same period in 1995. The increase in slot revenues is attributable to the addition of approximately 370 slot units and an increase in slot marketing in the first half 1996. The Atlantic City industry's slot revenue increased 3.7% by comparison and there was a 7.8% increase in slot units in the first half of 1996 compared to 1995. The increase in slot revenues was partially offset by a $2.9 million or 7.1% decline in table game revenues. This decline is attributable to a decline in the Company's table game market share in Atlantic City during the six months ended June 30, 1996. The decline in other gaming revenues of $.5 million or 33.9% is principally due to the decline in keno revenues during the six months ended June 30, 1996. The Las Vegas Showboat's net revenues declined $1.9 million or 5.6% in the first six months of 1996 compared to the first half of 1995. This decline was principally due to a decline in slot revenues of $2.9 million or 13.6%. Management believes the decline is partially due to the loss of slot customers due to the increased competition for the local market and customers lost during the renovation project from July to December 1995. The Company is continuing to focus its efforts on the establishment of viable marketing programs to reestablish the customer base lost during the construction period and to attract new customers. The decline in other gaming revenues of $.3 million or 19.6% in the first half of 1996 compared to 1995 is principally due to the decrease in bingo revenue during the second quarter of 1996 resulting from new competition for that market segment. Income From Operations The Company's income from operations decreased $3.2 million or 14.6% in the six months ended June 30, 1996 compared to the same period in the prior year. The decrease was due principally to a decline in income from operations at both the Atlantic City Showboat and Las Vegas Showboat. These declines were partially offset by lower operating costs for the Company's corporate and development functions. 17 Income From Operations Six Months ended June 30, (Unaudited) (in thousands) 1996 1995 Variance Percent -------------------------------------------------- Atlantic City $ 30,1 $ 31,5 $ (1 -4.6% Las Vegas (3 ( -1199.7% Corporate and development (8 (9 -17.3% Other -69.7% -------------------------------------------------- Consolidated $ 18,5 $ 21,6 $ (3 -14.6% -------------------------------------------------- Atlantic City $ 43,4 $ 45,6 $ (2 -4.8% Las Vegas 2 ( -118.9% Corporate and development (8 (9 -18.1% Other (71) (233) -69.5% -------------------------------------------------- Consolidated $ 34,8 $ 37,9 $ (3 -8.2% -------------------------------------------------- *EBITDA is defined as income from operations before depreciation and amortization. EBITDA should not be construed as a substitute for income from operations, net earnings (loss) and cash flows from operating activities determined in accordance with Generally Accepted Accounting Principles ("GAAP"). The Company has included EBITDA because it believes it is commonly used by certain investors and analysts to analyze and compare gaming companies on the basis of operating performance, leverage and liquidity and to determine a company's ability to service debt. The Atlantic City Showboat's income from operations, before management fees, decreased $1.4 million or 4.6% in the first half of 1996 compared to 1995. This decrease is attributed to the increased operating expenses of $4.8 million or 3.3% to $149.1 million for the first half of 1996 up from $144.3 million for the same period in the prior year. This was partially offset by the $3.4 million increase in net revenue during the first half of 1996. The increase in operating expenses is attributable to increased marketing expenses for slot patrons of $4.3 million in response to aggressive competition for slot patrons in the Atlantic City market during the first half of 1996. 18 Income From Operations The $3.6 million decline in income from operations at the Las Vegas Showboat, before management fees and inter-company rent, was due principally to the decline in slot revenues and other gaming revenues during the six months ended June 30, 1996 compared to the same period in 1995. Operating expenses increased $1.7 million during the second half of 1996 to $35.8 million compared to $34.1 million for the same period in 1995. The increased operating expense is due primarily to increases in advertising and marketing promotions for the casino and an increase in depreciation expense due to the completion of the construction project. The $1.7 million decline in operating expenses for corporate and development is attributed to a reduction in the scope of development activities for the six months ended June 30, 1996 compared to 1995. The Company capitalized $1.1 million of costs related to the Company's St. Louis project in the first half of 1996 compared to $3.4 million capitalized for the Company's East Chicago and Randolph riverboat projects in the same period in 1995. The increase in other income from operations for the six months ended June 30, 1996 compared to the same period in 1995 is attributed to the elimination of expenses for the Star Casino when it was sold in March of 1995. The Company realized no earnings during the six months ended June 30, 1996, from its investment in the Sydney Harbour Casino as a result of the write-off of preopening costs. Approximately A$20.7 million of preopening costs were written-off in the six months ended June 30, 1996 and all propening costs have been written-off as of June 30, 1996. Net income In the six months ended June 30, 1996 the Company recorded net income of $.3 million or $.02 per share compared to net income of $6.7 million or $.43 per share for the six months ended June 30, 1995. Unusual items totaling $4.3 million are contributing factors to the decline in net income for the six months ended June 30, 1996 compared to June 30, 1995. The 1996 results reflect an after tax loss of $2.0 million or $.12 per share for the write down of the Company's investment in Showboat Mardi Gras, L.L.C. (SMG). SMG was formed to develop a riverboat casino operation in Randolph, Missouri. The 1996 results also reflect net interest expense for the East Chicago, Indiana project of $.6 million or $.03 per share and a reduction of interest income of $.4 million or $.02 per share due to the investment of corporate cash in the East Chicago Subsidiary. In comparison, the first six months of 1995 net income results included an after tax gain of $1.4 million or $.09 per share on the sale of the Star Casino. 19 MATERIAL CHANGES IN FINANCIAL CONDITION As of June 30, 1996 the Company held cash and cash equivalents of $74.4 million compared to $106.9 million at December 31, 1995. This decline is due principally to the funding of the East Chicago project. On March 28, 1996 the Company's 55% owned subsidiaries, Showboat Marina Casino Partnership (SMCP) and Showboat Marina Finance Corporation (SMFC), sold $140.0 million, 13 1/2% First Mortgage Notes due 2003 (the "First Mortgage Notes"). The funds were raised to support the development of the $195.0 million East Chicago Showboat riverboat casino project in East Chicago, Indiana (the "East Chicago Showboat"). Interest expense incurred on the First Mortgage Notes will be capitalized to the extent permitted under generally accepted accounting principles and as a result the Company anticipates that a portion of this expense will impact results in reporting periods preceding the opening of the East Chicago Showboat project, currently anticipated for July, 1997. As a result, for the period ended December 31, 1996, the Company anticipates that net interest expense of approximately $2.0 million to $3.0 million will be recorded. The First Mortgage Notes are senior secured obligations of SMCP and rank senior in right of payment to all existing and future subordinated indebtedness of SMCP and pari passu with SMCP's senior indebtedness. Terms not otherwise defined herein have the meanings assigned to them in the First Mortgage Note Indenture. The First Mortgage Notes are secured by a first lien on substantially all of SMCP's assets. The First Mortgage Note Indenture places significant restrictions on SMCP for the incurrence of additional Indebtedness, the creation of additional Liens on the Collateral securing the First Mortgage Notes, transactions with Affiliates and making Restricted Payments unless certain conditions are met. Restricted Payments include paying a management fee to the Manager of the East Chicago Showboat, an entity which is 55% owned by the Company, unless among other things, SMCP's Fixed Charge Coverage Ratio for the most recently ended four full fiscal quarters, after giving effect to such Restricted Payment must be greater than 1.5 to 1.0. To make any other Restricted Payment SMCP must meet, among other things, a Fixed Charge Coverage Ratio for the most recently ended four full fiscal quarters, after giving effect to such Restricted Payment, must be greater than 2.0 to 1.0. 20 In addition, subject to certain qualifications and exceptions, the Company entered into a standby equity commitment with SMCP, pursuant to which it will cause to be made up to an aggregate of $30.0 million in additional capital contributions to SMCP if, during the first three full four fiscal quarters following the commencement of operations at the East Chicago Showboat, the project's combined cash flow (defined) is less than $35.0 million for any one such full four quarter period. However, in no event will the Company be required to cause to be contributed to SMCP more than $15.0 million in respect of any such full four quarter period. In addition, subject to certain qualifications and exceptions, the Company entered into a completion guarantee with SMCP to complete the East Chicago project so that it becomes operational, including the payment of all costs owing prior to such completion, up to a maximum aggregate amount of $30.0 million. The Company's obligation to complete the East Chicago project will be suspended during the pendency of any force majeure event or other event outside the control of the Company. Currently, the Company believes that SMCP has sufficient resources to complete the East Chicago Showboat. However, no assurance can be given that SMCP will be able to complete the East Chicago Showboat from its available financing resources. During the six months ended June 30, 1996 the Company expended approximately $39.4 million on capital improvements at its Las Vegas and Atlantic City facilities (which were funded from operations) and construction costs at the East Chicago Showboat(which were principally funded from the proceeds of the First Mortgage Notes). Approximately $22.1 million of the $39.4 million related to the East Chicago Showboat. On April 1, 1996, an affiliate of the Company, Sydney Harbour Casino Holdings Limited, ("SHCH") through its wholly owned subsidiary, Sydney Harbour Casino Properties Pty Limited, ("SHCP") renegotiated its agreement with Leighton Properties Pty Limited ("Leighton Properties") for the design and construction of the interim and permanent Sydney Harbour Casino. The renegotiated project cost is approximately A$867.2 million, a A$176.1 million increase over the April 1994 projected project cost of A$691.1 million, and includes the administration and management of the project, an accelerated completion date of December 1997, the firming up of monetary allowances and resolution of certain claims by Leighton Properties to SHCP. The design element changes incorporated in the renegotiated contract for the permanent casino were made with a view toward improving its operational efficiency and product quality and to match the changing competitive environment. The increased project cost is being funded in part by the sale of 35,250,000 preferred ordinary shares of stock by SHCH on May 13, 1996, providing net proceeds 21 of approximately A$64.0 million. Additional financing of A$150.0 million has been negotiated with local banks and is subject to finalizing the bank documents and obtaining required approvals. As with any construction contract, the final amount of such contract will be subject to modification based upon change orders and the occurrence of events such as costs associated with certain types of construction delays. No assurance can be given that the construction costs for the Sydney Harbour will not exceed the announced project cost estimate. The sale of the additional equity by SHCH reduced the Company's equity in the project to 24.6% from 26.3%. The Company through its subsidiary, Showboat Lemay, Inc. ("Showboat Lemay"), has an 80% general partner interest in Southboat Limited Partnership ("SLP") which, subject to licensing, plans to build and operate a riverboat casino project and related facilities (the "Southboat Casino Project") on the Mississippi River near Lemay, Missouri. Pursuant to the limited partnership agreement, Showboat Lemay is responsible for borrowing up to $75.0 million (the "Development Financing') on behalf of SLP. The Company has committed to use its best efforts to obtain a commitment letter for the Development Financing within 60 days after SLP is selected for investigation for a gaming license by the Missouri Gaming Commission or obtain the Development Financing within a commercially reasonable time following such selection. The Company's commitment replaced a previous commitment letter from an unrelated party. No assurance can be given that SLP will be successful in obtaining the necessary funds to finance its gaming project or that SLP will successfully obtain a casino license. The Company continues to examine, and if appropriate, may pursue potential gaming opportunities in jurisdictions where gaming is legalized and in other jurisdictions that, in the future, may legalize private for profit casino gaming. There can be no assurance that legislation will be enacted in any additional jurisdictions, that any properties in which the Company may have invested will be compatible with any gaming legislation so enacted, that legalized gaming will continue to be authorized in any jurisdictions or the Company will be able to obtain the required licenses in any jurisdiction. Further, no assurance can be given that any of the announced or unannounced projects under development will be completed, licensed or result in any significant contribution to the Company's cash flow or earnings. Casino gaming operations are highly regulated and new casino developments are subject to a number of risks and uncertainties, many of which are beyond the Company's control. 22 The Company believes that it has sufficient capital resources, including its existing cash balances, cash provided by operations and existing borrowing capacity, to cover the cash requirements of its existing operations. The ability of the Company to satisfy its cash requirements, will be dependent upon the future performance of its casino hotels which will continue to be influenced by prevailing economic conditions and financial, business and other factors, certain of which are beyond the control of the Company. As the Company realizes expansion opportunities, the Company will need to make significant capital investments in such opportunities and additional financing will be required. The Company anticipates that additional funds will be obtained through loans or public offerings of equity or debt securities. Although no assurance can be made that such funds will be available or at interest rates acceptable to the Company. All statements contained herein that are not historical facts, including but not limited to, statements regarding the Company's current business strategy, the Company's prospective joint ventures, expansions of existing projects, and the Company's plans for future development and operations, are based upon current expectations. These statements are forward-looking in nature and involve a number of risks and uncertainties. Actual results may differ materially. Among the factors that could cause actual results to differ materially are the following: the availability of sufficient capital to finance the Company's business plan on terms satisfactory to the Company; competitive factors, such as legalization of gaming in jurisdictions from which the Company draws significant numbers of patrons and an increase in the number of casinos serving the markets in which the Company's casinos are located; changes in labor, equipment and capital costs; the ability of the Company to consummate its contemplated joint ventures on terms satisfactory to the Company and to obtain necessary regulatory approvals therefore; changes in regulations affecting the gaming industry; the ability of the Company to comply with its Indentures for its 9 1/4% First Mortgage Bonds and 13% Senior Subordinated Indebtedness; future acquisitions or strategic partnerships; general business and economic conditions; and other factors described from time to time in the Company's reports filed with the Securities and Exchange Commission. The Company wishes to caution the readers not to place undue reliance on any such forward-looking statements, which statements are made pursuant to the Private Litigation Reform Act of 1995 and, as such, speak only as of the date made. 23 SHOWBOAT, INC. AND SUBSIDIARIES PART II, OTHER INFORMATION Item Legal Proceedings. 24 SHOWBOAT, INC. AND SUBSIDIARIES PART II, OTHER INFORMATION (continued) "Hyland, et al. v. Griffin Investigations, et al.", Case No. 95-CV-2236 (JEI), instituted on May 5, 1995, in the United States District Court for the District of New Jersey (Camden Division). The Company was served with a First Amended Complaint on August 29, 1995. Seventy-six casino operators, including the Company, and others were originally named as defendants in the action. The action, brought on behalf of "card counters," alleges that the casino operators exclude card counters from play and share information about card counters. The action is based on alleged violations of federal antitrust law, the Fair Credit Reporting Act, and various state consumer protection laws. On May 30, 1996, the Court granted defendants' motions to dismiss the plaintiffs' complaint in its entirety. "ITSI TV Productions, Inc. v. Bally's Grand, Inc.", et al., Case No. CV-N-90-314-HDM, instituted on June 29, 1990 in the United States Court, District of Nevada (the "Nevada action"). The plaintiff claims that numerous hotel-casinos, including the Company, infringed on the plaintiff's copyright by displaying to sports book customers certain horse race broadcasts. The plaintiff seeks to recover damages for copyright infringement in an unknown amount. The same factual issues were raised in an action filed in the United States District Court for the Eastern District of California (the "California action') in which the Company was not a party. The United States District Court for the District of Nevada stayed and administratively stayed the Nevada action pending resolution of the liability issues in the California action. The California action was tried in 1993 and therein the Court found that although the plaintiff owned the copyright, there was no infringement. The plaintiff appealed the decision of the trial court in the California action and the Ninth Circuit Court of Appeals recently affirmed that decision. No action has been taken with respect to the administrative stay imposed by the Nevada District Court in the Nevada action. Management believes that the plaintiff is not entitled to damages and intends to defend vigorously the allegations. 25 SHOWBOAT, INC. AND SUBSIDIARIES PART II, OTHER INFORMATION (continued) Item Changes in Securities Not Applicable Item Defaults Upon Senior Securities. Not Applicable 26 SHOWBOAT, INC. AND SUBSIDIARIES PART II, OTHER INFORMATION (continued) Item Submission of Matters to a Vote of Security Holders (a) The Company's annual meeting of shareholders was held on May 30, 1996. (b) Directors elected at the annual meeting for a term expiring in 1999 are as follows: George A. Zettler and Carolyn M. Sparks. The Directors continuing in office after the annual meeting are as follows: J.K. Houssels (term expires in 1998); William C. Richardson (term expires in 1998); John D. Gaughan (term expires in 1997); Jeanne S. Stewart (term expires in 1998); Frank A. Modica (term expires in 1997); H. Gregory Nasky (term expires in 1997); and J. Kell Houssels, III (term expires in 1997). (c) Votes for the election of directors: Nominees For Withheld Abstain --------------- ------------ ----------- --------- George A. Zettler 10,520,078 1,878,513 0 Carolyn M. Sparks 10,513,193 1,885,398 0 Votes for approval of amendments to the 1889 Directors' Stock Option Plan: For Against Abstain ------------ ---------- 9,855,805 2,500,712 42,074 Votes for ratification and selection of auditors for the year ended December 31, 1996: Broker For Against Abstain Non-Votes ----------- ------- --------- ---------- KPMG Peat Marwick 12,066,792 5,671 14,152 311,976 Item Other Information Not applicable 27 SHOWBOAT, INC. AND SUBSIDIARIES PART II, OTHER INFORMATION (continued) Item Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description ---------- ---------------------------------- 4.01 Indenture dated as of March 28, 1996, among Showboat Marina Casino Partnership, Showboat Marina Fiance Corporation, Donaldson, Lufkin & Jenrette Securities Corporation, Nomura Securities International, Inc., Bear, Stearns & Co., Inc. and American Bank National Association, as trustee, relating to the 13 1/2 Series A and Series B First Mortgage Notes due 2003. 10.01 Escrow and Disbursement Agreement dated March 28, 1996, by and among Showboat Marina Casino Partnership, Showboat Marina Finace Corporation and Showboat, Inc.(as escrow agent and disbursement agent) and American Bank National Association, as trustee. (b) Reports on Form 8-K None 28 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Showboat, Inc. Registrant DateAugust 14, 1996 s/ J. Kell Houssels, III --------------------- -------------------------------------- J. KELL HOUSSELS, III, President and Chief Executive Officer DateAugust 14, 1996 s/ R. Craig Bird --------------------- -------------------------------------- R. CRAIG BIRD, Executive Vice President - Finance and Administration and Chief Financial Officer 29 EXHIBIT INDEX Exhibit No. Description ------------ ---------------------------------- 4.01 Indenture dated as of March 29,1 996, among Showboat Marina Casino Partnership, Showboat Marina Fiance Corporation, Donaldson, Lufkin & Jenrette Securities Corporation, Nomura Securities International, Inc., Bear, Stearns & Co., Inc. and American Bank National Association, as trustee, relating to the 13 1/2 Series A and Series B First Mortgage Notes due 2003. 10.01 Escrow and Disbursement Agreement dated March 28, 1996, by amd among Showboat Marina Casino Partnership, Showboat Marina Finance Corporation and Showboat, Inc. (as escrow agent and disbursement agent) and American Bank National Association, as trustee. 27.1 Financial Data Schedules 30 EX-4.01 2 EXHIBIT 4.01 EXECUTION COPY SHOWBOAT MARINA CASINO PARTNERSHIP SHOWBOAT MARINA FINANCE CORPORATION ISSUERS $140,000,000 SERIES A AND SERIES B 13 1/2% FIRST MORTGAGE NOTES DUE 2003 ___________________ INDENTURE Dated as of March 28, 1996 ___________________ AMERICAN BANK NATIONAL ASSOCIATION TRUSTEE TABLE OF CONTENTS PAGE ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions 1 Section 1.02. Other Definitions 17 Section 1.03. Incorporation by Reference of Trust Indenture Act 17 Section 1.04. Rules of Construction 18 ARTICLE 2 THE FIRST MORTGAGE NOTES Section 2.01. Form and Dating 19 Section 2.02. Execution and Authentication 19 Section 2.03. Registrar and Paying Agent 20 Section 2.04. Paying Agent to Hold Money in Trust 21 Section 2.05. Holder Lists 21 Section 2.06. Transfer and Exchange 21 Section 2.07. Replacement First Mortgage Notes 27 Section 2.08. Outstanding First Mortgage Notes 27 Section 2.09. Treasury First Mortgage Notes 27 Section 2.10. Temporary First Mortgage Notes 28 Section 2.11. Cancellation 28 Section 2.12. Defaulted Interest 28 Section 2.13. Record Date 29 ARTICLE 3 OFFERS TO PURCHASE OR REDEMPTION Section 3.01. Notices to Trustee 29 Section 3.02. Selection of First Mortgage Notes to Be Purchased or Redeemed 29 Section 3.03. Notice of Redemption 30 Section 3.04. Effect of Notice of Redemption 31 Section 3.05. Deposit of Purchase or Redemption Price 31 Section 3.06. First Mortgage Notes Purchased or Redeemed in Part 32 Section 3.07. Optional Redemption 32 Section 3.08. Redemption Pursuant to Gaming Law 32 Section 3.09. Mandatory Redemption 33 Section 3.10. Repurchase Offers 33 ARTICLE 4 COVENANTS Section 4.01. Payment of First Mortgage Notes 35 Section 4.02. Maintenance of Office or Agency 35 Section 4.03. Reports 35 Section 4.04. Compliance Certificate 36 Section 4.05. Taxes 37 Section 4.06. Stay, Extension and Usury Laws 37 Section 4.07. Restricted Payments 37 i PAGE Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries 40 Section 4.09. Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock 41 Section 4.10. Asset Sales 42 Section 4.11. Event of Loss 43 Section 4.12. Transactions with Affiliates 44 Section 4.13. Liens 45 Section 4.14. Line of Business 45 Section 4.15. Corporate or Partnership Existence 45 Section 4.16. Change of Control 46 Section 4.17. Designation of Unrestricted Subsidiary 46 Section 4.18. Maintenance of Insurance 47 Section 4.19. Limitation on Status as Investment Company 48 Section 4.20. Collateral Documents 48 Section 4.21. Further Assurances 48 Section 4.22. Restrictions on Leasing and Dedication of Property 48 Section 4.23. Note Guarantees 50 Section 4.24. Excess Cash Flow Offers 50 Section 4.25. Use of Proceeds 50 Section 4.26. Disbursement and Escrow Agreement 50 Section 4.27. Gaming Licenses 50 Section 4.28. Construction 51 Section 4.29. Filing of First Preferred Ship Mortgage 51 Section 4.30. Payment and Performance Bond 51 Section 4.31. Transfer of Certificate of Suitability 51 ARTICLE 5 SUCCESSORS Section 5.01. Merger, Consolidation or Sale of Assets 52 Section 5.02. Successor Corporation Substituted 52 ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01. Events of Default and Remedies 53 Section 6.02. Acceleration 54 Section 6.03. Other Remedies 55 Section 6.04. Waiver of Past Defaults 56 Section 6.05. Control by Majority 56 Section 6.06. Limitation on Suits 56 Section 6.07. Rights of Holders of First Mortgage Notes to Receive Payment 57 Section 6.08. Collection Suit by Trustee 57 Section 6.09. Trustee May File Proofs of Claim 57 Section 6.10. Priorities 57 Section 6.11. Undertaking for Costs 58 Section 6.12. Management of Casinos 58 ARTICLE 7 TRUSTEE Section 7.01. Duties of Trustee 58 Section 7.02. Rights of Trustee 59 ii PAGE Section 7.03. Individual Rights of Trustee 60 Section 7.04. Trustee's Disclaimer 60 Section 7.05. Notice of Defaults 60 Section 7.06. Reports by Trustee to Holders of the First Mortgage Notes 61 Section 7.07. Compensation and Indemnity 61 Section 7.08. Replacement of Trustee 62 Section 7.09. Successor Trustee by Merger, etc. 63 Section 7.10. Eligibility; Disqualification 63 Section 7.11. Preferential Collection of Claims Against Company 64 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Legal Defeasance or Covenant Defeasance 64 Section 8.02. Legal Defeasance and Discharge 64 Section 8.03. Covenant Defeasance 65 Section 8.04. Conditions to Legal or Covenant Defeasance 65 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions 66 Section 8.06. Repayment to Company 67 Section 8.07. Reinstatement 67 Section 8.08. First Mortgage Note Collateral 67 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of First Mortgage Notes 68 Section 9.02. With Consent of Holders of First Mortgage Notes 68 Section 9.03. Compliance with Trust Indenture Act 70 Section 9.04. Revocation and Effect of Consents 70 Section 9.05. Notation on or Exchange of First Mortgage Notes 70 Section 9.06. Trustee to Sign Amendments, etc. 70 ARTICLE 10 COLLATERAL AND SECURITY Section 10.01. Security 71 Section 10.02. Recording and Opinions 72 Section 10.03. Release of Collateral 73 Section 10.04. Protection of the Trust Estate 74 Section 10.05. Certificates of the Company 74 Section 10.06. Certificates of the Trustee 74 Section 10.07. Authorization of Actions to Be Taken by the Trustee Under the Collateral Documents 75 Section 10.08. Priority of Application of Cash Proceeds by Trustee 75 Section 10.09. Termination of Security Interest 76 Section 10.10. Cooperation of Trustee 76 Section 10.11. Collateral Agent 76 ARTICLE 11 NOTE GUARANTEES Section 11.01. Note Guarantee 76 iii PAGE Section 11.02. Additional Note Guarantees 78 Section 11.03. Limitation of Guarantors' Liability 78 Section 11.04. Guarantors May Consolidate, etc., on Certain Terms 78 Section 11.05. Releases of Note Guarantees 79 Section 11.06. "Trustee" to Include Paying Agent 79 ARTICLE 12 MISCELLANEOUS Section 12.01. Trust Indenture Act Controls 80 Section 12.02. Notices 80 Section 12.03. Communication by Holders of First Mortgage Notes with Other Holders of First Mortgage Notes 81 Section 12.04. Certificate and Opinion as to Conditions Precedent 81 Section 12.05. Statements Required in Certificate or Opinion 81 Section 12.06. Rules by Trustee and Agents 82 Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders and Partners 82 Section 12.08. Governing Law 82 Section 12.09. No Adverse Interpretation of Other Agreements 82 Section 12.10. Successors 82 Section 12.11. Severability 83 Section 12.12. Counterpart Originals 83 Section 12.13. Table of Contents, Headings, etc. 83 EXHIBITS Exhibit A. Form of First Mortgage Note Exhibit B. Form of Certificate to Be Delivered Upon Exchange or Registration of Transfer of First Mortgage Notes Exhibit C. Form of Intercreditor Agreement Exhibit D. Form of First Preferred Ship Mortgage iv CROSS-REFERENCE TABLE* TRUST INDENTURE ACT SECTION INDENTURE SECTIONS 310 (a)(1) 7.10 (a)(2) 7.10 (a)(3) N.A. (a)(4) N.A. (a)(5) 7.10 (b) 7.10 (c) N.A. 311 (a) 7.11 (b) 7.11 (c) N.A. 312 (a) 2.05 (b) 12.03 (c) 12.03 313 (a) 7.06 (b)(1) 10.03 (b)(2) 7.07 (c) 7.06;12.02 (d) 7.06 314 (a) 12.05 (b) N.A. (c)(1) N.A. (c)(2) N.A. (c)(3) N.A. (d) 10.02;10.03;10.05;10.06 (e) 10.02;12.05 (f) N.A. 315 (a) N.A. (b) N.A. (c) N.A. (d) N.A. (e) N.A. 316 (a)(last sentence) N.A. (a)(1)(A) N.A. (a)(1)(B) N.A. (a)(2) N.A. (b) N.A. (c) 2.13 317 (a)(1) N.A. (a)(2) N.A. (b) N.A. 318 (a) N.A. (b) N.A. (c) 12.01 N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. v vi INDENTURE (this "Indenture"), dated as of March 28, 1996, by and among Showboat Marina Casino Partnership, an Indiana general partnership ("SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY") and American Bank National Association, a national banking association, as trustee (the "TRUSTEE"). The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the holders (the "Holders") of the Company's 13 1/2% Series A First Mortgage Notes due 2003 (the "SERIES A FIRST MORTGAGE NOTES") and the Company's 13 1/2% Series B First Mortgage Notes due 2003 (the "SERIES B FIRST MORTGAGE NOTES" and, together with the Series A First Mortgage Notes, the "FIRST MORTGAGE NOTES"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "ACCRUAL PERIOD" shall have the meaning specified in paragraph 1 of the First Mortgage Notes. "ACQUIRED INDEBTEDNESS" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person merged with or into or became a Restricted Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Restricted Subsidiary of such specified Person and (ii) Indebtedness encumbering any asset acquired by such specified Person. "ADDITIONAL PROJECT FINANCING" shall have the meaning specified in the Escrow and Disbursement Agreement. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling, 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 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; PROVIDED, HOWEVER, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "AGENT" means any Registrar, Paying Agent or co-registrar. "ASSET SALE" means (i) the sale, conveyance, transfer or other disposition (whether in a single transaction or a series of related transactions) of property or assets (including by way of a sale and leaseback) of the Company or any Restricted Subsidiary (each referred to in this definition as a "disposition") or (ii) the issuance or sale of Equity Interests of any Restricted Subsidiary (whether in a single transaction or a series of related transactions), in each case, other than (a) a disposition of inventory in the ordinary course of business, (b) the disposition of all or substantially all of the assets of the Company in a manner permitted pursuant to Section 5.01 hereof or any disposition that constitutes a Change of Control pursuant to this Indenture, (c) any disposition that is a Restricted Payment or that is a dividend or distribution permitted under Section 4.07 hereof or any Investment that is not prohibited thereunder or any disposition of cash or Cash Equivalents to an Unrestricted Subsidiary, (d) any single disposition, or related series of dispositions, of assets with an aggregate fair market value of less than $500,000, (f) any Event of Loss and (g) any Lease Transaction. "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "BOARD OF DIRECTORS" means the board of directors of Showboat Indiana so long as Showboat Indiana is the controlling entity of the managing general partner of Showboat Partnership, and thereafter means the board of directors of the entity controlling the managing general partner of Showboat Partnership. "CAPITAL CONTRIBUTION" means $39.0 million in cash contributed to Showboat Partnership by the Parent Partnership and SMIP in connection with the purchase by the Parent Partnership and SMIP of Capital Stock of the Company. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on the balance sheet in accordance with GAAP. "CAPITAL STOCK" means, with respect to any Person, (i) any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock of such Person, or (ii) if such Person is a partnership, partnership interests (whether general or limited) and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership (excluding any contingent interest on Indebtedness). "CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any commercial bank having capital and surplus in excess of $300.0 million, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper rated A-1 or the equivalent thereof by Moody's Investors Service, Inc. or Standard & Poor's Corporation, in each case maturing within one year after the date of acquisition and (vi) investment funds investing solely in securities of the types described in clauses (ii)-(v) above. "CASINO" means the riverboat casino to be located in East Chicago, Indiana on Lake Michigan. "CASINO VESSEL CONSTRUCTION CONTRACT" means that certain Casino Vessel Construction Contract entered into as of March 8, 1996, between Showboat Partnership and Atlantic Marine, Inc., and any amendments, modifications or supplements thereto. "CERTIFICATE OF SUITABILITY" means the certificate of suitability issued to the Parent Partnership by the Indiana Commission on January 8, 1996, as in effect on the date of the Indenture, as replaced by the certificate of suitability issued to Showboat Partnership. 2 "CHANGE OF CONTROL" means the occurrence of any of the following: (i) the sale, lease or transfer, in one or a series of transactions, of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, or the sale, lease or transfer of the Casino (except, in either case, in connection with an Event of Loss); (ii) the consummation of any transaction or series of transactions the result of which is that the Permitted Holder and its Related Parties beneficially owns less than 50% of the general partnership interests of the Parent Partnership or the manager or less than 50% of the total Equity Interests of Showboat Partnership; (iii) the consummation of any transaction or series of transactions the result of which is that the Parent Partnership owns less than 99% of the total Equity Interests of the Company; (iv) the Company ceases to own, directly or through Wholly Owned Restricted Subsidiaries, either (1) 100% of the Capital Stock of each entity that operates or holds a Gaming License or (2) all or substantially all of the Project Assets of the East Chicago Showboat; or (v) the adoption of a plan relating to liquidation, dissolution or winding up of the Company. "CLOSING DATE" means March 28, 1996. "COAST GUARD" means the United States Coast Guard. "COLLATERAL" means all assets, now owned or hereafter acquired, of Showboat Partnership or any Guarantor defined as Collateral in the Collateral Documents, which shall initially include all real estate, leaseholds, estates, improvements and all personal property owned by Showboat Partnership and any Restricted Subsidiary with certain exceptions as provided in the Collateral Documents and this Indenture, and which shall include, without limitation, upon its completion, the Casino. "COLLATERAL AGENT" shall have the meaning assigned to it in the Security Agreement. "COLLATERAL ASSIGNMENT" means that certain Assignment of Contracts and Documents dated as of the Closing Date executed by the Company in favor of the Trustee. "COLLATERAL DOCUMENTS" means, collectively, the Leasehold Mortgage, the First Preferred Ship Mortgage, Pledge Agreement, Security Agreement, Collateral Assignment, Payment and Performance Bond, Financing Statements, Escrow and Disbursement Agreement, Project Title Insurance, the Completion Guarantee, the Completion Guarantor Subordination Agreement, the Standby Equity Commitment, the Consent and Subordination Agreement, the Environmental Indemnity Agreement, the Casino Vessel Construction Contract, the Management Agreement, the License Agreement, the Lease Agreement and any other agreements, instruments, financing statements or other documents that evidence, guarantee, secure, set forth or limit the Lien of the Trustee in the Collateral. "COMBINED CASH FLOW" means, with respect to any Person for any period, the Combined Net Income After Tax Distributions (assuming all required payments to Second Century are accounted for as an operating expense) of such Person for such period plus (a) an amount equal to any extraordinary loss plus any net loss realized in connection with any Asset Sale (to the extent such losses were deducted in computing Combined Net Income), plus (b) Combined Interest Expense of such Person for such period, plus (c) Combined Depreciation and Amortization Expense of such Person for such period to the extent such depreciation and amortization were deducted in computing Combined Net Income, plus (d) the amount distributed in respect of the same period under clause (z) of Section 4.07 hereof in respect of income taxes, in each case, on a combined basis for such Person and its Restricted Subsidiaries and determined in accordance with GAAP. 3 "COMBINED DEPRECIATION AND AMORTIZATION EXPENSE" means, with respect to any Person for any period, the total amount of depreciation and amortization expense and other noncash charges (excluding any noncash item that represents an accrual, reserve or amortization of a cash expenditure for a present or future period) of such Person and its Restricted Subsidiaries for such period on a combined basis as determined in accordance with GAAP. "COMBINED INTEREST EXPENSE" means, with respect to any period, the sum of (a) combined interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, to the extent such expense was deducted in computing Combined Net Income (including amortization of original issue discount and non cash interest payments, the interest component of Capital Lease Obligations, and net payments (if any) pursuant to Hedging Obligations, and excluding amortization of deferred financing fees) and (b) commissions, discounts and other fees and charges paid or accrued with respect to letters of credit and bankers' acceptance financing. "COMBINED NET INCOME AFTER TAX DISTRIBUTIONS" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a combined basis, determined in accordance with GAAP, less all distributions in respect of such period under clause (z) of Section 4.07 hereof; PROVIDED, HOWEVER, that (i) the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be included only to the extent of the amount of dividends or distributions paid in cash (or to the extent converted into cash) to the referent Person or a Wholly Owned Subsidiary thereof in respect of such period, (ii) the Net Income of any Person acquired in a pooling of interests transaction shall not be included for any period prior to the date of such acquisition, (iii) the Net Income for such period of any Restricted Subsidiary that is not a Guarantor shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or in similar distributions has been legally waived, and (iv) the cumulative effect of a change in accounting principles shall be excluded. "COMBINED NET WORTH" means, with respect to any Person at any time, the sum of the following items, as shown on the combined balance sheet of such Person and its Restricted Subsidiaries as of such date: (i) the common equity of such Person and its Restricted Subsidiaries; plus (ii) (without duplication), (a) the aggregate liquidation preference of Preferred Stock of such Person and its Restricted Subsidiaries (other than Disqualified Stock), and (b) any increase in depreciation and amortization resulting from any purchase accounting treatment from an acquisition or related financing; less (iii) any goodwill incurred subsequent to the Issuance Date and less (iv) any write up of assets (in excess of fair market value) after the Issuance Date, in each case on a combined basis for such Person and its Restricted Subsidiaries determined in accordance with GAAP; PROVIDED, that in calculating Combined Net Worth, any gain or loss from any Asset Sale shall be excluded. "COMMENCEMENT DATE" shall have the meaning specified in paragraph 1 of the First Mortgage Notes. "COMPLETION GUARANTEE" means that certain Completion Guarantee dated as of the Closing Date executed by Showboat in favor of the Trustee. 4 "COMPLETION GUARANTOR SUBORDINATION AGREEMENT" means that certain Completion Guarantor Subordination Agreement dated the Closing Date by and between Showboat and the Trustee. "CONSENT AND SUBORDINATION AGREEMENT" means that certain Manager's Consent and Subordination of Management Agreement dated as of the Closing Date among Showboat Partnership, the Manager and the Trustee. "CONSTRUCTION BUDGET" means itemized schedules setting forth on a line item basis all of the costs (including financing costs) estimated to be incurred in connection with the financing, design, development, construction, equipping and opening of the East Chicago Showboat, as such schedules are delivered to the Disbursement Agent on the Issuance Date and as amended from time to time in accordance with the terms of the Escrow and Disbursement Agreement. "CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Company. "DEFAULT" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "DEFINITIVE NOTES" means First Mortgage Notes that are in the form of the First Mortgage Notes attached hereto as Exhibit A, that do not include the information called for by footnotes 1 and 2 thereof. "DEPOSITORY" means, with respect to the First Mortgage Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depository with respect to the First Mortgage Notes until a successor shall have been appointed and become such pursuant to the applicable provision of this Indenture, and, thereafter, "Depository" shall mean or include such successor. "DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to March 15, 2003. "EAST CHICAGO SHOWBOAT" means the Casino, Pavilion, parking garage, breakwater and other land-based and dockside facilities proposed to be constructed in East Chicago, Indiana by the Company, as the Plans may be amended pursuant to the Indenture and the Collateral Documents, but excluding (i) any obsolete personal property or real property improvement determined by the Board of Directors to be no longer useful or necessary to the operations or support of East Chicago Showboat and (ii) any equipment leased from a third party in the ordinary course of business. "ECCF" means East Chicago Communication Foundation, Inc., an Indiana non-profit corporation. "ENVIRONMENTAL INDEMNITY AGREEMENT" means that certain Environmental Indemnity Agreement dated as of the Closing Date between Showboat Partnership and the Trustee. 5 "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "ESCROW ACCOUNT" shall have the meaning specified in the Escrow and Disbursement Agreement. "ESCROW AND DISBURSEMENT AGREEMENT" means the Escrow and Disbursement Agreement among the Company, the Trustee, the Escrow Agent and the Disbursement Agent. "EVENT OF LOSS" means, with respect to any property or asset (tangible or intangible, real or personal), any of the following: (A) any loss, destruction or damage of such property or asset; (B) any institution of any proceedings for the condemnation or seizure of such property or asset or for the exercise of any right of eminent domain; (C) any actual condemnation, seizure or taking by exercise of the power of eminent domain or otherwise of such property or asset, or confiscation of such property or asset or the requisition of the use of such property or asset; or (D) any settlement in lieu of clause (B) or (C) above; PROVIDED that any event under clauses (B), (C) or (D) for the benefit of the Company shall not be an Event of Loss. "EXCESS CASH FLOW" means, for any period, the Company's Combined Cash Flow, less the sum of (i) combined cash interest expense (including the interest portion of any payments associated with Capital Lease Obligations and capitalized interest) of the Company and its Restricted Subsidiaries that is actually paid during such period, (ii) up to $12.0 million in combined capital expenditures of the Company and its Restricted Subsidiaries that are actually made during such period, (iii) principal payments on the First Mortgage Notes or any other Indebtedness (including the principal portion of any Capital Lease Obligations) of the Company and its Restricted Subsidiaries that are actually made or paid during such period, (iv) the amount distributed in respect of the same period under clause (z) of Section 4.07 of this Indenture in respect of income taxes, and (v) $3.0 million, all determined on a combined basis in accordance with GAAP. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCHANGE OFFER" means the offer that may be made by the Company pursuant to the Registration Rights Agreement to exchange Series A First Mortgage Notes for Series B First Mortgage Notes. "EXISTING INDEBTEDNESS" means up to $1.0 million in aggregate principal amount of Indebtedness (other than Capital Lease Obligations) of the Company and its Restricted Subsidiaries in existence on the Issuance Date, plus interest accruing thereon, after application of the net proceeds of the sale of the Series A First Mortgage Notes as described in the Offering Memorandum, until such amounts are repaid. "FINANCING STATEMENTS" means the UCCs executed by the Company in favor of the Trustee. "FIRST MORTGAGE NOTES" means the Company's 13 1/2% First Mortgage Notes due March 15, 2003 to be issued pursuant to this Indenture. "FIRST PREFERRED SHIP MORTGAGE" means the First Preferred Ship Mortgage in the form attached to this Indenture as Exhibit D. 6 "FIXED CHARGE COVERAGE RATIO" means, with respect to any Person as of any date, the ratio of the Combined Cash Flow of such Person for the most recently ended four full fiscal quarters for which internal financial statements are available to the Fixed Charges of such Person for such period. In the event that the Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues Disqualified Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of Indebtedness, or such issuance or redemption of Disqualified Stock, as if the same had occurred at the beginning of the applicable four-quarter period. For purposes of making the computation referred to above, acquisitions, dispositions and discontinued operations (as determined in accordance with GAAP) that have been made by the Company or any of its Restricted Subsidiaries, including all mergers, consolidations and dispositions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be calculated on a pro forma basis assuming that all such acquisitions, dispositions, discontinued operations, mergers, consolidations (and the reduction of any associated fixed charge obligations resulting therefrom) had occurred on the first day of the applicable four- quarter reference period. "FIXED CHARGES" means, with respect to any Person for any period, the sum of (i) Combined Interest Expense of such Person for such period, (ii) any capitalized interest not deducted in calculating Combined Net Income and (iii) to the extent not included above, the maximum amount of interest which would have to be paid by such Person or its Restricted Subsidiaries under a Guarantee of Indebtedness of any other Person if such Guarantee were called upon, in each case, on a combined basis and in accordance with GAAP. "GAAP" means generally accepted accounting principles 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 have been approved by a significant segment of the accounting profession, which are in effect from time to time. For the purposes of this Indenture, the term "combined" with respect to any Person shall mean such Person combined with its Restricted Subsidiaries, and shall not include any Unrestricted Subsidiary. "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, 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 Indiana Gaming Commission 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 LICENSE" means every material license, franchise 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 Indiana Riverboat Gambling Act, and the regulations promulgated thereunder, and other applicable federal, state, foreign or local laws. 7 "GLOBAL NOTE" means a First Mortgage Note that contains the paragraph referred to in footnote 1 and the additional schedule referred to in footnote 2 to the form of the First Mortgage Note attached hereto as EXHIBIT A. "GOVERNMENT SECURITIES" means securities that are (a) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (b) 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 of 1933), 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. "GUARANTEE" means a guarantee (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. "GUARANTOR" means any Restricted Subsidiary that has or is obligated to deliver a Note Guarantee in accordance with Section 11.02 hereof, and their successors and assigns. "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person under (i) currency exchange or interest rate swap agreements, currency exchange or interest rate cap agreements and currency exchange or interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange or interest rates. "HOLDER" means a Person in whose name a First Mortgage Note is registered. "INDEBTEDNESS" means, with respect to any Person, (a) any indebtedness of such Person, whether or not contingent (i) in respect of borrowed money, (ii) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof), (iii) representing the balance deferred and unpaid of the purchase price of any property (including Capital Lease Obligations), except any such balance that constitutes an accrued expense or trade payable, or (iv) representing any Hedging Obligations, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, (b) to the extent not otherwise included, any obligation by such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the Indebtedness of another Person (other than by endorsement of negotiable instruments for collection in the ordinary course of business) and (c) to the extent not otherwise included, Indebtedness of another Person secured by a Lien on any asset owned by such Person (whether or not such Indebtedness is assumed by such Person). For purposes of this definition, the term "Indebtedness" shall not include any amount of the liability in respect of any operating lease that at such time would not be required to be capitalized and reflected as a liability on a balance sheet in accordance with GAAP. 8 "INDENTURE" means this Indenture, as amended, modified or supplemented from time to time. "INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal or investment banking firm of nationally recognized standing that is, in the judgment of the Board of Directors, (i) qualified to perform the task for which it has been engaged and (ii) disinterested and independent with respect to the Company and all of its Subsidiaries, each Affiliate of the Company, and the Permitted Holder and its Related Parties. "INDIANA ACT" means the Indiana Riverboat Gambling Act. "INITIAL PERIOD" shall have the meaning specified in paragraph 1 of the First Mortgage Notes. "INTERCREDITOR AGREEMENT" means the Intercreditor Agreement, a form of which is attached hereto as Exhibit C. "INVESTMENTS" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including Guarantees and any guarantee of performance for the benefit of a third Person or commitment to invest in a third Person, in each case to the extent of such guarantee or such commitment and measured at the time such guarantee of performance or commitment to invest is made), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "ISSUANCE DATE" means the closing date for the sale and original issuance of the First Mortgage Notes. "LEASE AGREEMENT" means that certain Redevelopment Project Lease Agreement dated as of October 19, 1995 between the City of East Chicago, Department of Redevelopment and the Parent Partnership, as amended, modified or supplemented from time to time, as assigned to Showboat Partnership. "LEASEHOLD MORTGAGE" means that certain Leasehold Mortgage and Security Agreement, dated as of the Closing Date granted by Showboat Partnership in favor of the Trustee encumbering Showboat Partnership's right, title and interest in and to the Lease Agreement and the leasehold estate created thereby. "LICENSE AGREEMENT" means that certain License Agreement dated as of the Closing Date between Showboat Partnership and Showboat. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not 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 AGREEMENT" means the Management Agreement dated as of March 1, 1996 between the Manager and the Company, as in effect on the Issuance Date. 9 "MANAGER" means Showboat Marina Partnership, an Indiana general partnership. "MINIMUM FACILITIES" means, with respect to East Chicago Showboat, a passenger vessel fully documented and certified by the Coast Guard licensed to accommodate at least 1,800 passengers (in addition to master, crew and any other employees of the Company) with all engines, propulsion, navigation, safety, heating and air conditioning, and other marine equipment necessary for the proper and safe operation of a cruising vessel and with a casino of at least 1,800 gaming positions of operating slot machines and operating table games (assuming 12 gaming positions per craps table and 7 gaming positions per other tables), 800 usable parking spaces in a parking garage, together with all necessary dockside facilities for embarking and disembarking passengers and all banking, coin, security and other ancillary equipment and facilities necessary to operate East Chicago Showboat on at least a 20 hour per day, seven day per week, 365 day per year basis. "NET INCOME" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and calculated before deducting any amortization of pre-opening expenses incurred prior to the date East Chicago Showboat is Operating and before any reduction in respect of Preferred Stock dividends, excluding, however, (i) any gain (but not loss) realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries, and (iii) excluding any extraordinary gain (but not loss). "NET LOSS PROCEEDS" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Event of Loss, including, without limitation, insurance proceeds from condemnation awards or damages awarded by any judgment, net of the direct costs in recovery of such Net Loss Proceeds (including, without limitation, legal, accounting, appraisal and insurance adjuster fees) and any taxes paid or payable as a result thereof. "NET PROCEEDS" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale, net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions), and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness secured by a Lien (other than the First Mortgage Notes) on the asset or assets that are the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets. "NET REVENUES" means, with respect to any Person for any period, the net revenues (after promotional allowances) of such Person and its Restricted Subsidiaries calculated on a combined basis in accordance with GAAP. "NON-RECOURSE FINANCING" means Indebtedness incurred in connection with the purchase or lease of personal or real property useful in the Principal Business and as to which the lender upon default (i) may seek recourse or payment only through the return or sale of the property or equipment so purchased or leased and (ii) may not otherwise assert a valid claim for payment on such Indebtedness against the Company or any Restricted Subsidiary or any other property of the Company or any Restricted Subsidiary. 