10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-12882

BOYD GAMING CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	88-0242733
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3883 Howard Hughes Parkway, Ninth Floor, Las Vegas NV 89169

(Address of principal executive offices) (Zip Code)

(702) 792-7200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value of $0.01 per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

As of June 30, 2009, the aggregate market value of the voting common stock held by non-affiliates of the registrant, based on the closing price on the New York Stock Exchange for such date, was approximately $428.8 million.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of March 1, 2010
Common stock, $0.01 par value	86,130,453 shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the registrant’s 2010 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A within 120 days after the registrant’s fiscal year end of December 31, 2009 are incorporated by reference into Part III of this Form 10-K.

BOYD GAMING CORPORATION

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2009

TABLE OF CONTENTS

		Page No.
	PART I
ITEM 1.	Business	1
ITEM 1A.	Risk Factors	11
ITEM 1B.	Unresolved Staff Comments	27
ITEM 2.	Properties	27
ITEM 3.	Legal Proceedings	27
ITEM 4.	Reserved	28
ITEM 4A.	Executive Officers of the Registrant	28
	PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
ITEM 6.	Selected Financial Data	30
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
ITEM 7A.	Quantitative and Qualitative Disclosure About Market Risk	59
ITEM 8.	Financial Statements and Supplementary Data	61
ITEM 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	61
ITEM 9A.	Controls and Procedures	61
ITEM 9B.	Other Information	63
	PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance	63
ITEM 11.	Executive Compensation	63
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	63
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	63
ITEM 14.	Principal Accounting Fees and Services	63
	PART IV
ITEM 15.	Exhibits, Financial Statement Schedules	64
	SIGNATURES	120

PART I

ITEM 1. Business.

Overview

Boyd Gaming Corporation (the “Company,” the “Registrant,” “Boyd Gaming,” “we” or “us”) is a multi-jurisdictional gaming company that has been operating for approximately 35 years. As of December 31, 2009, we wholly-owned and operated 15 casino entertainment facilities located in Nevada, Mississippi, Illinois, Louisiana and Indiana. In addition, we own and operate a pari-mutuel jai-alai facility located in Dania Beach, Florida, a travel agency, and a captive insurance company that underwrites travel-related insurance. As of December 31, 2009, we owned an aggregate of approximately 812,500 square feet of casino space, containing approximately 21,400 slot machines, 425 table games and 7,550 hotel rooms. We derive the majority of our gross revenues from our gaming operations, which produced approximately 75%, 74%, and 75% of gross revenues for the years ended December 31, 2009, 2008, and 2007, respectively. Food and beverage gross revenues, which produced approximately 13%, 13%, and 12% of gross revenues for the years ended December 31, 2009, 2008, and 2007, respectively, represent the only other revenue source which produced more than 10% of gross revenues during these periods.

We are also a 50% member in a limited liability company that owns and operates Borgata Hotel Casino and Spa in Atlantic City, New Jersey.

Significant developments affecting our business during the past five years are as follows:

• We began construction on Echelon, our multibillion dollar Las Vegas Strip development project, in the second quarter of 2007. Echelon is located on the former Stardust site, which we closed in November 2006 and demolished in March 2007. On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of our Echelon development project. We remain committed to having a meaningful presence on the Las Vegas Strip. During the period of delay, we intend to consider alternative development options for Echelon, which may include developing the project in phases, alternative capital structures for the project, scope modifications to the project, or additional strategic partnerships, among others. We can provide no assurances as to when, or if, construction will resume on the project, or if we will be able to obtain alternative sources of financing for the project.

• Our new hotel at Blue Chip Casino, Hotel & Spa opened on January 22, 2009, following completion of an expansion project that added a 22-story hotel, which includes 300 guest rooms, a spa and fitness center, additional meeting and event space, as well as new dining and nightlife venues to the existing property structures.

• In 2008, we completed the launch of our nationwide branding initiative and loyalty program. Players are now able to use their “Club Coast” or “B Connected” cards to earn and redeem points at nearly all of our wholly-owned Boyd Gaming property in Nevada, Illinois, Indiana, Louisiana and Mississippi.

• The Water Club, an 800-room boutique hotel expansion project at Borgata, opened in June 2008. The expansion includes five swimming pools, a state-of-the-art spa, additional meeting and retail space, and a separate porte-cochere and front desk.

• In February 2007, we completed our exchange of the Barbary Coast Hotel and Casino and its related 4.2 acres of land for approximately 24 acres located north of and contiguous to our Echelon development project on the Las Vegas Strip in a nonmonetary, tax-free transaction.

• In October 2006, we sold the South Coast Hotel and Casino for total consideration of approximately $513 million, consisting of approximately $401 million in cash and approximately 3.4 million shares of our common stock valued at $112 million.

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• In January 2006, we expanded our Blue Chip Casino, Hotel & Spa through the construction of a single-level boat that allowed us to expand our casino. In connection with this expansion, we also added a new parking structure and enhanced the land-based pavilion.

We are subject to a variety of regulations in the jurisdictions in which we operate and are required to be licensed by certain authorities in order to conduct gaming operations. A more detailed description of the regulations to which we are subject is contained in Exhibit 99.1 to this Annual Report on Form 10-K, which exhibit is incorporated herein by reference.

For further information related to our segment information for revenues, net income and total assets as of and for the three years in the period ended December 31, 2009, see Note 17 to our Consolidated Financial Statements presented in Part IV, Item 15, Exhibits and Financial Statement Schedules.