10 "NON-RECOURSE INDEBTEDNESS" means Indebtedness or Disqualified Stock, as the case may be, or that portion of Indebtedness or Disqualified Stock, as the case may be, (a) as to which neither the Company nor any of its Restricted Subsidiaries (i) provides credit support pursuant to any undertaking, agreement or instrument that would constitute Indebtedness or Disqualified Stock, as the case may be, or (ii) is directly or indirectly liable, and (b) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness or Disqualified Stock, as the case may be, of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or Disqualified Stock, as the case may be, or cause the payment thereof to be accelerated or payable prior to its stated maturity. "NOTE CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. "NOTE GUARANTEE" means any Guarantee given by any Guarantor pursuant to the terms of this Indenture. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "OFFERING" means the Offering of the Series A First Mortgage Notes by the Company as contemplated by the Offering Memorandum. "OFFERING MEMORANDUM" means the Offering Memorandum relating to the Series A First Mortgage Notes dated March 21, 1996. "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, in the case of the Company, for so long as it is a partnership, of Showboat Indiana. "OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company or a Guarantor, as the case may be, by two Officers of the Company or a Guarantor, as the case may be, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company or a Guarantor, as the case may be, that meets the requirements set forth in Section 12.05 hereof. "OPERATING" means, with respect to East Chicago Showboat, the first time that (i) all Gaming Licenses have been granted, are in full force and effect and have not been revoked or suspended, (ii) all Liens (other than Liens created by the Collateral Documents or Permitted Liens) related to the construction of East Chicago Showboat have been discharged or, if payment is not yet due or if such payment is contested in good faith by the Company, sufficient funds remain in the Escrow Account to discharge such Liens, (iii) East Chicago Showboat is in a condition (including installation of furnishings, fixtures and equipment) to receive guests in the ordinary course of business, (iv) gaming and other operations in accordance with applicable law are open to the general public and are being conducted at East Chicago Showboat with respect to at least the Minimum Facilities, (v) the Casino has been certified by the U.S. Coast Guard, and (vi) a notice of completion of the East Chicago Showboat has been duly recorded in Indiana. 11 "OPERATING YEAR" means the four full consecutive fiscal quarter period of the Company first beginning after the date that East Chicago Showboat first becomes Operating, and each succeeding four full consecutive fiscal quarter period thereafter that begins immediately after each anniversary of the date the East Chicago Showboat first becomes Operating. "OPINION OF COUNSEL" means an opinion from legal counsel that meets the requirements of Section 12.05 hereof. Such counsel may be an employee of or counsel to the Company, any Subsidiary of the Company, any Guarantor or the Trustee. "PARENT PARTNERSHIP" means Showboat Marina Partnership, an Indiana general partnership. "PARTNERSHIP" means Showboat Marina Casino Partnership, an Indiana general partnership. "PAYMENT AND PERFORMANCE BOND" means that certain Payment and Performance Bond relating to the Casino Vessel Construction Contract. "PERMITTED HOLDER" means Showboat. "PERMITTED INVESTMENTS" means (a) any Investments in the Company, any Guarantor or in any Restricted Subsidiary if the Investments in such Restricted Subsidiary from the Company, any Guarantor or any of the other Restricted Subsidiaries aggregate less than $1.0 million; (b) any Investments in Cash Equivalents; and (c) Investments by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Guarantor or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated, dissolved or wound-up into, the Company or a Guarantor. "PERMITTED LIENS" means (a) Liens in favor of the Company; PROVIDED that if such Liens are on any Collateral, that such Liens are either collaterally assigned to the Trustee or subordinate to the Lien in favor of the Trustee securing the First Mortgage Notes or any Note Guarantee; (b) Liens on property of a Person existing at the time such Person is merged into or consolidated with or into, or wound up into, the Company or any Restricted Subsidiary; PROVIDED, that such Liens were in existence prior to the contemplation of such merger or consolidation or winding-up and do not extend to any other assets other than those of the Person merged into or consolidated with the Company or such Restricted Subsidiary and any replacement or accession to such property; (c) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company; PROVIDED that such Liens were in existence prior to the contemplation of such acquisition; (d) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business or in the construction of East Chicago Showboat and which obligations are not expressly prohibited by this Indenture; PROVIDED, HOWEVER, that the Company has obtained a title insurance endorsement insuring against losses arising therewith or if such Lien arises after completion of East Chicago Showboat, the Company has bonded within a reasonable time after becoming aware of the existence of such Lien; (e) Liens securing obligations in respect of this Indenture, First Mortgage Notes and any Note Guarantee; (f) any existing Liens listed on the Project Title Insurance and leases, to the extent permitted pursuant to Section 4.22 hereof; (g) (1) Liens for taxes, assessments or governmental charges or claims or (2) statutory Liens of landlords, and carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's, crew wages, maritime or other similar Liens arising in the ordinary course of business or in the construction of East Chicago Showboat, in the case of each of (1) and (2), with respect to amounts that either (A) are not yet delinquent or (B) are being contested 12 in good faith by appropriate proceedings as to which appropriate reserves or other provisions have been made in accordance with GAAP; PROVIDED, HOWEVER, that the Company has obtained a title insurance endorsement insuring against losses arising therewith or if such Lien arises after completion of East Chicago Showboat, the Company has bonded within a reasonable time after becoming aware of the existence of such Lien; (h) easements, rights-of- way, navigational servitudes, restrictions, minor defects or irregularities in title and other similar charges or encumbrances which do not interfere in any material respect with the ordinary conduct of business of the Company and its Restricted Subsidiaries; (i) Liens securing purchase money or lease obligations otherwise permitted by this Indenture incurred or assumed in connection with the acquisition, purchase or lease of real or personal property to be used in the Principal Business of the Company or any of its Restricted Subsidiaries; PROVIDED, that such Lien does not extend to any Collateral or to any property or assets of the Company or any Restricted Subsidiary other than the property or assets so purchased or leased; (j) Liens on East Chicago Showboat or any related facilities or real estate securing any Indebtedness permitted to be incurred pursuant to Section 4.09 hereof which is used to finance the Project Expansion Costs of a Project Expansion; PROVIDED that (i) such Lien is junior or PARI PASSU to the Lien securing the First Mortgage Notes; (ii) the aggregate principal amount of such Indebtedness does not exceed 70% of the aggregate Project Expansion Costs of such Project Expansion; (iii) the First Mortgage Notes are secured by such Project Expansion on a senior or PARI PASSU basis with respect to such Lien; and (iv) with respect to any Indebtedness secured by a Lien ranking PARI PASSU with the Lien securing the First Mortgage Notes, (A) the holders of such Indebtedness or any trustee or other representative thereof becomes a party to an Intercreditor Agreement substantially in the form attached to this Indenture as an Exhibit and exercises rights and remedies in accordance with the provisions thereof, and (B) the Trustee receives an endorsement to its title insurance policy relating to the Lien of the Leasehold Mortgage insuring the continuing priority of such Lien as set forth in the title insurance policy; and (k) a leasehold mortgage in favor of a party financing the lessee of space within East Chicago Showboat; PROVIDED that (i) the lease affected by such leasehold mortgage is permitted pursuant to Section 4.22 hereof, (ii) neither the Company nor any Restricted Subsidiary is liable for the payment of any principal of, or interest or premium on, such financing and (iii) the affected lease and leasehold mortgage are expressly made subject and subordinate to the Lien of the Leasehold Mortgage. "PERMITTED PROCEED USES" means (i) funding interest payments on the First Mortgage Notes, (ii) repurchasing First Mortgage Notes pursuant to a Repurchase Offer, (iii) funding Project Costs relating to East Chicago Showboat in accordance with the Escrow and Disbursement Agreement and (iv) providing working capital, to the extent of funds remaining after the payment of the items set forth in clauses (i) through (iii) above. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PLANS" means all drawings, plans and specifications prepared by or on behalf of the Company and its Restricted Subsidiaries, as the same may be amended, modified or supplemented from time to time, and, if required, submitted to and approved by the appropriate Gaming Authorities, which describe and show East Chicago Showboat and the labor and materials necessary for construction thereof. "PLEDGE AGREEMENT" means that certain Pledge Agreement dated as of the Closing Date, by and between Showboat Partnership and the Trustee. 13 "PREFERRED STOCK" means any Equity Interest with preferential right of payment of dividends or upon liquidation, dissolution, or winding up. "PRINCIPAL BUSINESS" means the casino gaming and resort business and any activity or business incidental, directly related or similar thereto, or any business or activity that is a reasonable extension, development or expansion thereof or ancillary thereto, including any hotel, entertainment, recreation or other activity or business designed to promote, market, support, develop, construct or enhance the casino gaming and resort business operated by the Company and its Restricted Subsidiaries. "PROJECT" means East Chicago Showboat. "PROJECT ASSETS" means, with respect to East Chicago Showboat at any time, all of the assets then in use related to East Chicago Showboat including the Casino, pavilion, parking garage, breakwater, any real estate assets, any buildings or improvements thereon, and all equipment, furnishings and fixtures, but excluding: (i) any obsolete personal property or real property improvement determined by the Board of Directors to be no longer useful or necessary to the operations or support of East Chicago Showboat and (ii) any equipment leased from a third party in the ordinary course of business. "PROJECT COSTS" means, with respect to the construction or development of East Chicago Showboat, the aggregate costs required to complete the construction or development of East Chicago Showboat, through the date on which East Chicago Showboat is Operating in accordance with the Plans, the applicable legal requirements and the Construction Budget. "PROJECT EXPANSION" means any addition, improvement, extension or capital repair to East Chicago Showboat or any contiguous or adjacent property, including the purchases of real estate improvements thereon, but excluding separable furniture. "PROJECT EXPANSION COSTS" means, with respect to a Project Expansion, the aggregate costs required to complete such Project Expansion, including direct costs related thereto, including, but not limited to, construction management, architectural, engineering, interior design, legal and other professional fees, site work, utility installation, permits, certificates and bonds, but excluding principal or interest payments on any Indebtedness, operating expenses (including, but not limited to, non- construction supplies and pre-opening expenses) and any allocation to corporate overhead or administrative expenses of the Company, any Guarantor, or any Subsidiary. "PROJECT TITLE INSURANCE" means any lender's policy of title insurance issued to the Trustee for the benefit of the Holders. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement dated as of the Closing Date, by and among the Company and the other parties named on the signature pages thereto, as such agreement may be amended, modified or supplemented from time to time. "RELATED PARTIES" means any Wholly-Owned Subsidiary of the Permitted Holder. "REPURCHASE OFFER" means an offer made by the Company to purchase all or any portion of a Holder's First Mortgage Notes pursuant to Sections 4.10, 4.11, 4.16, 4.24 or 4.28 hereof. 14 "RESPONSIBLE OFFICER" means with respect to the Trustee, any officer within the corporate trust department of the Trustee located at the Corporate Trust Office of the Trustee (or any successor group of the Trustee) and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "RESTRICTED INVESTMENT" means (i) an Investment other than a Permitted Investment or (ii) any sale, conveyance, lease, transfer or other disposition of assets at less than fair market value to an Unrestricted Subsidiary, PROVIDED THAT the amount of such Restricted Investment under this clause (ii) shall be such difference in value. "RESTRICTED SUBSIDIARY" means, at any time, any direct or indirect Subsidiary of the Company that is not then an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon the occurrence of any Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of Restricted Subsidiary. "SEC" means the Securities and Exchange Commission. "SECOND CENTURY" means East Chicago Second Century, Inc. or any successor corporation that is entitled to receive 0.75% of Adjusted Gross Gaming Receipts (as defined in certain economic development commitments of Showboat Partnership to the City of East Chicago) of East Chicago Showboat under the Certificate of Suitability. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SECURITY AGREEMENT" means that certain Security Agreement dated as of the Closing Date, by and between Showboat Partnership and the Trustee. "SEMIANNUAL PERIOD" shall have the meaning specified in paragraph 1 of the First Mortgage Notes. "SHOWBOAT" means Showboat, Inc., a Nevada corporation. "SHOWBOAT INDIANA" means Showboat Indiana, Inc., a Nevada corporation. "SMIP" means Showboat Marina Investment Partnership, an Indiana general partnership. "SIGNIFICANT SUBSIDIARY" means any Subsidiary which would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated under the Act, as such Regulation is in effect on the Issuance Date. "STANDBY EQUITY COMMITMENT" means that certain Standby Equity Commitment Agreement entered into as of the Closing Date by and among Showboat and the Company. "SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company or any of its Restricted Subsidiaries which is expressly by its terms subordinated in right of payment to the First Mortgage Notes or any Note Guarantee. "SUBSIDIARY" means, with respect to any Person, (i) any corporation, association, or other business entity (other than a partnership) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote 15 in the election of directors, managers or trustees thereof is at the time of determination 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 of which more than 50% of the partnership's capital accounts, distribution rights or general or limited partnership interests are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb), as in effect on the date on which this Indenture is qualified under the TIA. "TCEF" means Twin City Education Foundation, Inc., an Indiana non-profit corporation. "TRANSFER RESTRICTED SECURITIES" means securities that bear or are required to bear the legend set forth in Section 2.06 hereof. "TRUSTEE" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "UCCS" means those certain UCC-1 financing statements and UCC- 2 fixture filings filed by Showboat Partnership, Finance Corporation or any Guarantor in connection with any of the Collateral Documents. "UNRESTRICTED SUBSIDIARY" means any entity that would have been a Restricted Subsidiary of the Company but for its designation as an "Unrestricted Subsidiary" in accordance with the provisions of this Indenture so long as it remains an Unrestricted Subsidiary in accordance with the terms of this Indenture. "VOTING STOCK" means, with respect to any Person, any class or series of capital stock of such Person that is ordinarily entitled to vote in the election of directors thereof at a meeting of stockholders called for such purpose, without the occurrence of any additional event or contingency. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness or Disqualified Stock, as the case may be, at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (x) 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 (y) the number of years (calculated to the nearest one-twelfth) that shall elapse between such date and the making of such payment, by (b) the then outstanding principal amount or liquidation preference, as applicable, of such Indebtedness or Disqualified Stock, as the case may be. "WHOLLY OWNED RESTRICTED SUBSIDIARY" is any Wholly Owned Subsidiary that is a Restricted Subsidiary. "WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of such Person. 16 SECTION 1.02. OTHER DEFINITIONS. DEFINED IN TERM SECTION "Affiliate Transaction" 4.12 "Asset Sale Offer" 4.10 "Bankruptcy Law" 4.01 "Benefitted Party" 11.01 "Certificate of Suitability Transfer Offer" 4.28 "Certificate of Suitability Transfer Payment" 4.28 "Change of Control Offer" 4.16 "Change of Control Payment" 4.16 "Company" Introduction "Covenant Defeasance" 8.03 "Event of Default" 6.01 "Event of Loss Offer" 4.11 "Excess Cash Offer Amount" 4.24 "Excess Cash Purchase Price" 4.24 "Excess Cash Flow Offer" 4.24 "Excess Loss Proceeds" 4.11 "Excess Proceeds" 4.10 "incur" 4.09 "Lease Transaction" 4.22 "Legal Defeasance" 8.02 "Offer Amount" 3.10 "Offer Period" 3.10 "Paying Agent" 2.03 "Payment Default" 6.01 "Purchase Date" 3.10 "Purchase Price" 3.10 "Refinancing Indebtedness" 4.09 "Registrar" 2.03 "Repurchase Offer" 3.10 "Restricted Payments" 4.07 SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the 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: "INDENTURE SECURITIES" means the First Mortgage Notes and the Note Guarantees; "INDENTURE SECURITY HOLDER" means a Holder of a First Mortgage Note; 17 "INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; "OBLIGOR" on the First Mortgage Notes means the Company, the Guarantors, if any, and any successor obligor upon the First Mortgage Notes or any Note Guarantee, as the case may be. All other terms used in this Indenture regarding a reference to the TIA and 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. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (iii) "or" is not exclusive; (iv) words in the singular include the plural, and in the plural include the singular; (v) provisions apply to successive events and transactions; (vi) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time; (vii) the term "redeem" and the correlative terms "redemption" and "redeemed" shall not include any Repurchase Offer; and (viii) the term "consolidated" when used in the context of the Company and its Restricted Subsidiaries shall exclude all assets, liabilities, revenue or expenses of Unrestricted Subsidiaries. 18 ARTICLE 2 THE FIRST MORTGAGE NOTES SECTION 2.01. FORM AND DATING. (a) The First Mortgage Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. Each First Mortgage Note shall be dated the date of its authentication. The First Mortgage Notes shall be in denominations of $1,000 and integral multiples thereof except that First Mortgage Notes used to pay Liquidated Damages may be in other denominations. (b) The terms and provisions contained in the First Mortgage Notes and the Note Guarantees shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. First Mortgage Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the text referred to in footnotes 1 and 2 thereto). First Mortgage Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without including the text referred to in footnotes 1 and 2 thereto). Each Global Note shall represent such of the outstanding First Mortgage Notes as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding First Mortgage Notes from time to time endorsed thereon and that the aggregate amount of outstanding First Mortgage 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 amount of outstanding First Mortgage Notes represented thereby shall be made by the Trustee or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. SECTION 2.02. EXECUTION AND AUTHENTICATION. (a) The aggregate principal amount of First Mortgage Notes that may be authenticated and delivered under this Indenture is unlimited. The First Mortgage Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto and shall have such appropriate insertions, omissions, substitutions and other variations as permitted or contemplated by Exhibit A hereto, as established by a resolution of the Board of Directors delivered to the Trustee hereunder, together with an Officers' Certificate setting forth the form of such series, at or prior to the written order of the Company contemplated by Section 2.02(d). The First Mortgage Notes may have such letters, numbers or other marks of identification or designation and such legends or endorsements placed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any securities exchange on which any series of the First Mortgage Notes may be listed or to conform to usage, all as determined by the officers executing such First Mortgage Notes. Two Officers of the Company shall sign each First Mortgage Note issued hereunder for the Company by manual or facsimile signature. 19 (b) If an Officer whose signature is on a First Mortgage Note no longer holds that office at the time a First Mortgage Note is authenticated, the First Mortgage Note shall nevertheless be valid. (c) A First Mortgage Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the First Mortgage Note has been authenticated under this Indenture. (d) The Trustee shall, upon a written order of the Company signed by two Officers of the Company, authenticate First Mortgage Notes of any series with the Note Guarantees for original issue up to the aggregate principal amount stated in paragraph 4 of the First Mortgage Notes plus First Mortgage Notes issued to pay Liquidated Damages pursuant to paragraph 2 of the First Mortgage Notes. The aggregate principal amount of First Mortgage Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. (e) The Trustee may appoint an authenticating agent acceptable to the Company to authenticate First Mortgage Notes. Unless limited by the terms of such appointment, an authenticating agent may authenticate First Mortgage 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 the Company or any Guarantor or an Affiliate of the Company or any Guarantor. SECTION 2.03. REGISTRAR AND PAYING AGENT. (a) The Company shall maintain an office or agency where First Mortgage Notes may be presented for registration of transfer or for exchange ("REGISTRAR") and an office or agency where First Mortgage Notes may be presented for payment ("PAYING AGENT"). The Registrar shall keep a register of the First Mortgage Notes and of their transfer and exchange. The Company 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 Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails 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. (b) The Company initially appoints The Depository Trust Company ("DTC") to act as Depository with respect to the Global Notes. (c) The Company initially appoints the Trustee to act as the Registrar and Paying Agent and for service of notices and demands and to act as Note Custodian in connection with the First Mortgage Notes. 20 SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company 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 and Liquidated Damages, if any, or interest on the First Mortgage Notes, and shall notify the Trustee of any Default by the Company or any Guarantor 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 Company 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 a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary 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 Company or a Guarantor, the Trustee shall serve as Paying Agent for the First Mortgage Notes. SECTION 2.05. 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 Company and/or the Guarantors shall 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 First Mortgage Notes and the Company and the Guarantors shall otherwise comply with TIA Section 312(a). SECTION 2.06. TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES. When Definitive Notes are presented by a Holder to the Registrar with a request: (x) to register the transfer of the Definitive Notes; or (y) to exchange such Definitive Notes for an equal principal amount of Definitive Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met; PROVIDED, HOWEVER, that the Definitive Notes presented or surrendered for register of transfer or exchange: (i) shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing; and 21 (ii) in the case of a Definitive Note that is a Transfer Restricted Security, such request shall be accompanied by the following additional information and documents, as applicable: (A) if such Transfer Restricted Security is being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification to that effect from such Holder (in substantially the form of Exhibit B hereto); or (B) if such Transfer Restricted Security is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in accordance with Rule 144A under the Securities Act or pursuant to an exemption from registration in accordance with Rule 144 or Rule 904 under the Securities Act or pursuant to an effective registration statement under the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B hereto); or (C) if such Transfer Restricted Security is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B hereto) and an Opinion of Counsel from such Holder or the transferee reasonably acceptable to the Company and to the Registrar to the effect that such transfer is in compliance with the Securities Act. (b) TRANSFER OF A DEFINITIVE NOTE FOR A BENEFICIAL INTEREST IN A GLOBAL NOTE. A Definitive Note may not be exchanged for a beneficial interest in a Global Note except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Note, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with: (i) if such Definitive Note is a Transfer Restricted Security, a certification from the Holder thereof (in substantially the form of Exhibit B hereto) to the effect that such Definitive Note is being transferred by such Holder to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in accordance with Rule 144A under the Securities Act; and (ii) whether or not such Definitive Note is a Transfer Restricted Security, written instructions from the Holder thereof directing the Trustee to make, or to direct the Note Custodian to make, an endorsement on the Global Note to reflect an increase in the aggregate principal amount of the First Mortgage Notes represented by the Global Note, in which case the Trustee shall cancel such Definitive Note in accordance with Section 2.11 hereof and cause, or direct the Note Custodian to cause, in accordance with the standing instructions and procedures existing between the Depository and the Note Custodian, the 22 aggregate principal amount of First Mortgage Notes represented by the Global Note to be increased accordingly. If no Global Notes are then outstanding, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate a new Global Note in the appropriate principal amount. (c) TRANSFER AND EXCHANGE OF GLOBAL NOTES. The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture and the procedures of the Depository therefor, which shall include restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. (d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL NOTE FOR A DEFINITIVE NOTE. (i) Any Person having a beneficial interest in a Global Note may upon request exchange such beneficial interest for a Definitive Note. Upon receipt by the Trustee of written instructions or such other form of instructions as is customary for the Depository, from the Depository or its nominee on behalf of any Person having a beneficial interest in a Global Note, and, in the case of a Transfer Restricted Security, the following additional information and documents (all of which may be submitted by facsimile): (A) if such beneficial interest is being transferred to the Person designated by the Depository as being the beneficial owner, a certification to that effect from such Person (in substantially the form of Exhibit B hereto); or (B) if such beneficial interest is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in accordance with Rule 144A under the Securities Act or pursuant to an exemption from registration in accordance with Rule 144 or Rule 904 under the Securities Act or pursuant to an effective registration statement under the Securities Act, a certification to that effect from the transferor (in substantially the form of Exhibit B hereto); or (C) if such beneficial interest is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect from the transferor (in substantially the form of Exhibit B hereto) and an Opinion of Counsel from the transferee or transferor reasonably acceptable to the Company and to the Registrar to the effect that such transfer is in compliance with the Securities Act, in which case the Trustee or the Note Custodian, at the direction of the Trustee, shall, in accordance with the standing instructions and procedures existing between the Depository and the Note Custodian, cause the aggregate principal amount of Global Notes to be reduced accordingly and, following such reduction, the Company shall execute and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate and deliver to the transferee a Definitive Note in the appropriate principal amount. 23 (ii) Definitive Notes issued in exchange for a beneficial interest in a Global Note pursuant to this Section 2.06(d) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Definitive Notes to the Persons in whose names such First Mortgage Notes are so registered. (e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL NOTES. Notwithstanding any other provision of this Indenture (other than the provisions set forth in subsection (f) of this Section 2.06), a Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (f) AUTHENTICATION OF DEFINITIVE NOTES IN ABSENCE OF DEPOSITORY. If at any time: (i) the Depository for the First Mortgage Notes notifies the Company that the Depository is unwilling or unable to continue as Depository for the Global Notes and a successor Depository for the Global Notes is not appointed by the Company within 90 days after delivery of such notice; or (ii) the Company, at its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of Definitive Notes under this Indenture, then the Company shall execute, and the Trustee shall, upon receipt of an authentication order in accordance with Section 2.02 hereof, authenticate and deliver, Definitive Notes in an aggregate principal amount equal to the principal amount of the Global Notes in exchange for such Global Notes. (g) LEGENDS. (i) Except as permitted by the following paragraphs (ii) and (iii), each First Mortgage Note certificate evidencing Global Notes and Definitive Notes (and all First Mortgage Notes issued in exchange therefor or substitution thereof) shall bear legends in substantially the following form: "THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF SHOWBOAT MARINA CASINO PARTNERSHIP, AN INDIANA GENERAL PARTNERSHIP, AND SHOWBOAT MARINA FINANCE CORPORATION, A NEVADA CORPORATION (COLLECTIVELY, THE 24 "COMPANY") THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE." (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Note) pursuant to Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act: (A) in the case of any Transfer Restricted Security that is a Definitive Note, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Note that does not bear the first legend set forth in (i) above and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) in the case of any Transfer Restricted Security represented by a Global Note, such Transfer Restricted Security shall not be required to bear the first legend set forth in (i) above, but shall continue to be subject to the provisions of Section 2.06(c) hereof; PROVIDED, HOWEVER, that with respect to any request for an exchange of a Transfer Restricted Security that is represented by a Global Note for a Definitive Note that does not bear the first legend set forth in (i) above, which request is made in reliance upon Rule 144, the Holder thereof shall certify in writing to the Registrar that suchrequest is being made pursuant to Rule 144 (such certification to be substantially in the form of Exhibit B hereto). (iii) Notwithstanding the foregoing, upon consummation of the Exchange Offer, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate Series B First Mortgage Notes in exchange for Series A First Mortgage Notes accepted for exchange in the Exchange Offer, which Series B First Mortgage Notes shall not bear the first legend set forth in (i) above, and the Registrar shall rescind any restriction on the transfer of such First Mortgage Notes, in each case unless the Holder of such Series A First Mortgage Notes is either (A) a broker- dealer, (B) a Person participating in the distribution of the Series A First Mortgage Notes or (C) a Person who is an affiliate (as defined in Rule 144A) of the Company. (h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all beneficial interests in Global Notes have been exchanged for Definitive Notes, redeemed, repurchased or cancelled, all Global Notes 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 Definitive Notes, redeemed, repurchased or cancelled, the principal amount of First Mortgage Notes 25 represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note, by the Trustee or the First Mortgage Notes Custodian, at the direction of the Trustee, to reflect such reduction. (i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Definitive Notes and Global Notes at the Registrar's request. (ii) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company 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 Sections 2.10, 3.06 or 9.05 hereto). (iii) The Registrar shall not be required to register the transfer of or exchange any First Mortgage Note selected for redemption in whole or in part, except the unredeemed portion of any First Mortgage Note being redeemed in part. (iv) All Definitive Notes and Global Notes issued upon any registration of transfer or exchange of Definitive Notes or Global Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Definitive Notes or Global Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required: (A) to issue, to register the transfer of or to exchange First Mortgage Notes during a period beginning at the opening of business on a Business Day 15 days before the day of any selection of First Mortgage Notes for purchase or redemption under Section 3.02 or 3.10 hereof or register the transfer of or exchange any First Mortgage Note so selected for purchase or redemption in whole or in part, except the unpurchased or unredeemed portion of any First Mortgage Note being purchased or redeemed in part; or (B) to register the transfer of or to exchange any First Mortgage Note so selected for redemption in whole or in part, except the unredeemed portion of any First Mortgage Note being redeemed in part; or (C) to register the transfer of or to exchange a First Mortgage Note between a record date and the next succeeding interest payment date. (vi) Prior to due presentment to the Trustee registration of the transfer of any First Mortgage Note, the Trustee, any Agent, the Company and the Guarantors may deem and treat the Person in whose name any First Mortgage Note is registered as the absolute owner of such First Mortgage Note for the purpose of receiving payment of principal of, premium and Liquidated Damages, if any, and interest on such First Mortgage Notes and for all other purposes whatsoever, whether or not such First Mortgage Note is overdue, and neither the Trustee, any Agent, the Company nor the Guarantors shall be affected by notice to the contrary. 26 (vii) The Trustee shall authenticate Definitive Notes and Global Notes in accordance with the provisions of Section 2.02 hereof. SECTION 2.07. REPLACEMENT FIRST MORTGAGE NOTES. (a) If any mutilated First Mortgage Note is surrendered to the Trustee, or the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any First Mortgage Note, the Company shall issue and the Trustee, upon the written order of the Company signed by two Officers of the Company, shall authenticate a replacement First Mortgage Note if the Trustee's requirements are met. If required by the Trustee or the Company or the Guarantors, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee, the Company and the Guarantors to protect the Company, the Guarantors, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a First Mortgage Note is replaced. The Company and the Guarantors may charge for its expenses in replacing a First Mortgage Note. (b) Every replacement First Mortgage Note is an additional obligation of the Company and the Guarantors and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other First Mortgage Notes duly issued hereunder. SECTION 2.08. OUTSTANDING FIRST MORTGAGE NOTES. (a) The First Mortgage Notes outstanding at any time are all the First Mortgage Notes authenticated by the Trustee except for those cancelled by it, 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 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a First Mortgage Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the First Mortgage Note. (b) If a First Mortgage Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. (c) If the principal amount of any First Mortgage Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. (d) If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay First Mortgage Notes payable on that date, then on and after that date such First Mortgage Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. SECTION 2.09. TREASURY FIRST MORTGAGE NOTES. In determining whether the Holders of the required principal amount of First Mortgage Notes have concurred in any direction, waiver or consent, First Mortgage Notes owned by the Company, any Guarantor, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or a Guarantor, 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 First Mortgage Notes that a Trustee knows are so owned shall be so disregarded. Notwithstanding the foregoing, First Mortgage Notes that are to be acquired by the Company, any Guarantor, any Subsidiary of the Company or any Guarantor or an Affiliate of the Company or any Guarantor pursuant to an exchange offer, tender offer or other agreement shall not be 27 deemed to be owned by the Company, such Guarantor, a Subsidiary of the Company or such Guarantor or an Affiliate of the Company or such Guarantor until legal title to such First Mortgage Notes passes to the Company, such Guarantor, Subsidiary of the Company or such Guarantor or Affiliate of the Company or such Guarantor, as the case may be. SECTION 2.10. TEMPORARY FIRST MORTGAGE NOTES. (a) Until Definitive First Mortgage Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary First Mortgage Notes upon a written order of the Company signed by two Officers of the Company. Temporary First Mortgage Notes shall be substantially in the form of Definitive First Mortgage Notes but may have variations that the Company considers appropriate for temporary First Mortgage Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive First Mortgage Notes in exchange for temporary First Mortgage Notes. (b) Until such exchange, Holders of temporary First Mortgage Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11. CANCELLATION. The Company at any time may deliver First Mortgage Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any First Mortgage Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all First Mortgage Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled First Mortgage Notes (subject to the record retention requirement of the Exchange Act), unless the Company directs cancelled First Mortgage Notes to be returned to it. The Company may not issue new First Mortgage Notes to replace First Mortgage Notes that it has redeemed or paid or that have been delivered to the Trustee for cancellation. All cancelled First Mortgage Notes held by the Trustee shall be destroyed and certification of their destruction delivered to the Company, unless by a written order, signed by two Officers of the Company, the Company shall direct that cancelled First Mortgage Notes be returned to it. SECTION 2.12. DEFAULTED INTEREST. If the Company or any Guarantor defaults in a payment of interest on any series of First Mortgage Notes, the Company or such Guarantor (to the extent of their obligations under the Note Guarantees) shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders of First Mortgage Notes of such series on a subsequent special record date, in each case at the rate provided in the First Mortgage Notes of such series and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of such defaulted interest proposed to be paid on each First Mortgage Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, PROVIDED that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. 28 SECTION 2.13. RECORD DATE. The record date for purposes of determining the identity of Holders entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture shall be determined as the Company determines or, if not so determined, as provided in TIA Section 316(c). ARTICLE 3 OFFERS TO PURCHASE OR REDEMPTION SECTION 3.01. NOTICES TO TRUSTEE. (a) If the Company elects to redeem First Mortgage Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the Section of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the series of First Mortgage Notes to be redeemed, (iv) the principal amount of First Mortgage Notes to be redeemed and (v) the redemption price. (b) If the Company is required to make an offer to purchase First Mortgage Notes pursuant to the provisions of Section 4.10, 4.11, 4.16, 4.24 or 4.28 it shall furnish to the Trustee, at least 30 days before the scheduled purchase date, an Officers' Certificate setting forth (i) the Section of this Indenture pursuant to which the offer to purchase shall occur, (ii) the offer's terms, (iii) the purchase price, (iv) the principal amount of the First Mortgage Notes to be purchased and (v) further setting forth a statement (A) of the Company's Excess Cash Flow for the fiscal year then ended, or to the effect that (B) the Company or one of its Restricted Subsidiaries has made an Asset Sale and there are Excess Proceeds aggregating more than $7.5 million and the amount of such Excess Proceeds, (C) the Company or one of its Restricted Subsidiaries has suffered an Event of Loss and there are Excess Loss Proceeds aggregating more than $7.5 million and the amount of such Excess Loss Proceeds, (D) a Change of Control has occurred, or (E) the transfer of the Certificate of Suitability from the Manager to the Company has not occurred by July 1, 1996, as applicable. SECTION 3.02. SELECTION OF FIRST MORTGAGE NOTES TO BE PURCHASED OR REDEEMED. (a) If less than all of the First Mortgage Notes are to be purchased in an Asset Sale Offer, Event of Loss Offer, Excess Cash Flow Offer, or Certificate of Suitability Transfer Offer or redeemed at any time, selection of First Mortgage Notes for purchase or redemption shall be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the First Mortgage Notes are listed, or, if the First Mortgage Notes are not so listed, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate (and in such manner as complies with applicable legal requirements); PROVIDED that no First Mortgage Notes of $1,000 or less shall be purchased or redeemed in part. (b) Notices of purchase or redemption shall be mailed by first class mail, postage prepaid, at least 30 but not more than 60 days before the purchase or redemption date to each Holder of First Mortgage Notes to be purchased or redeemed at such Holder's registered address. If any First Mortgage Note is to be purchased or redeemed in part only, any notice of purchase or redemption that relates to such First Mortgage Note shall state the portion of the principal amount thereof that has been or is to be purchased or redeemed. 29 (c) In the event of partial purchase or partial redemption in the manner provided above, the particular First Mortgage Notes to be purchased or redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the purchase or redemption date by the Trustee from the outstanding First Mortgage Notes not previously purchased or called for redemption. In the event that less than all of the First Mortgage Notes properly tendered in an Asset Sale Offer, Event of Loss Offer, Excess Cash Flow Offer or Certificate of Suitability Transfer Offer are to be purchased, the particular First Mortgage Notes to be purchased shall be selected promptly upon the expiration of such Asset Sale Offer, Event of Loss Offer, Excess Cash Flow Offer or Certificate of Suitability Transfer Offer. (d) The Trustee shall promptly notify the Company in writing of the First Mortgage Notes selected for purchase or redemption and, in the case of any First Mortgage Note selected for partial purchase or redemption, the principal amount thereof to be purchased or redeemed. First Mortgage Notes and portions of First Mortgage Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the First Mortgage Notes of a Holder are to be purchased or redeemed, the entire outstanding amount of First Mortgage Notes held by such redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to First Mortgage Notes purchased or called for redemption also apply to portions of First Mortgage Notes purchased or called for redemption. (e) A new First Mortgage Note in principal amount equal to the unpurchased or unredeemed portion of any First Mortgage Note purchased or redeemed in part shall be issued in the name of the Holder thereof upon cancellation of the original First Mortgage Note. On and after the purchase or redemption date, unless the Company defaults in payment of the purchase or redemption price, interest shall cease to accrue on First Mortgage Notes or portions thereof purchased or called for redemption. (f) In the event the Company is required to make an Asset Sale Offer, an Event of Loss Offer or an Excess Cash Flow Offer pursuant to Section 4.10, 4.11 or 4.24 hereof, and the amount of money in the Escrow Account or the amount of Excess Proceeds, Excess Loss Proceeds or Excess Cash Flow, as the case may be, to be applied to such purchase would result in the purchase of a principal amount of First Mortgage Notes that is not evenly divisible by $1,000, the Trustee shall promptly refund to the Company the amount of Excess Proceeds, Excess Loss Proceeds or Excess Cash Flow that are not applied pursuant to the terms of this Indenture, as the case may be, that is not necessary to purchase the immediately lesser principal amount of First Mortgage Notes that is so divisible. SECTION 3.03. NOTICE OF REDEMPTION. (a) At least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose First Mortgage Notes are to be redeemed at its registered address. (b) The notice shall identify the First Mortgage Notes to be redeemed and shall state: (i) the redemption date; (ii) the redemption price; (iii) if any First Mortgage Note is being redeemed in part, the portion of the principal amount of such First Mortgage Note to be redeemed and that, after the redemption date upon surrender of such First Mortgage Note, a new First Mortgage Note or First Mortgage Notes 30 in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original First Mortgage Note; (iv) the name and address of the Paying Agent; (v) that First Mortgage Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (vi) that, unless the Company defaults in making such redemption payment, interest on First Mortgage Notes called for redemption ceases to accrue on and after the redemption date; (vii) the paragraph of the First Mortgage Notes and/or Section of this Indenture pursuant to which the First Mortgage Notes called for redemption are being redeemed; and (viii)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 First Mortgage Notes. (c) At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; PROVIDED, HOWEVER, that the Company shall have delivered to the Trustee, at least 35 days prior to the redemption date, 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 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03 hereof, First Mortgage Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. SECTION 3.05. DEPOSIT OF PURCHASE OR REDEMPTION PRICE. (a) On or prior to any purchase date with respect to an offer to purchase the First Mortgage Notes required hereunder or redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the purchase or redemption price of, and accrued and unpaid interest, if any, on all First Mortgage Notes to be purchased or redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the purchase or redemption price of, and accrued and unpaid interest, if any, on, all First Mortgage Notes to be purchased or redeemed. (b) If the Company complies with the provisions of the preceding paragraph, on and after the purchase or redemption date, interest shall cease to accrue on the First Mortgage Notes or the portions of First Mortgage Notes purchased or called for redemption. If a First Mortgage Note is purchased or redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such First Mortgage Note was registered at the close of business on such record date. If any First Mortgage Note tendered for purchase or called for redemption shall not be so paid upon surrender for such tender or redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the purchase or redemption date until such principal is paid, and to the extent lawful on 31 any interest not paid on such unpaid principal, in each case at the rate provided in the First Mortgage Notes and in Section 4.01 hereof. SECTION 3.06. FIRST MORTGAGE NOTES PURCHASED OR REDEEMED IN PART. Upon surrender of a First Mortgage Note that is purchased or redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new First Mortgage Note equal in principal amount to the unpurchased or unredeemed portion of the First Mortgage Note surrendered. SECTION 3.07. OPTIONAL REDEMPTION. (a) Except as set forth in Section 3.08 hereof, the First Mortgage Notes of any series are not redeemable at the Company's option prior to March 15, 2000. From and after March 15, 2000, the First Mortgage Notes shall be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date as set forth in paragraph 5 of the First Mortgage Notes. (b) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. SECTION 3.08. REDEMPTION PURSUANT TO GAMING LAW. (a) Notwithstanding any other provisions of this Article 3, if any Gaming Authority requires that a Holder or beneficial owner of the First Mortgage Notes must be licensed, qualified or found suitable under any applicable gaming laws in order to maintain any Gaming License or franchise of the Company or any Restricted Subsidiary under any applicable gaming laws, and such Holder or beneficial owner fails to apply for a license, qualification or finding of suitability within 30 days after being requested to do so by such Gaming Authority (or such lesser period that may be required by such Gaming Authority) or if such Holder or beneficial owner is not so licensed, qualified or found suitable by such Gaming Authority or the Company determines, upon the written advice of counsel or any Gaming Authority, that the ownership of the First Mortgage Notes would jeopardize or prevent the issuance of any Gaming License to the Company, or the reinstatement or renewal of any Gaming License held by the Company, the Company shall have the right, at its option, (i) to require such Holder or beneficial owner to dispose of such Holder's or beneficial owner's First Mortgage Notes within 30 days of receipt of such finding by the applicable Gaming Authority that such Holder or beneficial owner will not be licensed, qualified or found suitable as directed by such Gaming Authority or within 30 days of the Company's determination, described herein, based upon written advice of counsel or any Gaming Authority (or such earlier date as may be required by the applicable Gaming Authority) or (ii) to call for redemption of the First Mortgage Notes of such Holder or beneficial owner at a redemption price equal to the lesser of the principal amount thereof or the price at which such Holder or beneficial owner acquired the First Mortgage Notes, together with, in either case, accrued and unpaid interest and Liquidated Damages thereon, if any, to the earlier of the date of redemption or the date of the finding of unsuitability by such Gaming Authority, which may be less than 30 days following the notice of redemption if so ordered by such Gaming Authority. In connection with any such redemption, and except as may be required by a Gaming Authority, the Company shall comply with the procedures contained in this Indenture and the First Mortgage Notes for redemption of the First Mortgage Notes. Under this Indenture, the Company is not required to pay or reimburse any Holder or beneficial owner of the First Mortgage Notes who is required to apply for such license, qualification or finding of suitability for the 32 costs or fees of such application, licensure, qualification or finding, including investigation costs for such qualification or finding. (b) In connection with any redemption pursuant to this Section 3.08, and except as may be required by a Gaming Authority, the Company shall be required to comply with Sections 3.01 through 3.06 hereof. SECTION 3.09. MANDATORY REDEMPTION. Except as set forth under Sections 4.10, 4.11, 4.16, 4.24 and 4.28 hereof, the Company shall not be required to make mandatory redemptions or sinking fund payments prior to maturity with respect to the First Mortgage Notes. SECTION 3.10. REPURCHASE OFFERS. (a) In the event that, pursuant to Section 4.10, 4.11, 4.16, 4.24 or 4.28 hereof, the Company shall be required to commence an offer to all Holders to purchase First Mortgage Notes (a "REPURCHASE OFFER"), it shall follow the procedures specified below. (b) The Repurchase Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than five Business Days after the termination of the Offer Period (the "PURCHASE DATE"), the Company shall purchase at the purchase price as determined in accordance with Section 4.10, 4.11, 4.16, 4.24 or 4.28 hereof, as the case may be (the "PURCHASE PRICE"), the principal amount of First Mortgage Notes required to be purchased pursuant to Section 4.10, 4.11, 4.16, 4.24 or 4.28 hereof, as the case may be (the "OFFER AMOUNT"), or, if less than the Offer Amount has been tendered, all First Mortgage Notes tendered in response to the Repurchase Offer. Payment for any First Mortgage Notes so purchased shall be made in the same manner as interest payments are made. (c) If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest, if any, shall be paid to the Person in whose name a First Mortgage Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender First Mortgage Notes pursuant to the Repurchase Offer. (d) Upon the commencement of a Repurchase Offer, the Company shall send, by first class mail, a notice to each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender First Mortgage Notes pursuant to the Repurchase Offer. The Repurchase Offer shall be made to all Holders. The notice, which shall govern the terms of the Repurchase Offer, shall state: (i) that the Repurchase Offer is being made pursuant to this Section 3.10 and Section 4.10, 4.11, 4.16, 4.24 or 4.28 hereof, as the case may be, and that all First Mortgage Notes properly tendered pursuant to such Repurchase Offer shall be accepted for payment; (ii) the Offer Amount, the Purchase Price and the Purchase Date, which shall be no earlier than 30 days nor later than 60 days from the date on which such notice is mailed, except as may be otherwise required by applicable law; (iii) that any First Mortgage Note not properly tendered shall remain outstanding and continue to accrue interest; 33 (iv) that, unless the Company defaults in making such payment, all First Mortgage Notes accepted for payment pursuant to the Repurchase Offer shall cease to accrue interest after the Purchase Date; (v) that Holders electing to have any First Mortgage Notes purchased pursuant to a Repurchase Offer shall be required to surrender the First Mortgage Notes, with the form titled "Option of Holder to Elect Purchase" on the reverse of the First Mortgage Notes completed, or transfer by book entry transfer, to the Company, the Depository, if appointed by the Company, or to the Paying Agent specified in the notice at the address specified in the notice prior to the close of business on the third Business Day preceding the Purchase Date; (vi) that Holders shall be entitled to withdraw their tendered First Mortgage Notes and their election to require the Company to purchase the First Mortgage Notes, PROVIDED, that the Company, the depository or the Paying Agent receives, not later than the close of business on the last day of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of First Mortgage Notes tendered for purchase, and a statement that such Holder is withdrawing his tendered First Mortgage Notes and his election to have such First Mortgage Notes purchased; and (vii) that Holders whose First Mortgage Notes are being purchased only in part shall be issued new First Mortgage Notes equal in principal amount to the unpurchased portion of the First Mortgage Notes surrendered (or transferred by book-entry transfer), which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. (e) The Company 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 or regulations are applicable in connection with the repurchase of the First Mortgage Notes pursuant to a Repurchase Offer. (f) On the Purchase Date, the Company shall, to the extent permitted by law, (i) accept for payment, pursuant to the terms of Section 3.02 hereof, the Offer Amount of First Mortgage Notes or portions thereof properly tendered pursuant to the Repurchase Offer, or if less than the Offer Amount has been tendered, all First Mortgage Notes tendered, (ii) deposit with the Paying Agent an amount equal to the aggregate Purchase Price in respect of all First Mortgage Notes or portions thereof so tendered and (iii) deliver, or cause to be delivered, to the Trustee for cancellation the First Mortgage Notes so accepted together with an Officers' Certificate stating that such First Mortgage Notes or portions thereof have been tendered to and purchased by the Company. The Paying Agent shall promptly (but in any case not later than three days after the Purchase Date) mail or deliver to each Holder an amount equal to the Purchase Price of the First Mortgage Notes tendered by such Holder and accepted by the Company for purchase and the Trustee shall promptly authenticate and mail or deliver a new First Mortgage Note to such Holder equal in principal amount to any unpurchased portion of the First Mortgage Notes surrendered, if any, PROVIDED that each such new First Mortgage Note shall be in a principal amount of $1,000 or an integral multiple thereof. Any First Mortgage Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Repurchase Offer on or as soon as practicable after the Purchase Date. (g) Other than as specifically provided in this Sec tion 3.10, any purchase pursuant to this Section 3.10 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof to the extent applicable. 