Business Strategy and Competitive Strengths

Our properties generally operate in highly competitive environments. We compete against other gaming companies as well as other hospitality and leisure companies. We believe that the following factors have contributed to our success in the past and are central to our future success:

• we emphasize slot revenues, the most consistently profitable segment of the gaming industry;

• we have comprehensive marketing and promotion programs;

• six of our Las Vegas properties are well-positioned to capitalize on the Las Vegas locals market;

• our downtown Las Vegas properties focus their marketing programs on, and derive a majority of their revenues from, a unique niche — Hawaiian customers;

• our operations are geographically diversified within the United States;

• we have the ability to expand certain existing properties and make opportunistic and strategic acquisitions; and

• we have an experienced management team.

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Properties

The following table sets forth certain information regarding our wholly-owned properties (listed by the segment in which each such property is reported) and Borgata, as of and for the year ended December 31, 2009.

	Year Opened or Acquired	Casino Space (Sq. ft.)	Slot Machines	Table Games	Hotel Rooms	Hotel Occupancy		Average Daily Rate
LAS VEGAS LOCALS
Gold Coast Hotel and Casino	2004	85,500	2,058	49	711	82	%	$	50
The Orleans Hotel and Casino	2004	133,800	2,812	60	1,885	87	%	$	50
Sam’s Town Hotel and Gambling Hall	1979	126,700	2,370	30	646	88	%	$	45
Suncoast Hotel and Casino	2004	95,000	2,217	36	426	83	%	$	70
Eldorado Casino	1993	24,200	448	5	—
Jokers Wild Casino	1993	28,100	484	7	—
DOWNTOWN LAS VEGAS
California Hotel and Casino	1975	36,000	1,078	29	781	87	%	$	34
Fremont Hotel and Casino	1985	30,200	1,060	24	447	85	%	$	37
Main Street Station Casino, Brewery and Hotel	1993	27,000	864	18	406	85	%	$	38
MIDWEST AND SOUTH
Mississippi
Sam’s Town Hotel and Gambling Hall	1994	66,000	1,315	33	842	77	%	$	48
Illinois
Par-A-Dice Hotel Casino	1996	26,000	1,146	22	202	89	%	$	65
Indiana
Blue Chip Casino, Hotel & Spa	1999	65,000	1,944	47	486	72	%	$	71
Louisiana
Treasure Chest Casino	1997	24,000	968	36	—
Delta Downs Racetrack Casino & Hotel	2001	15,000	1,615	—	203	92	%	$	56
Sam’s Town Hotel and Casino	2004	30,000	1,038	29	514	92	%	$	81
Total of wholly-owned properties		812,500	21,417	425	7,549
Atlantic City, New Jersey Borgata Hotel Casino and Spa	2003	160,000	3,928	182	2,771	83	%	$	133

In addition to the properties discussed above, we own and operate a pari-mutuel jai-alai facility in Dania Beach, Florida, one travel agency, and an insurance company that underwrites travel-related insurance. We also own 85 contiguous acres of land on the Las Vegas Strip where the Stardust was formerly located, of which 62 acres has been designated for our multibillion dollar Echelon development project.

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Las Vegas Locals Segment

Our Las Vegas Locals segment consists of six casinos that serve the resident population of the Las Vegas metropolitan area, which has been one of the fastest growing areas in the United States over the last decade. Las Vegas has historically been characterized by a vibrant economy and strong demographics that include a large population of retirees and other active gaming customers; however, the current recession has had an adverse impact on the growth and economy of Las Vegas, resulting in significant declines in the local housing market and rising unemployment in the Las Vegas valley, which has negatively affected consumer spending. Our Las Vegas Locals segment competes directly with other locals’ casinos and gaming companies, some of which operate larger casinos than ours.

Gold Coast Hotel and Casino

Gold Coast Hotel and Casino (“Gold Coast”) is located on Flamingo Road, approximately one mile west of the Las Vegas Strip and one-quarter mile west of Interstate 15, the major highway linking Las Vegas and southern California. Its location offers easy access from all four directions in the Las Vegas valley. The primary target market for Gold Coast consists of local middle-market customers who actively gamble. Gold Coast’s amenities include 711 hotel rooms and suites along with meeting facilities, multiple restaurant options, a 70-lane bowling center and action-packed gaming, including slots, table games, a poker room, a race and sports book and a bingo center.

The Orleans Hotel and Casino

The Orleans Hotel and Casino (“The Orleans”) is located on Tropicana Avenue, a short distance from the Las Vegas Strip. The target markets for The Orleans are both local residents and visitors to the Las Vegas area. The Orleans provides an exciting New Orleans French Quarter-themed environment. Amenities at The Orleans include 1,885 hotel rooms, a variety of restaurants and bars, a spa and fitness center, 18 stadium-seating movie theaters, a 70-lane bowling center, banquet and meeting space, and a special events arena that seats up to 9,500 patrons.

Sam’s Town Hotel and Gambling Hall

Sam’s Town Hotel and Gambling Hall (“Sam’s Town Las Vegas”) is located on the Boulder Strip, approximately six miles east of the Las Vegas Strip, and features a contemporary western theme. Its informal, friendly atmosphere appeals to both local residents and visitors alike. Amenities at Sam’s Town Las Vegas include 646 hotel rooms, a variety of restaurants and bars, 18 stadium-seating movie theaters, and a 56-lane bowling center. Gaming, bowling and live entertainment create a social center that has attracted many Las Vegas residents to Sam’s Town Las Vegas.

Suncoast Hotel and Casino

Suncoast Hotel and Casino (“Suncoast”) is located in Peccole Ranch, a master-planned community adjacent to Summerlin, and is readily accessible from most major points in Las Vegas, including downtown and the Las Vegas Strip. The primary target market for Suncoast consists of local middle-market customers who gamble frequently. Suncoast is a Mediterranean-themed facility that features 426 hotel rooms, multiple restaurant options, 25,000 square feet of banquet and meeting facilities, 16 stadium-seating movie theatres, and a 64-lane bowling center.