34 ARTICLE 4 COVENANTS SECTION 4.01. PAYMENT OF FIRST MORTGAGE NOTES. (a) The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the First Mortgage Notes on the dates and in the manner provided in the First Mortgage 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 10:00 a.m. Eastern time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company 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. (b) The Company shall pay interest (including post- petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the First Mortgage Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. (a) The Company 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 First Mortgage Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company or the Guarantors in respect of the First Mortgage Notes and this Indenture may be served. The Company 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 Company 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 of the Trustee. (b) The Company may also from time to time designate one or more other offices or agencies where the First Mortgage Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company 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. (c) The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. SECTION 4.03. REPORTS. (a) Whether or not required by the rules and regulations of the Commission, and within the time periods that are (or would be) prescribed thereby, so long as any First Mortgage Notes are outstanding, the Company shall furnish to the Holders of the First Mortgage Notes, (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on 35 Forms 10-Q and 10-K if the Company were required to file such Forms, including 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 current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the Commission, the Company shall file a copy of all such information and reports with the Commission for public availability (unless the Commission shall not accept such a filing) and make such information available to securities analysts and prospective investors upon request. (b) For so long as any First Mortgage Notes remain outstanding, the Company shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. SECTION 4.04. COMPLIANCE CERTIFICATE. (a) The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers of the Company with a view to determining whether the Company and each obligor on the First Mortgage Notes and this Indenture is in compliance with this Indenture and each Collateral Document and further stating, (i) as to each such Officer signing such certificate, that to the best of his or her knowledge the Company and each such obligor is in compliance with each and every covenant contained in this Indenture and each Collateral Document and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture or any Collateral Document (or, if a Default or Event of Default shall exist, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company or such obligor, as the case may be, is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred that remains in existence by reason of which payments on account of the principal of or interest, if any, on the First Mortgage Notes is prohibited or if such event exists, a description of the event and what action the Company or such obligor, as the case may be, is taking or proposes to take with respect thereto and (ii) the amount of Excess Cash Flow for such fiscal year and whether the Company is required to make an Excess Cash Flow Offer pursuant to Section 4.24 hereof. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company is in violation of any provisions of Article 4 or Article 5 hereof or, if any such violation exists, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the First Mortgage Notes are outstanding, deliver to the Trustee, within five Business Days upon any Officer becoming aware of any Default or Event of Default or any event of default under any document, instrument or agreement representing Indebtedness of the Company, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. 36 (d) Immediately upon East Chicago Showboat becoming Operating, the Company shall deliver promptly to the Trustee an Officers' Certificate that shall state that (i) East Chicago Showboat is Operating and (ii) the date on which East Chicago Showboat became Operating. SECTION 4.05. TAXES. The Company shall pay, and shall cause each of its 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 is not adverse in any material respect to the Holders of the First Mortgage Notes. SECTION 4.06. STAY, EXTENSION AND USURY LAWS. Each of the Company and the Guarantors 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 Company and the Guarantors (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 4.07. RESTRICTED PAYMENTS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (other than (1) dividends or distributions by the Company payable in Equity Interests (other than Disqualified Stock) of the Company or (2) dividends or distributions by a Restricted Subsidiary of the Company payable to the Company); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any of its Restricted Subsidiaries or any other Affiliate of the Company (other than any such Equity Interests owned by the Company or any Wholly Owned Restricted Subsidiary); (iii) purchase, redeem or otherwise acquire or retire for value any Subordinated Indebtedness of the Company or any of its Restricted Subsidiaries; (iv) make any payment in respect of repayment or reimbursement of amounts advanced under any obligation under the Completion Guarantee or make any payment of any fee for services to any Affiliate of any partner of the Company (other than a reimbursement of actual out-of-pocket costs not to exceed fair market value and other than any payment in the form of Equity Interests that are not Disqualified Stock); or (v) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (v) above being collectively referred to as "Restricted Payments"), unless, at the time of such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (b) for any Restricted Payment, the Company would, at the time of such Restricted Payment and after giving PRO FORMA effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof; and 37 (c) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the Issuance Date (including Restricted Payments permitted by clauses (u) and (x) in the next succeeding paragraph of this Section 4.07 but excluding Restricted Payments under clauses (v), (w), (y) and (z) in the next succeeding paragraph of this Section 4.07), is less than the sum of (i) 50% of the Combined Net Income After Tax Distributions of the Company for the period (taken as one accounting period) from the first day after East Chicago Showboat is Operating to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available (or, if such Combined Net Income After Tax Distributions for such period is a deficit, MINUS 100% of such deficit), PLUS (ii) 100% of the aggregate net cash proceeds received by the Company since the Issuance Date from the issue or sale of Equity Interests or debt securities of the Company that have been converted into such Equity Interests of the Company (other than (1) Equity Interests or convertible debt securities of the Company sold to a Restricted Subsidiary of the Company, (2) Disqualified Stock or debt securities that have been converted into Disqualified Stock, (3) Equity Interests the proceeds of which were applied under clauses (v) and (w) of the next succeeding paragraph of this Section 4.07 and (4) Equity Interests issued or sold to comply with the Standby Equity Commitment or the Completion Guarantee), PLUS (iii) to the extent not otherwise included in the Company's Combined Net Income After Tax Distributions, 100% of the cash dividends or distributions or the amount of the cash principal and interest payments received since the Issuance Date by the Company or any Restricted Subsidiary from any Unrestricted Subsidiary or in respect of any Restricted Investment (other than dividends or distributions to pay obligations of such Unrestricted Subsidiary for income taxes), until the entire amount of the Investment in such Unrestricted Subsidiary has been received or the entire amount of such Restricted Investment has been returned, as the case may be. The foregoing provisions shall not prohibit: (u) the payment of any dividend or the making of any distribution within 60 days after the date of declaration thereof, if, at the date of declaration, such payment or distribution would have complied with the provisions of this Indenture; (v) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Company or any Restricted Subsidiary in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of Equity Interests of the Company (other than any Disqualified Stock); (w) the redemption, repurchase, retirement or other acquisition of any Subordinated 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 Restricted Subsidiary of the Company) of Subordinated Indebtedness of the Company or Equity Interests of the Company (other than Disqualified Stock); PROVIDED, HOWEVER, that (A) the principal amount of such Subordinated Indebtedness shall not exceed the principal amount of the Subordinated Indebtedness so redeemed, repurchased, retired or otherwise acquired (plus the amount of reasonable expenses incurred and any premium paid in connection therewith), (B) the Subordinated Indebtedness shall have a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of the Subordinated Indebtedness being redeemed, repurchased, retired or otherwise acquired, and (C) such Subordinated Indebtedness is subordinated in right of payment to the First Mortgage Notes and any Note Guarantee on terms at least as favorable to the Holders as those contained in the documentation governing the Subordinated Indebtedness being redeemed, repurchased, retired or otherwise acquired; 38 (x) any redemption or purchase by the Company or any Restricted Subsidiary of Equity Interests of the Company required by a Gaming Authority in order to preserve a Gaming License; (PROVIDED, that so long as such efforts do not jeopardize any Gaming License, the Company or such Restricted Subsidiary shall have diligently attempted to find a third-party purchaser for such Equity Interests and no third-party purchaser acceptable to the applicable Gaming Authority was willing to purchase such Equity Interests within a time period acceptable to such Gaming Authority); (y) the payment of fees to the Manager under the Management Agreement; PROVIDED, HOWEVER, that: (A) no Default or Event of Default shall have occurred and be continuing by the Company; (B) at the time of payment of such fees, the Company's Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of such payment would have been at least 1.5 to 1.0 (calculated on a pro forma cash basis after only deducting such fees to the extent paid in cash and not deferred for such period including any fees deferred from a prior period to be paid in cash during such period and not deducting any such fees to the extent deferred and not paid in cash during such period); and (C) any fees not paid pursuant to the previous provision shall be deferred and may be paid only at such time that such fee may be paid under this clause (y) or as a Restricted Payment under paragraph (c) above; and (z) quarterly distributions to the partners of the Company in an amount not to exceed, with respect to any fiscal year, an amount equal to the good faith estimate of maximum federal and state income tax liability of the Company in such period if it were a taxable Person at the highest effective federal and state tax rate of any partner of the Parent Partnership. Each such quarterly distribution shall not exceed the estimated federal and state tax liability calculated on such basis. In addition, the Company may make one annual tax distribution in respect of any difference between the annual tax liability so calculated and the estimated quarterly distributions made. Any distribution of estimated tax payments that exceed the annual tax liability so calculated shall be applied to reduce the distributions in the following year; The amount of all Restricted Payments (other than cash) shall be the fair market value (as determined in good faith by, and evidenced by a resolution of, the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) on the date of such Restricted Payment of the asset(s) proposed to be transferred by the Company or such Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment. Not less than once each fiscal quarter, the Company shall deliver to the Trustee an Officers' Certificate stating that each Restricted Payment made during the prior fiscal quarter was permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed, which calculations may be based upon the Company's latest available financial statements. For purposes of determining the amount of Restricted Investments outstanding at any time, all Restricted Investments shall be valued at their fair market value at the time made (as determined in good faith by, and evidenced by a resolution of, the Board of Directors set forth in an Officers' Certificate delivered to the Trustee), and no adjustments shall be made for subsequent changes in fair market value. 39 SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or consensual restriction on the ability of any such Restricted Subsidiary to: (i) (A) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (B) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries (other than in respect of the subordination of such Indebtedness to the First Mortgage Notes or the Note Guarantees, as the case may be); (ii) make loans or advances to the Company or any of its Restricted Subsidiaries; or (iii) sell, lease, or transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. (b) Paragraph (a) of this Section 4.08 shall not apply (in each case) for such encumbrances or restrictions existing under or by reason of: (i) contractual encumbrances or restrictions in effect on the Issuance Date; (ii) this Indenture, the First Mortgage Notes, any Note Guarantees and the Collateral Documents; (iii) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any Restricted Subsidiary as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is 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 and replacements and accessions thereto; (iv) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (v) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature discussed in clause (iii) of paragraph (a) of this Section 4.08 on the property so acquired; (vi) applicable law or any applicable rule or order of any Gaming Authority; or (vii) any encumbrances or restrictions imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (i) through (vi) of this paragraph (b); PROVIDED, that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Board of Directors (as evidenced by a resolution thereof set forth in an Officers' Certificate delivered to the Trustee), no more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, 40 modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing. SECTION 4.09. LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to (collectively, "incur" and correlatively, an "incurrence" of) any Indebtedness (including Acquired Indebtedness) or issue any shares of Disqualified Stock; PROVIDED, HOWEVER, that the Company and its Restricted Subsidiaries may incur Indebtedness or issue shares of Disqualified Stock if: (i) East Chicago Showboat is Operating, and (ii) the Company's Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of such incurrence or issuance would have been at least 2.0 to 1.0, determined on a PRO FORMA basis (including a PRO FORMA application of the net proceeds therefrom) as if the additional Indebtedness had been incurred or the Disqualified Stock had been issued, as the case may be, and the application of such proceeds had occurred, at the beginning of such four-quarter period: The foregoing limitations shall not apply to: (a) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness for working capital in an aggregate principal amount not to exceed $3.0 million at any time outstanding; (b) the incurrence by the Company or any of its Restricted Subsidiaries of the Existing Indebtedness; (c) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by the First Mortgage Notes or a Note Guarantee or obligations arising under the Collateral Documents, to the extent that such obligations would constitute Indebtedness; (d) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness (the "REFINANCING INDEBTEDNESS") issued in exchange for, or the proceeds of which are used to extend, refinance, renew, replace, or refund Indebtedness referred to the first paragraph of this Section 4.09 or in clauses (b) or (c) or this clause (d); PROVIDED, HOWEVER, that (1) the principal amount of such Refinancing Indebtedness shall not exceed the principal amount of Indebtedness so extended, refinanced, renewed, replaced, substituted or refunded (plus the amount of reasonable expenses incurred and any premium paid in connection therewith), (2) the Refinancing Indebtedness shall, if applicable, be subordinated in right and priority of payment to the First Mortgage Notes and any Note Guarantee on terms at least as favorable to the Holders of the First Mortgage Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, substituted or refunded, and (3) the Refinancing Indebtedness shall have a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being extended, refinanced, renewed, replaced, substituted or refunded; (e) intercompany Indebtedness between or among the Company and any Wholly Owned Restricted Subsidiary; PROVIDED, HOWEVER, the obligations to pay principal, interest or other amounts under such intercompany Indebtedness is subordinated to the prior payment in full in cash of the First Mortgage Notes and any Note Guarantee; 41 (f) Hedging Obligations that are incurred for the purpose of fixing or hedging (1) interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding or (2) foreign currency exchange rate risk; (g) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase or lease of personal property or equipment used in the Principal Business of the Company or such Restricted Subsidiary, in an aggregate principal amount pursuant to this clause (g) not to exceed $16.0 million at any time outstanding; (h) the incurrence by the Company or any of its Restricted Subsidiaries of Non-Recourse Financing used to finance the purchase or lease of personal or real property used in the business of the Company or any such Restricted Subsidiary; PROVIDED, that (1) such Non-Recourse Financing represents at least 80% of the purchase price of such personal or real property, (2) the Indebtedness incurred pursuant to this clause (h) shall not exceed $15.0 million at any time outstanding, and (3) no such Indebtedness may be incurred pursuant to this clause (h) unless East Chicago Showboat is Operating and the Company shall have generated at least $10.0 million of Combined Cash Flow in any one fiscal quarter; and (i) the incurrence by the Company or any of its Restricted Subsidiaries of any other Indebtedness in an aggregate principal amount pursuant to this clause (i) not to exceed $4.0 million at any time outstanding. (j) The Company shall not permit any of its Unrestricted Subsidiaries to incur any Indebtedness (including Acquired Indebtedness) or issue any shares of Disqualified Stock, other than Non-Recourse Indebtedness; PROVIDED, HOWEVER, that if any such Unrestricted Subsidiary ceases to remain an Unrestricted Subsidiary, such event shall be deemed to constitute the incurrence of the Indebtedness of such Subsidiary by a Restricted Subsidiary. SECTION 4.10. ASSET SALES. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, cause, make or suffer to exist any Asset Sale, unless (i) no Default or Event of Default exists or is continuing immediately prior to or after giving effect to such Asset Sale, (ii) the Company or its Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value (as determined by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee) of the assets sold or otherwise disposed of and (iii) at least 80% of the consideration therefor received by the Company or such Restricted Subsidiary, as the case may be, is in the form of cash or Cash Equivalents; PROVIDED, HOWEVER, that the amount of (A) any liabilities (as shown on the Company's or such Restricted Subsidiary's, as the case may be, most recent balance sheet or in the notes thereto) of the Company or any Restricted Subsidiary, as the case may be (other than liabilities that are by their terms expressly subordinated to the First Mortgage Notes or any Note Guarantee), that are assumed or repaid by the transferee of any such assets and (B) any notes or other obligations received by the Company or any Restricted Subsidiary, as the case may be, from such transferee that are converted by the Company or such Restricted Subsidiary, as the case may be, into cash (to the extent of the cash received) within 10 Business Days following the closing of such Asset Sale, shall be deemed to be cash only for purposes of satisfying clause (iii) of this paragraph and for no other purpose under this Indenture. 42 (b) Within 180 days after the Company's or any Restricted Subsidiary's, as the case may be, receipt of the Net Proceeds of any Asset Sale, the Company or such Restricted Subsidiary, as the case may be, may apply the Net Proceeds from such Asset Sale to an investment in any one or more businesses, capital expenditures or other tangible assets of the Company or any Restricted Subsidiary, in each case, engaged, used or useful in the Principal Business, with no concurrent obligation to make an offer to repurchase any First Mortgage Notes. Pending the final application of any such Net Proceeds, the Company or such Restricted Subsidiary, as the case may be, may temporarily reduce Indebtedness under a revolving credit facility, if any, or otherwise invest such Net Proceeds in Cash Equivalents, which shall be pledged to the Trustee as security for the First Mortgage Notes if such unapplied Net Proceeds aggregate more than $2.0 million at any time. Any Net Proceeds from any Asset Sale that are not invested as provided in the first sentence of this paragraph shall be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $7.5 million, the Company shall make an offer to all Holders (an "Asset Sale Offer") to purchase the maximum principal amount of First Mortgage Notes, that is an integral multiple of $1,000, that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date fixed for the closing of such Asset Sale Offer, in accordance with the procedures set forth in this Indenture. The Company shall commence an Asset Sale Offer with respect to Excess Proceeds within 10 Business Days after the date that the Excess Proceeds exceed $7.5 million by mailing the notice required pursuant to the terms of this Indenture. To the extent that the aggregate amount of First Mortgage Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may, subject to the other provisions of this Indenture, use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of First Mortgage Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the First Mortgage Notes to be purchased in the manner described under Section 3.02 hereof. To the extent that the aggregate amount of First Mortgage Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may, subject to the other provisions of the Indenture, use any remaining Excess Proceeds for general corporate purposes. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. This Indenture shall also require the Company (or such Restricted Subsidiary, as the case may be) to grant to the Trustee, on behalf of the Holders, a first priority lien on any properties or assets acquired with the Net Proceeds of any such Asset Sale on the terms set forth in this Indenture and the Collateral Documents. SECTION 4.11. EVENT OF LOSS. (a) Within 12 months after any Event of Loss with respect to Collateral with a fair market value (or replacement cost, if greater) in excess of $1.0 million, the Company or the affected Restricted Subsidiary, as the case may be, shall apply the Net Loss Proceeds from such Event of Loss to the rebuilding, repair, replacement or construction of improvements to the East Chicago Showboat, with no concurrent obligation to make any purchase of any First Mortgage Notes; PROVIDED that (i) the Company delivers to the Trustee within 90 days of such Event of Loss a written opinion from a reputable architect that the East Chicago Showboat with at least the Minimum Facilities can be rebuilt, repaired, replaced, or constructed and Operating within one year of such Event of Loss and that, with respect to any Event of Loss that occurs on or prior to July 1, 1997, such rebuilding, repair, replacement or construction of improvements can be rebuilt, repaired, replaced or constructed and Operating on or prior to December 31, 1997, (ii) an Officer's Certificate certifying that the Company has available from Net Loss Proceeds or other sources sufficient funds to complete such rebuilding, repair, replacement or construction, and (iii) the Net Loss Proceeds are less than $75.0 million. Any Net Loss Proceeds from an Event of Loss that are not reinvested or are not permitted to be reinvested as provided in the first sentence of this paragraph shall be deemed "Excess Loss Proceeds." When the aggregate amount of Excess Loss Proceeds 43 exceeds $7.5 million, the Company shall make an offer to all Holders (an "Event of Loss Offer") to purchase the maximum principal amount of First Mortgage Notes, that is an integral multiple of $1,000, that may be purchased out of the Excess Loss Proceeds at a purchase price in cash in an amount equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date fixed for the closing of such Event of Loss Offer, in accordance with the procedures set forth in this Indenture. If the aggregate principal amount of First Mortgage Notes tendered pursuant to an Event of Loss Offer exceeds the amount of Excess Loss Proceeds, the Trustee shall select the First Mortgage Notes to be purchased in the manner described under Section 3.02 hereof. To the extent that the aggregate amount of First Mortgage Notes tendered pursuant to an Event of Loss Offer is less than the Excess Loss Proceeds, the Company may, subject to the other provisions of this Indenture, use any remaining Excess Loss Proceeds for general corporate purposes. Upon completion of any such Event of Loss Offer, the amount of Excess Loss Proceeds shall be reset at zero. Pending any permitted rebuilding, repair, replacement or construction or the completion of any Event of Loss Offer, the Company shall pledge to the Trustee as additional Collateral any Net Loss Proceeds or other cash on hand required for such permitted rebuilding, repair, replacement or construction pursuant to the terms of the mortgages relating to the East Chicago Showboat. Such pledged funds shall be released to the Company to pay for or reimburse the Company for the actual cost of such permitted rebuilding, repair or construction, or such Event of Loss Offer, pursuant to the terms of the mortgages relating to the East Chicago Showboat. Pending the final application of the Net Loss proceeds, such proceeds shall be invested in Cash Equivalents which shall be pledged to the Trustee as security for the First Mortgage Notes. The Company or such Restricted Subsidiary shall also grant to the Trustee, on behalf of the Holders, a first priority lien on any properties or assets rebuilt, repaired or constructed with such Net Loss Proceeds on the terms set forth in this Indenture and the Collateral Documents. (b) With respect to any Event of Loss pursuant to clause (D) of the definition of "Event of Loss" that has a fair market value (or replacement cost, if greater) in excess of $15.0 million, the Company (or the affected Restricted Subsidiary, as the case may be, shall be required to receive consideration at least (i) equal to the fair market value (as determined by an Independent Financial Advisor) of the assets subject to an Event of Loss and (ii) 90% of which is in the form of cash or Cash Equivalents; PROVIDED, HOWEVER, that the amount of (A) any liabilities (as shown on the Company's or such Restricted Subsidiary's, as the case may be) most recent balance sheet or in the notes thereto) of the Company (or such Restricted Subsidiary, as the case may be) (other than liabilities that are by their terms expressly subordinated to the First Mortgage Notes or any Note Guarantee) that are assumed or repaid by the transferee of any such assets and (B) any notes or other obligations received by the Company (or such Restricted Subsidiary, as the case may be) from such transferee that are converted by the Company or such Restricted Subsidiary, as the case may be, into cash (to the extent of cash received) within 10 Business Days following the closing of such sale of the assets subject to such Event of Loss, shall be deemed to be cash only for purposes of satisfying clause (ii) of this paragraph and for no other purpose. SECTION 4.12. TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, 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 guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless: (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person, and (ii) the Company delivers to the Trustee with respect to any Affiliate Transaction involving aggregate payments in excess of $1.0 million, a resolution adopted by a majority of the disinterested non- employee directors of the Board of Directors approving such Affiliate 44 Transaction and set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and with respect to any Affiliate Transaction involving aggregate payments of, or loans in the principal amount of, $10.0 million or more, an opinion as to the fairness to the Company or such Restricted Subsidiary from a financial point of view issued by an Independent Financial Advisor. The restrictions contained in this Section 4.12 shall not apply to the following: (1) transactions between or among the Company and/or any of its Restricted Subsidiaries; (2) Restricted Payments permitted by Section 4.07 hereof; (3) purchases of Equity Interests (other than Disqualified Stock) by any holder of Capital Stock of the Company (or an Affiliate of any holder of Capital Stock of the Company); PROVIDED that such Equity Interests do not bear cash dividends; (4) any payments due to the Manager under the Management Agreement in the form executed prior to the Issuance Date; (5) payments to Second Century, TCEF and ECCF relating to the Company's economic development commitments to the City of East Chicago under the Certificate of Suitability; and (6) the transactions contemplated by the Completion Guarantee and the Standby Equity Commitment. SECTION 4.13. LIENS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien, except Permitted Liens, on any asset owned as of the Issuance Date or thereafter acquired by the Company or such Restricted Subsidiary (including, without limitation, the Collateral), or any income or profits therefrom, or assign or convey any right to receive income or profits therefrom. SECTION 4.14. LINE OF BUSINESS. For so long as any First Mortgage Notes are outstanding, the Company shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any business or activity other than the Principal Business. Finance Corporation shall not own or acquire any assets or properties, or conduct any business or activities other than in connection with the issuance of the First Mortgage Notes and observance of the provisions of this Indenture. SECTION 4.15. CORPORATE OR PARTNERSHIP EXISTENCE. Subject to Article 5 and Article 11 hereof, as the case may be, the Company and each of the Guarantors shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate or partnership existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company, any such Guarantor or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company, the Guarantor and their respective Subsidiaries; PROVIDED, HOWEVER, that the Company and the Guarantors shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of their respective Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company, the Guarantors and their Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the First Mortgage Notes. 45 SECTION 4.16. CHANGE OF CONTROL. Upon the occurrence of a Change of Control, the Company shall make an offer to purchase all or any part (equal to $1,000 or an integral multiple thereof) of the First Mortgage Notes (the "Change of Control Offer") at a purchase price in cash (the "Change of Control Payment") equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase. Such Change of Control Offer shall be made in accordance with the procedures set forth in Article 3 hereof. Within 30 days following any Change of Control, the Company shall commence such Change of Control Offer by mailing the notice set forth in Section 3.10 hereof to Holders of First Mortgage Notes. SECTION 4.17. DESIGNATION OF UNRESTRICTED SUBSIDIARY (a) The Board of Directors may designate any Restricted Subsidiary (other than Finance Corporation) to be an Unrestricted Subsidiary; PROVIDED, that: (i) at the time of designation, the Investment by the Company and any of its Restricted Subsidiaries in such Subsidiary shall be deemed a Restricted Investment (to the extent not previously included as a Restricted Investment) made on the date of such designation in the amount of the greater of (A) the net book value of such Investment or (B) the fair market value of such Investment (as determined in good faith by, and evidenced by a resolution of, the Board of Directors set forth in an Officers' Certificate delivered to the Trustee); (ii) since the Issuance Date, such Unrestricted Subsidiary has not acquired any assets from the Company or any Restricted Subsidiary, other than as permitted by the provisions of this Indenture, including the provisions described under Sections 4.07 and 4.10 hereof; (iii) at the time of designation, no Default or Event of Default has occurred and is continuing or will result immediately after such designation or as a result of any Restricted Investment in such Subsidiary; (iv) at the time of designation, such Subsidiary has no Indebtedness other than Non-Recourse Indebtedness of such Subsidiary or a Note Guarantee; (v) such Subsidiary does not own any Equity Interests in a Restricted Subsidiary; (vi) such Subsidiary does not own or operate or possess any material license, franchise or right used in connection with the ownership or operation of any part of the Project Assets of East Chicago Showboat; and (vii) such Subsidiary does not operate any gaming operations in East Chicago, Indiana or within a 50 mile radius of Chicago, Illinois, or permit any gaming operations to be conducted on any property owned by such Subsidiary in East Chicago, Indiana or within a 50 mile radius of Chicago, Illinois, other than operations that are conducted by the Company or a Restricted Subsidiary pursuant to a lease that extends beyond March 15, 2003. (b) An Unrestricted Subsidiary shall cease to be an Unrestricted Subsidiary and shall become a Restricted Subsidiary if either (i) at any time while it is a Subsidiary of the Company, (A) such Subsidiary acquires any assets from the Company or any Restricted Subsidiary other than as permitted by the provisions of this Indenture, including the provisions described under Sections 4.07 and 4.10; (B) 46 such Subsidiary has any Indebtedness other than Non-Recourse Indebtedness of such Subsidiary; (C) such Subsidiary owns any Equity Interests in a Restricted Subsidiary of the Company; and (D) such Subsidiary owns or operates or possesses any material license, franchise or right used in connection with the ownership or operation of any part of the Project Assets of the East Chicago Showboat or (ii) the Company designates such Unrestricted Subsidiary to be a Restricted Subsidiary and no Default or Event of Default occurs or will be continuing immediately after such designation. (c) Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. As of the Issuance Date, the Company shall not have any Unrestricted Subsidiaries. Unrestricted Subsidiaries shall not be subject to any of the restrictive covenants set forth in this Indenture and will not be Guarantors. SECTION 4.18. MAINTENANCE OF INSURANCE. Until the First Mortgage Notes have been paid in full, the Company shall, and shall cause its Restricted Subsidiaries to, maintain insurance with responsible carriers against such risks and in such amounts as is customarily carried by similar businesses with such deductibles, retentions, self insured amounts and coinsurance provisions as are customarily carried by similar businesses of similar size, including, without limitation, property and casualty, and shall have provided insurance certificates evidencing such insurance to the Trustee prior to the Issuance Date, excluding, however, insurance coverages for which insurance certificates cannot be issued until after the commencement of construction on the Casino or the Project, in which event the Company shall provide such insurance certificates evidencing its compliance with the insurance requirements of this Section 4.18 promptly after such construction has commenced but in no event later than 30 days after such commencement. The Company shall promptly provide such certificates or other evidence of insurance prior to the anniversary or renewal date of each such policy, which certificate shall expressly state the expiration date for each policy listed. The Company shall furnish or cause to be furnished copies of the policies to the Trustee. Customary insurance coverage shall be deemed to include the following: (i) workers' compensation insurance, to the extent required to comply with all applicable state laws, including a specific endorsement or separate policy covering liability for Federal Longshoremen's and Harbor Workers' Compensation Act (if any employees are so covered by such Act), territorial, or United States laws and regulations or the laws and regulations of any other applicable jurisdiction, (ii) Protection and Indemnity Insurance Collision, including hull liability, liability insurance with minimum limits of $1.0 million, (iii) umbrella or excess liability insurance providing liability limits over and above the foregoing insurance up to a minimum limit of $25.0 million, and (iv) property insurance protecting the property against such risks and hazards as are from time to time covered by an "all-risk" policy or a property policy covering "special" causes of loss (such insurance shall provide coverage in not less than the lesser of 120% of the outstanding principal amount of First Mortgage Notes plus accrued and unpaid interest or 100% of actual replacement value (as determined at each policy renewal based on the F.W. Dodge Building Index or some other recognized means) of any improvements and with a deductible for physical damage to the Casino of not more than 2% of the insured value of the Casino and a deductible for the land based facilities of not more than $500,000 (other than earthquake and flood insurance, for which the deductible may be up to 10% of such replacement value or such greater amount as is available on reasonably commercial terms). Subject to the terms of the Lease Agreement, all insurance required under this Indenture (except worker's compensation) shall name the Company and the Trustee as additional insureds or loss payees, as the case may be, with losses in excess of $1.0 million payable jointly to the Company and the Trustee (unless a Default or Event of Default has occurred and is then continuing, in which case all losses are payable solely to the Trustee), with no recourse against the Trustee for the payment of premiums, deductibles, 47 commissions or club calls, and for at least 30 days notice of cancellation. In the event that an Event of Loss exceeds $7.5 million, all Excess Loss Proceeds shall be deposited in the Escrow Account to be applied in accordance with Section 4.11 hereof. All such insurance policies shall be issued by carriers having an A.M. Best & Company, Inc. rating of A- or higher and a financial size category of not less than X, or if such carrier is not rated by A.M. Best & Company, Inc., having the financial stability and size deemed appropriate by an opinion from a reputable insurance broker. The Company shall deliver to the Trustee on the Issuance Date and each anniversary thereafter a certificate of an insurance agent stating that the insurance policies obtained by the Company and its Restricted Subsidiaries comply with this provision and the related applicable provisions of the Collateral Documents. SECTION 4.19. LIMITATION ON STATUS AS INVESTMENT COMPANY. None of the Company and its Restricted Subsidiaries shall take any action that would result in a requirement to register as an "investment company" (as that term is defined in the Investment Company Act of 1940, as amended), or otherwise becoming subject to regulation under the Investment Company Act of 1940, as amended. SECTION 4.20. COLLATERAL DOCUMENTS. Neither the Company nor any of its Restricted Subsidiaries shall amend, waive or modify, or take or refrain from taking any action that has the effect of amending, waiving or modifying any provision of the Collateral Documents, to the extent that such amendment, waiver, modification or action could have an adverse effect on the rights of the Trustee or the Holders of First Mortgage Notes; PROVIDED, that: (i) the Collateral may be released or modified as expressly provided in this Indenture and in the Collateral Documents; (ii) any Note Guarantee and pledges may be released as expressly provided in this Indenture and in the Collateral Documents; (iii) the Construction Budget may be amended as expressly provided in the Escrow and Disbursement Agreement; and (iv) this Indenture and any of the Collateral Documents may be otherwise amended, waived or modified as set forth in Article 9 hereof. SECTION 4.21. FURTHER ASSURANCES. The Company shall (and shall cause each of its Restricted Subsidiaries to) do, execute, acknowledge, deliver, record, re- record, file, re-file, register and re-register, as applicable, any and all such further acts, deeds, conveyances, security agreements, mortgages, assignments, estoppel certificates, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as may be required from time to time in order (i) to carry out more effectively the purposes of the Collateral Documents, (ii) to subject to the Liens created by any of the Collateral Documents any of the properties, rights or interests required to be encumbered thereby, (iii) to perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and the Liens intended to be created thereby, and (iv) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Trustee any of the rights granted or now or hereafter intended by the parties thereto to be granted to the Trustee or under any other instrument executed in connection therewith or granted to the Company under the Collateral Documents or under any other instrument executed in connection therewith. SECTION 4.22. RESTRICTIONS ON LEASING AND DEDICATION OF PROPERTY. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, lease, sublease, or grant a license, concession or other agreement to occupy, manage or use any real or personal 48 Project Assets owned or leased by the Company or any Restricted Subsidiary (each, a "Lease Transaction"), other than the following Lease Transactions: (i) the Company or any Restricted Subsidiary may enter into a Lease Transaction with respect to any space on or within East Chicago Showboat with any Person (other than an Unrestricted Subsidiary with respect to any space on or within East Chicago Showboat); PROVIDED that such Lease Transaction shall not interfere with, impair or detract from the operations of any of the Project Assets and shall, in the opinion of the Company, enhance the value and operations of East Chicago Showboat and such Lease Transaction is at a fair market rent (in light of other similar or comparable prevailing commercial transactions) and contains such other terms such that the Lease Transaction, taken as a whole, is commercially reasonable and fair to the Company or such Restricted Subsidiary in light of prevailing or comparable transactions in other casinos, hotels, attractions or shopping venues; (ii) the Company or any Restricted Subsidiary may enter into a management or operating agreement with respect to any Project Asset (other than any Project Asset or space used for any casino or gaming operations) with any Person (other than an Unrestricted Subsidiary); PROVIDED that the manager or operator has experience in managing or operating similar operations, such management or operating agreement is on commercially reasonable and fair terms to the Company or such Restricted Subsidiary and such management or operating agreement is terminable without penalty to the Company or such Restricted Subsidiary upon no more than 90 days written notice; and (iii) the Company may dedicate land, easements or space to any Governmental Authority, provided that such dedication does not materially economically impair the use or operations of the East Chicago Showboat. (b) Notwithstanding the foregoing, the Company shall not be permitted to enter into any Lease Transaction: (x) if at the time of such proposed Lease Transaction, a Default or Event of Default has occurred and is continuing or would occur immediately after entering into such Lease Transaction (or immediately after any extension or renewal of such Lease Transaction made at the option of the Company or any Restricted Subsidiary); (y) that permits gaming or casino operations to be conducted with respect to any space on or within East Chicago Showboat by a Person other than the Company or a Restricted Subsidiary; or (z) if such Lease Transaction provides that the Company or any Restricted Subsidiary may subordinate its interest with respect to any space on or within East Chicago Showboat to any lessee or any party providing financing to any lessee. (c) The Trustee shall enter into a commercially customary leasehold non-disturbance and attornment agreement with the lessee under any Lease Transaction permitted under this Section 4.22. Such agreement, among other things, shall provide that if the interests of the Company (or in the case of a Lease Transaction being entered into by a Restricted Subsidiary, the interests of the Restricted Subsidiary) in the Project Assets subject to the Lease Transaction are acquired by the Trustee (on behalf of the Holders of the First Mortgage Notes), whether by purchase and sale, foreclosure, or deed in lieu of foreclosure or in any other way, or by a successor to the Trustee, including, without limitation, a purchaser at a foreclosure sale, then (1) the interests of the lessee in the Project Assets subject to the Lease Transaction shall continue in full force and effect and shall not be terminated or disturbed, except in accordance with the lease documentation applicable to the Lease Transaction, and (2) the lessee in the Lease Transaction shall attorn to and be bound to the Trustee (on behalf of the Holders of First Mortgage Notes), its successors and assigns under all terms, covenants and conditions of the lease documentation applicable to the Lease Transaction. Such agreement shall also contain such other provisions that are 49 commercially customary and that shall not materially and adversely affect the Lien granted by the Leasehold Mortgage, as certified by the Board of Directors in an Officers' Certificate delivered to the Trustee. SECTION 4.23. NOTE GUARANTEES. The Company shall, and shall cause each of its Restricted Subsidiaries to, comply with Section 11.02 hereof. SECTION 4.24. EXCESS CASH FLOW OFFER. (a) Within 90 days after each Operating Year, the Company shall make an offer to all Holders (an "EXCESS CASH FLOW OFFER") to purchase the maximum principal amount of First Mortgage Notes, that is an integral multiple of $1,000, that may be purchased with 50% of the Company's Excess Cash Flow (the "EXCESS CASH FLOW OFFER AMOUNT") in respect of the Operating Year then ended, at a purchase price in cash equal to 101% of the principal amount of First Mortgage Notes to be purchased, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date fixed for the closing of such Excess Cash Flow Offer (the "EXCESS CASH FLOW PURCHASE PRICE"), in accordance with the procedures set forth in this Indenture. The Excess Cash Flow Offer shall remain open for 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law. Upon the expirations of such period, the Company will apply the Excess Cash Flow Offer Amount to the purchase of all First Mortgage Notes tendered at the Excess Cash Flow Purchase Price. If the aggregate principal amount of First Mortgage Notes tendered pursuant to any such offer exceeds the amount of funds available to repurchase such First Mortgage Notes, the Trustee will select the First Mortgage Notes to be repurchased in the manner set forth under Section 3.02 hereof. To the extent that the aggregate amount of First Mortgage Notes tendered pursuant to any Excess Cash Flow Offer is less than the Excess Cash Flow Offer Amount with respect thereto, the Company may, subject to the other provisions of this Indenture, use any remaining Excess Cash Flow for general corporate purposes. (b) Any offer to repurchase First Mortgage Notes pursuant to this section shall be made in accordance with the procedures set forth in Section 3.10 hereof. SECTION 4.25. USE OF PROCEEDS. The Company shall use the net proceeds from the sale of the Series A First Mortgage Notes and the proceeds from the Capital Contribution, to the extent of cash remaining, and any Additional Project Financing, to the extent received in cash, if any, only for Permitted Proceed Uses. The Company shall cause all of such proceeds to be deposited into the Escrow Account and disbursed only in accordance with the terms of the Escrow and Disbursement Agreement. SECTION 4.26. GAMING LICENSES. The Company shall use its best efforts to obtain and retain in full force and effect at all times all Gaming Licenses necessary for the operation of East Chicago Showboat. SECTION 4.27. CONSTRUCTION. The Company shall cause construction of the East Chicago Showboat, including the furnishing, fixturing and equipping thereof, to be prosecuted with diligence and continuity in a good and workerlike manner substantially in accordance with the Plans and within the Construction Budget. 50 SECTION 4.28. TRANSFER OF CERTIFICATE OF SUITABILITY. If the Certificate of Suitability has not been transferred from the Manager to the Company by July 1, 1996, the Company shall make an offer to all Holders (a "Certificate of Suitability Transfer Offer") to purchase all or any part (equal to $1,000 or an integral multiple thereof) of the First Mortgage Notes equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase. Such Certificate of Suitability Transfer Offer shall be made in accordance with the procedures set forth in Article 3 hereof. Within 30 days following July 1, 1996, the Company shall commence such Certificate of Suitability Transfer Offer by mailing the notice set forth in Section 3.10 hereof to Holders of First Mortgage Notes. Until the earlier to occur of (i) the completion of such Certificate of Suitability Transfer Offer or (ii) transfer of the Certificate of Suitability from the Manager to the Company, the Company will cause the amount of funds remaining in the Escrow Account to be no less than $147.0 million. SECTION 4.29. FILING OF FIRST PREFERRED SHIP MORTGAGE. The Company shall cause, as soon as practicable after construction has been sufficiently completed to permit such actions (but in no event later than five (5) business days after title to the Casino vessel has been conveyed to Showboat Partnership pursuant to the terms of the Casino Vessel Construction Contract), the Casino vessel to be a newly documented United States vessel with the United States Coast Guard, and to file and perfect a First Preferred Ship Mortgage with respect to such Casino vessel in favor of the Trustee for the ratable benefit of the Holders of the First Mortgage Notes. The Company shall also cause, as soon as practicable after filing of the First Preferred Ship Mortgage with the United States Coast Guard, Financing Statements to be filed with respect to the Casino with the Secretary of State of Indiana and the Office of the Lake County Recorder. In no event shall the Casino vessel be titled under the laws of any state, including the State of Indiana. SECTION 4.30. PAYMENT AND PERFORMANCE BOND. Until such time as the Casino is secured by the First Preferred Ship Mortgage as provided in Section 4.29, the Company shall have in effect the Payment and Performance Bond naming the Trustee, for the benefit of the Holders of the First Mortgage Notes, as an obligee on such bond, guaranteeing the completion of the Casino vessel by Atlantic Marine, Inc. SECTION 4.31. TRANSFER OF CERTIFICATE OF SUITABILITY. The Company shall use its best efforts to diligently pursue the transfer of the Certificate of Suitability from the Manager to the Company. 51 ARTICLE 5 SUCCESSORS SECTION 5.01 MERGER, CONSOLIDATION OR SALE OF ASSETS. The Company may not consolidate or merge with or into or wind-up into (whether or not the Company is the surviving Person), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, any Person unless: (i) the Company is the surviving Person or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation or partnership organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof; (ii) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all of the obligations of the Company under this Indenture and the Collateral Documents pursuant to a supplemental indenture or other documents or instruments in form reasonably satisfactory to the Trustee under the First Mortgage Notes and this Indenture; (iii) immediately after such transaction, no Default or Event of Default exists; (iv) such transaction shall not result in the loss or suspension or material impairment of any Gaming License; (v) the Company or any Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (A) shall have Combined Net Worth (immediately after the transaction but prior to any purchase accounting adjustments resulting from the transaction) equal to or greater than the Combined Net Worth of the Company immediately preceding the transaction and (B) shall, 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, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Cover Ratio test set forth in Section 4.09 hereof; and (vi) such transaction would not require any Holder or beneficial owner of First Mortgage Notes to obtain a Gaming License or be qualified or found suitable under the law of any applicable gaming jurisdiction; PROVIDED that such Holder or beneficial owner would not have been required to obtain a Gaming License or be qualified or found suitable under the laws of any applicable gaming jurisdiction in the absence of such transaction. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, 52 conveyance or other disposition, the provisions of this Indenture referring to the "COMPANY" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; PROVIDED, HOWEVER, that (i) the Company has delivered to the Trustee an Officers' Certificate and Opinion of Counsel, subject to customary assumptions and exclusions, stating that the proposed transaction complies with this Indenture and (ii) the surviving entity or acquiring corporation shall (A) assume all of the obligations of the acquired Person under this Indenture, the First Mortgage Notes, and, if applicable, the Collateral Documents, (B) acquire and own and operate, directly or through Wholly Owned Subsidiaries, all or substantially all of the properties and assets then constituting the assets of the Company or any of its Subsidiaries, as the case may be, (C) have been issued, or have a consolidated Subsidiary that has been issued, Gaming Licenses to operate the acquired casino operations and entities substantially in the manner and scope operated prior to such transaction, which Gaming Licenses are in full force and effect and (D) comply fully with Section 5.01 hereof; PROVIDED FURTHER, HOWEVER, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the First Mortgage Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT AND REMEDIES. (a) Each of the following constitutes an Event of Default: (i) default in payment when due and payable, upon redemption or otherwise, of principal of or premium, if any, on the First Mortgage Notes or under any Note Guarantee; (ii) default for 30 days or more in the payment when due of interest or Liquidated Damages on the First Mortgage Notes or under any Note Guarantee; (iii) East Chicago Showboat is not Operating by October 1, 1997 and continues to be not Operating; (iv) failure by the Company or any Guarantor to comply with Section 4.07, 4.09, 4.10, 4.11, 4.16, 4.24, 4.25 or 4.28 hereof; (v) failure by the Company or any Guarantor for 30 days after receipt of written notice until December 31, 1997, and thereafter for 60 days after receipt of written notice, to comply with any of its other agreements in this Indenture, the Collateral Documents, or the First Mortgage Notes; (vi) default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries, whether such Indebtedness or Guarantee now exists or is created after the Issuance Date, which default (A) is caused by a failure to pay when due principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a "PAYMENT DEFAULT") or (B) results in the acceleration of such Indebtedness prior to its express maturity or would constitute a default in the payment of such issue of Indebtedness at final maturity of such issue and, in each case, the principal amount of 53 any such Indebtedness, together with the principal amount of any other such Indebtedness under which a Payment Default then exists or with respect to which the maturity thereof has been so accelerated or which has not been paid at maturity, aggregates $5.0 million or more; (vii) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which final judgments remain unpaid, undischarged and unstayed for a period of more than 60 days; (viii) breach by the Company, any Guarantor or any of their Subsidiaries of any representation or warranty set forth in any Note Guarantee or any of the Collateral Documents, or default by the Company or any Guarantor in the performance of any covenant set forth in any Note Guarantee or any of the Collateral Documents or the repudiation by the Company, any Guarantor or any of their Subsidiaries of its obligations under, or any judgment or decree by a court or governmental agency of competent jurisdiction declaring the unenforceability of, any Note Guarantee or any of the Collateral Documents for any reason that would materially impair the benefits to the Trustee or the Holders of the First Mortgage Notes thereunder; (ix) the Company or any Guarantor that is a Significant Subsidiary of the Company or any group of Guarantors that together would constitute a Significant Subsidiary of the Company (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, (D) makes a general assignment for the benefit of its creditors, (E) generally is not paying its debts as they become due, or (F) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (1) is for relief against the Company or any of Guarantor that is a Significant Subsidiary of the Company or any group of Guarantors that together would constitute a Significant Subsidiary of the Company in an involuntary case or (2) appoints a Custodian of Company or any of Guarantor that is a Significant Subsidiary of the Company or any group of Guarantors that together would constitute a Significant Subsidiary of the Company; (x) revocation, termination, suspension or other cessation of effectiveness of any Gaming License which results in the cessation or suspension of gaming operations for a period of more than 90 days at East Chicago Showboat and such cessation or suspension of gaming operations is continuing; or (xi) any failure by Showboat to comply with the terms of the Completion Guarantee, the Standby Equity Commitment or the Escrow and Disbursement Agreement for 30 days after the receipt of written notice. SECTION 6.02. ACCELERATION. (a) If any Event of Default (other than an Event of Default specified in clause (viii) or (ix) set forth in paragraph (a) of Section 6.01 hereof with respect to the Company or any Guarantor that is a Significant Subsidiary or any group of Guarantors that would together constitute a Significant Subsidiary), occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding First Mortgage Notes (treating all First Mortgage Notes of every series as a single class) may declare the principal, premium, if any, interest and any other monetary obligations on all of the First Mortgage Notes to be due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (ix) set forth in paragraph (a) of Section 6.01 hereof occurs with respect to the Company or any Guarantor that is a Significant Subsidiary or any group of Guarantors that would 54 together constitute a Significant Subsidiary of the Company, the principal, premium, if any, interest any other monetary obligations on all of the outstanding First Mortgage Notes shall be due and payable immediately without further action or notice. The Holders of a majority in aggregate principal amount of the then outstanding First Mortgage Notes by written notice to the Trustee may on behalf of all of the Holders 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, interest or premium that has become due solely because of the acceleration) have been cured or waived. (b) Notwithstanding paragraph (a) of this Section 6.02, the Trustee shall have no obligation to accelerate the First Mortgage Notes if in the best judgment of the Trustee acceleration is not in the best interest of the Holders of the First Mortgage Notes. (c) If an Event of Default occurs on or after March 15, 2000 for First Mortgage Notes of any series by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the First Mortgage Notes pursuant to Section 3.07 hereof, then, upon acceleration of the First Mortgage Notes, an equivalent premium shall also become and be immediately due and payable on First Mortgage Notes of such series, to the extent permitted by law, anything in this Indenture or in the First Mortgage Notes to the contrary notwithstanding. If an Event of Default occurs prior to March 15, 2000, for First Mortgage Notes of any series by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the First Mortgage Notes prior to such date, then, upon acceleration of the First Mortgage Notes, an additional premium shall also become and be immediately due and payable on First Mortgage Notes of such series in an amount equal to (i) the highest premium then payable on the First Mortgage Notes of any other series or (ii) if no such premium is then payable, for each of the years beginning on March 15 of the years set forth below, as set forth below (expressed as a percentage of the principal amount that would otherwise be due but for the provisions of this sentence): YEAR PERCENTAGE 1996 120.250% 1997 116.875% 1998 113.500% 1999 110.125% 2000 106.750% SECTION 6.03. OTHER REMEDIES. (a) If an Event of Default occurs and is continuing, the Trustee, may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the First Mortgage Notes or to enforce the performance of any provision of the First Mortgage Notes or this Indenture. (b) The Trustee may maintain a proceeding even if it does not possess any of the First Mortgage Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a First Mortgage Note 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 acquies cence in the Event of Default. All remedies are cumulative to the extent permitted by law. 55 SECTION 6.04. WAIVER OF PAST DEFAULTS. Holders of not less than a majority in aggregate principal amount of the then outstanding First Mortgage Notes by notice to the Trustee may on behalf of the Holders of all of the First Mortgage Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Liquidated Damages, if any, or interest on, the First Mortgage Notes (including in connection with an offer to purchase) (provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding First Mortgage Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). 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 6.05. CONTROL BY MAJORITY. Holders of a majority in principal amount of the then outstanding First Mortgage Notes (treating all First Mortgage Notes of every series as a single class) 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 it, including the exercise of any remedy under the Collateral Documents. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of First Mortgage Notes or that may involve the Trustee in personal liability. SECTION 6.06. LIMITATION ON SUITS. (a) A Holder of a First Mortgage Note may pursue a remedy with respect to this Indenture or the First Mortgage Notes only if: (i) the Holder of a First Mortgage Note gives to the Trustee written notice of a continuing Event of Default or the Trustee receives such notice from the Company; (ii) the Holders of at least 25% in principal amount of the then outstanding First Mortgage Notes (treating all First Mortgage Notes of every series as a single class) make a written request to the Trustee to pursue the remedy; (iii) such Holder of a First Mortgage Note or Holders of First Mortgage Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (iv) 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 (v) during such 60-day period the Holders of a majority in principal amount of the then outstanding First Mortgage Notes do not give the Trustee a direction inconsistent with the request; provided, however, that such provision does not effect the right of a Holder to sue for enforcement of any overdue payment thereon. 56 (b) A Holder of a First Mortgage Note may not use this Indenture to prejudice the rights of another Holder of a First Mortgage Note or to obtain a preference or priority over another Holder of a First Mortgage Note. SECTION 6.07. RIGHTS OF HOLDERS OF FIRST MORTGAGE NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a First Mortgage Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the First Mortgage Note, on or after the respective due dates expressed in the First Mortgage 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 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in clause (i) or (ii) set forth in paragraph (a) of Section 6.01 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 Company or any Guarantor for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the First Mortgage 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 6.09. 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 of the First Mortgage Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the First Mortgage Notes, including the Guarantors), its creditors or its 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 7.07 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 7.07 hereof out of the estate in any such proceeding, shall be denied for any 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 First Mortgage 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. SECTION 6.10. PRIORITIES. (a) If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: 57 First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of First Mortgage Notes for amounts due and unpaid on the First Mortgage Notes for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the First Mortgage Notes for principal, premium and Liquidated Damages, if any, and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. (b) The Trustee may fix a record date and payment date for any payment to Holders of First Mortgage Notes 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 of a First Mortgage Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding First Mortgage Notes. SECTION 6.12. MANAGEMENT OF CASINOS. Notwithstanding any provision of this Article 6 to the contrary, following an Event of Default that permits the taking of possession of the East Chicago Showboat by the Trustee or the appointment of a receiver of either the Collateral or any part thereof pursuant to the Leasehold Mortgage (as such term is defined in the Collateral Documents), or after such taking of possession of such appointment, the Trustee or any such receiver shall be authorized, subject to the restrictions imposed by the Indiana Act, to the extent applicable, in addition to the rights and powers of the Trustee and such receiver set forth elsewhere in this Indenture and the Collateral Documents, to retain one or more experienced operators of casinos to manage the East Chicago Showboat on behalf of the Holders of First Mortgage Notes; provided, however, that any such operator shall have all necessary legal qualifications, including all Gaming Licenses to manage the East Chicago Showboat. ARTICLE 7 TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and the Collateral Documents, 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 his or her own affairs. (b) Except during the continuance of an Event of Default: 58 (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Collateral Documents and the Trustee need perform only those duties that are specifically set forth in this Indenture and the Collateral Documents 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 in all material respects to the requirements of this Indenture and the Collateral Documents. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform in all material respects to the requirements of this Indenture and the Collateral Documents. (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 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, 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 6.05 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 paragraphs (a), (b) and (c) of this Section 7.01. (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 before or following the occurrence of any Event of Default at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company or the Guarantors. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02. RIGHTS OF TRUSTEE. (a) 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, 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. 59 (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 Company or any Guarantor shall be sufficient if signed by an Officer of the Company or such Guarantor. (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 requested such action in accordance with this Indenture and 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 4.01 hereof, the Trustee shall have no duty to inquire as to the performance of the Company's covenants in Article 4 hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except (i) any Event of Default occurring pursuant to clause (i) or (ii) set forth in paragraph (a) of Section 6.01 hereof or (ii) any Default or Event of Default of which the Trustee shall have received written notification or obtained actual knowledge. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of First Mortgage Notes and may otherwise deal with the Company and the Guarantors with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest 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 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Collateral Documents, the First Mortgage Notes or any Note Guarantee, it shall not be accountable for the Company's use of the proceeds from the First Mortgage Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture or the Collateral Documents, 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 First Mortgage Notes or any other document in connection with the sale of the First Mortgage Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. 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 of First Mortgage Notes a notice 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, or interest on any First Mortgage Note, the Trustee may withhold the notice if and so long as the Trustee in good faith determines that withholding the notice is in the interests of the Holders of the First Mortgage Notes. 60 SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE FIRST MORTGAGE NOTES. (a) On each May 15 beginning with the May 15 following the date of this Indenture, and for so long as First Mortgage Notes remain outstanding, the Trustee shall mail to the Holders of the First Mortgage Notes a brief report dated as of such reporting date that complies with TIA Sec. 313(a) (but if no event described in TIA Sec. 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Sec. 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Sec. 313(c). (b) A copy of each report at the time of its mailing to the Holders of First Mortgage Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the First Mortgage Notes are listed in accordance with TIA Sec. 313(d). The Company shall promptly notify the Trustee when the First Mortgage Notes are listed on any stock exchange. (c) At the expense of the Company, the Trustee or, if the Trustee is not the Registrar, the Registrar, shall report the names of record Holders of the First Mortgage Notes to any Gaming Authority when requested to do so by the Company. (d) At the express direction of the Company and at the Company's expense, the Trustee shall provide any Gaming Authority with: (i) copies of all notices, reports and other written communications which the Trustee gives to Holders; (ii) a list of all of the Holders promptly after the original issuance of the First Mortgage Notes and periodically thereafter if the Company so directs; (iii) notice of any Default under this Indenture, any acceleration of the Indebtedness evidenced hereby, the institution of any legal actions or proceedings before any court or governmental authority in respect of a Default or Event of Default hereunder; (iv) notice of the removal or resignation of the Trustee within five Business Days of the effectiveness thereof; (v) notice of any transfer or assignment of rights under this Indenture or the Note Guarantees known to the Trustee within five Business Days thereof; and (vi) a copy of any amendment to the First Mortgage Notes or this Indenture within five Business Days of the effectiveness thereof. (e) To the extent requested by the Company and at the Company's expense, the Trustee shall cooperate with any Gaming Authority in order to provide such Gaming Authority with the information and documentation requested and as otherwise required by applicable law. SECTION 7.07. COMPENSATION AND INDEMNITY. (a) The Company and the Guarantors shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder in accordance with a written schedule provided by the Trustee to the Company. The Trustee's compensation shall not be limited by 61 any law on compensation of a trustee of an express trust. The Company and the Guarantors 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. (b) The Company and the Guarantors shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company 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 to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company or any Guarantor of its obligations hereunder, except to the extent such failure to notify results in a loss, liability or expense. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company and the Guarantors shall pay the reasonable fees and expenses of such counsel. Neither the Company nor any Guarantor need pay for any settlement made without its consent, which consent shall not be unreasonably withheld. (c) The obligations of the Company and the Guarantors under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. (d) To secure the Company's and the Guarantors' payment obligations in this Section 7.07, the Trustee shall have a Lien prior to the First Mortgage Notes or any Note Guarantee on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular First Mortgage Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. (e) When the Trustee incurs expenses or renders services after an Event of Default specified in clause (viii) or (ix) set forth in paragraph (a) of Section 6.01 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. (f) The Trustee shall comply with the provisions of TIA Sec. 313(b)(2) to the extent applicable. SECTION 7.08. REPLACEMENT OF TRUSTEE. (a) 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 and taking of office as provided in this Section 7.08. (b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of First Mortgage Notes of a majority in principal amount of the then outstanding First Mortgage Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (i) the Trustee fails to comply with Section 7.10 hereof; (ii) 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; 62 (iii) a Custodian or public officer takes charge of the Trustee or its property; or (iv) the Trustee becomes incapable of acting. (c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. For up to one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding First Mortgage Notes may by written action appoint a successor Trustee to replace the successor Trustee appointed by the Company. (d) If any Gaming Authority requires a Trustee to be approved, licensed or qualified and the Trustee fails or declines to do so, such approval, license or qualification shall be obtained upon the request of, and at the expense of, the Company unless the Trustee declines to do so, or, if the Trustee's relationship with either the Company or the Guarantors may, in the Company's discretion, jeopardize any material gaming license or franchise or right or approval granted thereto, the Trustee shall resign, and, in addition, the Trustee may at its option resign if the Trustee in its sole discretion determines not to be so approved, licensed or qualified. (e) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, any Guarantor or the Holders of First Mortgage Notes of at least 10% in principal amount of the then outstanding First Mortgage Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) If the Trustee, after written request by any Holder of a First Mortgage Note who has been a Holder of a First Mortgage Note for at least six months, fails to comply with Section 7.10 hereof, such Holder of a First Mortgage Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (g) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. 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. The successor Trustee shall mail a notice of its succession to Holders of the First Mortgage Notes. 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 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's and the Guarantors' obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09. 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; provided such corporation shall be otherwise eligible and qualified under this Article. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. (a) There shall at all times be a Trustee hereunder that is a corporation 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 a combined capital and surplus of at least $50 million as set forth in its most recent published annual report of condition. 63 (b) This Indenture shall always have a Trustee who satisfies the requirements of TIA Sec. 310(a)(1), (2) and (5). The Trustee is subject to TIA Sec. 310(b).Section 7.11. Preferential Collection of ClaimS AGAINST COMPANY. The Trustee is subject to TIA Sec. 311(a), excluding any creditor relationship listed in TIA Sec. 311(b). A Trustee who has resigned or been removed shall be subject to TIA Sec. 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate delivered to the Trustee, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding First Mortgage Notes upon compliance with the conditions set forth below in this Article Eight. SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their respective obligations with respect to all outstanding First Mortgage Notes and any Note Guarantees on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding First Mortgage Notes and cured all existing Events of Default, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (i) and (ii) below, and to have satisfied all its other obligations under such First Mortgage Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions, which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding First Mortgage Notes to receive payments in respect of the principal of, premium, if any, and interest and Liquidated Damages, if any, such First Mortgage Notes when such payments are due solely out of the trust created pursuant to this Indenture, (ii) the Company's and any Guarantor's obligations with respect to the First Mortgage Notes concerning issuing temporary First Mortgage Notes, registration of First Mortgage Notes, mutilated, destroyed, lost or stolen First Mortgage 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 Company's and any Guarantor's obligations in connection therewith and (iv) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. 64 SECTION 8.03. COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from their obligations under the covenants contained in Sections 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21, 4.22, 4.23, 4.24, 4.25, 4.28, 4.29 and 4.30 and Articles 5, 10 and 11 hereof with respect to the outstanding First Mortgage Notes and Note Guarantees on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the First Mortgage Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders of the First Mortgage Notes (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 First Mortgage Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding First Mortgage Notes, the Company and the 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 6.01 hereof, but, except as specified above, the remainder of this Indenture and such First Mortgage Notes and Note Guarantees shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof or clauses (iv) through (viii) set forth in paragraph (a) of Section 6.01 hereof shall not constitute Events of Default. SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. (a) The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding First Mortgage Notes: (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the First Mortgage Notes, cash in U.S. dollars, 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 due on the outstanding First Mortgage Notes on the stated maturity date or on the applicable redemption date, as the case may be, and the Company must specify whether the First Mortgage Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the Issuance Date, there has been a change in the applicable U.S. federal income tax laws, in either case to the effect that, and based thereon such opinion of counsel in the United States shall confirm that, subject to customary assumptions and exclusions, the Holders of the outstanding First Mortgage Notes shall not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and shall be subject to U.S. 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; 65 (iii) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders of the outstanding First Mortgage Notes shall not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and shall be subject to U.S. 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 with respect to certain Events of Default on the date of such deposit; (v) such Legal Defeasance or Covenant Defeasance 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 Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an opinion of counsel to the effect that, as of the date of such opinion and subject to customary assumptions and exclusions following the deposit, the trust funds shall not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally under any applicable United States or state law and that the Trustee has a perfected security interest in such trust funds for the ratable benefit of the Holders of the outstanding First Mortgage Notes; (vii) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of the First Mortgage Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; and (viii) the Company shall have delivered to the Trustee an Officers' Certificate and an opinion of counsel in the United States (which opinion of counsel may be subject to customary assumptions and exclusions), each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. (a) Subject to Section 8.06 hereof, all money and non- callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding First Mortgage Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such First Mortgage Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such First Mortgage Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. (b) The Company and the Guarantors shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any 66 such tax, fee or other charge which by law is for the account of the Holders of the outstanding First Mortgage Notes. (c) Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(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 8.06. REPAYMENT TO COMPANY. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any First Mortgage Note and remaining unclaimed for two years after such principal, premium, if any, or interest, has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such First Mortgage Note shall thereafter, as a secured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company 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 Company 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 Company. SECTION 8.07. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantors' obligations under this Indenture and the First Mortgage Notes and Note Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company and the Guarantors make any payment of principal of, premium, if any, or interest on any First Mortgage Note following the reinstatement of its obligations, the Company and the Guarantors shall be subrogated to the rights of the Holders of such First Mortgage Notes to receive such payment from the money held by the Trustee or Paying Agent. SECTION 8.08. FIRST MORTGAGE NOTE COLLATERAL. Upon the Company's exercise under Section 8.01 hereof of the option applicable to either Section 8.02 or 8.03, Collateral, except the funds in the trust fund described in Section 8.04 hereof, shall be released pursuant to Section 10.03 hereof. 67 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF FIRST MORTGAGE NOTES. (a) Notwithstanding Section 9.02 hereof, without the consent of any Holder of First Mortgage Notes, the Company and the Trustee together may amend or supplement this Indenture, the First Mortgage Notes, the Note Guarantees or the Collateral Documents: (i) to cure any ambiguity, defect or inconsistency; (ii) to comply with Article 5 or Article 11 hereof; (iii) to provide for uncertificated First Mortgage Notes in addition to or in place of certificated First Mortgage Notes; (iv) to provide for the assumption of the Company's or any Guarantor's obligations to the Holders of the First Mortgage Notes in the case of a merger or consolidation pursuant to Article 5 or Article 11 hereof, as the case may be; (v) to make any change that would provide any additional rights or benefits to the Holders of the First Mortgage Notes (including providing for additional Note Guarantees pursuant to this Indenture) or that does not adversely affect the legal rights hereunder of any such Holder of First Mortgage Notes; (vi) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; or (vii) to enter into additional or supplemental Collateral Documents. (b) Upon the request of the Company accompanied by a resolution of the Board of Directors of the Company and the Guarantors authorizing the execution of any such amended or supplemental Indenture, First Mortgage Notes, Note Guarantees or Collateral Documents, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental Indenture, First Mortgage Notes, Note Guarantees or Collateral Documents 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, First Mortgage Notes, Note Guarantees or Collateral Documents that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02. WITH CONSENT OF HOLDERS OF FIRST MORTGAGE NOTES. (a) Except as provided below in this Section 9.02 or elsewhere in this Indenture, the Company and the Trustee may amend or supplement this Indenture, the First Mortgage Notes, the Note Guarantees or the Collateral Documents with the consent of the Holders of at least a majority in principal amount of all of the First Mortgage Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for First Mortgage Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the First Mortgage Notes, except a payment default resulting 68 from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the First Mortgage Notes may be waived with the consent of the Holders of a majority in principal amount of all of the then outstanding First Mortgage Notes (including consents obtained in connection with a tender offer or exchange offer for First Mortgage Notes). Without the consent of at least 662/3% in principal amount of all of the First Mortgage Notes, the Company may not amend, alter or waive the provisions with respect to Section 4.16 hereof. (b) Upon the request of the Company accompanied by a resolution of the Board of Directors of the Company and the Guarantors authorizing the execution of any such amended or supplemental Indenture, First Mortgage Notes, Note Guarantees or Collateral Documents, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of First Mortgage Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors in the execution of such amended or supplemental Indenture, First Mortgage Notes, Note Guarantees or Collateral Documents, unless such amended or supplemental Indenture, First Mortgage Notes, Note Guarantees or Collateral Documents affects the Trustee's own rights, duties or immunities under this Indenture, the First Mortgage Notes, the Note Guarantees, the Collateral Documents or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture, First Mortgage Notes, Note Guarantees or Collateral Documents. (c) It shall not be necessary for the consent of the Holders of First Mortgage Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. (d) After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders of First Mortgage Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company 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, First Mortgage Notes, Note Guarantees or Collateral Documents or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the First Mortgage Notes then outstanding may waive compliance in a particular instance with any provision of this Indenture, the First Mortgage Notes, the Note Guarantees or the Collateral Documents. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any First Mortgage Notes held by a non- consenting Holder of First Mortgage Notes): (i) reduce the principal amount of First Mortgage Notes whose Holders must consent to an amendment, supplement or waiver; (ii) reduce the principal or change the fixed maturity of any First Mortgage Note or alter or waive the provisions with respect to the redemption of the First Mortgage Notes (provided, however, that the term "redemption" does not apply to any provision with respect to any Repurchase Offer); (iii) reduce the rate or change the time for payment of interest on any First Mortgage Note; (iv) waive a Default or Event of Default in the payment of principal of, premium, if any, or interest on the First Mortgage Notes (except a rescission of acceleration of the First Mortgage Notes by the Holders of at least a majority in aggregate principal amount of the First Mortgage Notes and a waiver of the payment default that resulted from such acceleration); 69 (v) make any First Mortgage Note payable in money other than that stated in the First Mortgage Notes; (vi) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of First Mortgage Notes to receive payments of principal of or premium, if any, or interest on the First Mortgage Notes; (vii) release all or substantially all of the Collateral from the Lien of this Indenture or the Collateral Documents; or (viii) make any change in the foregoing amendment and waiver provisions. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture, the First Mortgage Notes, the Note Guarantees and the Collateral Documents shall be set forth in a amended or supplemental Indenture or Collateral Document that complies with the TIA as then in effect, if applicable. This Indenture shall be construed to comply in every respect with the TIA. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a First Mortgage Note is a continuing consent by the Holder of a First Mortgage Note and every subsequent Holder of a First Mortgage Note or portion of a First Mortgage Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any First Mortgage Note. However, any such Holder of a First Mortgage Note or subsequent Holder of a First Mortgage Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05. NOTATION ON OR EXCHANGE OF FIRST MORTGAGE NOTES. (a) The Trustee may place an appropriate notation about an amendment, supplement or waiver on any First Mortgage Note thereafter authenticated. The Company in exchange for all First Mortgage Notes may issue and the Trustee shall authenticate new First Mortgage Notes (accompanied by a notation of the Note Guarantees duly endorsed by the Guarantors) that reflect the amendment, supplement or waiver. (b) Failure to make the appropriate notation or issue a new First Mortgage Note shall not affect the validity and effect of such amendment, supplement or waiver.SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental indenture, Note, Note Guarantee or Collateral Document, if necessary, authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company or any Guarantor may not sign an amendment or supplemental Indenture, Note, Note Guarantee or Collateral Document until the Board of Directors approves it. In executing any amended or supplemental indenture, Note, Note Guarantee or Collateral Document, if necessary, the Trustee shall be entitled to receive and (subject to Section 7.01) shall be fully protected in relying upon, an Officer's 70 Certificate and an Opinion of Counsel, which Opinion of Counsel may be subject to customary assumptions and exclusions, stating that the execution of such amended or supplemental indenture, Note, Note Guarantee or Collateral Document is authorized or permitted by this Indenture. ARTICLE 10 COLLATERAL AND SECURITY SECTION 10.01. SECURITY. (a) The due and punctual payment of the principal of, premium and Liquidated Damages, if any, and interest on all of the First Mortgage Notes of every series issued hereunder when and as the same shall be due and payable, whether on an interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on the overdue principal of, premium and Liquidated Damages, if any, and interest on the First Mortgage Notes and performance of all other obligations of the Company to the Holders of First Mortgage Notes or the Trustee under this Indenture, the First Mortgage Notes and the Note Guarantees, according to the terms hereunder or thereunder, shall be ratably secured by a lien on the Collateral owned by the Company and each Note Guarantee similarly shall be ratably secured by the Collateral owned by such Guarantor, as provided in the Collateral Documents that the Company and the Guarantors have entered into simultaneously with the execution of this Indenture for the benefit of the Holders of First Mortgage Notes. (b) Each Holder of First Mortgage Notes, by its acceptance thereof, consents and agrees to the terms of the Collateral Documents (including, without limitation, the provisions providing for foreclosure and release of Collateral) as the same may be in effect or may be amended from time to time in accordance with its terms and authorizes and directs the Trustee to enter into the Collateral Documents and to perform its obligations and exercise its rights thereunder in accordance therewith. The Company and the Guarantors shall deliver to the Trustee copies of all documents executed pursuant to this Indenture and the Collateral Documents and shall 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 Collateral Documents to assure and confirm to the Trustee the security interest in the Collateral contemplated hereby, by the Collateral Documents or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the First Mortgage Notes and the Note Guarantees secured hereby, according to the intent and purposes herein expressed. (c) The Company shall take, or shall cause its Restricted Subsidiaries to take, upon request of the Trustee, any and all actions reasonably required to cause the Collateral Documents to create and maintain, as security for the obligations of the Company or the respective Guarantors hereunder, valid and enforceable perfected first priority Liens in and on all the Collateral, in favor of the Trustee for the ratable benefit of the Holders, superior to and prior to the right of payment to all Subordinated Indebtedness of the Company or the respective Guarantor and subject to no other Liens than Permitted Liens. (d) The Net Proceeds of all Asset Sales (if unapplied Net Proceeds of Asset Sales exceed $2.0 million at any time) and the Net Loss Proceeds of all Events of Loss of assets constituting Collateral (other than Permitted Investments), as well as Excess Proceeds, shall be promptly and without any commingling deposited with the Trustee subject to a lien in favor of the Trustee for the benefit of the Holders of the First Mortgage Notes unless and until applied as permitted under Section 4.10 or Section 4.11 hereof, as the case may be. The Trustee shall release to the Company any Excess Proceeds or Excess Loss Proceeds, as the case may be, that remain after making an offer to purchase the 71 First Mortgage Notes in compliance with Section 4.10 or Section 4.11 hereof, as the case may be. Amounts so paid to the Trustee shall be invested or released in accordance with the provisions of this Indenture. (e) The Trustee may appoint one or more collateral agents, who may be delegated any one or more of the duties or rights of the Trustee under the Collateral Documents or that are specified in any of the Collateral Documents. SECTION 10.02. RECORDING AND OPINIONS. (a) The Company and the Guarantors shall cause the applicable Collateral Documents including the Leasehold Mortgage, the First Preferred Ship Mortgage and any Financing Statements, all amendments or supplements to each of the foregoing and any other similar security documents as necessary, to be registered, recorded and filed and/or re-recorded, re-filed and renewed in such manner and in such place or places, if any, as may be required by law or reasonably requested by the Trustee in order fully to preserve and protect (i) the Lien securing the obligations under the First Mortgage Notes and the Note Guarantees pursuant to the Collateral Documents and (ii) the Lien of the Guarantors securing (for the ratable benefit of the Holders of the First Mortgage Notes) the First Mortgage Notes and the Note Guarantees and to effectuate and preserve the security of the Holders of First Mortgage Notes and all rights of the Trustee. (b) The Company, the Guarantors and any other obligor shall furnish to the Trustee: (i) promptly after the execution and delivery of this Indenture, and promptly after the execution and delivery of any other instrument of further assurance or amendment, an Opinion of Counsel in the United States either (i) stating that, subject to customary assumptions and exclusions, in the opinion of such counsel, this Indenture, the Leasehold Mortgage, the First Preferred Ship Mortgage, the Financing Statements and other applicable Collateral Documents and all other instruments of further assurance or amendment have been properly recorded, registered and filed to the extent necessary to make effective the Lien intended to be created by such Collateral Documents and reciting the details of such action or referring to prior Opinions of Counsel in which such details are given, and stating that, subject to customary assumptions and exclusions, as to such Collateral Documents and such other instruments such recording, registering and filing are the only recordings, registerings and filings necessary to give notice thereof and that no re- recordings, re-registerings or re-filings are necessary to maintain such notice, and further stating that all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the rights of the Holders of First Mortgage Notes and the Trustee hereunder and under the Collateral Documents or (ii) stating that, subject to customary assumptions and exclusions, in the opinion of such counsel, no such action is necessary to make any other Lien created under any of the Collateral Documents effective as intended by such Collateral Documents; and (ii) within 30 days after January 1, in each year beginning with the year 1997, an Opinion of Counsel, dated as of such date, either (A) stating that, subject to customary assumptions and exclusions, in the opinion of such counsel, such action has been taken with respect to the recording, registering, filing, re-recording, re-registering and re-filing of this Indenture and all supplemental indentures, financing statements, continuation statements or other instruments of further assurance as is necessary to maintain the Lien of this Indenture and the Collateral Documents until the next Opinion of Counsel is required to be rendered pursuant to this paragraph and reciting the details of such action or referring to prior Opinions of Counsel in which such details are given, and stating that all financing statements and continuation 72 statements have been executed and filed that are necessary fully to preserve and protect the rights of the Holders and the Trustee hereunder and under the Collateral Documents or (B) stating that, subject to customary assumptions and exclusions, in the opinion of such counsel, no such action is necessary to maintain such Lien, until the next Opinion of Counsel is required to be rendered pursuant to this paragraph. (c) The Company shall furnish to the Trustee the certificates or opinions, as the case may be, required by TIA Section 314(d). Such certificates or opinions shall be subject to the terms of TIA Section 314(e). SECTION 10.03. RELEASE OF COLLATERAL. (a) Subject to paragraphs (b), (c) and (d) of this Section 10.03, Collateral may be released from the Lien and security interest created by this Indenture and the Collateral Documents at any time or from time to time upon the request of the Company pursuant to an Officers' Certificate certifying that all terms for release and conditions precedent hereunder and under any applicable Collateral Document have been met and specifying (i) the identity of the Collateral to be released and (ii) the provision of this Indenture that authorizes such release. The Trustee shall release (at the sole cost and expense of the Company) (i) all Collateral that is contributed, sold, leased, conveyed, transferred or otherwise disposed of (including, without limitation, any Collateral that does not constitute Project Assets, and that is contributed, sold, leased, conveyed, transferred or otherwise disposed of to an Unrestricted Subsidiary, but excluding any such contribution, sale, lease, conveyance, transfer or other distribution to the Company or a Restricted Subsidiary); provided that such contribution, sale, lease, conveyance, transfer or other distribution is or shall be in accordance with the provisions of this Indenture, including, without limitation, the requirement that the net proceeds from such contribution, sale, lease, conveyance, transfer or other distribution are or shall be applied in accordance with this Indenture and that no Default or Event of Default has occurred and is continuing or would occur immediately following such release; (ii) Collateral that is condemned, seized or taken by the power of eminent domain or otherwise confiscated pursuant to an Event of Loss; provided that the Net Loss Proceeds, if any, from such Event of Loss are or shall be applied in accordance with Section 4.11 hereof and that no Default or Event of Default has occurred and is continuing or would occur immediately following such release; (iii) Collateral that may be released with the consent of Holders pursuant to Article 9 hereof; (iv) all Collateral (except as provided in Article 8 hereof and, in particular, the funds in the trust fund described in Section 8.04 hereof) upon discharge or defeasance of this Indenture in accordance with Article 8 hereof; (v) all Collateral upon the payment in full of all obligations of the Company with respect to the First Mortgage Notes; and (vi) Collateral of a Guarantor whose Note Guarantee is released pursuant to Section 11.06 hereof. Upon receipt of such Officers' Certificate 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 Collateral Documents. (b) No Collateral shall be released from the Lien and security interest created by the Collateral Documents pursuant to the provisions of the Collateral Documents unless there shall have been delivered to the Trustee the certificate required by this Section 10.03. (c) The Trustee may release Collateral from the Lien and security interest created by this Indenture and the Collateral Documents upon the sale or disposition of Collateral pursuant to the Trustee's powers, rights and duties with respect to remedies provided under any of the Collateral Documents. 73 (d) The release of any Collateral from the terms of this Indenture and the Collateral Documents shall not be deemed to impair the security under this Indenture in contravention of the provisions hereof if and to the extent the Collateral is released pursuant to the terms hereof. To the extent applicable, the Company shall cause TIA Sec. 313(b), relating to reports, and TIA Sec. 314(d), relating to the release of property or securities from the Lien and security interest of the Collateral Documents and relating to the substitution therefor of any property or securities to be subjected to the Lien and security interest of the Collateral Documents to be complied with. Any certificate or opinion required by TIA Sec. 314(d) may be made by an Officer of the Company except in cases where TIA Sec. 314(d) requires that such certificate or opinion be made by an independent Person, which Person shall be an independent engineer, appraiser or other expert selected or approved by the Trustee in the exercise of reasonable care. SECTION 10.04. PROTECTION OF THE TRUST ESTATE. Upon prior written notice to the Company and the Guarantors, the Trustee shall have the power (i) to institute and maintain such suits and proceedings as it may deem expedient, to prevent any impairment of the Collateral under any of the Collateral Documents; and (ii) to enforce the obligations of the Company, the Guarantors or any Restricted Subsidiary under this Indenture or the Collateral Documents, to institute and maintain such suits and proceedings as may be expedient to prevent any impairment of the Collateral under the Collateral Documents and in the profits, rents, revenues and other income arising therefrom; including the 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 any Collateral or be prejudicial to the interests of the Holders of First Mortgage Notes or the Trustee, to the extent permitted thereunder. Upon receipt of notice that a Restricted Subsidiary or a Guarantor is not in compliance with any of the requirements of the Leasehold Mortgage or the First Preferred Ship Mortgage, the Trustee may, but shall have no obligation to purchase, at the Company's expense, such insurance coverage necessary to comply with the appropriate section of such mortgage. SECTION 10.05. CERTIFICATES OF THE COMPANY. The Company shall furnish to the Trustee, prior to each proposed release of Collateral pursuant to the Collateral Documents (i) all documents required by TIA Sec. 314(d) and (ii) an Opinion of Counsel in the United States, which may be rendered by internal counsel to the Company, to the effect that, subject to customary assumptions and exclusions, such accompanying documents constitute all documents required by TIA Sec. 314(d). The Trustee may, to the extent permitted by Sections 7.01 and 7.02 hereof, accept as conclusive evidence of compliance with the foregoing provisions the appropriate statements contained in such documents and such Opinion of Counsel. SECTION 10.06. CERTIFICATES OF THE TRUSTEE. In the event that the Company wishes to release Collateral in accordance with the Collateral Documents and has delivered the certificates and documents required by the Collateral Documents and Sections 10.03 and 10.04 hereof, the Trustee shall determine whether it has received all documentation required by TIA Sec. 314(d) in connection with such release and, based on such determination and the Opinion of Counsel delivered pursuant to clause (ii) of Section 10.05 hereof, shall deliver a certificate to the Collateral Agent setting forth such determination. 74 SECTION 10.07. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE COLLATERAL DOCUMENTS. (a) Subject to the provisions of Sections 7.01 and 7.02 hereof, the Trustee may, in its sole discretion and without the consent of the Holders of First Mortgage Notes, direct, on behalf of the Holders of First Mortgage Notes, the Collateral Agent to, take all actions it deems necessary or appropriate in order to (i) enforce any of the terms of the Collateral Documents and (ii) collect and receive any and all amounts payable in respect of the Obligations of the Company hereunder. The Trustee shall have power to institute and 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 Collateral Documents or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Holders of First Mortgage Notes 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 of First Mortgage Notes or of the Trustee). (b) Upon an Event of Default and so long as such Event of Default continues, subject to the restrictions imposed by the Indiana Act, to the extent applicable, the Trustee may exercise in respect of the Collateral, in addition to the other rights and remedies provided for herein, in the Collateral Documents or otherwise available to it, all of the rights and remedies of a secured party under the Uniform Commercial Code or other applicable law, and the Trustee may also upon obtaining possession of the Collateral as set forth herein, without notice to the Company, except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of the Trustee's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Trustee may deem commercially reasonable. The Company acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the seller than if such a sale were a public sale. The Company agrees that, to the extent notice of sale shall be required by law, at least 10 days' notice to the Company of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Trustee shall not be obligated to make any sale regardless of notice of sale having been given. The Trustee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. SECTION 10.08 PRIORITY OF APPLICATION OF CASH PROCEEDS BY TRUSTEE. Any cash that is Collateral held by the Trustee and all cash proceeds received by the Trustee in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied (unless otherwise provided for in the Collateral Documents and after payment of any and all amounts payable to the Trustee pursuant to this Indenture), as the Trustee shall determine or as the Holders of the First Mortgage Notes shall direct pursuant to Section 6.05 hereof, (i) against the obligations for the ratable benefit of the Holders of the First Mortgage Notes, (ii) to maintain, repair or otherwise protect the Collateral or (iii) to take such other action to protect the other rights of the Holders of the First Mortgage Notes or to take any other appropriate action or remedy for the benefit of the Holders of the First Mortgage Notes. Any surplus of such cash or cash proceeds held by the Trustee and remaining after payment in full of all the obligations shall be paid over to the Company or to whomsoever may be lawfully entitled to receive such surplus or as a court of competent jurisdiction may direct. 