Eldorado Casino and Jokers Wild Casino

Located in downtown Henderson, the Eldorado Casino (“Eldorado”) is approximately 14 miles from the Las Vegas Strip. Jokers Wild Casino (“Jokers Wild”) is also located in Henderson. The amenities at each of these properties include slots, table games, a sports book, and dining options. The principal customers of these properties are Henderson residents.

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Downtown Las Vegas Segment

Our Unique Downtown Niche

We directly compete with 11 casinos that operate in downtown Las Vegas; however, we have developed a distinct niche for our downtown properties by focusing on customers from Hawaii. Our downtown properties focus their marketing on gaming enthusiasts from Hawaii and tour and travel agents in Hawaii with whom we have cultivated relationships since we opened our California Hotel and Casino (“California”) in 1975. Through our Hawaiian travel agency, Vacations Hawaii, we operate as many as six charter flights from Honolulu to Las Vegas each week, helping to ensure a stable supply of air transportation. We also have strong, informal relationships with other Hawaiian travel agencies and offer affordable all-inclusive packages. These relationships, combined with our Hawaiian promotions, have allowed California, Fremont Hotel and Casino (“Fremont”) and Main Street Station Casino, Brewery and Hotel (“Main Street Station”) to capture a significant share of the Hawaiian tourist trade in Las Vegas. For the year ended December 31, 2009, patrons from Hawaii comprised approximately 66% of the occupied room nights at California, 52% of the occupied room nights at Fremont, and 54% of the occupied room nights at Main Street Station.

California Hotel and Casino

California’s amenities include 781 hotel rooms, multiple dining options, a sports book, and meeting space. California and Main Street Station are connected by an indoor pedestrian bridge.

Fremont Hotel and Casino

Fremont is adjacent to the principal pedestrian thoroughfare in downtown Las Vegas known as the Fremont Street Experience. The property’s amenities include 447 hotel rooms, a race and sports book, and meeting space.

Main Street Station Casino, Brewery and Hotel

Main Street Station’s amenities include 406 hotel rooms and three restaurants, one of which includes a brewery. In addition, Main Street Station features a 96-space recreational vehicle park, the only such facility in the downtown area.

Midwest and South Segment

Our Midwest and South properties consist of four dockside riverboat casinos, one racino and one barge-based casino that operate in four states in the Midwest and southern United States. Generally, these states allow casino gaming on a limited basis through the issuance of a limited number of gaming licenses. Our Midwest and South properties generally serve customers within a 100-mile radius and compete directly with other casino facilities operating in their respective immediate and surrounding market areas, as well as with gaming operations in surrounding jurisdictions.

Sam’s Town Hotel and Gambling Hall

Sam’s Town Hotel and Gambling Hall (“Sam’s Town Tunica”) is a barge-based casino located in Tunica County, Mississippi. The property has extensive amenities, including 842 hotel rooms, an entertainment lounge, four dining venues, and the 1,600-seat River Palace Arena. Tunica is the closest gaming market to Memphis, Tennessee and is located approximately 30 miles south of Memphis. The adult population within a 250-mile radius is over nine million people, which includes the cities of Nashville and Memphis in Tennessee, Jackson, Mississippi and Little Rock, Arkansas.

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Par-A-Dice Hotel Casino

Par-A-Dice Hotel Casino (“Par-A-Dice”) is a dockside riverboat casino located on the Illinois River in East Peoria, Illinois that features a 202-room hotel. Located adjacent to the Par-A-Dice riverboat is a land-based pavilion, which includes three restaurants, a cocktail lounge, and a gift shop. Par-A-Dice is strategically located near Interstate 74, a major east-west interstate highway. Par-A-Dice is the only gaming facility located within approximately 90 miles of Peoria, Illinois.

Blue Chip Casino, Hotel & Spa

Blue Chip Casino, Hotel & Spa (“Blue Chip”) is a dockside riverboat casino located in Michigan City, Indiana, which is 40 miles west of South Bend, Indiana and 60 miles east of Chicago, Illinois. The property competes primarily with five casinos in northern Indiana and southern Michigan and, to a lesser extent, with casinos in the Chicago area and racinos located near Indianapolis. On January 31, 2006, we began operations on our newly constructed single-level dockside riverboat. The new boat allowed us to expand our casino and in connection with the construction of our new boat, add a new parking structure and enhance the land-based pavilion. On January 22, 2009, we completed an expansion project at Blue Chip that added a 22-story hotel, which includes 300 guest rooms, a spa and fitness center, additional meeting and event space, as well as new dining and nightlife venues to the existing property structure.

Treasure Chest Casino

Treasure Chest Casino (“Treasure Chest”) is a dockside riverboat casino located on Lake Pontchartrain in the western suburbs of New Orleans, Louisiana. The property is designed as a classic 18^th century Victorian style paddlewheel riverboat, with a total capacity for 1,750 people. The entertainment complex located adjacent to the riverboat houses a 140-seat Caribbean showroom and two restaurants. Located approximately five miles from the New Orleans International Airport, Treasure Chest primarily serves residents of suburban New Orleans.

Delta Downs Racetrack Casino & Hotel

In 2001, we acquired substantially all of the assets of the Delta Downs Racetrack Casino & Hotel (“Delta Downs”) in Vinton, Louisiana. Delta Downs has historically conducted horse races on a seasonal basis and operated year-round simulcast facilities for customers to wager on races held at other tracks. In 2002, we began slot operations in connection with a renovation project that expanded the facility. We completed an expansion of the casino in 2004 and opened a 203-room hotel at the property in 2005.

Delta Downs is approximately 25 miles closer to Houston than the next closest gaming property, located in Lake Charles, Louisiana. Customers traveling from Houston, Beaumont and other parts of southeastern Texas will generally have to drive past Delta Downs to reach Lake Charles.

Sam’s Town Hotel and Casino

Sam’s Town Hotel and Casino (“Sam’s Town Shreveport”) is a dockside riverboat casino located along the Red River in Shreveport, Louisiana. Amenities at the property include 514 hotel rooms, a spa, four restaurants, a live entertainment venue, and convention and meeting space. Feeder markets include east Texas (including Dallas), Texarkana, Arkansas and surrounding Louisiana cities, including Bossier City, Minden, Ruston and Monroe. The continued expansion of Native American gaming in Oklahoma could have a material adverse impact on the operations of Sam’s Town Shreveport.

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Atlantic City, New Jersey

Borgata Hotel Casino and Spa

Borgata opened in Atlantic City, New Jersey in July 2003. Atlantic City is predominantly a regional day-trip and overnight-trip market. Borgata directly competes with ten other Atlantic City casinos as well as with gaming operations in surrounding jurisdictions.

Borgata is an upscale destination resort that features a 160,000 square-foot casino with a total of 2,771 guest rooms and suites comprised of 1,971 guest rooms and suites at the Borgata hotel and 800 guest rooms and suites at The Water Club. Borgata also features 13 restaurants, 19 retail boutiques, a European-style health spa at the Borgata hotel, a world class spa at The Water Club, and two nightclubs. In addition, the property also contains meeting and event space, as well as several entertainment venues.

We own a 50% interest in the LLC that operates the Borgata. As the managing member, we are responsible for the day-to-day operations of Borgata, including the operation and maintenance of the facility. Borgata employs a management team and full staff to perform these services for the property. We maintain the oversight and responsibility for the operations, but do not receive a management fee from Borgata.

In February 2010, we entered into an agreement that, among other things, amended our operating agreement with MGM Mirage Corporation (“MGM”) to permit the transfer of MGM’s 50% ownership interest of the Borgata into a divestiture trust in connection with MGM’s potential settlement agreement with the Division of Gaming Enforcement. The agreement includes the following provisions, among others, that would become effective only upon the transfer of MGM’s interest into the divestiture trust and the approval of the New Jersey Casino Control Commission, that (i) we would receive a priority distribution of approximately $31 million (equal to the excess prior capital contributions made by us) upon successful refinancing of the Borgata credit facility, and (ii) we would receive a payment from the trust equal to the greater of $10 million or 3% of the proceeds from the sale of MGM’s 50% interest in Borgata. See Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K for additional information related to this agreement.

Development Project

Echelon

On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of our multibillion dollar Echelon development project on the Las Vegas Strip. At that time, we did not anticipate the long-term effects of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas geographical area; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. The credit markets have yet to show significant recovery, thereby rendering financing for this type of development unavailable. Based on our current outlook, we do not expect to resume construction for three to five years.

Nonetheless, we remain committed to having a significant presence on the Las Vegas Strip. During the suspension period, we intend to consider alternative development options for Echelon, which may include developing the project in phases, alternative capital structures for the project, scope modifications to the project, or additional strategic partnerships, among others. We can provide no assurances as to when, or if, construction will resume on the project, or if we will be able to obtain alternative sources of financing for the project.

Employees

At December 31, 2009, we employed approximately 15,400 persons. On such date, we had collective bargaining agreements with five unions covering approximately 1,300 employees, substantially all of whom are employed at Fremont, Eldorado, Main Street Station and Blue Chip. Other agreements are in various stages of negotiation. Employees covered by expired agreements have continued to work during the negotiations, in one case under the terms of the expired agreements.

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Corporate History, Availability of Reports and Corporate Governance Information

We were incorporated in Nevada in June 1988. Our principal executive offices are currently located at 3883 Howard Hughes Parkway, Ninth Floor, Las Vegas, NV 89169, and our main telephone number is (702) 792-7200. Our website is www.boydgaming.com. We make our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, and all amendments to these reports, available free of charge on our corporate website as soon as reasonably practicable after such reports are filed with, or furnished to, the SEC. In addition, our Code of Business Conduct, Corporate Governance Guidelines, and charters of the Audit Committee, Compensation and Stock Option Committee, and the Corporate Governance and Nominating Committee are available on our website. We will provide reasonable quantities of electronic or paper copies of filings free of charge upon request. In addition, we will provide a copy of the above referenced charters to stockholders upon request.

Important Information Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements contain words such as “may,” “will,” “might,” “expect,” “believe,” “anticipate,” “outlook,” “could,” “would,” “estimate,” “continue,” “pursue,” “target,” “project,” “intend,” “plan,” “seek,” “estimate,” “should,” “may,” “assume,” and “continue,” or the negative thereof or comparable terminology, and may include statements regarding:

• the factors that contribute to our ongoing success and our ability to be successful in the future;

• our strategy;

• competition, including expansion of gaming into additional markets, the impact of competition on our operations, our ability to respond to such competition, and our expectations regarding continued competition in the markets in which we compete;

• expenses;

• indebtedness, including our ability to refinance or pay amounts outstanding under our bank credit facility and notes when they become due and our compliance with related covenants;

• our financing needs and ability to obtain financing;

• our intentions with respect to maintaining a flexible capital structure for potential strategic transactions;

• the type of covenants that will be included in any future debt instruments;

• our expectations with respect to continued disruptions in the global capital markets and reduced levels of consumer spending and the impact of these trends on our financial results;