75 SECTION 10.09. TERMINATION OF SECURITY INTEREST. Upon the payment in full of all Obligations of the Company under this Indenture and the First Mortgage Notes, or upon Legal Defeasance or Covenant Defeasance, the Trustee shall, at the request of the Company, deliver a certificate to the Trustee stating that such Obligations have been paid in full, and instruct the Trustee to release the Liens pursuant to this Indenture and the Collateral Documents. SECTION 10.10. COOPERATION OF TRUSTEE. In the event the Company or any Guarantor pledges or grants a security interest in additional Collateral, the Trustee shall cooperate with the Company or such Guarantor in reasonably and promptly agreeing to the form of, and executing as required, any instruments or documents necessary to make effective the security interest in the Collateral to be so substituted or pledged. To the extent practicable, the terms of any security agreement or other instrument or document necessitated by any such substitution or pledge shall be comparable to the provisions of the existing Collateral Documents. Subject to, and in accordance with the requirements of this Article 10 and the terms of the Collateral Documents, in the event that the Company or any Guarantor engages in any transaction pursuant to Section 10.03 hereof, the Trustee shall cooperate with the Company or such Guarantor in order to facilitate such transaction in accordance with any reasonable time schedule proposed by the Company, including by delivering and releasing the Collateral in a prompt and reasonable manner. SECTION 10.11. COLLATERAL AGENT. The Trustee may, from time to time, appoint one or more Collateral Agents hereunder. Each of such Collateral Agents may be delegated any one or more of the duties or rights of the Trustee hereunder or under the Collateral Documents or that are specified in any Collateral Documents, including without limitation, the right to hold any Collateral in the name of, registered to, or in the physical possession of, such Collateral Agent, for the rateable benefit of the Holders of the First Mortgage Notes. Each such Collateral Agent shall have such rights and duties as may be specified in an agreement between the Trustee and such Collateral Agent. The Trustee and any Collateral Agent shall be authorized hereunder to give any acknowledgment reasonably requested by any party under the Intercreditor Agreement to confirm the rights and obligations of the parties under the Intercreditor Agreement. ARTICLE 11 NOTE GUARANTEES SECTION 11.01. NOTE GUARANTEE. (a) Each Subsidiary of the Company hereafter formed or acquired (other than Unrestricted Subsidiaries) that in accordance with Section 11.02 hereof is required to guarantee the obligations of the Company under the First Mortgage Notes upon execution of a counterpart of this Indenture, hereby jointly and severally and unconditionally guarantees, on an unsubordinated secured basis (each such guarantee being a "Note Guarantee"), to each Holder of a First Mortgage Note authenticated and delivered by the Trustee irrespective of the validity or enforceability of this Indenture, the First Mortgage Notes or the obligations of the Company under this Indenture or the First Mortgage Notes, that: (i) the principal of, premium, if any, and interest on the First Mortgage Notes of every series issued hereunder shall be paid in full when due, whether at the maturity or interest payment or mandatory redemption date, by acceleration, call for redemption or otherwise, and interest on the overdue principal and interest, if any, of the First Mortgage Notes and all other obligations of the Company to the Holders or the Trustee under this Indenture or the First Mortgage Notes shall be promptly paid in full or performed, all in 76 accordance with the terms of this Indenture and the First Mortgage Notes; and (ii) in case of any extension of time of payment or renewal of any First Mortgage Notes or any of such other obligations, they shall be paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed for whatever reason, each Guarantor shall be obligated to pay the same whether or not such failure to pay has become an Event of Default that could cause acceleration pursuant to Section 6.02 hereof. Each Guarantor agrees that this is a guarantee of payment not a guarantee of collection. (b) Each Guarantor hereby agrees that its obligations with regard to each Note Guarantee shall be joint and several, unconditional, irrespective of the validity or enforceability of the First Mortgage Notes or the obligations of the Company under this Indenture, the absence of any action to enforce the same, the recovery of any judgment against the Company or any other obligor with respect to this Indenture, the First Mortgage Notes or the Obligations of the Company under this Indenture or the First Mortgage Notes, any action to enforce the same or any other circumstances (other than complete performance) that might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor further, to the extent permitted by law, waives and relinquishes all claims, rights and remedies accorded by applicable law to guarantors and agrees not to assert or take advantage of any such claims, rights or remedies, including but not limited to: (i) any right to require the Trustee, the Holders or the Company (each, a "Benefitted Party") to proceed against the Company or any other Person or to proceed against or exhaust any security held by a Benefitted Party at any time or to pursue any other remedy in any Benefitted Party's power before proceeding against such Guarantor; (ii) the defense of the statute of limitations in any action hereunder or in any action for the collection of any Indebtedness or the performance of any obligation hereby guaranteed; (iii) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other Person or the failure of a Benefitted Party to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other Person; (iv) demand, protest and notice of any kind 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 such Guarantor, the Company, any Benefitted Party, any creditor of such Guarantor, the Company or on the part of any other Person whomsoever in connection with any Indebtedness or Obligations hereby guaranteed; (v) any defense based upon an election of remedies by a Benefitted Party, including but not limited to an election to proceed against such Guarantor for reimbursement; (vi) any defense based upon any statute or rule of law that provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (vii) any defense arising because of a Benefitted Party's election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code; or (viii) any defense based on any borrowing or grant of a security interest under Section 364 of the Federal Bankruptcy Code. Each Guarantor hereby covenants that its Note Guarantee shall not be discharged except by complete performance of the obligations contained in its Note Guarantee and this Indenture. (c) If any Holder or the Trustee is required by any court or otherwise to return to either the Company or any Guarantor, or any custodian, trustee, or similar official acting in relation to either the Company or such Guarantor, any amount paid by the Company or such Guarantor to the Trustee or such Holder, the applicable Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (d) Each Guarantor further agrees that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the obligations guaranteed hereby may be 77 accelerated as provided in Section 6.02 hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration as to the Company or any other obligor on the First Mortgage Notes of the obligations guaranteed hereby and (ii) in the event of any declaration of acceleration of those obligations as provided in Section 6.02 hereof, those obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purpose of this Note Guarantee. SECTION 11.02. ADDITIONAL NOTE GUARANTEES. The Company shall cause each Restricted Subsidiary other than Finance Corporation to (i) execute and deliver to the Trustee a supplemental indenture and supplemental Collateral Documents in form reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Company's obligations under the First Mortgage Notes, this Indenture and the Collateral Documents on the terms set forth in this Indenture and (ii) deliver to the Trustee an opinion of counsel that, subject to customary assumptions and exclusions, such supplemental indenture and supplemental Collateral Documents, if any, have been duly executed and delivered by such Restricted Subsidiary. The Note Guarantee shall be secured by a lien or charge on all Collateral, if any, owned by such Restricted Subsidiary. The Note Guarantee shall be released if the Company or its Restricted Subsidiaries cease to own any Equity Interests in such Restricted Subsidiary or if such Restricted Subsidiary becomes an Unrestricted Subsidiary in accordance with the terms of this Indenture. SECTION 11.03. LIMITATION OF GUARANTORS' LIABILITY. Each Guarantor and by its acceptance hereof, each beneficiary hereof, hereby confirms that it is its intention that the Note Guarantee by such Guarantor not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any of the Note Guarantees. To effectuate the foregoing intention, each such person hereby irrevocably agrees that the obligation of such Guarantor under its Note Guarantee under this Article 11 shall be limited to the maximum amount as shall, after giving effect to such maximum amount and all other liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor in respect of such maximum amount not constituting a fraudulent conveyance. Each beneficiary under the Note Guarantees, by accepting the benefits hereof, confirms its intention that, in the event of a bankruptcy, reorganization or other similar proceeding of the Company or any Guarantor in which concurrent claims are made upon such Guarantor hereunder, to the extent such claims shall not be fully satisfied, each such claimant with a valid claim against the Company shall be entitled to a ratable share of all payments by such Guarantor in respect of such concurrent claims. SECTION 11.04. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. (a) No Guarantor shall consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person, whether or not it is affiliated with such Guarantor, unless (i) subject to the provisions of Section 11.05 and certain other provisions of this Indenture, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor pursuant to a supplemental indenture and supplemental Collateral Documents in form reasonably satisfactory to the Trustee pursuant to which such Person shall unconditionally guarantee, on a senior secured basis, all of such Guarantor's obligations under such Guarantor's Note Guarantee, this Indenture and the Collateral Documents on the terms set forth in this 78 Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; (iii) such transaction shall not result in the loss or suspension or material impairment of any Gaming License; (iv) such Guarantor, or any Person formed by or surviving any such consolidation or merger, shall have Combined Net Worth (immediately after giving effect to such transaction), equal to or greater than the Combined Net Worth of such Guarantor immediately preceding the transaction; and (v) such transactions would not require any Holder of First Mortgage Notes to obtain a Gaming License or be qualified under the laws of any applicable gaming jurisdiction; provided that such Holder would not have been required to obtain a Gaming License or be qualified under the laws of any applicable gaming jurisdiction in the absence of such transactions. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee in this Indenture and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. (b) Notwithstanding the foregoing, (i) a Guarantor may consolidate with or merge with or into the Company, provided that the surviving corporation (if other than the Company) shall expressly assume by supplemental indenture complying with the requirements of this Indenture, the due and punctual payment of the principal of, premium, if any, and interest on all of the First Mortgage Notes, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be performed by the Company; and (ii) a Guarantor may consolidate with or merge with or into any other Guarantor. SECTION 11.05. RELEASES OF NOTE GUARANTEES. In the event of (i) a sale or disposition of all or substantially all of the assets of any Guarantor by way of merger, consolidation or otherwise, (ii) a Restricted Subsidiary becoming an Unrestricted Subsidiary pursuant to the terms of this Indenture or (iii) a sale or other disposition of all of the Capital Stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the Capital Stock of such Guarantor or the Restricted Subsidiary becomes an Unrestricted Subsidiary pursuant to the terms of this Indenture) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) shall be released and relieved of its obligations under its Note Guarantee; provided that (A) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof and (B) the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture. SECTION 11.06. "TRUSTEE" TO INCLUDE PAYING AGENT. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article 11 shall in such case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully and for all intents and purposes as if such Paying Agent were named in this Article 11 in place of the Trustee. 79 ARTICLE 12 MISCELLANEOUS SECTION 12.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Sec. 318(c), the imposed duties shall control. SECTION 12.02. NOTICES. (a) Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company or the Guarantors: Showboat Marina Casino Partnership Showboat Marina Finance Corporation 2001 East Columbus Drive East Chicago, Indiana 46312 Telecopier No.: (219) 398-0144 Attention: Vice President - Finance and Administration With a copy to: Kummer Kaempfer Bonner & Renshaw 3800 Howard Hughes Parkway Seventh Floor Las Vegas, Nevada 89109 Attention: John N. Brewer, Esq. Telephone No.: (702) 792-7000 Telecopier No.: (702) 796-7181 and to: Ice Miller Donadio & Ryan One American Square 31st Floor Indianapolis, Indiana 46204 Attention: Stephen J. Hackman, Esq. Telephone: (317) 236-2100 Telecopier: (317) 235-2219 If to the Trustee: American Bank National Association 101 East 5th St. St. Paul, MN 55101 Telecopier No.: (612) 229-6415 Attention: Corporate Trust Department 80 (b) The Company, the Guarantors or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. (c) All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next- day delivery. (d) 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 Sec. 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. (e) 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. (f) If the Company or a Guarantor mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.SECTION 12.03. COMMUNICATION BY HOLDERS OF FIRST MORTGAGE NOTES WITH OTHER HOLDERS OF FIRST MORTGAGE NOTES. Holders may communicate pursuant to TIA Sec. 312(b) with other Holders with respect to their rights under this Indenture or the First Mortgage Notes. The Company, the Guarantors, the Trustee, the Registrar and anyone else shall have the protection of TIA Sec. 312(c). SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company or the Guarantors to the Trustee to take any action under this Indenture, the Company or the Guarantors shall furnish to the Trustee: (i) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 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 (ii) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, subject to customary assumptions and exclusions, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.Section 12.05. 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 Sec. 314(a)(4)) shall comply with the provisions of TIA Sec. 314(e) and shall include: 81 (i) a statement that the Person making such certificate or opinion has read such covenant or condition; (ii) 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; (iii) 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 (iv) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. SECTION 12.06. 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 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, STOCKHOLDERS AND PARTNERS. No director, officer, employee, incorporator, stockholder or partner of the Company or the Guarantors, as such, shall have any liability for any obligations of the Company or the Guarantors under the First Mortgage Notes, any Note Guarantee, this Indenture, the Collateral Documents, as applicable, or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder of the First Mortgage Notes by accepting a First Mortgage Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the First Mortgage Notes and the Note Guarantees. 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. SECTION 12.08. GOVERNING LAW. THIS INDENTURE AND THE FIRST MORTGAGE NOTES SHALL BE, SUBJECT TO CERTAIN EXCEPTIONS, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF. THE COLLATERAL DOCUMENTS SHALL BE GOVERNED, SUBJECT TO CERTAIN EXCEPTIONS, BY THE LAWS OF THE STATE OF INDIANA OR THE LAWS OF THE STATE OF NEVADA, AS SPECIFIED THEREIN. SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.10. SUCCESSORS. All agreements of the Company and the Guarantors in this Indenture, the First Mortgage Notes and the Note Guarantees, as applicable, shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors. 82 SECTION 12.11. SEVERABILITY. In case any provision in this Indenture, in the First Mortgage Notes or in the Note Guarantees shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.12. 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 12.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table 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. [Signature pages follow] 83 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day first above written. COMPANY: SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana general partnership By: SHOWBOAT MARINA PARTNERSHIP, an Indiana general partnership, its general partner By: SHOWBOAT INDIANA INVESTMENT LIMITED PARTNERSHIP, a Nevada limited partnership, its general partner By: SHOWBOAT INDIANA, INC., a Nevada corporation, its general partner By: s/J. Keith Wallace Name: J. Keith Wallace Title: President and Chief Executive Officer By: s/John N. Brewer Name: John N. Brewer Title: Assistant Secretary SHOWBOAT MARINA FINANCE CORPORATION, a Nevada corporation By: s/Mark J. Miller Name: Mark J. Miller Title: Treasurer By: s/John N. Brewer Name: John N. Brewer Title: Assistant Secretary AMERICAN BANK NATIONAL ASSOCIATION By: Name: Title: By: s/Thomas M. Rorsman Name: Thomas M. Rorsman Title: Vice Presisdent EXHIBIT A 13 1/2% [SERIES A] [SERIES B] FIRST MORTGAGE NOTES DUE 2003 No. SHOWBOAT MARINA CASINO PARTNERSHIPSHOWBOAT MARINA FINANCE CORPORATION Jointly and severally promise to pay to _____________, or registered assigns, the principal sum of ___________________ Dollars on March 15, 2003. Interest Payment Dates: March 15 and September 15 Record Dates: March 1 and September 1 Dated: SHOWBOAT MARINA CASINO PARTNERSHIP,an Indiana general partnership By: SHOWBOAT MARINA PARTNERSHIP, an Indiana general partnership, its general partner By: SHOWBOAT INDIANA INVESTMENT LIMITED PARTNERSHIP, a Nevada limited partnership, its general partner By: SHOWBOAT INDIANA, INC., a Nevada corporation, its general partner By: Name: Title: By: Name: Title: SHOWBOAT MARINA FINANCE CORPORATION, a Nevada corporation By: Name: Title: By: Name: Title: This is one of the Global First Mortgage Notes referred to in the within-mentioned Indenture: American Bank National Association, a national banking association, as Trustee By: __________________________________ Name: Title: EXHIBIT A 13 1/2% Series A First Mortgage Note due 2003 Unless and until it is exchanged in whole or in part for First Mortgage Notes in definitive form, this First Mortgage Note may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"), to the issuer or its 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.1 THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF SHOWBOAT MARINA CASINO PARTNERSHIP, AN INDIANA GENERAL PARTNERSHIP, AND SHOWBOAT MARINA FINANCE CORPORATION, A NEVADA CORPORATION (COLLECTIVELY, THE "COMPANY"), THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A NON U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. This Paragraph should be included only if the First Mortgage is issued in global form. 1. INTEREST. Showboat Marina Casino Partnership, an Indiana general partnership ("Showboat Partnership"), and Showboat Marina Finance Corporation, a Nevada corporation ("Finance Corporation" and, together with Showboat Partnership, the "Company") (or any successor thereto as provided in the Indenture), jointly and severally promise to pay interest at the rate of 13 1/2% per annum of the principal amount of this First Mortgage Note (the "Interest") and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below from the Issuance Date to the date of payment of such principal amount of this First Mortgage Note. Installments of Interest and Liquidated Damages shall become due and payable semi-annually in arrears on each March 15 and September 15 (each, an "Interest Payment Date") to the holder of record at the close of business on the immediately preceding March 1 or September 1. Additionally, installments of accrued and unpaid Interest and Liquidated Damages shall become due and payable with respect to any principal amount of this First Mortgage Note that matures (whether at stated maturity, upon acceleration, upon maturity of repurchase obligation or otherwise) upon such maturity of such principal amount of this First Mortgage Note. Interest and Liquidated Damages on this First Mortgage Note shall be computed on the basis of a 360-day year, consisting of twelve 30-day months. Each installment of Interest shall be calculated to accrue from and including the most recent date to which Interest has been paid or provided for (or from and including the Issuance Date if no installment of Interest has been paid) to, but not including, the date of payment. 2. METHOD OF PAYMENT. The Company shall pay interest (except defaulted interest) and Liquidated Damages, if any, to the Persons who are registered Holders of First Mortgage Notes at the close of business on March 1 or September 1 next preceding the Interest Payment Date, even if such First Mortgage Notes are cancelled after such record date and on or before such Interest Payment Date (the "Record Date"), except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Holder hereof must surrender this First Mortgage Note to a Paying Agent to collect principal payments. The First Mortgage Notes shall be payable both as to principal, interest and premium and Liquidated Damages, if any, at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest, if any, may be made by check mailed to the Holders of First Mortgage Notes at their respective addresses set forth in the register of Holders of First Mortgage Notes; provided that all payments with respect to Global Notes and $5.0 million or more in principal amount of First Mortgage Notes the Holders of which have given wire transfer instructions to the Company shall be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. 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, American Bank National Association (including any successor appointed under the Indenture, the "Trustee"), the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Company 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 AND COLLATERAL DOCUMENTS. The Company issued the First Mortgage Notes under an Indenture dated as of March 28, 1996 (as it may be amended, modified or supplemented from time to time, the "Indenture") among the Company and the Trustee. The terms of the First Mortgage 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 Secs. 77aaa-77bbbb), as in effect on the Issuance Date. The First Mortgage Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The First Mortgage Notes are obligations of the Company that may be issued from time to time in one or more series. The First Mortgage Notes of this series are limited in principal amount to $140,000,000, plus amounts, if any, issued to pay Liquidated Damages on outstanding First Mortgage Notes as set forth in Paragraph 2 hereof. The First Mortgage Notes are secured by a pledge of the Capital Stock of each Subsidiary now or hereafter owned by the Company, including by a pledge of the Capital Stock of Finance Corporation, and of any intercompany notes held by the Company pursuant to the Pledge Agreement referred to in the Indenture, unless such pledge would in any way jeopardize obtaining or maintaining a Gaming License or would require the Trustee or a Holder or beneficial owner of First Mortgage Notes to be licensed, qualified or found suitable by any applicable Gaming Authority. The terms of the Indenture shall govern any inconsistencies between the Indenture and the First Mortgage Notes or the Note Guarantee. The First Mortgage Notes are secured by certain collateral pursuant to the Collateral Documents referred to in the Indenture that may be released pursuant to the terms thereof. 5. OPTIONAL REDEMPTION. Except as set forth in Section 3.07 of the Indenture, the First Mortgage Notes shall not be redeemable at the Company's option prior to March 15, 2000 (except as otherwise required by a Gaming Authority). From and after March 15, 2000 (except as otherwise required by a Gaming Authority), the First Mortgage Notes shall be subject to redemption at the option of the Company, 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 and Liquidated Damages thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on March 15 of the years indicated below. Percentage of Principal Year Amount 2000 106.750% 2001 103.375% 2002 and thereafter 100.000% Notwithstanding the foregoing or any other provisions of Article 3 of the Indenture, if any Gaming Authority requires that a Holder or beneficial owner of the First Mortgage Notes must be licensed, qualified or found suitable under any applicable gaming laws in order to maintain any or obtain any applied for Gaming License or franchise of the Company or any Restricted Subsidiary under any applicable gaming laws, and such Holder or beneficial owner fails to apply for a license, qualification or finding of suitability within 30 days after being requested to do so by such Gaming Authority (or such lesser period that may be required by such Gaming Authority) or if such Holder or beneficial owner is not so licensed, qualified or found suitable or the Company determines, upon the written advice of counsel or any Gaming Authority, that the ownership of the First Mortgage Notes would jeopardize or prevent the issuance, reinstatement or renewal of any Gaming License held by the Company, the Company shall have the right, at its option, (i) to require such Holder or beneficial owner to dispose of such Holder's or beneficial owner's First Mortgage Notes within 30 days of notice of such finding by the applicable Gaming Authority that such Holder or beneficial owner will not be licensed, qualified or found suitable as directed by such Gaming Authority or within 30 days of the Company's determination, described herein, based upon written advice of counsel or any Gaming Authority (or such earlier date as may be required by the applicable Gaming Authority) or (ii) to call for redemption of the First Mortgage Notes of such Holder or beneficial owner at a redemption price equal to the lesser of the principal amount thereof or the price at which such Holder or beneficial owner acquired the First Mortgage Notes, together with, in either case, accrued and unpaid interest and Liquidated Damages thereon, if any, to the earlier of the date of redemption or the date of the finding of unsuitability by such Gaming Authority, which may be less than 30 days following the notice of redemption if so ordered by such Gaming Authority. In connection with any such redemption, and except as may be required by a Gaming Authority, the Company shall comply with the procedures contained in the Indenture for redemption of the First Mortgage Notes. The Company shall not be required to pay or reimburse any Holder or beneficial owner of First Mortgage Notes who is required to apply for such license, qualification or finding of suitability for the costs of such licensure or investigation for such qualification or finding of suitability. Such expenses shall, therefore, be the obligation of such Holder or beneficial owner. Any redemption pursuant to Section 3.07 of the Indenture shall be made pursuant to the provisions of Sections 3.01 through 3.06 of the Indenture. 6. MANDATORY REDEMPTION. Except as set forth in paragraph five above, the Company shall not be required to make mandatory redemption or sinking fund payments prior to maturity with respect to the First Mortgage Notes. 7. REPURCHASE AT OPTION OF HOLDER. Under certain circumstances, as provided in the Indenture, the Company may be required to purchase all or a portion of the First Mortgage Notes. Holders of First Mortgage Notes that are subject to an offer to purchase shall receive an offer to purchase from the Company prior to any related purchase date, and may elect to have such First Mortgage Notes purchased by completing the form titled "Option of Holders to Elect Purchase" appearing below. 8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose First Mortgage Notes are to be redeemed at its registered address. First Mortgage Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the First Mortgage Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on First Mortgage Notes or portions thereof called for redemption. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The First Mortgage Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. A Holder may register, transfer or exchange First Mortgage Notes in accordance with the terms of the Indenture. The Registrar and the Trustee may require a Holder of First Mortgage Notes, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder of First Mortgage Notes to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any First Mortgage Note selected for redemption. Also, the Company is not required to transfer or exchange any First Mortgage Note for a period of 15 days before a selection of First Mortgage Notes to be redeemed. 10. PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee for registration of the transfer of this First Mortgage Note, the Trustee, any Agent, the Company and the Guarantors may deem and treat the Person in whose name this First Mortgage Note is registered as its absolute owner for the purpose of receiving payment of principal of, premium, if any, and interest and Liquidated Damages, if any, on this First Mortgage Note and for all other purposes whatsoever, whether or not this First Mortgage Note is overdue, and neither the Trustee, any Agent, the Company nor any Guarantor shall be affected by notice to the contrary. The registered Holder of a First Mortgage Note shall be treated as its owner for all purposes. 11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the First Mortgage Notes, the Note Guarantees and the Collateral Documents may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the First Mortgage Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for First Mortgage Notes), and any existing default or compliance with any provision of the Indenture, the First Mortgage Notes, the Note Guarantees and the Collateral Documents may be waived with the consent of the Holders of a majority in principal amount of the then outstanding First Mortgage Notes (including consents obtained in connection with a tender offer or exchange offer for First Mortgage Notes). Without the consent of any Holder of First Mortgage Notes, the Company and the Trustee together may amend or supplement the Indenture, the First Mortgage Notes, the Note Guarantees and the Collateral Documents to cure any ambiguity, defect or inconsistency, to comply with Section 5.01 of the Indenture, to provide for uncertificated First Mortgage Notes in addition to or in place of certificated First Mortgage Notes, to provide for the assumption of the Company's obligations to Holders of the First Mortgage Notes in the case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the First Mortgage Notes (including providing for additional Note Guarantees pursuant to the Indenture), or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act or to enter into additional or supplemental Collateral Documents. 12. DEFAULTS AND REMEDIES. Events of Default include (as more fully described, and subject to, the terms and conditions of the Indenture as it may be amended, modified or supplemented from time to time): (i) default in payment when due and payable, upon redemption or otherwise, of principal of or premium, if any, on the First Mortgage Notes or under any Note Guarantee; (ii) default for 30 days or more in the payment when due of interest or Liquidated Damages, if any, on the First Mortgage Notes or under any Note Guarantee; (iii) East Chicago Showboat is not Operating by October 1, 1997 and continues to be not Operating; (iv) failure by the Company or any Guarantor to comply with Section 4.07, 4.09, 4.10, 4.11, 4.16, 4.24, 4.25 or 4.28 hereof; (v) failure by the Company or any Guarantor for 30 days after receipt of written notice until December 31, 1997, and thereafter for 60 days after receipt of written notice, to comply with any of its other agreements in the Indenture, the Collateral Documents or the First Mortgage Notes; (vi) default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries, whether such Indebtedness or Guarantee now exists or is created after the Issuance Date, which default (a) is caused by a failure to pay when due principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity or would constitute a default in the payment of such issue of Indebtedness at final maturity of such issue and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which a Payment Default then exists or with respect to which the maturity thereof has been so accelerated or which has not been paid at maturity, aggregates $5.0 million or more; (vii) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which final judgments remain unpaid, undischarged and unstayed for a period of more than 60 days; (viii) breach by the Company, any Guarantor or any of their Subsidiaries of any representation or warranty set forth in any Note Guarantee or any of the Collateral Documents, or default by the Company or any Guarantor in the performance of any covenant set forth in any Note Guarantee or any of the Collateral Documents or the repudiation by either of the Company, any Guarantor or any of their Subsidiaries of their obligations under, or any judgment or decree by a court or governmental agency of competent jurisdiction declaring the unenforceability of, any Note Guarantee or any of the Collateral Documents for any reason that would materially impair the benefits to the Trustee or the Holders of the First Mortgage Notes thereunder; (ix) certain events of bankruptcy or insolvency with respect to the Company or any Guarantor that is a Significant Subsidiary of the Company or any group of Guarantors that together would constitute a Significant Subsidiary of the Company; (x) revocation, termination, suspension or other cessation of effectiveness of any Gaming License which results in the cessation or suspension of gaming operations for a period of more than 90 days at East Chicago Showboat and such cessation or suspension of gaming operations is continuing; or (xi) any failure by Showboat to comply with the terms of the Completion Guarantee, the Standby Equity Commitment or the Escrow and Disbursement Agreement for 30 days after the receipt of written notice. If any Event of Default (other than by reason of bankruptcy or insolvency) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding First Mortgage Notes may declare the principal, premium, if any, interest and any other monetary obligations on all of the First Mortgage Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company or any Guarantor, all outstanding First Mortgage Notes shall become due and payable without further action or notice. Holders of the First Mortgage Notes may not enforce the Indenture or the First Mortgage Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding First Mortgage Notes may direct the Trustee in its exercise of any trust or power, including the exercise of any remedy under the Collateral Documents. The Trustee may withhold from Holders of the First Mortgage Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. In addition, the Trustee shall have no obligation to accelerate the First Mortgage Notes if in the best judgment of the Trustee acceleration is not in the best interest of the Holders of the First Mortgage Notes. The Holders of a majority in aggregate principal amount of the First Mortgage Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the First Mortgage Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, premium, if any, or the principal of, any First Mortgage Note held by a non-consenting Holder. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required, within five Business Days upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. GUARANTEE. Payment of principal of, premium, if any, and interest on overdue principal and overdue interest on the First Mortgage Notes and all other obligations of the Company to the Holders shall be unconditionally guaranteed by the Guarantors pursuant to, and subject to the terms of, Article 11 of the Indenture. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator, stockholder or partner of the Company or the Guarantors, as such, shall have any liability for any obligations of the Company or the Guarantors under the First Mortgage Notes, any Note Guarantee, the Indenture, the Collateral Documents, as applicable, or for any claim based on, in respect of, or by reason of such obligations or their creation. Each holder of the First Mortgage Notes by accepting a First Mortgage Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the First Mortgage Notes and the Note Guarantees. 16. AUTHENTICATION. This First Mortgage 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 SECURITIES. In addition to the rights provided to Holders of First Mortgage Notes under the Indenture, Holders of Transferred Restricted Securities shall have all of the rights set forth in the A/B Exchange Registration Rights Agreement dated as of March 28, 1996, between the Company and the parties named on the signature pages thereof (the "Registration Rights Agreement"). 19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the First Mortgage 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 First Mortgage Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 20. ADDITIONAL INFORMATION. Any Holder of the First Mortgage Notes or prospective investor may obtain a copy of the Indenture, the Registration Rights Agreement and the other Collateral Documents without charge by writing to the Company at the following address: Showboat Marina Casino Partnership Showboat Marina Finance Corporation 2001 East Columbus Drive East Chicago, Indiana 46312 Attention: Vice President - Finance and Chief Financial Officer ASSIGNMENT FORM To assign this First Mortgage Note, fill in the form below: (I) or (we) assign and transfer this First Mortgage 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 First Mortgage Note on the books of the Company. The agent may substitute another to act for him. Date:_________ Your Signature:___________________________________ (Sign exactly as your name appears on the face of this First Mortgage Note) OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this First Mortgage Note purchased by the Company pursuant to Section 4.10, 4.11, 4.16, 4.24 or 4.28 of the Indenture, check the box below: [] Section 4.10 [] Section 4.11 [] Section 4.16 [] Section 4.24 [] Section 4.28 Date: __________ Signature:_____________________________________________ (Sign exactly as your name appears on the First Mortgage Note) Tax Identification No.: Signature Guarantee.
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTE2 The following exchanges of a part of this Global Note for Definitive Notes have been made: Principal Amount of this Signature of Amount of decrease in Amount of increase in Global Note authorized officer of Principal Amount of Principal Amount of following such decrease Trustee or Note Date of Exchange this Global Note this Global Note (or increase) Custodian
2. This schedule should only be included if the First Mortgage Note is issued in global form. EXHIBIT B CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF FIRST MORTGAGE NOTES Re: 13 1/2% First Mortgage Notes due 2003 of Showboat Marina Casino Partnership and Showboat Marina Finance Corporation. This Certificate relates to $_____ principal amount of First Mortgage Notes held in * ________ book-entry or *_______ definitive form by ________________ (the "Transferor"). The Transferor*: [] has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Note held by the Depository a First Mortgage Note or First Mortgage Notes in definitive, registered form of authorized denominations in an aggregate principal amount equal to its beneficial interest in such Global Note (or the portion thereof indicated above); or [] has requested the Trustee by written order to exchange or register the transfer of a First Mortgage Note or First Mortgage Notes. In connection with such request and in respect of each such First Mortgage Note, the Transferor does hereby certify that Transferor is familiar with the Indenture relating to the above captioned First Mortgage Notes and as provided in Section 2.06 of such Indenture, the transfer of this First Mortgage Note does not require registration under the Securities Act (as defined below) because:* [] Such First Mortgage Note is being acquired for the Transferor's own account, without transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section 2.06(d)(i)(A) of the Indenture). [] Such First Mortgage Note is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended (the "Securities Act")) in reliance on Rule 144A (in satisfaction of Section 2.06(a)(ii)(B), Section 2.06(b)(A) or Section 2.06(d)(i) (B) of the Indenture) or pursuant to an exemption from registration in accordance with Rule 904 under the Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section 2.06(d)(i)(B) of the Indenture.) _______________ *Check applicable box. [] Such First Mortgage Note is being transferred in accordance with Rule 144 under the Securities Act, or pursuant to an effective registration statement under the Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section 2.06(d)(i)(B) of the Indenture). [] Such First Mortgage Note is being transferred in reliance on and in compliance with an exemption from the registration requirements of the Securities Act, other than Rule 144A, 144 or Rule 904 under the Securities Act. An Opinion of Counsel to the effect that such transfer does not require registration under the Securities Act accompanies this Certificate (in satisfaction of Section 2.06(a)(ii)(C) or Section 2.06(d)(i)(C) of the Indenture). __________________________________ [INSERT NAME OF TRANSFEROR] By:_______________________________ Date:_____________________________________ _______________ *Check applicable box. EX-10.01 3 EXHIBIT 10.01 EXECUTION COPY ESCROW AND DISBURSEMENT AGREEMENT By and Among SHOWBOAT MARINA CASINO PARTNERSHIP SHOWBOAT MARINA FINANCE CORPORATION and SHOWBOAT, INC. (as Escrow Agent and Disbursement Agent) and AMERICAN BANK NATIONAL ASSOCIATION (as Trustee) dated as of March 28, 1996 ESCROW AND DISBURSEMENT AGREEMENT THIS ESCROW AND DISBURSEMENT AGREEMENT (this "AGREEMENT") is dated as of March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ("SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), and Showboat, Inc., a Nevada corporation ("SHOWBOAT"), as escrow agent and disbursement agent (as applicable, the "ESCROW AGENT" and the "DISBURSEMENT AGENT"). RECITALS A. FIRST MORTGAGE NOTES. The Company has issued $140,000,000 aggregate principal amount of 13 1/2% First Mortgage Notes due 2003 (the "FIRST MORTGAGE NOTES"). The First Mortgage Notes are to be issued pursuant to the provisions of an Indenture (the "INDENTURE") dated as of March 28, 1996 among the Company and the Trustee. The proceeds from the issuance of the First Mortgage Notes (net of any discounts and commissions, certain expense reimbursements and certain reductions for the receipt of immediately available funds) in the amount of $135.1 million (the "NOTE PROCEEDS") will be deposited contemporaneously with the execution of this Agreement into a segregated cash collateral trust account to be maintained at National Westminster Bank, at Freehold, New Jersey, Custody Account No. 35400008, in the name of American Bank National Association, as Trustee, "Collateral Account for Showboat Marina Casino Partnership and Showboat Marina Finance Corporation" (the "ESCROW ACCOUNT"). The Escrow Account and all balances and investments from time to time therein shall be under the sole control and dominion of the Trustee. In addition, the Indenture provides that (i) the proceeds from the Capital Contribution, to the extent of cash remaining, (ii) the Additional Project Financing, to the extent of cash received, if any, (iii) any Insurance Proceeds received on or prior to the date on which East Chicago Showboat first becomes Operating, and (iv) any awards, payments or other compensation or settlement in lieu thereof made in connection with any taking of property or condemnation or eminent domain proceeding whether actual or threatened ("CONDEMNATION PROCEEDS"), will be deposited in the Escrow Account upon receipt thereof by the Company. As used herein, the term "PROCEEDS" shall refer to the Note Proceeds and the proceeds of any Capital Contribution, Additional Project Financing and Insurance Proceeds. B. COLLATERAL AND COLLATERAL ASSIGNMENT. As security for its obligations under the First Mortgage Notes and the Indenture, the Company has granted security interests to the Trustee, for the benefit of the holders from time to time of the First Mortgage Notes (the "Holders"), in certain assets and has collaterally assigned certain contracts to the Trustee. As further security for its obligations under the First Mortgage Notes and the Indenture, the Company has also granted a security interest to the Trustee, for the benefit of the Holders of the First Mortgage Notes, in all of its right, title and interest in and to the Escrow Account, and any Proceeds or other amounts held therein. C. PURPOSE. The parties hereto have entered into this Agreement in order to set forth the conditions upon which, and the manner in which, funds will be disbursed from the Escrow Account in order to permit the Company to design, develop, construct, equip and open East Chicago Showboat. D. COMPLETION GUARANTEE. Showboat, pursuant to the Completion Guarantee, has guaranteed the completion of East Chicago Showboat, up to a maximum of $30.0 million. AGREEMENT NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that (i) the recitals above are true and correct and are by this reference incorporated herein as if fully set forth herein and (ii) as follows: 1. DEFINITIONS. 1.1 DEFINED TERMS. In this Agreement, unless a different meaning clearly appears from the context, the terms defined in this Section 1 shall have the meanings herein specified, such definitions to be equally applicable to both the singular and plural forms of any of the terms defined: "ADDITIONAL PROJECT FINANCING" means any funds, not initially subject to this Agreement, which the Company obtains prior to the date on which East Chicago Showboat becomes Operating in accordance with the terms of the Indenture through the incurrence of additional debt (including, without limitation, loans or advances made to the Company by Showboat, or capital contributions caused to be made to the Company by Showboat, in each case under the Completion Guarantee), but only to the extent that such funds (a) are on deposit in the Escrow Account and (b) are held by the Company free and clear of any claims of any other parties whatsoever (other than Permitted Liens). "ADDITIONAL REVENUE" means revenue (including, without limitation, investment income accruing on funds in the Escrow Account and the Segregated Account) generated by the Company other than from the disposition of its assets or the receipt of the proceeds of any Additional Project Financing, but only to the extent that such revenue (a) is on deposit in the Escrow Account and (b) is held by the Company free and clear of any claims of any other parties whatsoever (other than Permitted Liens); PROVIDED, HOWEVER, that as of any date of measurement, Additional Revenue shall also include investment income which the Company reasonably determines will accrue on funds in the Escrow Account through the date on which the Company reasonably anticipates that East Chicago Showboat first will be Operating. "AVAILABLE FUNDS" with respect to the Company means, at any given time, the sum of (a) the Original Allocation less disbursements theretofore made from the Escrow Account, (b) Additional Revenue theretofore received, (c) Realized Savings theretofore achieved, (d) Additional Project Financing theretofore received, (e) Capital Lease Savings theretofore achieved and (f) any undisbursed funds in the Segregated Account. "CAPITAL LEASE SAVINGS" means, with respect to any personal property that the Company determines, subsequent to the date hereof, to fund pursuant to Capital Lease Obligations, the excess of the amount budgeted in the Construction Budget for the purchase of such personal property over the total amount of capital lease payments required to be paid over the term of the capital lease pursuant to the instrument or agreement governing such capital lease; PROVIDED, HOWEVER, that Capital Lease Savings for any line item shall be zero if (a) the total amount of liabilities with respect to Capital Lease Obligations incurred by the Company or any of its subsidiaries exceeds $16,000,000 at any one time; (b) the Company fails to allocate a sufficient amount in the Construction Budget to make the capital lease payments, if any, required to be paid pursuant to the terms of the instrument or agreement governing such capital lease prior to the date 2 on which East Chicago Showboat becomes Operating; or (c) the Company fails to promptly deliver to the Disbursement Agent a copy of the instrument or agreement governing the capital lease. "CLOSING FEES AND EXPENSES" means fees and expenses (a) incurred by the Company in connection with the raising of debt or equity to finance East Chicago Showboat and (b) paid on or before the Closing Date. The Closing Fees and Expenses are identified on EXHIBIT 1 to the Company's Closing Certification as "Fees and Expenses." "COMPANY'S CLOSING CERTIFICATION" means an Officers' Certificate in the form attached hereto as EXHIBIT B-1. "COMPLETION DATE" means October 1, 1997. "CONSTRUCTION BUDGET" means an itemized schedule setting forth on a line item basis all of the costs (including anticipated Debt Financing Costs through the date that the Company reasonably anticipates that East Chicago Showboat first will be Operating) which the Company anticipates to expend in connection with the financing, design, development, construction, equipping and opening of East Chicago Showboat, as such Construction Budget may be amended from time to time pursuant to this Agreement; PROVIDED, HOWEVER, that the Construction Budget does not and shall not include (a) any expenses paid by the Company in connection with East Chicago Showboat prior to the Closing Date, or (b) to the extent not included within clause (a), any expenses paid pursuant to paragraphs (a) through (h) of the Initial Disbursements Certificate attached hereto as EXHIBIT A. The Construction Budget as of the date hereof is attached as EXHIBIT 1 to the Company's Closing Certification. As more fully set forth in Section 6.2 of this Agreement, at or before the first requested disbursement from the Escrow Account following the Initial Disbursements, the Company shall prepare a revised Construction Budget utilizing the Project Cost Schedule in the form attached hereto as EXHIBIT D, and the "Construction Budget" thereafter shall consist of the line item allocations set forth in column (iv) thereof under the heading "Construction Budget." "CONSTRUCTION EXPENSES" means expenses incurred in connection with the construction of East Chicago Showboat in accordance with the Construction Budget, excluding, however, (a) any such Construction Expenses paid prior to the Closing Date, (b) any Pre-Opening Expenses, (c) any Debt Financing Costs and (d) any Closing Fees and Expenses. "CONSTRUCTION SCHEDULE" means a schedule describing the sequencing of the components of work to be undertaken in connection with the construction of East Chicago Showboat, which schedule (as the same may be amended) demonstrates that East Chicago Showboat will be Operating on or before the Completion Date. "CONTRACTOR" means a contractor, subcontractor or supplier of materials or services in connection with the construction and design of East Chicago Showboat. "CONTRACTS" means the contracts pertaining to the construction of East Chicago Showboat, including, without limitation, any contracts, subcontracts, licenses and performance and payment bonds or guarantees. 3 "DEBT FINANCING COSTS" means all premium, principal, repayments, interest, Liquidated Damages and other amounts payable or accrued from time to time under the First Mortgage Notes or any Additional Project Financing. "DISBURSEMENT AGENT" means Showboat, or such substitute Disbursement Agent as may be designated in accordance with Section 10 hereof. "ESCROW AGENT" means Showboat, or such substitute Escrow Agent as may be designated in accordance with Section 10 hereof. "ESCROW AGENT STATEMENT" shall mean a statement in form and substance satisfactory to the Disbursement Agent prepared by the Escrow Agent setting forth in reasonable particularity the balance of funds in the Escrow Account and the manner in which such funds are invested. "FINAL PLANS" with respect to any particular work or improvement means Plans which (a) have received final approval from all governmental authorities required to approve such Plans prior to completion of the work or improvements; and (b) contain sufficient specificity to permit the completion of the work or improvement. "INITIAL DISBURSEMENTS CERTIFICATE" means an Officer's Certificate from the Company in the form attached hereto as EXHIBIT A. "INITIAL CONSTRUCTION BUDGET" means the line items identified on the budget attached as EXHIBIT 1 to the Company's Closing Certification and the corresponding entries listed thereon under the heading "Available Amount" (except that the Initial Construction Budget shall not include the "Fees and Expenses" line item listed thereon and the corresponding amount listed in the Available Amount column. The Initial Construction Budget also specifies (under the entry for "Additional Revenue" within the Debt Financing Costs category) the Additional Revenue which the Company reasonably anticipates it will earn as investment income on funds in the Escrow Account through the date that the Company reasonably anticipates that East Chicago Showboat first will be Operating. "INITIAL PROPERTY" means the real property located in East Chicago, Indiana, leased by the City of East Chicago, Indiana Department of Redevelopment to Showboat Partnership, under the Redevelopment Project Lease, on which the Company will construct at least part of the Minimum Facilities. "INSURANCE PROCEEDS" means the proceeds from any insurance covering an Event of Loss received by or on behalf of the Company prior to the date on which East Chicago Showboat becomes Operating or any such proceeds required to be deposited into the Escrow Account pursuant to the terms of the Indenture and/or the Mortgages. "MORTGAGES" means (i) that certain Leasehold Mortgage, Assignment of Rents and Security Agreement executed by Showboat Partnership encumbering Showboat Partnership's interest in the Redevelopment Project Lease and the leasehold estate created thereby, in favor of the Trustee, on behalf of the Holders of the First Mortgage Notes, (ii) that certain First Preferred Ship Mortgage in the form attached as an Exhibit to the Indenture to be executed by the Company 4 to encumber the Casino vessel in favor of the Trustee, on behalf of the Holders of the First Mortgage Notes, and (iii) all liens and security interests granted by the Company in accordance with the terms of the Indenture, by executing and filing security agreements and financing statements in the applicable state, under the Uniform Commercial Code adopted by such state, to encumber property utilized in the construction of East Chicago Showboat. "OFFICERS' CERTIFICATE" means a certificate signed by two officers, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer. "ORIGINAL ALLOCATION" means the Note Proceeds less the Initial Disbursements listed in paragraphs (a) through (h) of the Initial Disbursements Certificate. "PERMITTED DISBURSEMENTS" shall mean the disbursements from the Escrow Account pursuant to Sections 3.2, 3.3 or 3.4 hereof. "PLANS" means the plans, specifications, working drawings, change orders, correspondence and related items that collectively: (a) provide for and detail the manner of construction of improvements which contain at least the Minimum Facilities; (b) call for construction that will permit East Chicago Showboat to be Operating on or prior to the Completion Date; (c) call for construction which will cause East Chicago Showboat to be completed for a total cost consistent with the Construction Budget and the line items set forth therein; and (d) to the extent such Plans are amended, such Plans that continue to represent a logical evolution consistent with previous Plans, as the same may be amended, modified or supplemented from time to time, and, if required, submitted to and approved by the appropriate gaming or regulatory authorities. "PRE-OPENING EXPENSES" means expenses of the type described on EXHIBIT K attached hereto. "PROJECT ARCHITECT" means, (i) Showboat, for so long as Showboat continues serving as Disbursement Agent under this Agreement, and, in the event that Showboat ceases to serve as Disbursement Agent hereunder, (ii) as applicable, (a) The Hillier Group and (b) Rodney Lay & Associates, Inc., and, in each case, their respective successors identified by notice to the Disbursement Agent. "PROJECT COST SCHEDULE" means an itemized schedule in the form of EXHIBIT D hereto. "PROJECT MANAGER" means, (i) Showboat, for so long as Showboat continues serving as Disbursement Agent under this Agreement, and, in the event that Showboat ceases to serve as Disbursement Agent hereunder, (ii) as applicable, (a) Tonn & Blank, Incorporated, (b) KLM and (c) Atlantic Marine, Inc., and, in each case, their respective successors identified by notice to the Disbursement Agent. "PROPERTY" means the Initial Property. 5 "REALIZED SAVINGS" means the excess of the amount budgeted in the Construction Budget for a line item over the amount of funds expended or owed by the Company to complete the tasks set forth in such line item and for the materials and services used to complete such tasks; PROVIDED, HOWEVER, that: (a) Realized Savings for any line item shall be deemed to be zero if such savings are obtained in a manner that materially detracts from the overall quality and amenities of East Chicago Showboat being constructed by the Company as reasonably determined by the Project Architect, and (b) Realized Savings for each line item shall in all cases be deemed to be zero until (i) the Company completes all work and improvements covered by the line item, or (ii) the Company satisfies or reasonably provides for in all material respects the obligations arising out of the completion of that line item. For purposes of clause (ii) of the immediately preceding sentence, the Company shall be deemed to have satisfied or reasonably provided for in all material respects the obligations arising out of the completion of a particular line item if (A) the Company entered into Contracts providing for the completion of all tasks set forth in such line item and for all materials and services required for such tasks for a guaranteed fixed or maximum price, with payment and performance bonds (or other assurances) satisfactory to the Disbursement Agent for each such Contract, (B) copies of such Contracts and related bonds (or other assurances) have been delivered to the Disbursement Agent, and (C) the Disbursement Agent has concluded that such Contracts and bonds (or other assurances) provide reasonable assurance that the work involved in the line item will be completed by a specified date consistent with the timely construction of East Chicago Showboat and for a cost less than or equal to the aggregate guaranteed fixed or maximum prices in such Contracts. In determining whether the Contracts and bonds (or other assurances) meet the foregoing test, the Disbursement Agent may rely upon such factual certificates of the Company, the Project Architect and the Project Manager as the Disbursement Agent deems reasonably appropriate. "REMAINING COSTS" means, at any given time, the amount necessary to pay, through completion, all theretofore unpaid costs (including Retainage Amounts and Debt Financing Costs) to be incurred or payable in connection with the construction of East Chicago Showboat through the date that the Company reasonably anticipates that East Chicago Showboat first will be Operating. "RETAINAGE AMOUNTS" means, at any given time, amounts which have accrued and are owing under the terms of a Contract for work or services already provided but which at such time (and in accordance with the terms of the Contract) are being withheld from payment to the Contractor until certain subsequent events (e.g., completion benchmarks) have been achieved under the Contract. "REVIEWING AGENT" means Showboat, any successor thereto, and any replacement thereof. "SEGREGATED ACCOUNT" means a segregated cash collateral trust account the balance of which shall not exceed $5.0 million at any one time to be maintained at National City Bank, in East Chicago, Indiana, Custody Account No. 501755883, in the name of Showboat, as Escrow Agent, as agent/bailee for American Bank National Association, as Trustee. "TITLE INSURER" means, collectively, Chicago Title Insurance Company and Stewart Title Guaranty Company. 6 "TITLE POLICY" means the lender's policy or policies of title insurance to be provided by the Title Insurer to the Trustee with respect to the Initial Property, together with all endorsements thereto. 1.2 INDENTURE DEFINED TERMS. In addition, the following terms shall have the respective meanings assigned to such terms in the Indenture: CASH EQUIVALENTS CASINO CASINO VESSEL CONSTRUCTION CONTRACT CLOSING DATE COLLATERAL DOCUMENTS COMBINED CASH FLOW COMPLETION GUARANTEE EAST CHICAGO SHOWBOAT EVENT OF LOSS FIRST PREFERRED SHIP MORTGAGE LIEN MINIMUM FACILITIES OFFICER OPERATING PURCHASE DATE PROJECT REDEVELOPMENT PROJECT LEASE REPURCHASE OFFER 1.3 INDEX OF ADDITIONAL DEFINED TERMS. In addition, the terms listed in the left column below shall have the respective meanings assigned to such terms in the Section of this Agreement listed opposite such terms in the right column below: Section of DEFINED TERM DEFINITION ACCOUNT 16.2 AGENT 16.2 AGREEMENT Introduction COLLATERAL 16.2 COMPANY Introduction CONDEMNATION PROCEEDS Introduction DISBURSEMENT AGENT Introduction DISBURSEMENT AUTHORIZATION 3.1 DISBURSEMENT REQUEST 5.2 DISPUTED AMOUNTS 6.2(h) ESCROW ACCOUNT A of Recitals ESCROW ACCOUNT COLLATERAL 16.1 7 ESCROW AGENT Introduction EVENT OF DEFAULT 6.3 FINANCE CORPORATION Introduction FIRST MORTGAGE NOTES A of Recitals INDENTURE A of Recitals INITIAL DISBURSEMENTS 6.1 NOTE PROCEEDS A of Recitals PAYING AGENT 3.3 PAYMENT DATE 3.3 PAYMENT REQUEST 3.3 PRE-CLOSING DISBURSEMENTS 6.4 PROCEEDS A of Recitals SHOWBOAT Introduction SHOWBOAT PARTNERSHIP Introduction TRUSTEE Introduction 2. ESTABLISHMENT OF ESCROW ACCOUNT. 2.1 APPOINTMENT OF ESCROW AGENT. The Trustee hereby appoints the Escrow Agent, and the Escrow Agent hereby accepts appointment, to act as the Trustee's agent, on behalf of the Holders of the First Mortgage Notes, for purposes of perfecting the pledge, assignment and security interest in the Collateral as set forth in Section 16.1 of this Agreement, and the Escrow Agent hereby accepts such appointment. By executing and delivering this Agreement, the Escrow Agent hereby acknowledges its receipt of the Note Proceeds and the proceeds of the remaining Capital Contribution. 2.2 ESTABLISHMENT OF ESCROW ACCOUNT. Concurrently with the execution and delivery hereof and for so long as this Agreement is in full force and effect, the Company shall establish and maintain the Escrow Account and the Segregated Account. The Escrow Account and the Segregated Account shall, and the Company hereby acknowledges and agrees that the Escrow Account and the Segregated Account shall, at all times remain under the exclusive dominion and control of the Trustee. Funds in the Escrow Account shall be held in trust and not commingled with any ordinary deposit or commercial bank account. The Escrow Agent shall note in its records that all funds and other assets in the Escrow Account have been pledged to the Trustee and that the Escrow Agent is holding such items as agent for the Trustee. Accordingly, all such funds and assets shall not be within the bankruptcy "estate" (as such term is used in 11 U.S.C. Sec. 541) of the Escrow Agent. All such funds and all earnings accruing from time to time thereon shall be held in the Escrow Account until disbursed in accordance with the terms hereof or until transferred to such other Escrow Account as the Trustee and the Company may direct the Escrow Agent to establish. All funds contained in the Escrow Account shall be invested in cash and Cash Equivalents (as defined in the Indenture) as are specified, from time to time, by the Company in writing pending disbursement of such funds pursuant to this Agreement; PROVIDED, HOWEVER, that the Escrow Agent shall not invest any such funds in any investment unless such investment is described in Section 16.3 of this Agreement and the Escrow Agent has taken the actions described in Section 16.3 of this Agreement with respect to such investment. If no such instructions are received by the Escrow Agent after request, such funds shall be invested in Cash Equivalents (provided that the requirements set forth in Section 16.3 of this Agreement with respect to such investment have been satisfied). Concurrently with the execution and delivery hereof, the Company shall deliver all of the 8 Proceeds to the Escrow Agent for deposit into the Escrow Account, subject to the security interest granted to the Trustee pursuant to Section 16.1 hereof. 3. DISBURSEMENTS FROM ESCROW. 3.1 CONDITION TO DISBURSEMENT. Except as provided in Section 3.3, 3.4, 6.1, 10.2.1 or 16.3(g) hereof, the Escrow Agent shall disburse funds from the Escrow Account only to the extent and in the manner directed by the Disbursement Agent in a written authorization (each, a "DISBURSEMENT AUTHORIZATION") delivered by the Disbursement Agent to the Escrow Agent in the form of EXHIBIT H attached hereto, which shall be accompanied by the Disbursement Request in the form of EXHIBIT C attached hereto delivered by the Company pursuant to this Agreement. 3.2 METHOD OF DISBURSEMENT. Upon receipt of a Disbursement Authorization as set forth in Section 3.1 above, the Escrow Agent shall disburse funds from the Escrow Account as specified in the Disbursement Authorization. Such disbursement shall be effected within five (5) business days of receipt thereof. 3.3 PAYMENTS ON FIRST MORTGAGE NOTES. Ten (10) days prior to the date that (i) any payment is due on the First Mortgage Notes, or (ii) in connection with any Repurchase Offer, the Purchase Date, the Company shall deliver to the Escrow Agent and the Trustee a Payment Request in the form of EXHIBIT I attached hereto (each, a "PAYMENT REQUEST") describing the amount required to be paid, the paying agent appointed pursuant to the Indenture (the "PAYING AGENT") to which the Escrow Agent should transfer funds in order to effect the payment, and the day (the "PAYMENT DATE") upon which such payment is due and payable. If the Company fails to deliver timely such Payment Request, then the Trustee may deliver such Payment Request to the Escrow Agent. On the Payment Date, the Escrow Agent shall disburse to the Paying Agent the amounts described in the Payment Request as due and payable on that date. The Company acknowledges that the failure of either notice referenced in this Section 3.3 to be delivered to the Escrow Agent shall not in any way exonerate or diminish the Company's obligation to make all payments under the Indenture and the First Mortgage Notes as and when due. 3.4 TRANSFER OF FUNDS TO THE TRUSTEE. Upon the receipt of written notice executed by the Trustee, which certifies that an Event of Default has occurred and is continuing and that the Trustee is entitled to the funds in the Escrow Account and the Segregated Account, the Escrow Agent shall deliver to the Trustee all funds in the Escrow Account and the Segregated Account, other than amounts then permitted to be disbursed under clauses (i), (ii) and (iii) of Section 6.2.1 hereof. Notwithstanding anything to the contrary in this Agreement, in the event that the Company fails to make any payment of any amount when due or fails to timely perform any of its obligations under the Casino Vessel Construction Contract, then the Escrow Agent shall, upon receipt of a written request executed by the Trustee, disburse from the Escrow Account any amounts necessary in the reasonable judgment of the Trustee to cure such payment or performance default. 4. AMENDMENTS TO CONSTRUCTION BUDGET; REVIEWING AGENT. 4.1 CONSTRUCTION BUDGET AMENDMENT PROCESS. 9 (a) The Construction Budget for East Chicago Showboat may be amended from time to time in the manner set forth herein. The Company shall have the right from time to time to amend the Construction Budget to amend the amounts allocated for specific line item components of the work required to complete East Chicago Showboat. Any such amendment shall be in writing and shall identify with particularity the line item to be increased, the amount of the increase, and the Realized Savings, Additional Revenue, Capital Lease Savings, previously unallocated reserves in the Construction Budget, previously allocated reserves which are permitted to be reduced pursuant to this Section 4.1 and/or any Additional Project Financing, which funds represent Available Funds (but excluding Retainage Amounts), which the Company proposes will be utilized to pay for such increase. Construction line items may be reduced only upon obtaining Realized Savings or Capital Lease Savings. Unallocated reserves may be reduced by allocation to other line items. Any amounts of Available Funds so identified for use in connection with a particular line item thenceforth shall be deemed dedicated to the particular line item, unless and until the Construction Budget is amended to reduce the amounts budgeted for such line item. (b) The Company shall submit the Construction Budget amendment to the Disbursement Agent by an Officers' Certificate in the form of EXHIBIT E hereto, together with the Project Manager's and Project Architect's certification as provided in EXHIBITS 1 and 2, respectively, to the Construction Budget Amendment Certificate. Upon submission of such Officers' Certificate to the Disbursement Agent, together with the Project Manager's and Project Architect's certificate (and if the line item "unallocated reserve" on such Construction Budget is zero, together with a copy of a review letter from the Reviewing Agent in the form of SCHEDULE 4 to EXHIBIT E hereto with respect to such amendment), such amendment shall become effective hereunder, and the Construction Budget for East Chicago Showboat shall thereafter be as so amended. 4.2 CONTRACT AMENDMENT PROCESS. The Company shall have the right from time to time to amend any Contract to change the scope of the work and the Company's payment obligations thereunder. Any such amendment shall be in writing and shall identify with particularity all changes being made. Each such amendment shall be effective when and only when: (a) the Company and the Contractor have executed and delivered the Contract Amendment (with the effectiveness thereof subject only to satisfaction of the conditions in clauses (b) and (c) below); (b) the Company has submitted the Contract amendment to the Disbursement Agent and the Trustee by an Officers' Certificate in the form attached hereto as EXHIBIT F, together with the Project Manager's and Project Architect's certification as provided in EXHIBITS 1 and 2, respectively, to the Contract Amendment Certificate; and (c) the Disbursement Agent has acknowledged its receipt of the materials referenced in clause (b) above, as contemplated in the form of Contract Amendment Certificate. 4.3 REVIEW BY REVIEWING AGENT; PROJECT COST SCHEDULE. (a) The Company shall engage the Reviewing Agent, at the Company's expense, to review all Disbursement Requests and all disbursements from the Segregated Account (and, to the extent required by Section 4.1 above, all Construction Budget Amendment Certificates). In order to facilitate such review, the Company shall provide to the Reviewing Agent (i) concurrently with the submission to the Disbursement Agent of any Disbursement Request, a copy of the same and all materials provided in connection therewith, and (ii) within 15 days after submission to the Disbursement Agent of any Disbursement Request, a Project Cost Schedule updated to include payments made with the disbursements pursuant to the Disbursement Request. Concurrently with the delivery of each such Project Cost Schedule to the Reviewing Agent, the Company also shall provide a copy to the Disbursement Agent. 10 (b) The Company shall cause the Reviewing Agent, within 60 days after the submission of each Disbursement Request to the Disbursement Agent, to provide the Disbursement Agent with a certificate relating to said Disbursement Request in the form of EXHIBIT G attached hereto. (c) The Company covenants to promptly cure any cost overrun for any line item (taking into account any applicable reserves) by (i) providing sufficient funds to cover in full such cost overrun from any of the following (but in each case only to the extent that the same have not previously been expended or dedicated (including Retainage Amounts) to the payment of items contained in the Construction Budget): (A) the amount equal to the Original Allocation, (B) the unspent Additional Revenue, (C) the Realized Savings, (D) any Additional Project Financing or (E) Capital Lease Savings; and (ii) effecting a Construction Budget Amendment to dedicate such funds to the line item in question. (d) From and after the date, if any, upon which the unallocated reserves have been reduced to zero, the Company shall cause the Reviewing Agent, within 45 days after the submission of each Construction Budget Amendment Certificate, to review the Construction Budget Amendment Certificate and all supporting documentation for the purpose of obtaining from the Reviewing Agent a review letter in the form of SCHEDULE 4 to EXHIBIT E attached hereto. (e) The Project Cost Schedule further shall set forth (i) the actual investment income earned on the funds held in the Escrow Account and the Segregated Account through the date of such Project Cost Schedule, and (ii) the additional amount of investment income which the Company reasonably anticipates will accrue on the funds held in the Escrow Account and the Segregated Account from the date of the Project Cost Schedule through the date that the Company reasonably anticipates that East Chicago Showboat first will be Operating. If at any time the Company submits a Project Cost Schedule pursuant to this paragraph and the Company can no longer reasonably anticipate that the Additional Revenue earned (and anticipated to be earned through the date that the Company reasonably anticipates that East Chicago Showboat first will be Operating) from investments of funds in the Escrow Account and the Segregated Account will equal the amount of such Additional Revenue anticipated as of the date the Initial Disbursements are made (as set forth in the Initial Construction Budget), then (i) if the total amount of such Additional Revenue at such date earned or anticipated to be earned is less than the total amount of such Additional Revenue anticipated as of the date the Initial Disbursements are made, then the Available Funds shall be deemed reduced by the amount of such deficiency and the Company, as a condition to the next Disbursement Request, shall reallocate unallocated reserves, provide additional Available Funds or otherwise amend the Construction Budget so that the total Project Costs do not exceed total Available Funds; or (ii) if the total amount of such Additional Revenue at such date earned or anticipated to be earned is greater than the total amount of such Additional Revenue anticipated as of the date the Initial Disbursements are made, then the Available Funds shall be deemed increased by the amount of such excess, but only as and when such excess is actually earned and deposited into the Escrow Account. 5. DUTIES OF DISBURSEMENT AGENT. The Disbursement Agent agrees, for the benefit of the Trustee and the Holders of the First Mortgage Notes, that the Disbursement Agent shall perform the following duties pursuant to this Agreement: 11 5.1 FINAL DISBURSEMENT OF FUNDS TO THE COMPANY FOLLOWING OPERATING DATE. If the Company provides written certification to the Disbursement Agent that (a) East Chicago Showboat commenced Operating on or before the Completion Date, and East Chicago Showboat continues to be Operating as of the date of the certification, (b) funds remain in the Escrow Account and/or the Segregated Account as of the date of the certification, and (c) as of the date of the certification, East Chicago Showboat shall have generated at least $5.0 million of Combined Cash Flow in one fiscal quarter as certified by the Company, then the Disbursement Agent shall, upon the direction of the Company, pursuant to a Disbursement Authorization in the form of EXHIBIT H attached hereto, direct the Escrow Agent to disburse all remaining funds in the Escrow Account and the Segregated Account, if any, to the Company; PROVIDED, HOWEVER, that the Disbursement Agent shall direct the Escrow Agent to retain funds in the Escrow Account in an amount sufficient to pay any then unpaid Retainage Amounts as provided in Section 6.2.1(iii) herein. 5.2 DISBURSEMENT REQUESTS AND DISBURSEMENTS. (a) The Company shall have the right from time to time during the term of this Agreement to submit to the Disbursement Agent a request for the disbursement of funds from the Escrow Account in the form of EXHIBIT C hereto (a "DISBURSEMENT REQUEST"), together with the schedules and exhibits attached thereto. The Disbursement Agent shall approve each Disbursement Request subject to its satisfaction of the conditions set forth in Section 6 hereof. Such approval shall be evidenced by the Disbursement Agent's delivery to the Escrow Agent of the Disbursement Authorization. The Disbursement Agent shall notify the Company and the Reviewing Agent as soon as reasonably possible (and in any event within two (2) business days after the Disbursement Agent reaches its conclusion) if any Disbursement Request is disapproved and the reason(s) therefor. (b) Provided that a Disbursement Request is not disapproved by the Disbursement Agent, within three (3) business days following submission of a Disbursement Request, the Disbursement Agent (by delivery of the Disbursement Authorization to the Escrow Agent) shall authorize the Escrow Agent to disburse the funds requested in such Disbursement Request. 5.3 PERIODIC INSPECTION AND REVIEW OF PROJECT. The Disbursement Agent shall exercise commercially reasonable efforts and utilize commercially prudent practices in the performance of its duties hereunder consistent with those of similar institutions disbursing disbursement control funds. Commencing upon execution and delivery hereof, the Disbursement Agent shall have the right to meet periodically at reasonable times, however no less frequently than quarterly, upon no less than three (3) business days' notice, with representatives of the Company, the Project Architect, the Project Manager and such other employees, consultants or agents as the Disbursement Agent shall reasonably request to be present for such meetings. The Disbursement Agent may perform, and the Company agrees to provide the Disbursement Agent reasonable access to the Property to enable the Disbursement Agent to perform, such inspections and tests of East Chicago Showboat as it deems reasonably appropriate in the performance of its duties hereunder. In addition, the Disbursement Agent shall have the right at reasonable times upon prior notice to review all information (including Contracts) supporting the amendments to the Construction Budget, amendments to any Contracts, the Company's Disbursement Requests and any certificates in support of any of the foregoing, to inspect materials stored at East Chicago Showboat, to review the insurance required pursuant to the terms of the Indenture, to confirm receipt of endorsements from the Title Insurer insuring the continuing priority of the lien of the Mortgages as security for each advance of funds from the Escrow Account hereunder, and to examine 12 the Plans and all shop drawings relating to East Chicago Showboat. The Disbursement Agent is authorized to contact any Contractor for purposes of confirming receipt of progress payments. The Disbursement Agent shall be entitled to examine, copy and make extracts of the books, records, accounting data and other documents of the Company, including, without limitation, bills of sale, statements, receipts, conditional and unconditional lien releases, contracts or agreements, which relate to any materials, fixtures or articles incorporated into East Chicago Showboat. From time to time, at the request of the Disbursement Agent, the Company shall make available to the Disbursement Agent a Project Cost Schedule and/or a Construction Schedule for East Chicago Showboat. Upon the completion of the foundation for any building within East Chicago Showboat, the Disbursement Agent shall obtain and provide to the Trustee, on a building-by-building basis, a commitment from the Title Insurer evidencing the Title Insurer's unconditional commitment to issue a CLTA 102.5 or similar endorsement to the Title Policy insuring that said building is located entirely within the Property then leased by the Company and does not encroach upon any easement or other restrictions, encumbrances or rights of ways affecting said property, and shall deliver such commitment and other endorsements and assurances to the Trustee. The Company agrees to cooperate with the Disbursement Agent in assisting the Disbursement Agent to perform its duties hereunder and to take such further steps as the Disbursement Agent reasonably may request in order to facilitate the Disbursement Agent's performance of its obligations hereunder. 5.4 DISBURSEMENT AGENT'S DUTY TO REPORT EVENT OF DEFAULT. The Disbursement Agent shall, within five Business Days, upon becoming aware of any Default or Event of Default, deliver to the Trustee a statement specifying such Default or Event of Default. 6. CONDITIONS PRECEDENT TO DISBURSEMENT. 6.1 INITIAL DISBURSEMENTS. Upon satisfaction of the conditions described below in this Section 6.1, the Escrow Agent shall make the disbursements described in the Initial Disbursements Certificate (the "INITIAL DISBURSEMENTS") in the form of EXHIBIT A attached hereto. The conditions to the Initial Disbursement shall consist of the following: (a) The Escrow Agent shall have received the Note Proceeds and the proceeds of the remaining Capital Contribution; (b) The Escrow Agent shall have received the Initial Disbursements Certificate, and the Escrow Agent shall have received confirmation from the Trustee and the Disbursement Agent that they each have received the Initial Disbursements Certificate; (c) The Escrow Agent shall have received the Closing Certifications from the Disbursement Agent and the Trustee, in the form of EXHIBITS B-2 and B-3 attached hereto, respectively; and (d) The Escrow Agent shall have received the Company's Closing Certification from the Company in the form of EXHIBIT B-1 attached hereto. 6.2 CONDITIONS TO OTHER DISBURSEMENTS. The Disbursement Agent's approval of any disbursements from the Escrow Account other than the Initial Disbursements and the Pre- Closing Disbursements (described in Section 6.4) shall be subject to the following conditions: 13 (a) The Company shall have submitted to the Disbursement Agent a Disbursement Request as provided for herein pertaining to the amounts requested for disbursement, together with a completed SCHEDULE 1 in the form contemplated thereby and the certifications of the Project Manager and the Project Architect in the form of EXHIBITS 1 and 2 to the Disbursement Request. (b) The Disbursement Agent shall have received copies of all Contracts identified by the Company to be material to East Chicago Showboat (which the Company agrees shall include all Contracts with a total contract amount in excess of $75,000) and, with respect to each such Contract: (i) if such Contract contemplates any payments thereunder in excess of $75,000, a consent substantially in the form attached hereto as EXHIBIT J signed by the third-party contractor under each such Contract; and (ii) copies of such performance and payment bonds as the Company may require to be provided to the Company pursuant to any Contract. Such bonds shall name the Company and the Trustee as additional insureds or obligees and shall be in full force and effect. (c) The Disbursement Agent shall have received copies of all Plans which, as of the date of the Disbursement Request, constitute Final Plans. The Disbursement Agent may rely upon the certification of the Company set forth in the Disbursement Request in order to establish satisfaction of this condition. (d) The total payments by the Company with respect to each line item component described on the Construction Budget (plus any Retainage Amounts held for such line item) after giving effect to the requested disbursements shall not exceed the amount budgeted on the Construction Budget for such line item. Further, to the extent the work or payment required in connection with any line item has not yet been completed, there shall be no reason to believe that the estimated cost to complete such work or payment will exceed the difference between: (i) the amount budgeted for such line item on the Construction Budget; and (ii) the sum of (A) the total payments theretofore disbursed with respect to such line item and (B) any Retainage Amounts then held with respect to such line item. (e) The Disbursement Request on its face has been completed as to the information required therein and the required attachments, if any, are attached and the Disbursement Agent shall not have become aware of any material error, inaccuracy, misstatement or omission of fact in a Disbursement Request or an exhibit or attachment thereto or information provided by the Company upon the request of the Disbursement Agent. (f) The Disbursement Agent shall have received a copy of the Reviewing Agent's certificate in the form of EXHIBIT G hereto with respect to all prior Disbursement Requests more than 60 days old, and no such certificate shall have reported any exceptions to the procedures set forth therein. (g) (i) For so long as Showboat or any wholly owned subsidiary thereof shall serve as the Disbursement Agent under this Agreement, the Disbursement Agent is not aware that an Event of Default exists and is continuing. (i) For so long as any entity other than Showboat or any wholly owned subsidiary thereof shall serve as the Disbursement Agent under this Agreement, the Disbursement 14 Agent is not aware (from the facts set forth in any Disbursement Request or any certificate from the Project Manager or the Project Architect or the Reviewing Agent or any notice from the Trustee or the Company) that an Event of Default exists and is continuing. (h) The Disbursement Agent shall have received a commitment from the Title Insurer, attached to the Disbursement Request, evidencing the Title Insurer's unconditional commitment to issue an endorsement to the Title Policy in the form of a CLTA 122 Endorsement or other similar endorsement insuring the continuing priority of the Mortgages as security for each advance of funds from the Escrow Account that (i) since the previous disbursement from the Escrow Account, there has been no change in the condition of title unless permitted by the Indenture, and (ii) there are no intervening liens or encumbrances which may then or thereafter take priority over the Mortgages (other than (i) such intervening liens or encumbrances securing amounts ("DISPUTED AMOUNTS") the payment of which is being disputed in good faith by the Company and to which the Company has provided, upon the request of the Trustee, reasonable security to prevent the forfeiture or loss of all or any portion of the Property, or any impairment in the priority of the lien of the Mortgages, as a result of an adverse decision in such contest, and (ii) preferred maritime liens, so long as the Disbursement Agent has received confirmation from the Trustee that (A) the Title Insurer has delivered to the Trustee an endorsement to the Title Policy insuring against loss to the holders of the First Mortgage Notes due to the priority of such lien or encumbrance, and (B) if covered by the Completion Guarantee, Showboat has delivered to the Trustee written confirmation that if the Company is determined by a court of appropriate jurisdiction to be obligated to pay any of the Disputed Amounts, and the Company fails to pay or otherwise provide for the payment of such Disputed Amounts within 30 days after entry of the court's decision establishing the obligation of the Company, then Showboat shall pay or otherwise provide for payment of such Disputed Amount to the party entitled thereto within the ensuing 30-day period). Upon completion of any foundation for any building within East Chicago Showboat, the Title Insurer shall have issued, on a building-by- building basis, its foundation endorsement insuring that such foundation is constructed wholly within the boundaries of the Property then leased by the Company. (i) The respective amounts deposited into the Segregated Account pursuant to all previous Disbursement Requests shall have been paid to the respective parties identified on SCHEDULE 1 of each such previous Disbursement Request. (j) Each Disbursement Request shall designate the portion thereof that is being requested to pay (i) Construction Expenses and (ii) Pre-Opening Expenses. (k) With respect to that portion of a Disbursement Request that is identified as being made to pay Construction Expenses, SCHEDULE 1 to the Disbursement Request also shall itemize for each line item and for each party to whom payment is requested with respect to such line item, the following: (i) the name of the payee to be paid, (ii) the current payment requested, (iii) the increase or decrease in accrued but unpaid Retainage Amount for such payee since the last Disbursement Request (after giving effect to the payment contemplated by the Disbursement Request); (iv) the total amount contemplated to be payable to such payee under the terms of its applicable Contract through completion of all work and delivery of all materials contemplated by the Contract (I.E., the total contract amount); (v) the total payments made to such payee under its applicable Contract as of the Closing Date; (vi) the total payments made to such payee since the Closing Date (after giving effect to the payment contemplated by the Disbursement Request); (vii) the sum of all payments made to such payee (after giving effect to the payment contemplated by the Disbursement Request) (I.E., the sum of (v) and (vi) 15 above); (viii) the aggregate accrued Retainage Amounts which shall continue to be owed with respect to such Contract (after giving effect to the payment contemplated by the Disbursement Request); and (ix) the percentage of the work actually completed, or the materials actually delivered, under the Contract through the date for which payment is made hereunder (expressed as a percentage of the total work and materials contemplated by the Contract through completion). To the extent that the Disbursement Request includes a request for funds to pay Construction Expenses, the Disbursement Request also shall be accompanied by duly executed conditional lien releases, in form and substance satisfactory to the Disbursement Agent, from all Contractors identified as having provided the work, materials and/or services giving rise to such Construction Expenses, and covering in full such work, materials and/or services. (l) With respect to each Construction Expense identified for payment on a previous Disbursement Request, the Disbursement Agent shall have received duly executed acknowledgements of payment and unconditional (except as to Retainage Amounts) lien releases, in form and substance satisfactory to the Disbursement Agent, from all Contractors identified on the previous Disbursement Request for payment of Construction Expenses, and acknowledging the receipt by such Contractor of the respective "Current Payment Amounts" listed on the previous Disbursement Requests as payable to such Contractor. 6.2.1 In the event that the Disbursement Agent determines that condition (g) described above is not satisfied in respect of any Disbursement Request for any month and so long as such condition is not satisfied, the Disbursement Agent shall not authorize any disbursement of funds from the Escrow Account pursuant to a Disbursement Request or from the Segregated Account other than the following: (i) if all other conditions in Section 6 hereof (including those stated in Section 6.1 hereof) are met, payments in respect of work completed or materials purchased on or prior to the date that the Disbursement Agent determined that condition (g) was not satisfied and has so notified the Issuer and the Project Manager in writing. Each such disbursement shall be accompanied by a certificate from the Project Manager that such work was completed prior to such date, or an invoice dated prior to such date for any materials purchased prior to such date; (ii) payments not to exceed $5,000,000 in the aggregate to prevent the condition of East Chicago Showboat from deteriorating or to preserve any work completed on East Chicago Showboat as certified to be reasonably necessary by the Project Manager; PROVIDED, HOWEVER, that the limitations set forth in this subparagraph (ii) may be increased or decreased by the Trustee, in the exercise of its reasonable discretion, by written notice to the Disbursement Agent; and (iii) if such condition continues for a period of three (3) consecutive months or more, at the request of the Company, Retainage Amounts for work completed, provided that the Company and the Project Manager certify that the conditions for paying such amounts (other than completion of East Chicago Showboat) are met. 6.3 EVENTS OF DEFAULT. The occurrence of any of the following specified events shall be an Event of Default ("EVENT OF DEFAULT") hereunder. 16 6.3.1 The occurrence and continuance of an "Event of Default," as defined in the Indenture, under the Indenture. 6.3.2 The inability of the Project Manager or the Project Architect to deliver their respective certificate (in the form of EXHIBIT 1 and EXHIBIT 2 to EXHIBIT C attached hereto, respectively) with any Disbursement Request, or their respective certificates (in the form of EXHIBIT 1 and EXHIBIT 2 to EXHIBIT E attached hereto, respectively) with any Construction Budget Amendment Certificate, and any such failure continues for 30 days without being cured. 6.3.3 The delivery by the Reviewing Agent pursuant to Section 4.3 hereof of a certificate reporting an exception with respect to any prior Disbursement Request, and such exception shall continue for a period of 30 days without being cured, or the failure of the Reviewing Agent to deliver (a) with respect to any Disbursement Request, the letter required pursuant to Section 4.3(b) of this Agreement, and such failure shall continue for a period of 30 days without being cured, or (b) with respect to any Construction Budget Amendment Certificate, the letter required pursuant to Section 4.3(d) of this Agreement, and such failure shall continue for a period of 30 days without being cured. 6.3.4 Any representation, warranty, certification or statement by the Company, the Project Architect, the Project Manager or the Disbursement Agent in this Agreement, or any certificate, request, budget or statement delivered pursuant to this Agreement, shall be untrue in any material respect on the date given or made, and such untruthfulness continues for a period of 30 days without being cured. 6.3.5 Any time that the Available Funds are less than the amount required in the Construction Budget to cause East Chicago Showboat to become Operating on or before the Completion Date and such deficiency continues for a period of 30 days without being cured. 6.3.6 The failure to deliver any documents required by Section 3 and any such failure continues for 30 days without being cured. 6.3.7 The occurrence of an event of default under the Casino Vessel Construction Contract. 6.4 PRE-CLOSING DISBURSEMENT. Upon satisfaction of the conditions described below in this Section 6.4, the Escrow Agent shall make the disbursements described in the Pre-Closing Disbursement Certificate (the "PRE-CLOSING DISBURSEMENT") in the form of EXHIBIT N attached hereto. The conditions to the Pre- Closing Disbursement shall consist of the following: (a) The Escrow Agent shall have received the proceeds of the remaining Capital Contribution; and (b) The Escrow Agent shall have received the Pre- Closing Disbursements Certificate. 17 7. LIMITATION OF LIABILITY. 7.1 LIMITATION OF DISBURSEMENT AGENT'S LIABILITY. The Disbursement Agent's responsibility and liability under this Agreement shall be limited as follows: (a) the Disbursement Agent does not represent, warrant or guarantee to the Trustee or the holders of the First Mortgage Notes the performance of the Company, the Project Architect, the Project Manager, any contractor, subcontractor or provider of materials or services in connection with the construction of East Chicago Showboat (PROVIDED, HOWEVER, that the foregoing shall not in any way limit or impair Showboat's obligations under the Completion Guarantee); (b) the Disbursement Agent shall have no responsibility to the Company, the Trustee or the Holders of the First Mortgage Notes as a consequence of performance by the Disbursement Agent hereunder except for any gross negligence or willful misconduct of the Disbursement Agent; (c) the Company shall remain solely responsible for all aspects of its business and conduct in connection with East Chicago Showboat, including but not limited to the quality and suitability of the Plans, the supervision of the work of construction, the qualifications, financial condition and performance of all architects, engineers, contractors, subcon tractors, suppliers, consultants and property managers, the accuracy of all applications for payment, and the proper application of all disbursements; (d) the Disbursement Agent is not obligated to supervise, inspect or inform the Company, the Trustee or any third party of any aspect of the construction of East Chicago Showboat or any other matter referred to above; and (e) the Disbursement Agent owes no duty of care to the Company to protect against, or to inform the Company of, any negligent, faulty, inadequate or defective design or construction of East Chicago Showboat. The Disbursement Agent shall have no duties or obligations hereunder except as expressly set forth herein, shall be responsible only for the performance of such duties and obligations, shall not be required to take any action otherwise than in accordance with the terms hereof and shall not be in any manner liable or responsible for any loss or damage arising by reason of any act or omission to act by it hereunder or in connection with any of the transactions contemplated hereby, including, but not limited to, any loss that may occur by reason of forgery, false representations, the exercise of its discretion, or any other reason, except for its gross negligence or willful misconduct. 7.2 LIMITATION OF ESCROW AGENT'S LIABILITY. The Escrow Agent's responsibility and liability under this Agreement shall be limited as follows: (a) the Escrow Agent does not represent, warrant or guarantee to the Trustee or the holders of the First Mortgage Notes the performance of the Company, the Project Architect, the Project Manager, any contractor, subcontractor or provider of materials or services in connection with construction of East Chicago Showboat; (b) the Escrow Agent shall have no responsibility to the Company, the Trustee or the holders of the First Mortgage Notes as a consequence of performance by the Escrow Agent hereunder except for any gross negligence or willful misconduct of the Escrow Agent or failure to account for funds held on deposit; (c) the Company shall remain solely responsible for all aspects of its business and conduct in connection with East Chicago Showboat, including, but not limited to, the quality and suitability of the Plans, the supervision of the work of construction, the qualifications, financial condition and performance of all architects, engineers, contractors, subcontractors, suppliers, consultants and property managers, the accuracy of all applications for payment, and the proper application of all disbursements; (d) the Escrow Agent is not obligated to supervise, inspect or inform the Company, the Trustee or any third party of any aspect of the construction of East Chicago Showboat or any other matter referred to above; and (e) the Escrow Agent owes no duty of care to the Company to protect against, or to inform the Company of, any negligent, faulty, inadequate or defective design or construction of East Chicago Showboat. The Escrow Agent shall have no duties or obligations hereunder except as expressly set forth herein, shall be responsible only for the performance of such duties and obligations, shall not be required to take any action otherwise than in 18 accordance with the terms hereof and shall not be in any manner liable or responsible for any loss or damage arising by reason of any act or omission to act by it hereunder or in connection with any of the transactions contemplated hereby, including, but not limited to, any loss that may occur by reason of forgery, false representations, the exercise of its discretion, or any other reason, except for its gross negligence or willful misconduct or failure to account for funds on deposit. 8. INDEMNITY AND INSURANCE. 8.1 INDEMNITY OF DISBURSEMENT AGENT. The Company, jointly and severally, indemnifies, holds harmless and will defend the Disbursement Agent and its officers, directors, agents and employees, from and against any and all claims, actions, obligations, liabilities and expenses, including defense costs, investigative fees and costs, legal fees, and claims for damages, arising from the Disbursement Agent's performance of its obligations under this Agreement, except to the extent that such liability, expense or claim is attributable to the gross negligence or willful misconduct of the Disbursement Agent. 8.2 INDEMNITY OF ESCROW AGENT. The Company, jointly and severally, indemnifies, holds harmless and will defend the Escrow Agent and its officers, directors, agents and employees, from and against any and all claims, actions, obligations, liabilities and expenses, including defense costs, investigative fees and costs, legal fees, and claims for damages, arising from the Escrow Agent's performance of its obligations under this Agreement, except to the extent that such liability, expense or claim is attributable to the gross negligence or willful misconduct of the Escrow Agent or the Escrow Agent's failure to account for funds on deposit. 8.3 INSURANCE. The Disbursement Agent, at its sole cost and expense, shall purchase and maintain throughout the term of this Agreement, comprehensive general liability insurance, with minimum limits of $2,000,000 combined single limit per occurrence, covering all bodily injury and property damage arising out of the performance of its obligations under this Agreement. The policy required by this Section shall provide for thirty (30) days' prior written notice to the Trustee and the Company of cancellation or a material change. If any of such insurance is written on a claims made form, following termination of this Agreement, coverage shall survive for the maximum reporting period available at each anniversary date of such insurance, or not less than five (5) years, whichever is greater. The limits of coverage required above shall not in any way limit the liability of the Company under Sections 8.1 or 8.2 hereof. Notwithstanding the foregoing, Showboat shall not be obligated to purchase a separate insurance policy in order to fulfill its obligations as Disbursement Agent under this Section 8.3, but rather shall be entitled to utilize its existing insurance policy or policies, with any necessary amendments, in order to fulfill such obligations. 9. TERMINATION. This Agreement shall terminate automatically thirty (30) days following disbursement of all funds remaining in the Escrow Account and the Segregated Account, unless sooner terminated pursuant to Section 10 hereof; PROVIDED, HOWEVER, that (a) the obligations of the Company under Section 8 of this Agreement shall survive termination of this Agreement; and (b) if, following an Event of Loss, there exist Net Loss Proceeds that (in accordance with Section 4.11 of the Indenture) are deliverable to the Trustee and are eligible for distribution to the Company for rebuilding, repair or construction, then, at the option of the Trustee, the Company and the Disbursement Agent shall execute and deliver to the Trustee such documentation as the Trustee reasonably deems appropriate in order to cause (i) the Trustee to possess a first priority perfected security interest in said funds, and (ii) the 19 Disbursement Agent to administer the disbursement of said funds for such rebuilding, repair or construction pursuant to disbursement control procedures substantially akin to those set forth herein. 10. SUBSTITUTION OR RESIGNATION. 10.1 SUBSTITUTION OF THE DISBURSEMENT AGENT OR RESIGNATION. 10.1.1 In the event that the Disbursement Agent shall fail to fulfill its obligations under this Agreement, or shall, through gross negligence or willful misconduct, take any action that adversely affects the rights of the Trustee, the Holders of the First Mortgage Notes, or the Company, the Trustee, on behalf of the Holders of the First Mortgage Notes, or the Company shall each, in addition to any rights each might have at law or equity, have the right, upon the expiration of thirty (30) days following delivery of written notice of substitution to the Disbursement Agent and the Company, to cause the Disbursement Agent to be relieved of its duties hereunder and to select a substitute disbursement agent to serve hereunder. The Disbursement Agent may resign at any time upon thirty (30) days' written notice to all parties hereto. Such resignation shall take effect upon receipt by the Disbursement Agent of an instrument of acceptance executed by a successor disbursement agent and consented to by the other parties hereto. Upon selection of such substitute disbursement agent, the Trustee, the Company, the Escrow Agent and the substitute disbursement agent shall enter into an agreement substantially identical to this Agreement and, thereafter, the Disbursement Agent shall be relieved of its duties and obligations to perform hereunder, except that the Disbursement Agent shall transfer to the substitute disbursement agent upon request therefor originals of all books, records, and other documents in the Disbursement Agent's possession relating to this Agreement. In the event that the agency relationship between the Disbursement Agent and the Title Insurer is terminated, then Title Insurer shall have the right to become the Disbursement Agent hereunder upon notice to the parties hereto and execution and delivery to the parties of a written assumption of all of the Disbursement Agent's obligations hereunder. 10.1.2 The Escrow Agent acknowledges and agrees that the Trustee and the Company shall have the right to change the party acting as the "Disbursement Agent" pursuant to this Agreement, and the Trustee and the Company agree to provide written notice to the Escrow Agent of any such change. From and after the Escrow Agent's receipt of such notice, the Escrow Agent shall treat the new party identified by the Trustee and the Company to serve as the Disbursement Agent as the Disbursement Agent hereunder. 10.2 SUBSTITUTION OF ESCROW AGENT OR RESIGNATION. 10.2.1 The Trustee and the Company shall each have the right, upon the expiration of thirty (30) days following delivery of written notice of substitution to the Escrow Agent and the Company, to cause the Escrow Agent to be relieved of its duties hereunder and to select a substitute escrow agent to serve hereunder. The Escrow Agent may resign at any time upon thirty (30) days' written notice to all parties hereto. Such resignation shall take effect upon receipt by the Escrow Agent of an instrument of acceptance executed by a successor escrow agent and consented to by the other parties hereto. Upon selection of such substitute escrow agent, the Company, the Trustee, the Disbursement Agent and the substitute escrow agent shall enter into an agreement substantially identical to this Agreement and, thereafter, the Escrow Agent shall be relieved of its duties and obligations to perform hereunder, except that the Escrow Agent shall transfer to the substitute escrow agent upon request therefor all funds and Cash Equivalents maintained by the Escrow Agent hereunder and originals of all 20 books, records, plans and other documents in the Escrow Agent's possession relating to such funds or Cash Equivalents or this Agreement. 10.2.2 The Disbursement Agent acknowledges and agrees that the Trustee and the Company shall each have the right to change the party acting as "Escrow Agent" pursuant to this Agreement, and the Trustee and the Company agree to provide written notice to the Disbursement Agent of any such change. From and after Disbursement Agent's receipt of such notice, Disbursement Agent shall treat the new party identified by Trustee and the Company to serve as the Escrow Agent as the Escrow Agent hereunder. 10.3 SUBSTITUTION OF REVIEWING AGENT. The Disbursement Agent, the Escrow Agent and the Trustee acknowledge and agree that the Company shall have the right to change the party acting as the Reviewing Agent by written notice to the Reviewing Agent and the Company and the other parties hereto; PROVIDED, HOWEVER, that any substitute Reviewing Agent selected by the Company shall be an independent certified public accounting firm of national standing. From and after the Disbursement Agent's, the Escrow Agent's and the Trustee's receipt of such notice, the Disbursement Agent, the Escrow Agent and the Trustee shall treat the new party identified by the Company to serve as the Reviewing Agent as the Reviewing Agent hereunder. 11. NOTICE TO DISBURSEMENT AGENT AND ESCROW AGENT. The Company shall deliver to the Disbursement Agent and Escrow Agent, within five (5) business of the date on which any Officer (as defined in the Indenture) becomes aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. 12. ESCROW ACCOUNT STATEMENT. Upon the request of the Company or the Disbursement Agent from time to time, the Escrow Agent shall deliver to the Company and the Disbursement Agent a statement prepared by the Escrow Agent in a form satisfactory to the Disbursement Agent and the Company setting forth with reasonable particularity the balance of funds then in the Escrow Account and the manner in which such funds are invested; PROVIDED, HOWEVER, that the Escrow Agent shall not be required to provide such statements more often than weekly. 13. NOTICE. The parties hereto irrevocably instruct the Escrow Agent that on the first date upon which the balance in the Escrow Account is reduced to zero, the Escrow Agent shall deliver to the Trustee and the Disbursement Agent a notice that the balance in the Escrow Account has been reduced to zero. 14. MISCELLANEOUS. 14.1 WAIVER. Any party hereto may specifically waive any breach of this Agreement by any other party, but no such waiver shall be deemed to have been given unless such waiver is in writing, signed by the waiving party and specifically designates the breach waived, nor shall any such waiver constitute a continuing waiver of similar or other breaches. 14.2 INVALIDITY. If for any reason whatsoever, any one or more of the provisions of this Agreement shall be held or deemed to be inoperative, unenforceable or invalid in a particular case or in all cases, such circumstances shall not have the effect of rendering any of the other provisions of 21 this Agreement inoperative, unenforceable or invalid, and the inoperative, unenforceable or invalid provision shall be construed as if it were written so as to effectuate, to the maximum extent possible, the parties' intent. 14.3 NO AUTHORITY. Neither the Disbursement Agent nor the Escrow Agent shall have any authority to, and neither the Disbursement Agent nor the Escrow Agent shall, make any warranty or representation or incur any obligation on behalf of, or in the name of, the Trustee. 14.4 ASSIGNMENT. This Agreement is personal to the parties hereto, and the rights and duties of any party hereunder shall not be assignable except with the prior written consent of the other parties hereto. In any event, this Agreement shall inure to and be binding upon the parties and their successors and permitted assigns. 14.5 BENEFIT. The parties hereto, the holders from time to time of the First Mortgage Notes, and their respective successors and assigns, but no others, shall be bound hereby and entitled to the benefits hereof. 14.6 TIME. Time is of the essence for each provision of this Agreement. 