• our ability to meet our projected operating and maintenance capital expenditures and the costs associated with our expansion, renovations and development of new projects;

• ability to pay dividends or to pay any specific rate of dividends;

• our intention to fund any purchases made under our share repurchase program with existing cash resources and availability under our bank credit facility;

• Adjusted EBITDA and its usefulness as a measure of operating performance or valuation;

• the impact of new accounting pronouncements on our consolidated financial statements;

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• operations;

• that our bank credit facility and cash flows from operating activities will be sufficient to meet our projected expansion and maintenance capital expenditures for the next twelve months;

• our market risk exposure and ability to minimize risk;

• the timing or effects of our delay of construction at Echelon, when, or if, construction will recommence, the effect that such delay will have on our business, operations or financial condition, or our expectations as to the costs associated with wind-down procedures related to the project;

• expansion, development, investment and renovation plans, including the scope of such plans, expected costs, financing (including sources thereof and our expectation that long-term debt will substantially increase in connection with such projects) , timing and the ability to achieve market acceptance;

• development opportunities in new jurisdictions and our ability to successfully take advantage of such opportunities;

• regulations, including anticipated taxes, tax credits or tax refunds expected, and the ability to receive and maintain necessary approvals for our projects;

• our intent to elect ABSC inspection for certain of our riverboats by mid-2010;

• our asset impairment analyses;

• our intangible asset and goodwill impairment tests;

• pending litigation with respect to Dania Jai-Alai and Treasure Chest;

• the breach of contract issue with Las Vegas Energy Partners, LLC;

• the outcome of tax audits and assessments, including our appeals thereof, and our estimates as to the amount of taxes that will ultimately be owed;

• our nonbinding indication of interest with Station Casinos, Inc.;

• our expectations regarding the levels of our interest and capitalized interest costs in 2010;

• our overall outlook, including all statements under the heading Overall Outlook in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations;

• our ability to receive insurance reimbursement and our estimates of self-insurance accruals and future liability;

• compliance with applicable laws;

• that operating results for previous periods are not necessarily indicative of future performance;

• that estimates and assumptions made in the preparation of financial statements in conformity with U.S. GAAP may differ from actual results;

• our expectations with respect to qualification of the Echelon development project for LEED Silver Standard (or equivalent) certification;

• our estimates as to the effect of any changes in our Consolidated EBITDA on our ability to remain in compliance with certain bank credit facility covenants;

• the outcome of various tax audits and assessments, including the timing of resolutions of such audits, and the impact of these audits on our consolidated financial statements;

• our expectations with respect to recognition of total unrecognized share-based compensation costs related to unvested stock options and RSUs;

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• our expectations with respect to accretion of deferred net gain related to derivative instruments as a reduction of interest expense during the next twelve months; and

• expectations, plans, beliefs, hopes or intentions regarding the future.

Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include:

• The effects of intense competition that exists in the gaming industry.

• The current economic downturn and its effect on consumer spending.

• The fact that our expansion, development and renovation projects (including enhancements to improve property performance) are subject to many risks inherent in expansion, development or construction of a new or existing project, including:

• design, construction, regulatory, environmental and operating problems and lack of demand for our projects;

• delays and significant cost increases, shortages of materials, shortages of skilled labor or work stoppages;

• poor performance or nonperformance of any of our partners or other third parties upon whom we are relying in connection with any of our projects;

• construction scheduling, engineering, environmental, permitting, construction or geological problems, weather interference, floods, fires or other casualty losses;

• failure by us, our partners, or Borgata to obtain financing on acceptable terms, or at all; and

• failure to obtain necessary government or other approvals on time, or at all.

• The risk that our ongoing suspension of construction at Echelon may result in adverse affects on our business, results of operations or financial condition, including with respect to our joint venture participants and other resulting liabilities.

• The risk that any of our projects may not be completed, if at all, on time or within established budgets, or that any project will result in increased earnings to us.

• The risk that significant delays, cost overruns, or failures of any of our projects to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations.

• The risk that our projects may not help us compete with new or increased competition in our markets.

• The risk that new gaming licenses or jurisdictions become available (or offer different gaming regulations or taxes) that results in increased competition to us.

• The risk that the actual fair value for assets acquired and liabilities assumed from any of our acquisitions differ materially from our preliminary estimates.

• The risk that negative industry or economic trends, including the market price of our common stock trading below its book value, reduced estimates of future cash flows, disruptions to our business, slower growth rates or lack of growth in our business, may result in significant write-downs or impairments in future periods.

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• The risks associated with growth and acquisitions, including our ability to identify, acquire, develop or profitably manage additional companies or operations or successfully integrate such companies or operations into our existing operations without substantial costs, delays or other problems.

• The risk that we may not receive gaming or other necessary licenses for new projects.

• The risk that we may be unable to finance our expansion, development and renovation projects, including cost overruns on any particular project, as well as other capital expenditures through cash flow, borrowings under our bank credit facility and additional financings, which could jeopardize our expansion, development and renovation efforts.

• The risk that we may be unable to refinance our outstanding indebtedness as it comes due, or that if we do refinance, the terms are not favorable to us.

• The risk that we ultimately may not be successful in dismissing the action filed against Treasure Chest Casino and may lose our ability to operate that property, which result could adversely affect our business, financial condition and results of operations.

• The effects of the extensive governmental gaming regulation and taxation policies that we are subject to, as well as any changes in laws and regulations, including increased taxes, which could harm our business.

• The effects of extreme weather conditions or natural disasters on our facilities and the geographic areas from which we draw our customers, and our ability to recover insurance proceeds (if any).

• The risks relating to mechanical failure and regulatory compliance at any of our facilities.