14.7 CHOICE OF LAW. The existence, validity, construction, operation and effect of any and all terms and provisions of this Agreement shall be determined in accordance with and governed by the substantive laws of the State of New York, without giving effect to its conflicts of law principles. 14.8 ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supersedes any and all prior agreements, understandings and commitments, whether oral or written. This Agreement may be amended only by a writing signed by duly authorized representatives of all parties. 14.9 NOTICES. All notices, requests, approvals, consents and other communications required or permitted to be made hereunder shall, except as otherwise provided herein, be in writing and may be delivered personally or sent by telegram, telecopy, facsimile, telex, first class mail or overnight courier, postage prepaid, to the parties hereto addressed as follows: To the Escrow Agent: Showboat, Inc. c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Attention: R. Craig Bird Telephone: (609) 487-2000 Facsimile: (609) 823-7811 22 To the Disbursement Agent: Showboat, Inc. c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Attention: R. Craig Bird Telephone: (609) 487-2000 Facsimile: (609) 823-7811 With a copy to: Kummer Kaempfer Bonner & Renshaw 3800 Howard Hughes Parkway Las Vegas, Nevada 89104 Attention: John N. Brewer, Esq. Telephone: (702) 792-7000 Facsimile: (702) 796-7181 Showboat, Inc. 3720 Howard Hughes Parkway Suite 200 Las Vegas, Nevada 89104 Attention: Mark A. Clayton, Esq. Telephone: (702) 650-1200 Facsimile: (702) 791-3410 To the Trustee: American Bank National Association 101 East 5th Street St. Paul, Minnesota 55101 Attention: Corporate Trust Department Telephone: (612) 229-2600 Facsimile: (612) 229-6415 23 To the Company: Showboat Marina Casino Partnership Showboat Marina Finance Corporation 2001 East Columbus Drive East Chicago, Indiana 46312 Attention: Vice President - Finance and Administration Telephone: (219) 392-1111 Facsimile: (219) 736-2334 With copies to: Kummer Kaempfer Bonner & Renshaw 3800 Howard Hughes Parkway Las Vegas, Nevada 89104 Attention: John N. Brewer, Esq. Telephone: (702) 792-7000 Facsimile: (702) 796-7181 Ice Miller Donadio & Ryan One American Square, 31st Floor Indianapolis, Indiana 46204 Attention: Stephen J. Hackman, Esq. Telephone: (317) 236-2100 Facsimile: (317) 236-2219 To the Reviewing Agent: Showboat, Inc. c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey R. Craig Bird Telephone: (609) 487-2000 Facsimile: (609) 823-7811 With a copy to: Kummer Kaempfer Bonner & Renshaw 3800 Howard Hughes Parkway Las Vegas, Nevada 89104 Attention: John N. Brewer, Esq. Telephone: (702) 792-7000 Facsimile: (702) 796-7181 24 Such notices, requests and other communications sent as provided above shall be effective when received by the addressee thereof, unless sent by registered or certified mail, postage prepaid, in which case they shall be effective exactly five (5) business days after being deposited in the United States mail. The parties hereto may change their addresses by giving notice thereof to the other parties hereto in conformity with this section. 14.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 14.11 CAPTIONS. Captions in this Agreement are for convenience only and shall not be considered or referred to in resolving questions of interpretation of this Agreement. 14.12 RIGHT TO CONSULT COUNSEL. Each of the Disbursement Agent, the Escrow Agent, the Reviewing Agent and the Trustee may, if any of them deems it necessary or appropriate, consult with and be advised by counsel in respect of their duties hereunder. Each of the Disbursement Agent, the Escrow Agent, the Reviewing Agent and the Trustee shall be entitled to rely upon the advice of its counsel in any action taken in its respective capacity hereunder and shall be protected from any liability of any kind for actions taken in reasonable reliance upon such counsel's opinion. The Company, jointly and severally, agrees to pay all such reasonable counsel fees. 15. ARBITRATION. Any controversy between the parties hereto involving the construction or application of any of the terms, covenants, or conditions of this Agreement shall be submitted to arbitration on the request of any party to this Agreement, and such arbitration shall comply with and be governed by the provisions of the United States Arbitration Act (Title 9, U.S.Code) and the Commercial Rules of the American Arbitration Association. The arbitrator(s) in any such arbitration shall have the power to order and grant all remedies permitted at law or in equity, including, without limitation, provisional and equitable remedies. The exercise by a party of non-judicial or self-help remedies permitted by law or equity shall not constitute a waiver by that party of its right to compel arbitration of controversies hereunder. 16. GRANT OF SECURITY INTEREST. The Company hereby irrevocably pledges, assigns and sets over to the Trustee, and grants to the Trustee, for the benefit of the Holders of the First Mortgage Notes, a first priority continuing security interest in all of the Company's right, title and interest in and to all of the following, whether now owned or existing or hereinafter acquired or created (collectively, the "ESCROW ACCOUNT COLLATERAL"); (a) the Escrow Account and the Segregated Account; (b) all funds from time to time held in the Escrow Account and the Segregated Account, including, without limitation, the Proceeds and all certificates and instruments, if any, from time to time, representing or evidencing the Escrow Account, the Segregated Account, or the Proceeds; 25 (c) all Cash Equivalents, whether the same shall constitute certificated securities, uncertificated securities, investment property, instruments, general intangibles or otherwise, held by or registered in the name of the Escrow Agent or the Trustee or any of their respective nominees and all certificates and instruments, if any, from time to time representing or evidencing Cash Equivalents; (d) all notes, certificates of deposit, deposit accounts, checks and other instruments from time to time hereafter delivered to or otherwise possessed by the Trustee or the Escrow Agent for or on behalf of the Company in substitution for or in addition to any or all of the then existing Escrow Account Collateral; (e) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Escrow Account Collateral; and (f) all proceeds of the foregoing including, without limitation, cash proceeds. 16.2 DEFINITIONS. For purposes of this Section 16, the following terms shall have the following meanings: "AGENT" means the Escrow Agent with respect to the Escrow Account, the Segregated Account and the Escrow Account Collateral. "ACCOUNT" means the Escrow Account and the Segregated Account with respect to the Escrow Agent. "COLLATERAL" means the Escrow Account Collateral with respect to the Escrow Agent. 16.3 SAFEKEEPING OF COLLATERAL. The Company and the Trustee hereby irrevocably instruct the Agent, with respect to its respective Account and Collateral, as follows: (a) To the extent it is within its power, the Agent at all times shall maintain all of the Collateral free and clear of all liens, encumbrances, security interests, safekeeping or other charges, demands and claims of any nature whatsoever now or hereafter existing, in favor of anyone other than the Trustee (or the Agent, as agent for the Trustee); (b) With respect to any cash in the Account, the Agent shall at all times, as agent/bailee for the Trustee, maintain dominion and control over, and possession of, such cash until such time as such cash is disbursed from the Account in accordance with the terms of this Agreement; (c) With respect to any certificated securities, as a condition to acquiring any such securities: (i) the Agent shall confirm that the Agent does not have any knowledge of any other claims of any other person or entity in or to the securities; (ii) the Agent shall cause any such securities to be issued in the name of, or endorsed to, the Company, and the Agent shall receive from the Company an endorsement in blank pertaining to the securities; (iii) the Agent at all times shall maintain dominion and control over, and possession of, said securities until such time as the securities are sold for cash, at 26 which time all proceeds shall be held in accordance with clause (b) of this Section 16.3; and (iv) the Agent at all times shall designate in its records that it is holding said securities as agent for the Trustee, as trustee under the Indenture; (d) With respect to any uncertificated securities (other than uncertificated securities issued by the federal government or an agency or instrumentality thereof), as a condition to acquiring any such securities: (i) the Agent shall confirm that the Agent does not have any knowledge of any other claims of any other person or entity in or to the securities; (ii) the Agent (A) shall cause the Company to execute a letter substantially in the form of EXHIBIT L attached hereto addressed to the issuer (or the transfer agent for the issuer, if applicable) pertaining to the securities, shall deliver said letter to the issuer of the securities (or the transfer agent for the issuer, if applicable), and shall have received back from the issuer (or the transfer agent for the issuer, if applicable) a copy of said letter signed by the issuer of the securities (or the transfer agent for the issuer, if applicable), or (B) shall have taken such alternative steps as are necessary or appropriate in order to cause the Trustee to enjoy a continuous first priority perfected security interest in the securities; and (iii) the Agent shall at all times designate in its records that it is holding said securities as agent for the Trustee, as trustee under the Indenture. For purposes of determining the steps to be taken under clause (ii)(B) of this Section 16.3(d), the Agent may rely upon an opinion of counsel to the Company or the Agent (the expense of which shall be paid by the Company) specifying (A) that such counsel is familiar with the laws applicable to the perfection of security interests in said securities and (B) the steps required to perfect and maintain a first priority security interest in favor of the Trustee in said securities; (e) With respect to any uncertificated securities issued by the federal government or an agency or instrumentality thereof, as a condition to acquiring any such securities: (i) the Agent shall confirm that the Agent does not have any knowledge of any claims of any other person or entity in or to the securities; (ii) the Agent shall have taken such steps as are necessary and appropriate in order to cause the Trustee to enjoy a continuous perfected first priority security interest in said securities. For purposes of determining the foregoing steps, the Agent may rely upon an opinion of counsel to the Company or the Agent (the expense of which shall be paid by the Company) specifying (A) that such counsel is familiar with the laws applicable to the perfection of security interests in said securities and (B) the steps required to perfect and maintain a first priority security interest in favor of the Trustee in said securities; (f) The Agent shall take any other steps from time to time requested by Trustee to confirm and maintain the priority of the security interests in the Collateral; and (g) The Agent shall immediately disburse all funds held in the Account to the Trustee and transfer title to all other Collateral held by the Agent hereunder to the Trustee upon written notice by the Trustee to the Agent that an Event of Default has occurred and is continuing under the Indenture. 16.4 REMEDIES. In addition to any rights and remedies provided in the Indenture, the First Mortgage Notes and the other Collateral Documents, upon an Event of Default as defined in the Indenture and for so long as such Event of Default is continuing the Trustee may exercise any or all of the following remedies, successively or concurrently and in such order as the Trustee elects: 27 (a) The Trustee may deliver some or all of the notices contemplated by Section 16.3(g) above. (b) The Trustee may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it and subject to the restrictions imposed by the Indiana Riverboat Gambling Act, to the extent applicable, all the rights and remedies of a secured party under the UCC or other applicable law, and the Trustee may also upon obtaining possession of the Collateral as set forth herein, without notice to the Company except as specified below, sell the Collateral or any part thereof in one or more parcels at one or more public or private sales, at any exchange, broker's board or at any of the Trustee's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Trustee may deem commercially reasonable. The Company acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale. The Company agrees that, to the extent notice of sale shall be required by law, at least ten (10) days' notice to the Company of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Trustee shall not be obligated to make any sale regardless of notice of sale having been given. The Trustee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each purchaser at any such sale shall acquire the property sold free and clear of any claim or right of the Company, the Escrow Agent or the Disbursement Agent. (c) Any cash that is Collateral held by the Trustee and all cash proceeds received by the Trustee in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied (after payment of any and all amounts payable to the Trustee under the Indenture) against the obligations for the ratable benefit of the Holders of the First Mortgage Notes. Any surplus of such cash or cash proceeds held by the Trustee and remaining after payment in full of all the obligations shall be paid over to the Company or to whomsoever may be lawfully entitled to receive such surplus or as a court of competent jurisdiction may direct. (d) The Company hereby irrevocably appoints the Trustee as its attorney-in-fact effective upon and during the continuance of an Event of Default with full power of substitution to do any act which the Company is obligated hereby to do, to exercise such rights as the Company might exercise with respect to the Collateral and to execute and file in the Company's name any financing statements and amendments thereto required or advisable to protect the Trustee's rights or security interest hereunder. Such appointment and power of attorney shall be irrevocable and coupled with an interest. 16.5 It shall be a term and condition of the Escrow Account, notwithstanding any term or condition to the contrary in any other agreement relating to the Escrow Account and except as otherwise provided by the provisions of this Agreement, that no amount (including, without limitation, interest on or other proceeds of the Escrow Account or on any Cash Equivalents) shall be paid or released to or for the account of, or withdrawn from the Escrow Account by or for the account of, the Company or any other person or entity other than the Trustee or its designated agent. 16.6 TRANSFERS AND OTHER LIENS. The Company agrees that it will not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Escrow Account Collateral or (ii) create or permit to exist any lien upon or with respect to any of the Escrow Account Collateral, except for the security interest under this Agreement. 28 16.7 AGENCY. Each Agent shall act solely as the Trustee's agent in connection with its duties under this Section 16, notwithstanding any other provision contained in this Agreement, without any right to receive compensation from the Trustee and without any authority to obligate the Trustee or to compromise or pledge its security interest hereunder. The Company acknowledges and agrees that in no event shall the Trustee or the Holders of the First Mortgage Notes be liable for, nor shall the obligations of the Company under the Indenture and the First Mortgage Notes be affected or diminished as a consequence of, any action or inaction of an Agent with respect to the Escrow Account or the Escrow Account Collateral. 16.8 WAIVER OF SETOFF RIGHTS. The Escrow Agent and the Disbursement Agent hereby acknowledge the Trustee's security interest as set forth above and waive any security interest or other lien in the Escrow Account Collateral and further waive any right to set off the Escrow Account Collateral now or in the future against any indebtedness of the Company to the Escrow Agent or the Disbursement Agent. The waivers set forth in this Section 16.8 are of rights which may exist now or arise hereafter in favor of the Escrow Agent or the Disbursement Agent in their individual capacities, and not of any such rights which may exist now or arise hereafter in favor of the Escrow Agent or the Disbursement Agent in their capacities as agents for the Trustee. Nothing in this Section 16.8 shall be construed as waiving, limiting or diminishing any rights of the Trustee vis-a-vis the Company. 16.9 COOPERATION. Each Agent is hereby directed to cooperate with the Trustee in the exercise of its rights in the Collateral provided for herein. The Trustee will take all necessary action to preserve and protect the security interest created hereby as a lien and encumbrance upon the Collateral and, upon demand, the Company and each Agent will execute and deliver to the Trustee such instruments and documents as the Trustee may deem reasonably necessary or advisable to confirm or perfect the rights of the Trustee under this Agreement and the Trustee's interest in the Collateral. 16.10 SECURED OBLIGATIONS. This Agreement secures the due and punctual payment and performance of all obligations and indebtedness of the Company, whether now or hereafter existing, under the First Mortgage Notes and the Indenture including, without limitation, interest accrued thereon after the commencement of a bankruptcy, reorganization, dissolution, winding-up or similar proceeding involving the Company, to the extent permitted by applicable law. 17. CONSOLIDATION OF SHOWBOAT'S CAPACITIES UNDER THIS AGREEMENT. 17.1 SATISFACTION OF OBLIGATIONS. For so long as Showboat or any wholly owned subsidiary thereof as provided in Section 17.3 below continues to serve as the Disbursement Agent under this Agreement: (a) all certificates, letters and other documents that would otherwise be required to be executed and delivered to the Disbursement Agent by the Company (except in connection with disbursements to be made pursuant to Section 3.3 of this Agreement), the Project Architect, the Project Manager, the Reviewing Agent or any other party required to deliver a certificate to the Disbursement Agent under this Agreement before any disbursement, Construction Amendment, or Contract Amendment would be authorized under this Agreement, shall be deemed to have been executed and delivered to the Disbursement Agent upon execution and delivery by the Disbursement Agent to the Escrow Agent (with a copy delivered to the Trustee) of the Showboat Disbursement Certificate attached hereto as EXHIBIT M. 29 17.2 COMBINED REPRESENTATIONS AND WARRANTIES BY SHOWBOAT. Showboat hereby represents and warrants that, by executing and delivering each Showboat Disbursement Certificate to the Escrow Agent: (a) all representations and warranties that, in the absence of Section 17.1 would otherwise have been required to have been made by the Company, the Project Architect, the Project Manager, the Reviewing Agent, or any other party that would otherwise be required to deliver a certificate or other document to the Disbursement Agent before a Disbursement Authorization could be made, are true and correct; (b) it has undertaken all of the duties, including the duty of inquiry, assigned to the applicable party that would otherwise be required to deliver a certificate or other document to the Disbursement Agent in the absence of Section 17.1; and (c) it has in its possession the documentation that would otherwise, in the absence of Section 17.1, have been maintained by the Company, the Project Architect, the Project Manager, the Reviewing Agent or any other party required to deliver a certificate or other document to the Disbursement Agent under this Agreement, and such documentation may be inspected upon reasonable notice by the Trustee. 17.3 DELEGATION OF DUTIES OF ESCROW AGENT AND DISBURSEMENT AGENT. For so long as Showboat continues to serve as the Escrow Agent and the Disbursement Agent under this Agreement, Showboat may delegate its duties as such to any wholly owned subsidiary of Showboat; PROVIDED that Showboat shall remain liable for all duties of the Escrow Agent and Disbursement Agent hereunder. 18. SEGREGATED ACCOUNT. 18.1 RIGHTS OF THE COMPANY AND DISBURSEMENT AGENT TO SEGREGATED ACCOUNT. The Segregated Account shall be a segregated cash collateral trust account, the balance of which shall not exceed $5.0 million at any time, to be maintained at National City Bank, in East Chicago, Indiana, Custody Account No. 501755883, in the name of Showboat, as Escrow Agent, as agent/bailee for American Bank National Association, as Trustee. Notwithstanding the foregoing and subject to Section 3.4 hereof, all funds deposited and held in the Segregated Account shall belong to the Company and, pending disbursement in accordance with this Agreement, shall be invested in cash or Cash Equivalents; provided, however, that the Disbursement Agent shall not invest any such funds in any investment unless such investment is described in Section 16.1 of this Agreement and the Disbursement Agent has taken the actions described in Section 16.3 with respect to such investment. Pursuant to Section 16.1 of this Agreement, the Company has granted to the Trustee (for the benefit of the Holders of the First Mortgage Notes) a perfected first priority security interest in the Segregated Account, and the Disbursement Agent shall hold the Segregated Account and the funds therein, under the sole dominion and control of such Disbursement Agent, as agent/bailee for the Trustee (for the benefit of Holders of the First Mortgage Notes). Funds in the Segregated Account shall be disbursed solely in accordance with the terms and conditions of this Agreement. Further, the Disbursement Agent shall note in its records that all funds and other assets in the Segregated Account have been pledged to the Trustee, and that the Disbursement Agent is holding such items as agent for the Trustee. Accordingly, such funds shall not be within the bankruptcy "estate" (as such term is used in 11 U.S.C. 541) of the Disbursement Agent. The Company 30 hereby authorizes the Disbursement Agent to make disbursements on its behalf in accordance with this Agreement. 18.2 DISBURSEMENTS FROM SEGREGATED ACCOUNT. Promptly following the deposit of funds into the Segregated Account pursuant to paragraph (i) of the Initial Disbursements Certificate or in connection with a Disbursement Authorization, the Disbursement Agent shall pay the respective "Current Payment Amounts" to the payees identified on SCHEDULE 1 to the Disbursement Request giving rise to the Disbursement Authorization or replenish the Segregated Account; PROVIDED that no disbursements shall be made to the Segregated Account that would cause the balance therein to exceed $5.0 million at any one time. In addition, the Disbursement Agent will promptly pay any payee requested by the Project Manager pursuant to a payment request in the form of EXHIBIT I, provided that such funds are then available in the Segregated Account. 18.3 RIGHT TO SUBSTITUTE SEGREGATED ACCOUNT. The Company and the Disbursement Agent from time to time shall have the right to designate a substitute account to serve as the Segregated Account, PROVIDED that no such substitute account shall become the "Segregated Account" until (a) the Company shall have taken all steps deemed necessary or appropriate by the Trustee in order to cause the Trustee to enjoy a first priority perfected security interest in such substituted Segregated Account, (b) the depositary financial institution at which the substitute account is located shall have acknowledged in a manner satisfactory to the Trustee that the rights of the Trustee in such account are senior to those of the financial institution, and (c) the Escrow Agent and the Trustee shall have received notice of the location and account number of such new substitute account. [SIGNATURE PAGES FOLLOW] 31 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day first above written. THE ESCROW AGENT: SHOWBOAT, INC., A Nevada corporation By: /s/ R. Craig Bird Name: R. Craig Bird Title: Executive Vice President - Finance and Administration By: Name: Title: THE DISBURSEMENT AGENT: SHOWBOAT, INC., a Nevada corporation By: /s/ R. Craig Bird Name: R. Craig Bird Title: Executive Vice President - Finance and Administration THE TRUSTEE: AMERICAN BANK NATIONAL ASSOCIATION, a national banking association By: /s/ Frank P. Leslie, III Name: Frank P. Leslie, III Title: Vice President By: /s/ Thomas M. Korsman Name: Thomas M. Korsman Title: Vice President THE COMPANY: SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana general partnership By: SHOWBOAT MARINA PARTNERSHIP, an Indiana general partnership, its general partner By: SHOWBOAT INDIANA INVESTMENT LIMITED PARTNERSHIP, a Nevada limited partnership, its general partner By: SHOWBOAT INDIANA, INC., a Nevada corporation, its general partner By: /s/ J. Keith Wallace Name: J. Keith Wallace Title: President and Chief Executive Officer SHOWBOAT MARINA FINANCE CORPORATION, a Nevada corporation By: /s/ Mark J. Miller Name: Mark J. Miller Title: Treasurer STATE OF NEW YORK ) ) SS: COUNTY OF NEW YORK ) Before me, a Notary Public in and for said County and State, personally appeared R. Craig Bird, the authorized signatory of Showboat, Inc., a corporate organized and existing under the laws of the State of Nevada, and acknowledged the execution of the foregoing instrument as such authorized signatory acting for and on behalf of said partnership. Witness my hand and Notarial Seal this 28th day of March, 1996. Elizabeth T. McNamee /s/ Elizabeth T. McNamee Notary of Public, State of New York Signature No. 01MC5047948 Qualified in Suffolk County Elizabeth T. McNamee Commission Expires August 14, 1997 Printed Notary Public My Commission Expires: County of Residence: ______________________ New York 35 STATE OF MINNESOTA ) ) SS: COUNTY OF RAMSEY ) Before me, a Notary Public in and for said County and State, personally appeared Frank P. Leslie III and Thomas M. Korsman, the authorized signatories of American Bank National Association, a national banking association, and acknowledged the execution of the foregoing instrument as such authorized signatories acting for and on behalf of American Bank National Association. Witness my hand and Notarial Seal this 28th day of March, 1996. Colleen D. Schwab /s/ Colleen D. Schwab Notary Public - Minnesota Signature My Comm. Expires Jan. 31, 2000 Colleen D. Schwab Printed Notary Public STATE OF INDIANA ) ) SS: COUNTY OF LAKE ) Before me, a Notary Public in and for said County and State, personally appeared J. Keith Wallace the authorized signatory of Showboat Marina Casino Partnership, a general partnership organized and existing under the laws of the State of Nevada and acknowledged the execution of the foregoing instrument as such authorized signatory acting for and on behalf of said partnership. Witness my hand and Notarial Seal this 28th day of March, 1996. /s/ Richard J. Lesniak Signature Richard J. Lesniak Notary Public State of Indiana Lake County My Commission Exp. Apr. 13, 1998 Printed Notary Public My Commission Expires: County of Residence: ______________________ ____________________ STATE OF NEW YORK ) ) SS: COUNTY OF NEW YORK ) Before me, a Notary Public in and for said County and State, personally appeared Mark J. Miller, the authorized signatory of Showboat Marina Finance Corporation, a corporation organized and existing under the laws of the State of Nevada, and acknowledged the execution of the foregoing instrument as such authorized signatory acting for and on behalf of said partnership. Witness my hand and Notarial Seal this 28th day of March, 1996. Elizabeth T. McNamee /s/ Elizabeth T. McNamee Notary of Public, State of New York Signature No. 01MC5047948 Qualified in Suffolk County Elizabeth T. McNamee Commission Expires August 14, 1997 Printed Notary Public My Commission Expires: County of Residence: ______________________ New York TABLE OF EXHIBITS EXHIBIT A. Form of Initial Disbursements Certificate B-1. Form of Company's Closing Certification B-2. Form of Disbursement Agent's Closing Certification B-3. Form of Trustee's Closing Certification C. Form of Disbursement Request D. Project Cost Schedule E. Form of Construction Budget Amendment Certificate F. Form of Contract Amendment Certificate G. Form of Reviewing Agent Letter H. Form of Disbursement Authorization I. Form of Payment Request J. Form of Consent to Collateral Assignment of Contract K. Pre-Opening Expenses L. Form of Letter to Issuer (or Transfer Agent) of Uncertificated Securities M. Form of Showboat Disbursement Certificate N. Form of Pre-Closing Disbursement Certificate 37 EXHIBIT A TO ESCROW AND DISBURSEMENT AGREEMENT FORM OF INITIAL DISBURSEMENTS CERTIFICATE Showboat Marina Casino Partnership Showboat Marina Finance Corporation 2001 East Columbus Drive East Chicago, Indiana 46312 Showboat, Inc., as Escrow Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Attention: R. Craig Bird Showboat, Inc., as Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Attention: R. Craig Bird American Bank National Association, as Trustee 101 East 5th Street St. Paul, Minnesota 55101 Attention: Corporate Trust Department Re: Initial Disbursements Certificate Ladies and Gentlemen: This Initial Disbursements Certificate is delivered to you pursuant to that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ("SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement) and Showboat, Inc. ("SHOWBOAT"), a Nevada corporation, as disbursement agent (the "DISBURSEMENT AGENT"), and as escrow agent (the "ESCROW AGENT"). Capitalized terms used herein shall have the meanings assigned to such terms in the Escrow and Disbursement Agreement. The Company hereby irrevocably instructs the Escrow Agent to disburse the following sums to the following parties: (a) $___________ to Showboat, pursuant to instructions provided to the Escrow Agent by Showboat, as reimbursement of certain amounts advanced to the Company prior to the date hereof. (b) $ __________ to Kummer Kaempfer Bonner & Renshaw, counsel to the Company, as payment of certain legal fees incurred in connection with the issuance of the First Mortgage Notes; (c) $___________ to Ice Miller Donadio & Ryan, special Indiana counsel to the Company, as payment of certain legal fees incurred in connection with the issuance of the First Mortgage Notes; 38 (d) $___________ to Winston & Strawn, special Admiralty counsel to the Company, as payment of certain legal fees incurred in connection with the issuance of the First Mortgage Notes; (e) $ __________ to R.R. Donnelley, as payment for certain printing and engraving fees incurred in connection with the issuance of the First Mortgage Notes; (f) $___________ to _____________, as payment of certain fees and expenses incurred in connection with serving as surety for the Payment and Performance Bond. (g) $5,000,000 to the Segregated Account. [SIGNATURE PAGE FOLLOWS] 39 THE COMPANY: SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana general partnership By: SHOWBOAT MARINA PARTNERSHIP, an Indiana general partnership, its general partner By: SHOWBOAT INDIANA INVESTMENT LIMITED PARTNERSHIP, a Nevada limited partnership, its general partner By: SHOWBOAT INDIANA, INC., a Nevada corporation, its general partner By: Name: J. Keith Wallace Title: President and Chief Executive Officer SHOWBOAT MARINA FINANCE CORPORATION, a Nevada corporation By: Name: Mark J. Miller Title: Treasurer 40 EXHIBIT B-1 TO ESCROW AND DISBURSEMENT AGREEMENT FORM OF COMPANY'S CLOSING CERTIFICATION Showboat Marina Casino Partnership Showboat Marina Finance Corporation 2001 East Columbus Drive East Chicago, Indiana 46312 _____ __, 1996 Showboat, Inc., as Escrow Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Showboat, Inc., as Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 American Bank National Association, as Trustee 101 East 5th Street St. Paul, Minnesota 55101 Attention: Corporate Trust Department Re: Company's Closing Certification Ladies and Gentlemen: This Closing Certification is delivered to you pursuant to that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ( "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement) and Showboat, Inc. as disbursement agent (the "DISBURSEMENT AGENT"), and as escrow agent (the "ESCROW AGENT"). Capitalized terms used herein shall have the meanings assigned to such terms in the Escrow and Disbursement Agreement. The Company hereby certifies to each of you as follows: 1. As of the date hereof, there is no reason to believe that the date on which East Chicago Showboat will become Operating will not occur on or prior to the Completion Date. 2. The "Available Amount" column of the Initial Construction Budget attached hereto as EXHIBIT 1 constitutes the Construction Budget presently in effect for the Construction; PROVIDED, HOWEVER, that the Initial Construction Budget shall not include the "Fees and Expenses" line item or the corresponding amounts listed under the "Available Amount" column with respect thereto. 1 3. Said Initial Construction Budget accurately sets forth the anticipated Construction Expenses through completion of the construction of East Chicago Showboat and the various components of East Chicago Showboat identified thereon as line items, all within the respective line item amounts listed. 4. Said Initial Construction Budget also accurately sets forth (a) all anticipated Pre-Opening Expenses which the Company is expected to incur in order for East Chicago Showboat to begin Operating on or before the Completion Date, and (b) all anticipated Debt Financing Costs payable through the date that the Company reasonably anticipates that East Chicago Showboat first will be Operating and to provide a reserve to cover any additional Debt Financing Costs that will accrue but will not yet be payable as of such date, all within the line item allocations established for those components set forth in the Initial Construction Budget. 5. As of the date hereof, there are sufficient Available Funds to pay for the anticipated costs described in paragraphs 2, 3 and 4 above, and, after giving effect to the Initial Disbursements, the Company does not believe that any other expenses will need to be incurred by the Company in order to cause East Chicago Showboat to be Operating on or before the Completion Date. 6. There is no Default or Event of Default existing under the Indenture. The foregoing representations, warranties and certifications are true and correct and the Disbursement Agent is entitled to rely on the foregoing in authorizing and making the Initial Disbursements. THE COMPANY: SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana general partnership By: SHOWBOAT MARINA PARTNERSHIP, an Indiana general partnership, its general partner By: SHOWBOAT INDIANA INVESTMENT LIMITED PARTNERSHIP, a Nevada limited partnership, its general partner By: SHOWBOAT INDIANA, INC., a Nevada corporation, its general partner By: Name: J. Keith Wallace Title: President and Chief Executive Officer SHOWBOAT MARINA FINANCE CORPORATION, a Nevada corporation By: Name: Mark J. Miller Title: Treasurer 2 EXHIBIT 1 TO EXHIBIT B-1 INITIAL CONSTRUCTION BUDGET The following table sets forth the initial construction budget for the construction of East Chicago Showboat through its expected opening date of July 1, 1997 (in millions):
AVAILABLE AMOUNT: Casino vessel $ 46.0 Gaming and other equipment 17.2 Preopening expenses 11.0 Interest 16.6 Breakwater 16.4 Garage 15.8 Furniture, fixtures & equipment 11.9 Contingency 11.5 Pavilion 10.5 Design and development fees 16.0 Economic development incentives 5.9 Site improvements and infrastructure 5.6 Offering discounts and expenses 5.6 Bankroll and working capital 5.0 Total Available Amount $195.0 Interest is net of interest income anticipated to be earned on the funds in the Escrow Account. Assumes interest income of 4.0% on the cash balance in the Escrow Account.
1 EXHIBIT 2 TO EXHIBIT B-1 FORM OF PROJECT MANAGER'S CLOSING CERTIFICATION _____ __, 1996 Showboat, Inc., as Escrow Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Showboat, Inc., as Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 American Bank National Association, as Trustee 101 East 5th Street St. Paul, Minnesota 55101 Attention: Corporate Trust Department Re: Company's Closing Certification Project Manager's Closing Certification Ladies and Gentlemen: Showboat, Inc., a Nevada Corporation (the "PROJECT MANAGER") hereby certifies to each of you as follows: 1. We have reviewed the above referenced Company Closing Certification from the Company and that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ("SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), Showboat, Inc., a Nevada corporation ("SHOWBOAT") and as escrow agent (the "ESCROW AGENT"), as disbursement agent (the "DISBURSEMENT AGENT"), and American Bank National Association, as trustee (the "TRUSTEE") under the Indenture, to the extent necessary to understand the defined terms contained herein and in the Company's Closing Certification that is incorporated by reference from the Escrow and Disbursement Agreement, and to provide the certification contained herein. 2. The Project Manager hereby certifies and confirms the accuracy of the certifications in paragraphs 1 and 3 of the above- referenced Company's Closing Certification. 2 3. The Project Manager hereby certifies that to the best of its knowledge, East Chicago Showboat with the Minimum Facilities may be constructed in accordance within the Initial Construction Budget identified in the Company's Closing Certification. The foregoing representations, warranties and certifications are true and correct and you each are entitled to rely on the foregoing in connection with the Initial Disbursements. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Escrow and Disbursement Agreement. Showboat, Inc., a Nevada corporation By: Name: R. Craig Bird Title: Executive Vice President - Finance and Administration 3 EXHIBIT 3 TO EXHIBIT B-1 FORM OF PROJECT ARCHITECT'S CLOSING CERTIFICATION March 28, 1996 Showboat, Inc., as Escrow Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Showboat, Inc., as Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 American Bank National Association, as Trustee 101 East 5th Street St. Paul, Minnesota 55101 Attention: Corporate Trust Department Re: Company's Closing Certification Project Architect's Closing Certification Ladies and Gentlemen: Showboat, Inc., a Nevada Corporation (the "PROJECT ARCHITECT") hereby certifies to each of you as follows: 1. The Project Architect has reviewed the above referenced Company's Closing Certification from the Company and that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Inc., a Nevada corporation ("SHOWBOAT"), as escrow agent (the "Escrow Agent"), and as disbursement agent (the "DISBURSEMENT AGENT"), American Bank National Association, as trustee (the "TRUSTEE") under the Indenture, Showboat Marina Casino Partnership, an Indiana general partnership (the "PARTNERSHIP"), and Showboat Marina Finance Corporation, ("FINANCE CORPORATION" and, together with the Partnership, the "COMPANY"), to the extent necessary to understand the defined terms contained herein and in the Company's Closing Certification that are incorporated by reference from the Escrow and Disbursement Agreement, and to provide the certification contained herein. 2. The Project Architect hereby certifies and confirms the accuracy of the certifications in paragraphs 1 and 3 of the above- referenced Company's Closing Certification. 3. The Project Architect hereby certifies that to the best of its knowledge, East Chicago Showboat with the Minimum Facilities may be constructed in accordance within the Initial Construction Budget identified in the Company's Closing Certification. 4 The foregoing representations, warranties and certifications are true and correct and you each are entitled to rely on the foregoing in connection with the Initial Disbursements. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Escrow and Disbursement Agreement. Showboat, Inc., a Nevada corporation By: Name: R. Craig Bird Title: Executive Vice President - Finance and Administration 5 EXHIBIT B-2 TO ESCROW AND DISBURSEMENT AGREEMENT FORM OF DISBURSEMENT AGENT'S CLOSING CERTIFICATION Showboat, Inc., Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 _________ __, 1996 Showboat, Inc., Escrow Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Re: Disbursement Agent's Closing Certification Ladies and Gentlemen: This Closing Certification is delivered to you pursuant to that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among AGENT"), Showboat, Inc., a Nevada corporation ("SHOWBOAT"), as escrow agent (the "ESCROW AGENT"), and disbursement agent (the "DISBURSEMENT AGENT"), American Bank National Association, as trustee (the "TRUSTEE") under the Indenture (as defined therein), Showboat Marina Casino Partnership, an Indiana general partnership (the "PARTNERSHIP"), and Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with the Partnership, the "COMPANY"). Capitalized terms used herein shall have the meanings assigned to such terms in the Escrow and Disbursement Agreement. The Disbursement Agent hereby certifies to each of you as follows as contemplated by Section 6.1 (c) of the above- referenced Escrow and Disbursement Agreement: 1. The Escrow Account has been established as contemplated by the Escrow and Disbursement Agreement. 2. The Disbursement Agent has obtained and has in effect insurance of the type required by Section 8.3 of the Escrow and Disbursement Agreement. 3. The Disbursement Agent has received from the Company (a) an executed Initial Disbursements Certificate, and (b) an executed Closing Certification in the form attached to the Escrow and Disbursement Agreement as Exhibit B-1, together with closing certifications from the Project Manager and the Project Architect in the form called for thereby. The foregoing representations, warranties and certifications are true and correct and you each are entitled to rely on the foregoing in connection with the Initial Disbursements. 6 Showboat Inc., a Nevada Corporation By: Name: R. Craig Bird Title: Executive Vice President - Finance and Administration 7 EXHIBIT B-3 TO ESCROW AND DISBURSEMENT AGREEMENT FORM OF TRUSTEE'S CLOSING CERTIFICATION American Bank National Association, as Trustee 101 East 5th Street St. Paul, Minnesota 55101 Attention: Corporate Trust Department _____ __, 1996 Showboat, Inc., Escrow Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Re: Trustee's Closing Certification Ladies and Gentlemen: This Closing Certification is delivered to you pursuant to that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ( "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement) and Showboat, Inc., as escrow agent (the "ESCROW AGENT"), and as disbursement agent (the "DISBURSEMENT AGENT"). Capitalized terms used herein shall have the meanings assigned to such terms in the Escrow and Disbursement Agreement. The Trustee hereby certifies to each of you as follows as contemplated by Section 6.1 (c) of the above-referenced Escrow and Disbursement Agreement: 1. The Trustee has received from the Company an executed Initial Disbursements Certificate and an executed Closing Certification in the form attached to the Escrow and Disbursement Agreement as Exhibit B-1, together with closing certifications from the Project Manager and the Project Architect in the form called for thereby. 2. The Trustee has received from the Title Insurer the Title Policy required to be in effect under the terms of the Escrow and Disbursement Agreement as of the date of the Initial Disbursements. The foregoing representations, warranties and certifications are true and correct and you each are entitled to rely on the foregoing in connection with the Initial Disbursements. AMERICAN BANK NATIONAL ASSOCIATION, a national banking association, as Trustee By: Name: Title: 8 EXHIBIT C TO ESCROW AND DISBURSEMENT AGREEMENT DISBURSEMENT REQUEST AND CERTIFICATE [Letterhead of the Company] __________, 199__ Showboat, Inc., Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Re: Disbursement Request No. ____________ under Escrow and Disbursement Agreement Amount Requested: $_____________ Ladies and Gentlemen: This Disbursement Request and certificate is delivered to you pursuant to that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat, Inc., a Nevada corporation, as escrow agent (the "ESCROW AGENT"), and as disbursement agent (the "DISBURSEMENT AGENT"), American Bank National Association, as trustee (the "TRUSTEE") under the Indenture (as defined therein), Showboat Marina Casino Partnership, an Indiana general partnership (the "PARTNERSHIP"), and Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with the Partnership, the "COMPANY"). Capitalized terms used herein shall have the meanings assigned to such terms in the Escrow and Disbursement Agreement. The Company hereby requests that you, in your capacity as Disbursement Agent under the Escrow and Disbursement Agreement, authorize the Escrow Agent to make a disbursement of $______________ (the "DISBURSEMENT") to the parties identified on SCHEDULE 1 attached hereto and in the respective amounts listed for such parties on SCHEDULE 1 under the column "CURRENT PAYMENT AMOUNT." In connection with the requested Disbursement, the Company signing below hereby represent, and certify as follows: 1. With respect to amounts requested on SCHEDULE 1 for Construction Expenses, SCHEDULE 1 accurately lists, for each line item and for each party to whom payment is requested with respect to such line item, the following: (i) the name of the payee to be paid, (ii) the current payment requested, (iii) the increase or decrease in accrued but unpaid Retainage Amount for such payee since the last Disbursement Request (after giving effect to the payment contemplated by the Disbursement Request); (iv) the total amount contemplated to be payable to such payee under the terms of its applicable Contract through completion of all work and delivery of all materials contemplated by the Contract (i.e., the total contract amount); (v) the total payments made to such payee under its applicable Contract as of the Issue Date; (vi) the total payments made to such payee since the Issue Date (after giving effect to the payment contemplated by this Disbursement Request); (vii) the sum of all payments made to such payee (after giving effect to the payment contemplated by this Disbursement Request) (i.e., the sum of (v) and (vi) above); (viii) the aggregate accrued Retainage Amounts which shall continue to be owed with respect to such Contract (after giving effect to the payment contemplated by the Disbursement Request); and (ix) the percentage of the work actually completed, or the materials actually delivered, under the Contract through the date for which 1 payment is made hereunder (expressed as a percentage of the total work and materials contemplated by the Contract through completion). 2. The construction performed as of the date hereof is in accordance with the Plans for East Chicago Showboat and the disbursement is appropriate in light of the percentage of construction completed and the amount of stored materials. As of the date hereof, there is no reason to believe that the date on which East Chicago Showboat will become Operating will not occur on or prior to the Completion Date. 3. With respect to amounts requested on SCHEDULE 1 for Pre- Opening Expenses, all such Pre-Opening Expenses have been incurred and are payable in accordance with the Indenture, and all of the conditions set forth in EXHIBIT K to the Escrow and Disbursement Agreement to the disbursement and payment of said amounts have been satisfied. 4. Appropriate evidence of lien releases, if required by Section 6.2(k) or 6.2(l) of the Escrow and Disbursement Agreement, and title insurance endorsements, if required by Section 6.2(h) of the Escrow and Disbursement Agreement, have been received for all work, materials and/or services performed and/or delivered in connection with East Chicago Showboat. In addition all Title Policies required pursuant to the Escrow and Disbursement Agreement have been received. The lien releases and the title endorsements, to the extent applicable, are attached hereto. 5. The Construction Budget presently in effect is dated _________________ and includes all amendments through Construction Budget Amendment No. ___. Said Construction Budget accurately sets forth the anticipated Construction Expenses through completion of construction of East Chicago Showboat and the various components of East Chicago Showboat identified thereon as line items, all within the respective line item amounts listed. 6. The Construction Budget continues to accurately set forth (a) all anticipated Pre-Opening Expenses which the Company will need to incur in order the commence Operating East Chicago Showboat on or before the Completion Date, and (b) all anticipated Debt Financing Costs payable through the date that the Company reasonably anticipates that East Chicago Showboat first will be Operating and to provide a reserve to cover any additional Debt Financing Costs that will accrue but will not yet be payable as of such date, all within the line item allocations established for those components set forth in the Construction Budget. 7. After giving effect to the requested disbursement from the Escrow Account, there are sufficient Available Funds to pay for the anticipated costs described in paragraphs 6 and 7 above, and the Company does not believe that any other expenses will need to be incurred by the Company in order to cause East Chicago Showboat to be Operating on or before the Completion Date. 8. There is no Event of Default under the Indenture or any event, omission or failure of a condition which would constitute an Event of Default under the Indenture after notice or lapse of time or both. 9. As of the date hereof, the Company submitted to the Disbursement Agent all Plans which, as of the date hereof, constitute Final Plans. Further, all disbursements requested under this Disbursement Request are for the Payment of Construction Expenses incurred for work consistent with Plans which the Company reasonably believes ultimately will become Final Plans and which will permit the Company to complete construction of East Chicago Showboat on or before the Completion Date. 10. [ ] Check this box if this Disbursement is for the purchase of real estate. (If so checked, the undersigned will deliver a copy of the amended Collateral Documents evidencing that the Lien (as defined in the Indenture) of the Trustee has been amended to include such real estate). 2 The foregoing representations, warranties and certifications are true and correct and Disbursement Agent is entitled to rely on the foregoing in authorizing and making the Disbursement. Attached to this Disbursement Request are certificates from the Project Manager and Project Architect. THE COMPANY: SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana general partnership By: SHOWBOAT MARINA PARTNERSHIP, an Indiana general partnership, its general partner By: SHOWBOAT INDIANA INVESTMENT LIMITED PARTNERSHIP, a Nevada limited partnership, its general partner By: SHOWBOAT INDIANA, INC., a Nevada corporation, its general partner By: Name: J. Keith Wallace Title: President and Chief Executive Officer SHOWBOAT MARINA FINANCE CORPORATION, a Nevada corporation By: Name: Mark J. Miller Title: Treasurer 3
Schedule 1 to Disbursement Request and Certificate Date:________________ CONSTRUCTION EXPENSES Line Item: (i) Payee (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) % of Current Increase/ Total Payments Payments Total Aggregate Contract Payment Decrease in Amount Under Under Payments Accured and Work Amount Retainage Payable Contract Contract to Date Unpaid Completed Amount Since Under Prior to From and [(iv)+(v)] Retainage Last Contract Issue After Issue Amounts for Disbursement Terms Date Date Contract Request Total for Line Item Line Item: Total for Line Item Line Item: Total for Line Item PRE-OPENING EXPENSES Line Item: (i) Payee (ii) Current Payment Amount 1 Total for Line Item Line Item: Total for Line Item
2 EXHIBIT 1 TO EXHIBIT C CERTIFICATE OF PROJECT MANAGER (DISBURSEMENT REQUEST) ___________, 199__ Showboat, Inc., Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Re: Disbursement Request No. __________ Under Escrow and Disbursement Agreement Certificate of Project Manager Ladies and Gentlemen: The Project Manager hereby certifies as follows: 1. The Project Manager has reviewed the above referenced Disbursement Request and that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ("SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement) and Showboat, Inc., a Nevada Corporation ("SHOWBOAT"), as escrow agent (the "ESCROW AGENT"), and as disbursement agent (the "DISBURSEMENT AGENT") to the extent necessary to understand the defined terms contained herein and in the Disbursement Request that are incorporated by reference from the Escrow and Disbursement Agreement, and to provide the certification contained herein. Capitalized terms used herein shall have the meanings assigned to such terms in the Escrow and Disbursement Agreement. 2. The Project Manager hereby certifies and confirms the accuracy of the certifications in paragraphs 1, 2, 5, 6 and 9 of the above-referenced Disbursement Request. 3. The Project Manager hereby certifies that to the best of its knowledge, East Chicago Showboat with the Minimum Facilities may be constructed in accordance with the Construction Budget presently in effect. The foregoing representations, warranties and certifications are true and correct and the Disbursement Agent is entitled to rely on the foregoing in authorizing and making the Disbursement. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Escrow and Disbursement Agreement. 3 Showboat, Inc., a Nevada corporation By: Name: Title: 4 EXHIBIT 2 TO EXHIBIT C TO ESCROW AND DISBURSEMENT AGREEMENT CERTIFICATE OF PROJECT ARCHITECT (DISBURSEMENT REQUEST) _______, 199__ Showboat, Inc., Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Attention: R. Craig Bird Re: Disbursement Request No. __________ Under Escrow and Disbursement Agreement Certificate of Project Architect Ladies and Gentlemen: The Undersigned, (the "Project Architect) hereby certifies as follows: 1. We have reviewed the above referenced Disbursement Request and that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ( "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), to the extent necessary to understand the defined terms contained herein and in the Disbursement Request that are incorporated by reference from the Escrow and Disbursement Agreement, and to provide the certification contained herein, American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement) and Showboat, Inc., a Nevada Corporation ("SHOWBOAT"), as escrow agent (the "ESCROW AGENT"), and as disbursement agent (the "DISBURSEMENT AGENT"). Capitalized terms used herein shall have the meanings assigned to such terms in the Escrow and Disbursement Agreement. 2. We hereby certify and confirm the accuracy of the certifications contained in paragraphs 2 and 9 of the above- referenced Disbursement Request. 3. We hereby certify that, to the best of our knowledge, East Chicago Showboat with the Minimum Facilities may be constructed in accordance with the Construction Budget presently in effect. The foregoing representations, warranties and certifications are true and correct and the Disbursement Agent is entitled to rely on the foregoing in authorizing and making the Disbursement. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Escrow and Disbursement Agreement. 5 a Project Architect By: Name: Title: By: Name: Title: 6
EXHIBIT D TO ESCROW AND DISBURSEMENT AGREEMENT PROJECT COST SCHEDULE Prepared as of : _____________, 199__ CONSTRUCTION EXPENSES (i) (ii) (iii) (iv) (v) (vi) (vii) Line Item Total Excluded Construction Costs Paid Accrued and Available Estimated Costs Budget to Date Unpaid Amount Costs Since Issue Retainage Date Amounts to Date PRE-OPENING EXPENSES (i) Line Item (ii) Total (iii) (iv) (v) Costs (vi) (vii) Estimated Excluded Construction Paid to Accrued and Available Costs Costs Budget Date Since Unpaid Amount Issue Retainage Date Amounts to Date 1 DEBT FINANCING COSTS UNALLOCATED RESERVES TOTAL Includes "Excluded Costs" (column iii) under line item. Represents (a) expenses paid by the Colmpany in connection with East Chicago Showboat prior to the Issue Date, and (b) to the extent not covered by clause (a), any expenses paid pursuant to Initial Disbursemnts. Excludes "Excluded Costs" (column(iii), but includes Retainage Amounts accrued but unpaid as of Issue Date). Include Retainage Amounts, as and when paid. Include Retainage Amounts accrued as of Issue Date, to the extent still unpaid. Represents amounts presently allocated to Line Item that have not yet been disbursed or retained to cover Retainage Amounts.