• The risk that the instability in the financial condition of our lenders could have a negative impact on our credit facility.

• The effects of events adversely impacting the economy or the regions from which we draw a significant percentage of our customers, including the effects of the current economic recession, war, terrorist or similar activity or disasters in, at, or around our properties.

• The effects of energy price increases on our cost of operations and our revenues.

• Financial community and rating agency perceptions of our Company, and the effect of economic, credit and capital market conditions on the economy and the gaming and hotel industry.

Additional factors that could cause actual results to differ are discussed in Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K and in other current and periodic reports filed from time to time with the Securities and Exchange Commission (the “SEC”). All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement.

ITEM 1A. Risk Factors

Investment in our securities is subject to risks inherent to our business. The material risks and uncertainties that management believes affect us are described below.

Before making an investment decision, the investor should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this report, including the pending litigation discussed in this report, which provides a description of our current material litigation claims and assessments. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that management is not aware of or that is currently deemed immaterial may also adversely affect our business operations. This report is qualified in its entirety by these risk factors. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of our securities, including our common stock, could decline significantly, and the investor could lose all or part of the investment.

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We may incur impairments to goodwill, indefinite-lived intangible assets, or long-lived assets.

In accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 350, Intangibles – Goodwill and Other Intangible Assets (“ASC Topic 350”), we test our goodwill and indefinite-lived intangible assets for impairment annually or if a triggering event occurs. We perform the annual impairment testing for goodwill and indefinite-lived intangible assets in the second quarter of each fiscal year. In addition, in accordance with the provisions of ASC Topic 360, Property Plant and Equipment, Impairment or Disposal of Long-Lived Assets (“ASC Topic 360”), we test long-lived assets for impairment if a triggering event occurs.

Significant negative industry or economic trends, reduced estimates of future cash flows, disruptions to our business, slower growth rates or lack of growth in our business, have resulted in significant write-downs and impairment charges during the years ended December 31, 2009 and 2008, and, if one or more of such events continue, may indicate that additional impairment charges in future periods are required. If we are required to record additional impairment charges, this could have a material adverse affect on our consolidated financial statements.

On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of our multibillion dollar Echelon development project on the Las Vegas Strip. At such time, we did not anticipate the long-term effects of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas geographical area; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. The credit markets have yet to show significant recovery, thereby rendering financing for this type of development unavailable. Based on our current outlook, we do not expect to resume construction for three to five years.

The change in circumstances implies that the carrying amounts of the assets related to Echelon may not be recoverable; therefore, we performed an impairment test of these assets during the three months ended September 30, 2009. While the outcome of this evaluation resulted in no impairment of Echelon’s assets, as the estimated weighted net undiscounted cash flows from the project exceed the current carrying value of the assets of approximately $928 million at December 31, 2009, we can provide no assurances that future evaluations will reach the same conclusion. As we further develop and explore the viability of alternatives for the project, we will continue to monitor these assets for recoverability. If we are subject to a non-cash write-down of these assets, it could have a material adverse impact on our consolidated financial statements.

Due to the circumstances regarding the final development plan of Echelon, we reviewed our former investment in the Morgans joint venture for impairment. Considering the subsequent mutual termination of this joint venture, certain of our contributions, primarily related to the architectural and design plans, will ultimately not be realizable, as a result, we recorded an other-than-temporary non-cash impairment charge of $13.5 million during the year ended December 31, 2009 related to such costs.

In addition, during the year ended December 31, 2009, in conjunction with an amendment to the Dania Jai-Alai purchase agreement to settle the contingent payment prior to the satisfaction of the legal conditions, we recorded the remaining $28.4 million of the $75 million contingent liability as an additional cost of the acquisition (goodwill). We tested the goodwill for recoverability, which resulted in a noncash impairment charge of $28.4 million.

During the year ended December 31, 2008, we recorded $290.2 million in aggregate noncash impairment charges to write-down certain portions of our goodwill, intangible assets and other long-lived assets to their fair value at December 31, 2008. The impairment test for these assets was principally due to the decline in our stock price that caused our book value to exceed our market capitalization, which was an indication that these assets may not be recoverable. The primary reason for these impairment charges relates to the ongoing economic downturn and increased discount rates in the credit and equity markets, which has caused us to reduce our estimates for projected cash flows, and has reduced overall industry valuations.

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Our business is particularly sensitive to reductions in discretionary consumer spending as a result of downturns in the economy.

Consumer demand for entertainment and other amenities at casino hotel properties, such as ours, are particularly sensitive to downturns in the economy and the corresponding impact on discretionary spending on leisure activities. For example, the year ended December 31, 2009 was one of the toughest periods in Las Vegas Locals history. Changes in discretionary consumer spending or consumer preferences brought about by factors such as perceived or actual general economic conditions, effects of the current decline in consumer confidence in the economy, including the current housing crisis and credit crisis, the impact of high energy and food costs, the increased cost of travel, the potential for continued bank failures, perceived or actual disposable consumer income and wealth, or fears of war and future acts of terrorism could further reduce customer demand for the amenities that we offer, thus imposing practical limits on pricing and negatively impacting our results of operations and financial condition.

The current housing crisis and economic slowdown in the United States has resulted in a significant decline in the amount of tourism and spending in Las Vegas. If this decline continues, our financial condition, results of operations and cash flows would be adversely affected.

Our common stock price may fluctuate substantially, and a shareholder’s investment could decline in value.

The market price of our common stock may fluctuate substantially due to many factors, including:

• actual or anticipated fluctuations in our results of operations;

• announcements of significant acquisitions or other agreements by us or by our competitors;

• our sale of common stock or other securities in the future;

• trading volume of our common stock;

• conditions and trends in the gaming and destination entertainment industries;

• changes in the estimation of the future size and growth of our markets; and

• general economic conditions, including, without limitation, changes in the cost of fuel and air travel.

In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to companies’ operating performance. Broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, shareholder derivative lawsuits and/or securities class action litigation has often been instituted against that company. Such litigation, if instituted against us, could result in substantial costs and a diversion of management’s attention and resources.

Intense competition exists in the gaming industry, and we expect competition to continue to intensify.

The gaming industry is highly competitive for both customers and employees, including those at the management level. We compete with numerous casinos and hotel casinos of varying quality and size in market areas where our properties are located. We also compete with other non-gaming resorts and vacation destinations, and with various other casino and other entertainment businesses, and could compete with any new forms of gaming that may be legalized in the future. The casino entertainment business is characterized by competitors that vary considerably in their size, quality of facilities, number of operations, brand identities, marketing and growth strategies, financial strength and capabilities, level of amenities, management talent and geographic diversity. In most markets, we compete directly with other casino facilities operating in the immediate and surrounding market areas. In some markets, we face competition from nearby markets in addition to direct competition within our market areas.

In recent years, with fewer new markets opening for development, competition in existing markets has intensified. We have invested in expanding existing facilities, developing new facilities, and acquiring established facilities in existing markets. In addition, our competitors have also invested in expanding their existing facilities and developing new facilities. This expansion of existing casino entertainment properties, the increase in the number of properties and the aggressive marketing strategies of many of our competitors have increased competition in many markets in which we compete, and this intense competition can be expected to continue. In addition, competition may intensify if our competitors commit additional resources to aggressive pricing and promotional activities in order to attract customers.

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If our competitors operate more successfully than we do, if they attract customers away from us as a result of aggressive pricing and promotion, if they are more successful than us in attracting and retaining employees, if their properties are enhanced or expanded, if they operate in jurisdictions that gives them operating advantages due to differences or changes in gaming regulations or taxes, or if additional hotels and casinos are established in and around the locations in which we conduct business, we may lose market share or the ability to attract or retain employees. In particular, the expansion of casino gaming in or near any geographic area from which we attract or expect to attract a significant number of our customers could have a significant adverse effect on our business, financial condition and results of operations.

We also compete with legalized gaming from casinos located on Native American tribal lands. Expansion of Native American gaming in areas located near our properties, or in areas in or near those from which we draw our customers, could have an adverse effect on our operating results. For example, increased competition from federally recognized Native American tribes near Blue Chip has had a negative impact on our results. Native American gaming facilities typically have a significant operating advantage over our properties due to lower gaming taxes, allowing those facilities to market more aggressively and to expand or update their facilities at an accelerated rate. Although we have expanded our facility at Blue Chip in an effort to be more competitive in this market, these competing Native American properties could continue to have an adverse impact on the operations of Blue Chip.

Our expansion, development, investment and renovation projects may face significant risks inherent in construction projects or implementing a new marketing strategy, including receipt of necessary government approvals.

We regularly evaluate expansion, development, investment and renovation opportunities. On January 4, 2006, we announced our planned Las Vegas Strip development, Echelon, which represents the largest and most expensive development project we have undertaken to date.

This project and any other development projects we may undertake will be subject to the many risks inherent in the expansion or renovation of an existing enterprise or construction of a new enterprise, including unanticipated design, construction, regulatory, environmental and operating problems and lack of demand for our projects. Our current and future projects could also experience:

• delays and significant cost increases;

• shortages of materials;

• shortages of skilled labor or work stoppages;

• poor performance or nonperformance by any of our joint venture partners or other third parties on whom we place reliance;

• unforeseen construction scheduling, engineering, environmental, permitting, construction or geological problems; and

• weather interference, floods, fires or other casualty losses.

The completion dates of any of our projects could differ significantly from expectations for construction-related or other reasons. For example, on August 1, 2008, we announced that, due to the difficult environment in the capital markets, as well as weak economic conditions, our Echelon project would be delayed. Based on our current outlook, we do not anticipate that we will resume construction on our Echelon development project for three to five years.

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In addition, actual costs and construction periods for any of our projects can differ significantly from initial expectations. Our initial project costs and construction periods are based upon budgets, conceptual design documents and construction schedule estimates prepared at inception of the project in consultation with architects and contractors. Many of these costs can increase over time as the project is built to completion. For example, prior to delaying construction at Echelon, we announced that the estimated cost of the wholly-owned portion of Echelon increased by approximately $0.4 billion, principally as a result of additional scope, larger guest rooms and suites, and increased estimated construction costs, and that the estimated development costs associated with certain joint venture properties to be developed and constructed in connection with Echelon increased by approximately $250 million. We have incurred significant incremental costs in connection with delaying construction of Echelon and anticipate that additional cost increases could continue to occur if and when we recommence development of Echelon.

Additional costs upon restarting construction of Echelon could include, without limitation, costs associated with remobilization, changes in design, increases in material, labor, or insurance costs, construction code changes during the delay period, corrosive damage risk, damage to uncompleted structures, etc. The cost of any project may vary significantly from initial budget expectations and we may have a limited amount of capital resources to fund cost overruns. If we cannot finance cost overruns on a timely basis, the completion of one or more projects may be delayed until adequate funding is available. We can provide no assurance that any project will be completed on time, if at all, or within established budgets, or that any project will result in increased earnings to us. Significant delays, cost overruns, or failures of our projects to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations.