2 Additional Revenue Anticipated (as of Issue Date, as noted on Intial Constructin Budget) to be earned From Investments in Escrow Account $ Additional Revenue Earned From Investments in Escrow Account as of the Date of this Project Cost Schedule $ Additional Revenue Anticipated to be Earned, From investments in Escrow Account, from the Date of this Project Cost Schedule Through the Date East Chicago Showboat Anticipated to be Operating $ The undersigned hereby confirms the accuracy of the above Project Cost Schedule as of the date for which it has been prepared. Date:_____________, 199__ THE COMPANY: SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana general partnership By: SHOWBOAT INDIANA INVESTMENT LIMITED PARTNERSHIP, a Nevada limited partnership By: SHOWBOAT INDIANA, INC., a Nevada corporation, its general partner By: Name: Title: SHOWBOAT MARINA FINANCE CORPORATION By: Name: Title: 3 EXHIBIT E TO ESCROW AND DISBURSEMENT AGREEMENT CONSTRUCTION BUDGET AMENDMENT CERTIFICATE [Letterhead of the Company] Date: _______, 1996 Showboat, Inc., Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Re: Amendment No. ___________ to Construction Budget Under Escrow and Disbursement Agreement Construction Budget Amendment Certificate Ladies and Gentlemen: The Company requests that the Construction Budget for East Chicago Showboat be amended as set forth on SCHEDULE 1 to this certificate. This certificate is delivered pursuant to that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat, Inc., a Nevada corporation ("SHOWBOAT"), as escrow agent (the "ESCROW AGENT"), and as disbursement agent (the "DISBURSEMENT AGENT"), American Bank National Association, as trustee (the "TRUSTEE") under the Indenture (as defined therein), Showboat Marina Casino Partnership, an Indiana general partnership (the "PARTNERSHIP"), and Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with the Partnership, the "COMPANY"). Capitalized terms used in this certificate that are otherwise not defined shall have the meaning assigned in the Escrow and Disbursement Agreement. In connection with the requested Construction Budget amendment, the Company hereby represents, warrants and certifies as follows: 1. The proposed amendment is reasonably necessary in order to complete the work represented by such line item in the Construction Budget that is amended. 2. Funding to pay the costs represented by any line item increase is available from Realized Savings, Additional Revenue, Capital Lease Savings and/or Additional Project Financing to the extent not previously expended or dedicated (including Retainage Amounts) to the payment of items contained in the Construction Budget, from the allocation of otherwise unallocated reserves in the Construction Budget or from the reduction of allocated reserves pursuant to the terms and conditions of the Escrow and Disbursement Agreement and, in each case, as set forth on SCHEDULE 1 hereto. 3. The Construction Budget in effect immediately prior to the proposed amendment is attached to this Construction Budget Amendment Certificate as SCHEDULE 2, and the Construction Budget which will be in effect upon effectiveness of the proposed amendment is attached to this Construction Budget Amendment as SCHEDULE 3. 1 4. Immediately following the proposed amendment: (i) the Construction Budget will continue to provide for construction of improvements which are substantially consistent with the Minimum Facilities; (ii) the Construction Budget will continue to call for construction which will permit the date on which East Chicago Showboat becomes Operating to occur on or prior to the Completion Date; (iii) the Construction Budget will continue to reasonably establish the line item components of the work required to be undertaken in order to complete construction of East Chicago Showboat, and will continue to reasonably establish the cost of completing each line item component of such work; and (iv) the Remaining Costs will not exceed the Available Funds. 5. The construction performed as of the date hereof is in accordance with the Plans and the disbursement is appropriate in light of the percentage of construction completed and the amount of stored materials. The undersigned have no reason to believe that the date on which East Chicago Showboat will become Operating will not occur on or prior to the Completion Date. 6. After giving effect to the proposed amendment, the Construction Budget accurately sets forth the anticipated Construction Expenses through completion of the construction of East Chicago Showboat and the various lien item components thereof identified on the Construction Budget, all within the line item allocations established for those components set forth in the Construction Budget. 7. After giving effect to the proposed amendment, the Construction Budget accurately sets forth all anticipated Pre-Opening Expenses which the Company will need to incur in order to commence Operating East Chicago Showboat on or before the Completion Date, and all anticipated Debt Financing Costs which will be payable or which will accrue through the date that the Company reasonably anticipates that East Chicago Showboat first will be Operating and to provide a reserve to cover any additional Debt Financing Costs that will accrue but will not yet be payable as of such date, all within the respective line items established for those items in the Construction Budget. 8. After giving effect to the proposed amendment, there are sufficient Available Funds to pay for the anticipated costs described in paragraphs 6 and 7 above and the Company does not believe that any other expenses will need to be incurred by the Company in order to cause East Chicago Showboat to be Operating on or before the Completion Date. 9. There is no Event of Default under the Indenture or any event, omission or failure of a condition which could constitute an Event of Default under the Indenture after notice or lapse of time or both. 10. If the line item "UNALLOCATED RESERVES" is zero in the Construction Budget for East Chicago Showboat, SCHEDULE 1 to this Construction Budget amendment has been reviewed by the Reviewing Agent in accordance with the Escrow and Disbursement Agreement and attached as SCHEDULE 4 hereto is a copy of the Reviewing Agent's review letter. The undersigned certifies that the Construction Budget amendment contemplated hereby is permitted pursuant to the Escrow and Disbursement Agreement and the Indenture, and all conditions precedent thereto have been met. 2 Attached to this Construction Budget Amendment Certificate are certificates from the Project Manager and the Project Architect. THE COMPANY: SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana general partnership By: SHOWBOAT MARINE PARTNERSHIP, an Indiana general partnership, its general partner By: SHOWBOAT INDIANA INVESTMENT LIMITED PARTNERSHIP, a Nevada limited partnership By: SHOWBOAT INDIANA, INC., a Nevada corporation, its general partner By: Name: Title: SHOWBOAT MARINA FINANCE CORPORATION By: Name: Title: 3 SCHEDULE 1 TO CONSTRUCTION BUDGET AMENDMENT Amendment No. __ to Construction Budget. I. Increases to Line Items: The following line item is increased: ________________________ Old Amount of Line Item: ________________________ Amount of Increase: ________________________ New Total For Line Item: ________________________ Source of Funds For Increase: Source Amount Realized Savings _______________1 Additional Revenue _______________2 Previously Unallocated Reserve _______________ Additional Project Financing _______________2 Capital Lease Savings _______________3 Total _______________ II. Decreases to Line Items: The following line item is decreased: ________________________________ Old Amount of Line Item: ________________________________ Amount of Decrease: ________________________________ New Amount of Line Item: ________________________________ Reason For Decrease of Line Item: ___ Realized Savings1 ___ Decrease of Unallocated Reserves ___ Decrease of Allocated Reserves ___ Capital Lease Savings3 _______________________________ 1. Source and documentation (receipts for purchased goods or contracts for fixed price) for Realized Savings are attached. 2. Attached deposit slip into the Escrow Account to evidence additional funds. 3. Documentation (leases for goods leased pursuant to capital leases) for Capital Lease Savings are attached. 1 III. New Construction Budget Totals a. The total Construction Budget for the Project is now: $_____________ b. The amount disbursed to date for the Project is now: $_____________ c. Remaining amounts to be spent: $_____________ d. Available Funds for Project: $_____________ Item d should be greater than or equal to item c. 2 SCHEDULE 2 TO CONSTRUCTION BUDGET AMENDMENT CERTIFICATE EXISTING CONSTRUCTION BUDGET The following table sets forth the existing construction budget for East Chicago Showboat (in millions):
CONSTRUCTION BUDGET: Casino vessel $ 46.0 Gaming and other equipment 17.2 Preopening expenses 11.0 Interest 16.6 Breakwater 16.4 Garage 15.8 Furniture, fixtures & equipment 11.9 Contingency 11.5 Pavilion 10.5 Design and development fees 16.0 Economic development incentives 5.9 Site improvements and infrastructure 5.6 Offering discounts and expenses 5.6 Bankroll and working capital 5.0 Total $195.0 Interest is net of interest income anticipated to be earned on the funds in the Escrow Account. Assumes interest income of 4.0% on the cash balance in the Escrow Account.
1 SCHEDULE 3 TO CONSTRUCTION BUDGET AMENDMENT CERTIFICATE REVISED CONSTRUCTION BUDGET 2 SCHEDULE 4 TO CONSTRUCTION BUDGET AMENDMENT CERTIFICATE FORM OF REVIEWING AGENT'S LETTER _________, 199_ _______________________ _______________________ _______________________ _______________________ Dear ____________: At your request, we are submitting this proposal to perform certain agreed upon procedures relating to the Budget Amendment Certificate to be submitted as part of an Officer's Certificate pursuant to Section 4.1 of that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat, Inc., a Nevada corporation ("SHOWBOAT"), as escrow agent (the "ESCROW AGENT") and as disbursement agent (the "DISBURSEMENT AGENT"), American Bank National Association, as trustee (the "TRUSTEE") under the Indenture (as defined therein), Showboat Marina Casino Partnership, an Indiana general partnership (the "PARTNERSHIP"), and Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with the Partnership, the "COMPANY"). Capitalized terms used in this certificate that are otherwise not defined shall have the meaning assigned in the Escrow and Disbursement Agreement. It is our understanding that the purpose of these special procedures is to verify the information listed on Schedule 1 to Budget Amendment (an example of such schedule is shown as Schedule 1 to Exhibit E of the aforementioned Escrow and Disbursement Agreement), trace such information to the Construction Budget and recalculate the schedule for mathematical accuracy, and report any exceptions noted to the Company and the Disbursement Agent responsible for disbursing the funds pursuant to the Escrow and Disbursement Agreement. It is our further understanding that these special procedures are to be performed and our report thereon rendered timely such that it can be attached to the Officer's Certificate to the Disbursement Agent. We expect our report will read generally as follows: We have performed the procedures enumerated below as requested by the management of Showboat Marina Casino Partnership relating to amendments to the Construction Budget and in particular to the schedule attached to the Budget Amendment Certificate prepared for such purpose. These procedures were performed solely to assist the Company in complying with the terms of the Escrow and Disbursement Agreement, and to provide independent verification of accounting information included as part of Schedule 1 to the Budget Amendment. This report is intended solely for your information and that of the Escrow Agent. Our procedures were as follows: (a) We compared the accounting information included in Schedule 1 to the Budget Amendment to the accounting records of the Company and to the Construction Budget and found it to be in agreement except . . . 1 (b) We recalculated the information submitted for mathematical accuracy and are in agreement except . . . These agreed-upon procedures are substantially less in scope than an audit, the objective of which is the expression of an opinion on the selected financial information. Accordingly, we do not express such an opinion. Based on the application of the procedures referred to above, nothing came to our attention that caused us to believe that the accounting information included in the aforementioned Schedule 1 to the Budget Amendment, prepare by the Company, was unsupported by the accounting records of the Company or the Construction Budget, except as noted. Had we performed additional procedures, or had we made an audit of the selected financial information, other matters might have come to our attention that would have been reported to you. The aforementioned work and related report is anticipated to be performed and rendered for each Amendment to the Construction Budget made within the construction periods of East Chicago Showboat. Our fees for the special procedures work will be billed at our standard rate, plus reimbursable expenses, and submitted for payment upon completion of each such amendment. If the aforementioned is in accordance with our understanding, please sign and return the enclosed copy of this engagement letter in the attached return envelope. We look forward to working with you on this important engagement. Very truly yours, Accepted By: _____________________________________ Authorized Signature 2 EXHIBIT 1 TO EXHIBIT E CERTIFICATE OF PROJECT MANAGER CONSTRUCTION BUDGET AMENDMENT ________, 199__ Showboat, Inc., Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Re: Amendment No. ____ to Construction Budget Construction Budget Amendment Certificate, dated _____, 199__ Under Escrow and Disbursement Agreement Certificate of Project Manager Ladies and Gentlemen: Showboat, Inc., a Nevada corporation (the "PROJECT MANAGER") hereby certifies as follows: 1. The Project Manager has reviewed the above referenced Construction Budget Amendment Certificate and that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership (the "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement) and Showboat, Inc. ("SHOWBOAT"), as escrow agent (the "ESCROW AGENT") and as disbursement agent (the "DISBURSEMENT AGENT") to the extent necessary to understand the defined terms contained herein and in the Construction Budget Amendment Certificate that are incorporated by reference from the Escrow and Disbursement Agreement, and to provide the certification contained herein, Capitalized terms used herein shall have the meanings assigned to such terms in the Escrow and Disbursement Agreement. 2. The Project Manager hereby certifies and confirms the accuracy of the certifications in paragraphs 1, 3, 5 and 6 of the above-referenced Construction Budget Amendment Certificate. The foregoing representations, warranties and certifications are true and correct and the Disbursement Agent and the Reviewing Agent are entitled to rely on the foregoing in authorizing and making the amendment to the Construction Budget. ________________, as Project Manager By: Name: Title: 3 EXHIBIT 2 TO EXHIBIT E CERTIFICATE OF PROJECT ARCHITECT CONSTRUCTION BUDGET AMENDMENT Showboat, Inc., Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Re: Amendment No. ___ to Construction Budget Construction Budget Amendment Certificate, dated _____, 199__ Under Escrow and Disbursement Agreement Certificate of Project Architect Ladies and Gentlemen: The undersigned, as project architect (the "PROJECT ARCHITECT"), hereby certifies as follows: 1. The Project Manager has reviewed the above referenced Construction Budget Amendment Certificate and that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement), Showboat, Inc. ("SHOWBOAT") as escrow agent (the "ESCROW AGENT") and disbursement agreement ("DISBURSEMENT AGENT"), Showboat Marina Casino Partnership, an Indiana general partnership (the "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), to the extent necessary to understand the defined terms contained herein and in the Construction Budget Amendment Certificate that are incorporated by reference from the Escrow and Disbursement Agreement, and to provide the certification contained herein, . Capitalized terms used herein shall have the meanings assigned to such terms in the Escrow and Disbursement Agreement. 2. We hereby certify and confirm the accuracy of the certifications contained in paragraphs 1, 3, 5 and 6 of the above- referenced Construction Budget Amendment Certificate. The foregoing representations, warranties and certifications are true and correct and the Disbursement Agent and the Reviewing Agent are entitled to rely on the foregoing in authorizing and making the amendment to the Construction Budget. Showboat, Inc., as Project Manager By: Name: Title: 4 EXHIBIT F TO ESCROW AND DISBURSEMENT AGREEMENT CONTRACT AMENDMENT CERTIFICATE [Letterhead of Company] _______, 199__ Showboat Inc., Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Attention: R. Craig Bird American Bank National Association, Trustee 101 East 5th Street St. Paul, Minnesota 55101 Re: Amendment No. ___ to Contract dated __________ (the "CONTRACT") between Showboat Marina Casino Partnership and ________________ ("CONTRACTOR") Contract Amendment Certificate Ladies and Gentlemen: The Company requests that the above-referenced Contract be amended as set forth on SCHEDULE 1 to this certificate. This certificate is delivered pursuant to that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ( "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement) and Showboat, Inc., a Nevada Corporation ("SHOWBOAT"), as escrow agent (the "ESCROW AGENT") and as disbursement agent (the "DISBURSEMENT AGENT"). Capitalized terms used in this certificate that are not otherwise defined shall have the meaning assigned in the meaning assigned in the Escrow and Disbursement Agreement. In connection with the requested Contract amendment, the Company hereby represents, warrants and certifies as follows: 1. After giving effect to such amendment (and any related amendment to the Construction Budget): (a) The Construction Budget will continue to call for construction of improvements constituting the at least the Minimum Facilities; (b) If the amendment will effect a reduction in the scope of the work to be performed by Contractor, then the work eliminated from the scope of work either (i) is not necessary for the completion of the Minimum Facilities, or (ii) to the extent necessary for the completion of the Minimum Facilities, will be completed by the contractors set forth below under the new or amended contracts described below. Each such contractor is competent to perform the 1 work called for by the new or amended contract in exchange for the payments contemplated thereby. WORK CONTRACTOR CONTRACT __________ __________ __________ (c) The Company will continue to be able to complete the work within the line items pertaining to the Contract: (i) in a timely manner so as to permit the date on which East Chicago Showboat becomes Operating to occur on or prior to the Completion Date; and (ii) within the aggregate amounts specified for the line item on the Construction Budget. 2. After giving effect to the proposed amendment (and any related amendment to the Construction Budget), the Construction Budget accurately sets forth the anticipated Construction Expenses through completion of the construction of East Chicago Showboat and the various components of East Chicago Showboat, all within the line item allocations established for those components set forth in the Construction Budget. 3. After giving effect to the proposed amendment (and any related amendment to the Construction Budget), the Construction Budget accurately sets forth all anticipated Pre-Opening Expenses which the Company will need to incur in order to commence Operating East Chicago Showboat on or before the Completion Date, and all anticipated Debt Financing Costs which will be payable or which will accrue through the date that the Company reasonably anticipates that East Chicago Showboat first will be Operating and to provide a reserve to cover any additional Debt Financing Costs that will accrue but will not yet be payable as of such date, all within the respective line items established for those items in the Construction Budget. 4. There is no Event of Default or any event, omission or failure of a condition which could constitute an Event of Default after notice or lapse of time or both. The undersigned certifies that this Contract Amendment Certificate is authorized hereby is permitted pursuant to the Escrow and Disbursement Agreement and the Indenture, and all conditions precedent thereto have been met. Attached to this Contract Amendment Certificate are certificates from the Project Manager and the Project Architect. 2 THE COMPANY: SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana general partnership By: SHOWBOAT MARINA PARTNERSHIP, an Indiana general partnership, its general partner By: SHOWBOAT INDIANA INVESTMENT LIMITED PARTNERSHIP, a Nevada limited partnership, its general partner By: SHOWBOAT INDIANA, INC., a Nevada corporation, its general partner By: Name: J. Keith Wallace Title: President and Chief Executive Officer SHOWBOAT MARINA FINANCE CORPORATION, a Nevada corporation By: Name: Mark J. Miller Title: Treasurer ______________________________ hereby certifies that it has received the above Contract Amendment Certificate and the certifications of the Project Manager and the Project Architect attached thereto. DATE:_____________________ ______________________________ By: Name: Title: 1 SCHEDULE 1 TO CONTRACT AMENDMENT CERTIFICATE COPY OF EXECUTED CONTRACT AMENDMENT) 2 EXHIBIT 1 TO EXHIBIT F CERTIFICATE OF PROJECT MANAGER CONTRACT AMENDMENT ______, 199__ Showboat, Inc., Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Re: Amendment No. ___ to Contract dated __________ (the "CONTRACT") between Showboat Marina Casino Partnership, and ________________ ("CONTRACTOR") Contract Amendment Certificate dated _____, _____ Certificate of Project Manager Ladies and Gentlemen: The undersigned, as project manager (the "PROJECT MANAGER"), hereby certifies as follows: 1. The Project Manager has reviewed the above referenced Contract Amendment Certificate and that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ( "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement) and Showboat, Inc., a Nevada Corporation ("SHOWBOAT"), as escrow agent (the "ESCROW AGENT") and as disbursement agent (the "DISBURSEMENT AGENT"), to the extent necessary to understand the defined terms contained herein and in the Contract Amendment Certificate that are incorporated by reference from the Escrow and Disbursement Agreement, and to provide the certification contained herein. 2. We hereby certify and confirm the accuracy of the certifications in paragraphs 1 and 2 of the above-referenced Contract Amendment Certificate. The foregoing representations, warranties and certifications are true and correct and the Disbursement Agent is entitled to rely on the foregoing in authorizing and making the amendment to the Contract. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Escrow and Disbursement Agreement. Showboat, Inc., as Project Manager By: Name: Title: 3 EXHIBIT 2 TO EXHIBIT F CERTIFICATE OF PROJECT ARCHITECT CONTRACT AMENDMENT _________, 1996 Showboat, Inc., Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Re: Amendment No. ___ to Contract dated __________ (the "CONTRACT") between Showboat Marina Casino Partnership, and ________________ ("CONTRACTOR") Contract Amendment Certificate dated _____, 199_ Certificate of Project Architect Ladies and Gentlemen: The undersigned, as project architect (the "PROJECT ARCHITECT"), hereby certifies as follows: 1. The Project Architect has reviewed the above referenced Contract Amendment Certificate and that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ( "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement) and Showboat, Inc., a Nevada Corporation ("SHOWBOAT"), as escrow agent (the "ESCROW AGENT") and as disbursement agent (the "DISBURSEMENT AGENT"), to the extent necessary to understand the defined terms contained herein and in the Contract Amendment Certificate that are incorporated by reference from the Escrow and Disbursement Agreement, and to provide the certification contained herein. 2. We hereby certify and confirm the accuracy of the certifications contained in paragraphs 1 and 2 of the above- referenced Contract Amendment Certificate. The foregoing representations, warranties and certifications are true and correct and the Disbursement Agent and the Reviewing Agent are entitled to rely on the foregoing in authorizing and making the amendment to the Contract. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Escrow and Disbursement Agreement. Showboat, Inc., as project architect By: Name: Title: 4 EXHIBIT G TO ESCROW AND DISBURSEMENT AGREEMENT FORM OF REVIEWING AGENT LETTER CONFIRMING PROCEDURES ON DISBURSEMENT REQUEST Showboat, Inc., Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Re: Disbursement No. ___, dated __________, 199_, Under Escrow and Disbursement Agreement Ladies and Gentlemen: We have performed the procedures enumerated below as requested by the Company in connection with the above-referenced Disbursement, pursuant to section 4.3 of that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ( "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement) and Showboat, Inc., a Nevada Corporation ("SHOWBOAT"), as escrow agent (the "ESCROW AGENT") and as disbursement agent (the "DISBURSEMENT AGENT"). Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Escrow and Disbursement Agreement. These procedures were performed solely to assist the Company in complying with the terms of the Escrow and Disbursement Agreement and to provide independent verification of the nature of the construction disbursements made for East Chicago Showboat for which the Company has requested disbursements relating to the period noted. This report is intended solely for your information and that of the Escrow Agent. Our procedures were as follows: (a) We selected all disbursements made at the request of the Company individually in excess of $5,000, relating to disbursement No. __________, dated __________, 199_. (b) We selected, on a judgmental basis, a sample of 20% of those disbursements at the request of the Company individually less than $5,000. (c) We read the documentation supporting the disbursements noted in (a) and (b), and compared the documentation to the disbursement and to the construction budget category and found the disbursement had documentation to support the nature of the disbursement, the disbursement was appropriately categorized against the construction budget classification, and total disbursements to date, in such category, did not exceed the budgeted amount for such category, except as follows: These agreed-upon procedures are substantially less in scope than an audit, the objective of which is the expression of an opinion on the selected financial information. Accordingly, we do not express such an opinion. 5 Based on the application of the procedures referred to above, nothing came to our attention that caused us to believe that the disbursements in the schedules prepared by the Company that summarize the construction disbursements for East Chicago Showboat for disbursement No. ______________, dated _________________ 199_, lacked supporting documentation or were improperly categorized against the construction budget line items, except as noted. Had we performed additional procedures, or had we made an audit of the selected financial information, other matters might have come to our attention that would have been reported to you. Showboat, Inc., a Nevada corporation By: Name: Title: 6 EXHIBIT H TO ESCROW AND DISBURSEMENT AGREEMENT FORM OF DISBURSEMENT AUTHORIZATION [Letterhead of Disbursement Agent] Date: [Draw Date], 199_ Showboat, Inc., Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Re: Disbursement Authorization Ladies and Gentlemen: This Disbursement Authorization is delivered to you pursuant to that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ( "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement) and Showboat, Inc., a Nevada Corporation ("SHOWBOAT"), as escrow agent (the "ESCROW AGENT") and as disbursement agent (the "DISBURSEMENT AGENT"). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Escrow and Disbursement Agreement. Pursuant to Section 3 of the Escrow and Disbursement Agreement, you are hereby authorized and directed to disburse from the Escrow Account funds in the amount of $______________. [IF THIS DISBURSEMENT AUTHORIZATION IS THE FINAL DISBURSEMENT OF FUNDS TO THE COMPANY PURSUANT TO SECTION 5.1 OF THE ESCROW AND DISBURSEMENT AGREEMENT, ADD THE FOLLOWING SENTENCE: In addition, pursuant to Section 5.1 of the Escrow and Disbursement Agreement, the Disbursement Agent hereby directs the Escrow Agent to retain funds in the Escrow Account in an amount equal to $______________ in order to pay the Retainage Amounts pursuant to Section 6.2.1 of the Escrow and Disbursement Agreement.] We certify that we have received, reviewed and approved a Disbursement Request of the Company and that the disbursement authorized hereby is permitted pursuant to the Escrow and Disbursement Agreement. 1 Please confirm the transfer described above by returning a notice of confirmation to the undersigned at the address set forth above. as Disbursement Agent By: Name: Title: 2 EXHIBIT I TO ESCROW AND DISBURSEMENT AGREEMENT FORM OF PAYMENT REQUEST [Letterhead of Company] Date: [Draw Date], 199_ Showboat, Inc., as Escrow Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 American Bank National Association, as Trustee 101 East 5th Street St. Paul, Minnesota 55101 Attention: Corporate Trust Department Re: Payment Request Ladies and Gentlemen: This Payment Request is delivered to you pursuant to that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ( "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement) and Showboat, Inc., a Nevada Corporation ("SHOWBOAT"), as escrow agent (the "ESCROW AGENT") and as disbursement agent (the "DISBURSEMENT AGENT"). Pursuant to Section 3.3 of the Escrow and Disbursement Agreement, you are hereby directed to pay to _________________ (the "PAYING AGENT") on _______________________ (the "PAYMENT DATE") funds in the amount of $_________________ from the Escrow Account maintained by you in the name of the Company. The undersigned hereby certifies that payments in an amount equal to such sums will be due and payable on the First Mortgage Notes on the Payment Date. Please confirm the transfer described above by returning a notice of confirmation to the undersigned at the address set forth above. 3 THE COMPANY: SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana general partnership By: SHOWBOAT MARINA PARTNERSHIP, an Indiana general partnership, its general partner By: SHOWBOAT INDIANA INVESTMENT LIMITED PARTNERSHIP, a Nevada limited partnership, its general partner By: SHOWBOAT INDIANA, INC., a Nevada corporation, its general partner By: Name: J. Keith Wallace Title: President and Chief Executive Officer SHOWBOAT MARINA FINANCE CORPORATION, a Nevada corporation By: Name: Mark J. Miller Title: Treasurer cc: American Bank National Association, as Trustee under the Indenture 1 EXHIBIT J TO ESCROW AND DISBURSEMENT AGREEMENT FORM OF CONSENT TO COLLATERAL ASSIGNMENT OF CONTRACT CONTRACTING PARTY'S CONSENT TO ASSIGNMENT THIS CONTRACTING PARTY'S CONSENT TO ASSIGNMENT (this "CONSENT")is made as of _____________, 199_, by ,a(the "CONTRACTING PARTY"), whose address is ,for the benefit of American Bank National Association (the "TRUSTEE"), whose address is 101 East 5th Street, St. Paul, Minnesota 55101, Attention: Corporate Trust Department. RECITALS A. FIRST MORTGAGE NOTES. Pursuant to that certain Indenture dated as of March 28, 1996, by and among Showboat Marina Casino Partnership, an Indiana general partnership, and Showboat Marina Finance Corporation, a Nevada corporation, and the Trustee, as trustee (the "INDENTURE"), the Company has issued $140,000,000 principal amount of their 13 1/2% First Mortgage Notes due 2003 (the "FIRST MORTGAGE NOTES"). All defined terms used herein and not otherwise defined, shall have the meanings set forth in the Indenture, or the Escrow and Disbursement Agreement, as applicable. The proceeds of the First Mortgage Notes have been deposited into an escrow account maintained by the Escrow Agent pursuant to that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ( "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement) and Showboat, Inc., a Nevada Corporation ("SHOWBOAT"), as escrow agent (the "ESCROW AGENT") and as disbursement agent (the "DISBURSEMENT AGENT"). B. SECURITY. The Company must use certain proceeds of the First Mortgage Notes disbursed pursuant to the Escrow and Disbursement Agreement for the construction or operation of East Chicago Showboat. Contracting Party and the Company are parties to that certain dated , 199___ (the "CONTRACT") relating to construction or operation of East Chicago Showboat. The Company has executed an assignment of contracts and documents, collaterally assigning all of the Company's right, title and interest in and to, among other things, the Contract (the "COLLATERAL ASSIGNMENT"), dated as of _______, 1996, in favor of Trustee. CONSENT NOW THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, Contracting Party agrees as follows: 1. CONSENT TO ASSIGNMENT. Pursuant to the Contract, Contracting Party has performed or supplied, or agreed to perform or supply, certain services, materials or documents in connection with the Property or East Chicago Showboat. Contracting Party hereby consents to the assignment thereof by the Company to Trustee as provided in the Collateral Assignment and this Consent. 1 2. COMPANY'S DEFAULT UNDER CONTRACT. If the Company defaults under the Contract, before exercising any remedy, Contracting Party shall deliver to Trustee at its address set forth above, by registered or certified mail, postage prepaid, return receipt requested, written notice of such default, specifying the nature of the default and the steps necessary to cure the same. If the Company fails to cure the default within the time permitted under the Contract, then Trustee shall have an additional 30 days after the expiration of the time permitted under the Contract (but in no event less than an additional 30 days after the receipt by Trustee of the said notice from Contracting Party) within which Trustee shall have the right, but not the obligation, to cure such default. Contracting Party's delivery of such a notice of default to Trustee and Trustee's failure to cure the same within the said additional period shall be conditions precedent to the exercise of any right or remedy of Contracting Party arising by reason of such default, except that Contracting Party shall not be required to continue performance under the Contract for the said additional period, unless and until Trustee agrees to pay Contracting Party for that portion of the work, labor and materials rendered during the said period. 3. COMPANY'S DEFAULT UNDER LOAN DOCUMENTS. If Trustee gives written notice to Contracting Party that the Company has defaulted under the Loan Documents and requests that Contracting Party continue its performance under the Contract, Contracting Party shall thereafter perform for Trustee under the Contract in accordance with its terms, so long as Contracting Party shall be paid pursuant to the Contract for all work, labor and materials rendered thereunder, including payment of any sums due to Contracting Party for work performed up to and including the date of the Company's default. 4. PERFORMANCE FOR TRUSTEE. If Trustee (a) cures any default by the Company pursuant to Paragraph 2 above, (b) gives written notice to Contracting Party that the Company has defaulted under the Collateral Documents pursuant to Paragraph 3 above, (c) becomes the owner of East Chicago Showboat, (d) undertakes to complete the construction of East Chicago Showboat pursuant to its rights under the Collateral Documents, or (e) following an Event of Default, otherwise requires the performance of Contracting Party's obligations under the Contract or the use of any plans and specifications, drawings, surveys or other materials or documents previously prepared or provided by Contracting Party pursuant to the Contract, then in any such event, so long as Contracting Party has received and continues to receive the compensation required under the Contract related thereto, Trustee shall have the right to obtain performance from Contracting Party of all of its obligations under the Contract, and to use all such plans and specifications, drawings, surveys and other materials and documents, and the ideas, designs and concepts contained therein, in connection with the completion of East Chicago Showboat, without the payment of any additional fees or charges to Contracting Party. 5. AMENDMENTS AND CHANGE ORDERS. Contracting Party agrees that it will not modify, amend, supplement or in any way join in the release or discharge of Contracting Party's obligations under the Contract unless (a) such change is commercially reasonable, and (b) the Disbursement Agent under the Escrow and Disbursement Agreement or the Trustee has consented to such change in writing, and Contracting Party agrees that it will not perform any work pursuant to any change order or directive unless the same is issued and executed in accordance with the terms and conditions of the Contract. 6. LIST OF SUBCONTRACTING PARTIES. Upon the written request of the Trustee or the Disbursement Agent at any time and from time to time, Contracting Party shall furnish to the Trustee and the Disbursement Agent a current list of all persons with whom Contracting Party has entered into subcontracts or other agreements related to the rendering of work, labor or materials under the Contract, together with a statement as to the status of each such subcontract or agreement, and the respective amounts, if any, owed by Contracting Party related thereto. 7. REPRESENTATIONS AND WARRANTIES. Contracting Party represents and warrants to the Trustee and the Disbursement Agent that (a) it is duly licensed to conduct its business in the jurisdiction contemplated by the Contract, and will at all times maintain its license in full force and effect throughout the term thereof, (b) the Contract has not been amended, modified or supplemented except as set forth therein, (c) the 2 Contract constitutes a valid and binding obligation of Contracting Party and is enforceable in accordance with its terms, (d) there have been no prior assignments of the Contract, and (e) all covenants, conditions and agreements of the Company and Contracting Party contained in the Contract have been performed as required therein, except for those that are not due to be performed until after the date hereof. APPLICATION OF FUNDS. Nothing herein imposes or shall be construed to impose upon Trustee any duty to direct the application of any proceeds of the First Mortgage Notes, and Contracting Party acknowledges that Trustee is not obligated to Contracting Party or any of its subcontracting parties, materialmen, suppliers or laborers. ACKNOWLEDGMENT OF INDUCEMENT. Contracting Party is executing this consent to induce the purchasers of the First Mortgage Notes to purchase the First Mortgage Notes. Contracting Party understands that the purchasers of the First Mortgage Notes would not advance such funds and make such purchases but for Contracting Party's execution and delivery hereof. IN WITNESS WHEREOF, Contracting Party has executed this Consent as of the date first above written. CONTRACTING PARTY: ________________________ a_______________________ By: Name: Title: 3 EXHIBIT K TO ESCROW AND DISBURSEMENT AGREEMENT PRE-OPENING EXPENSES The Pre-Opening Expenses are described in the Attachment to this Exhibit K. The attachment further sets forth several line items of Pre-Opening Expenses and the respective maximum amounts which may be drawn under the line items for expenses incurred during the sequential calendar months from ___________ through ___________. No disbursement may be made for a particular line item category for expenses incurred in that category in any given calendar month in excess of the maximum set forth for the line item and the calendar month; PROVIDED, HOWEVER, that: (a) if the Company incurs less expenses under a line item for a given calendar month than the maximum set forth for that line item and calendar month, then the difference can be re-allocated to a later calendar month for the same line item and thereby increase the maximum expenditures for the line item in the specified later calendar month; and (b) if at any time all of the work, services and materials contemplated under a line item have been completed and the aggregate expense through said completion is less than the figure listed for the line item under the column entitled "Total," then the difference may be re-allocated to other line items in the Construction Budget (including line items which are not "Pre-Opening Expenses"). All re-allocations pursuant to the foregoing shall be made by Construction Budget Amendments pursuant to the process set forth in the Escrow and Disbursement Agreement. 1 EXHIBIT L TO ESCROW AND DISBURSEMENT AGREEMENT _____________, 199__ [INSERT NAME AND ADDRESS OF ISSUER OR TRANSFER AGENT FOR THE ISSUER, AS APPLICABLE] _______________________________________ _______________________________________ Attention: _____________________ Re: Pledge of securities of [INSERT NAME OF ISSUER] (the "ISSUER") Gentlemen and Ladies: This letter shall provide you with irrevocable instructions concerning securities (the "SECURITIES") of beneficial interest of _______________ [INSERT NAME OF ISSUER] to be held in account no. (the "ACCOUNT") and registered in the name of the undersigned (the "SECURITYHOLDER"). The undersigned hereby certifies and agrees as follows: 1. The Securityholder has pledged and granted a security interest in the Securities, together with all interest, dividends, gains and other income thereon and reinvestments thereof, together with all right, title and interest of Securityholder in the Account with respect to the foregoing (the "PLEDGE"), to American Bank National Association (the "TRUSTEE") in its capacity as trustee under that certain Indenture dated as of March 28, 1996, by and among Showboat Marina Casino Partnership, an Indiana general partnership ( "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), and American Bank National Association, a national banking association, as trustee (the "TRUSTEE") (the "INDENTURE") pertaining to the 13 1/2% First Mortgage Notes due 2003. In such capacity, the Trustee is referred to herein as the "PLEDGEE." 2. The Securityholder hereby represents to you that: (a) the Pledgee has designated _____________ [INSERT NAME OF AGENT] (the "AGENT") to serve as the Pledgee's designee and agent in order to perfect the security interest in favor of the Pledgee; and (b) the Securityholder has not granted any security interest, right or claim in the Securities or the Account to any person other than the Pledgee. 3. Accordingly, the Securityholder hereby irrevocably directs you to make such notations in the records pertaining to the Securities and the Account as are necessary to reflect the Pledge, including the registration of the Securities and the Account in the name of [INSERT SHOWBOAT MARINA CASINO PARTNERSHIP OR SHOWBOAT MARINA FINANCE CORPORATION, AS APPROPRIATE] and the registration of the Pledge of the Securities in the following name: "___________________ [INSERT NAME OF AGENT], as agent for American Bank National Association, in the latter's capacity as trustee under that certain Indenture dated as of March 28, 1996, by and among Showboat Marina Casino Partnership, an Indiana general partnership, Showboat Marina Finance Corporation, a Nevada corporation, and American Bank National Association, a national banking association, as trustee, pertaining to the 13 1/2% First Mortgage Notes due 2003" 4. The Securityholder hereby further irrevocably directs you to reinvest any and all dividends or distributions from net investment income and capital gains in additional Securities of the Issuer, subject to the Pledge. In addition, the Securityholder hereby irrevocably instructs you, notwithstanding any contrary instructions from the Securityholder, to follow only instructions received from the Agent, furnished in writing, concerning (a) 1 the payment or reinvestment of dividends or distributions and (b) the redemption, transfer, sale or any other disposition or transaction concerning the Securities or the interest, dividends, gains and other income thereon. 5. The Securityholder also irrevocably authorizes and directs you to send all notices, statements and all other communications concerning the Securities or the Account to the following address or such other address as may be specified in written instructions from the Agent: [INSERT NAME AND ADDRESS OF AGENT] [INSERT NAME OF AGENT], AS AGENT FOR [INSERT NAME OF TRUSTEE] [INSERT ADDRESS OF AGENT] Attn: Re: Showboat Marina Casino Partnership, and Showboat Marina Finance Corporation 6. The Securityholder agrees that neither you, the Issuer or any of their respective partners, trustees, officers, employees or affiliates (collectively, the "Issuer Affiliates") shall be liable for complying in good faith with the instructions contained herein or failing to comply with any contrary or inconsistent instructions that may subsequently be issued by the Securityholder. The Securityholder further agrees to hold harmless and indemnify each of the Issuer Affiliates against any claim or loss arising out of any actions or omissions taken by any person in reliance on or compliance with the instructions and authorizations contained herein. 7. The Securityholder agrees that the instructions contained herein may be revoked by the Securityholder only upon the receipt by you of the Agent's written consent to such revocation or written notification from the Agent that the Pledge has been terminated. Very truly yours, THE COMPANY: SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana general partnership By: SHOWBOAT MARINA PARTNERSHIP, an Indiana general partnership, its general partner By: SHOWBOAT INDIANA INVESTMENT LIMITED PARTNERSHIP, a Nevada limited partnership, its general partner By: SHOWBOAT INDIANA, INC., a Nevada corporation, its general partner By: Name: J. Keith Wallace Title: President and Chief Executive Officer SHOWBOAT MARINA FINANCE CORPORATION, a Nevada corporation By: Name: Mark J. Miller Title: Treasurer 2 GUARANTEE OF SIGNATURE Authorized Signature By: Address: Title: Dated: Dated: The undersigned hereby confirms the following for the benefit of the above-referenced Pledgee and Agent: (i) The undersigned is [CHECK APPROPRIATE BOX] [ ] The Issuer of the Securities, and the Issuer has been organized under the laws of a jurisdiction which has adopted Article 8 of the Uniform Commercial Code pertaining to investment securities, and said laws accordingly permit the undersigned to register a pledge of the Securities in favor of the Pledgee by taking the steps referenced in numbered paragraph 3 of the above letter. [ ] The transfer agent for the Issuer of the Securities, and the Issuer has been organized under the laws of a jurisdiction which has adopted Article 8 of the Uniform Commercial Code pertaining to investment securities, and said laws accordingly permit the undersigned to register a pledge of the Securities in favor of the Pledgee by taking the steps referenced in numbered paragraph 3 of the above letter. (ii) The undersigned agrees to comply with the instructions set forth in the above letter. The Pledge has been registered on ______________, 199_ [INSERT DATE]. (iii) Immediately after registration of the Pledge, there were no liens, restrictions or adverse claims (as to which the undersigned has a duty to disclose under the Uniform Commercial Code) to the Securities, other than the Pledge. Date: _____________________, 199_ 1 EXHIBIT M TO ESCROW AND DISBURSEMENT AGREEMENT FORM OF SHOWBOAT DISBURSEMENT AUTHORIZATION (SHOWBOAT DISBURSEME NT CERTIFICATE) [Letterhead of Showboat] Date: ______, 199_ Showboat, Inc., Disbursement Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 America Bank National Association 101 East 5th Street St. Paul, Minnesota 55101 Attention: Corporate Trust Department Re: Showboat Certificate Ladies and Gentlemen: This certificate (the "SHOWBOAT DISBURSEMENT CERTIFICATE") is delivered to you pursuant to that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ( "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement), Showboat, Inc. ("SHOWBOAT"), a Nevada corporation, as escrow agent (the "ESCROW AGENT") and as disbursement agent (the "DISBURSEMENT AGENT"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Escrow and Disbursement Agreement. DISBURSEMENT Pursuant to Section 3 and Section 17 of the Escrow and Disbursement Agreement, you are hereby authorized and directed to disburse from the Escrow Account funds in the amount of $______________. [IF THIS DISBURSEMENT AUTHORIZATION IS THE FINAL DISBURSEMENT OF FUNDS TO THE COMPANY PURSUANT TO SECTION 5.1 OF THE ESCROW AND DISBURSEMENT AGREEMENT, ADD THE FOLLOWING SENTENCE: In addition, pursuant to Section 5.1 of the Escrow and Disbursement Agreement, we hereby direct you to retain funds in the Escrow Account in an amount equal to $______________ in order to pay the Retainage Amounts pursuant to Section 6.2.1 of the Escrow and Disbursement Agreement.] AMENDMENTS TO CONSTRUCTION BUDGET OR TO CONTRACTS We hereby certify that the attached Construction Budget Amendment or Contract Amendment, as the case may be, is effective. 1 Showboat hereby makes to the Escrow Agent and the Trustee the representations and warranties set forth in Section 17.2 of the Escrow and Disbursement Agreement. All such representations and warranties are true and correct on the date hereof. Showboat, pursuant to Section 17 of the Escrow and Disbursement Agreement, hereby certifies that the disbursement, Construction Budget Amendment and/or Contract Amendment, as the case may be, authorized hereby is permitted under the Escrow and Disbursement Agreement. Please confirm the transfer described above by returning a notice of confirmation to the undersigned at the address set forth above. Showboat, Inc. By: Name: Title: 2 EXHIBIT N TO ESCROW AND DISBURSEMENT AGREEMENT FORM OF PRE-CLOSING DISBURSEMENT CERTIFICATE Showboat Marina Casino Partnership Showboat Marina Finance Corporation 2001 East Columbus Drive East Chicago, Indiana 46312 March 28, 1996 Showboat, Inc., as Escrow Agent c/o Showboat Development Company 6601 Ventnor Avenue Suite 105 Ventnor, New Jersey 08406 Attention: R. Craig Bird American Bank National Association 101 East 5th Street St. Paul, Minnesota 55101 Attention: Corporate Trust Department Re: Pre-Closing Disbursements Certificate Ladies and Gentlemen: This Pre-Closing Disbursement Certificate is delivered to you pursuant to that certain Escrow and Disbursement Agreement (the "ESCROW AND DISBURSEMENT AGREEMENT") dated March 28, 1996 by and among Showboat Marina Casino Partnership, an Indiana general partnership ( "SHOWBOAT PARTNERSHIP"), Showboat Marina Finance Corporation, a Nevada corporation ("FINANCE CORPORATION" and, together with Showboat Partnership, the "COMPANY"), American Bank National Association, a national banking association, as trustee (the "TRUSTEE") under the Indenture (as defined in the Escrow and Disbursement Agreement) and Showboat, Inc. ("SHOWBOAT"), a Nevada corporation, as disbursement agent (the "DISBURSEMENT AGENT"), and as escrow agent (the "ESCROW AGENT"). Capitalized terms used herein shall have the meanings assigned to such terms in the Escrow and Disbursement Agreement. The Company hereby irrevocably instructs the Escrow Agent to disburse the following sums to the following parties: (a) $__________ to Chicago Title Insurance Company, as payment of certain title insurance premiums and other costs incurred in connection with the issuance of the First Mortgage Notes; and (b) $___________ to Stewart Title Guaranty Company, as payment of certain title insurance premiums and other costs incurred in connection with the issuance of the First Mortgage Notes. [SIGNATURE PAGE FOLLOWS] 1 THE COMPANY: SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana general partnership By: SHOWBOAT MARINA PARTNERSHIP, an Indiana general partnership, its general partner By: SHOWBOAT INDIANA INVESTMENT LIMITED PARTNERSHIP, a Nevada limited partnership, its general partner By: SHOWBOAT INDIANA, INC., a Nevada corporation, its general partner By: Name: J. Keith Wallace Title: President and Chief Executive Officer SHOWBOAT MARINA FINANCE CORPORATION, a Nevada corporation By: Name: Mark J. Miller Title: Treasurer 2 EX-5 4 [ARTICLE] 5 [MULTIPLIER] 1000 [PERIOD-TYPE] 6-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-END] JUN-30-1996 [CASH] 26684 [SECURITIES] 46283 [RECEIVABLES] 17600 [ALLOWANCES] 2551 [INVENTORY] 2863 [CURRENT-ASSETS] 104935 [PP&E] 584772 [DEPRECIATION] 197951 [TOTAL-ASSETS] 802331 [CURRENT-LIABILITIES] 53853 [BONDS] 530556 [PREFERRED-MANDATORY] 0 [PREFERRED] 0 [COMMON] 16182 [OTHER-SE] 0 [TOTAL-LIABILITY-AND-EQUITY] 802331 [SALES] 208904 [TOTAL-REVENUES] 211815 [CGS] 0 [TOTAL-COSTS] 113826 [OTHER-EXPENSES] 79468 [LOSS-PROVISION] 2551 [INTEREST-EXPENSE] 14929 [INCOME-PRETAX] 609 [INCOME-TAX] 274 [INCOME-CONTINUING] 335 [DISCONTINUED] 0 [EXTRAORDINARY] 0 [CHANGES] 0 [NET-INCOME] 335 [EPS-PRIMARY] .02 [EPS-DILUTED] .02
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