In April 2007 we entered into an Energy Services Agreement with Las Vegas Energy Partners, LLC (“LVE”) to construct a central energy center in connection with our Echelon project. LVE has currently suspended construction of the central energy center while the Echelon project is delayed. On April 6, 2009, LVE notified us that, in its view, Echelon would be in breach of the Energy Services Agreement unless Echelon recommenced and proceeded with construction by May 6, 2009. We believe that LVE’s position is without merit; however, in the event of litigation, we cannot state with certainty the eventual outcome nor estimate the possible loss or range of loss, if any, associated with this matter.

Certain permits, licenses and approvals necessary for some of our current or anticipated projects have not yet been obtained. The scope of the approvals required for expansion, development, investment or renovation projects can be extensive and may include gaming approvals, state and local land-use permits and building and zoning permits. Unexpected changes or concessions required by local, state or federal regulatory authorities could involve significant additional costs and delay the scheduled openings of the facilities. We may not obtain the necessary permits, licenses and approvals within the anticipated time frames, or at all.

In addition, although we design our projects to minimize disruption of our existing business operations, expansion and renovation projects require, from time to time, all or portions of affected existing operations to be closed or disrupted. For example, to make way for the development of Echelon, we closed Stardust in November 2006 and demolished the property in March 2007. Any significant disruption in operations of a property could have a significant adverse effect on our business, financial condition and results of operations.

We face risks associated with growth and acquisitions.

As part of our business strategy, we regularly evaluate opportunities for growth through development of gaming operations in existing or new markets, through acquiring other gaming entertainment facilities or through redeveloping our existing gaming facilities. For example, in 2007, we completed the Barbary Coast exchange transaction and completed the acquisition of Dania Jai-Alai. In January 2009, we completed the hotel construction project at Blue Chip. We may also pursue expansion opportunities, including joint ventures, in jurisdictions where casino gaming is not currently permitted in order to be prepared to develop projects upon approval of casino gaming. The expansion of our operations, whether through acquisitions, development or internal growth, could divert management’s attention and could also cause us to incur substantial costs, including legal, professional and consulting fees. There can be no assurance that we will be able to identify, acquire, develop or profitably manage additional companies or operations or successfully integrate such companies or operations into our existing

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operations without substantial costs, delays or other problems. Additionally, there can be no assurance that we will receive gaming or other necessary licenses or approvals for our new projects or that gaming will be approved in jurisdictions where it is not currently approved.

Ballot measures or other voter-approved initiatives to allow gaming in jurisdictions where gaming, or certain types of gaming (such as slots), was not previously permitted could be challenged, and, if such challenges are successful, these ballot measures or initiatives could be invalidated. Furthermore, there can be no assurance that there will not be similar or other challenges to legalized gaming in existing or current markets in which we may operate or have development plans, and successful challenges to legalized gaming could require us to abandon or substantially curtail our operations or development plans in those locations, which could have a material adverse effect on our financial condition and results of operations.

On August 1, 2008, we announced that, due to the difficult environment in both the capital markets and the economy, our Echelon project would be delayed. Based on our current outlook, we do not anticipate that Echelon will resume construction for three to five years. We can provide no assurances regarding the timing or effects of our delay of construction at Echelon and when, or if, construction will recommence, or the effect that such delay will have on our business, operations or financial condition. In addition, our agreements or arrangements with third parties could require additional fees or terms in connection with modifying their agreements that may be unfavorable to us, and we can provide no assurances that we will be able to reach agreement on any modified terms.

Additionally, in February 2008, management determined to indefinitely postpone redevelopment of our Dania Jai-Alai facility, and in connection with that determination we recorded an $84.0 million noncash impairment charge to write-off Dania Jai-Alai’s intangible license rights and to write-down its property and equipment to their estimated fair values. Our decision to postpone the development was based on numerous factors, including the introduction of expanded gaming at a nearby Native American casino, the potential for additional casino gaming venues in Florida, and the existing Broward County pari-mutuel casinos performing below our expectations for the market. There can be no assurance that we will not face similar challenges and difficulties with respect to new development projects or expansion efforts that we may undertake, which could result in significant sunk costs that we may not be able to fully recoup or that otherwise have a material adverse effect on our financial condition and results of operations.

If we are unable to finance our expansion, development, investment and renovation projects, as well as other capital expenditures, through cash flow, borrowings under our bank credit facility and additional financings, our expansion, development, investment and renovation efforts will be jeopardized.

We intend to finance our current and future expansion, development, investment and renovation projects, as well as our other capital expenditures, primarily with cash flow from operations, borrowings under our bank credit facility, and equity or debt financings. If we are unable to finance our current or future expansion, development, investment and renovation projects, or our other capital expenditures, we will have to adopt one or more alternatives, such as reducing, delaying or abandoning planned expansion, development, investment and renovation projects as well as other capital expenditures, selling assets, restructuring debt, reducing the amount or suspending or discontinuing the distribution of dividends, obtaining additional equity financing or joint venture partners, or modifying our bank credit facility. These sources of funds may not be sufficient to finance our expansion, development, investment and renovation projects, and other financing may not be available on acceptable terms, in a timely manner, or at all. In addition, our existing indebtedness contains certain restrictions on our ability to incur additional indebtedness.

Recently, there have been significant disruptions in the global capital markets that have adversely impacted the ability of borrowers to access capital. We anticipate that these disruptions may continue for the foreseeable future. We anticipate that we will be able to fund our currently active expansion projects using cash flows from operations and availability under our bank credit facility (to the extent that availability exists after we meet our working capital needs). In addition, we have previously submitted nonbinding indications of interest to Station Casinos, Inc. (“Station”), and have noted that, if a transaction to acquire any of Station’s assets were to occur, we would use availability under our bank credit facility to finance any transaction which would reduce the availability of funds for other uses.

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If availability under our bank credit facility does not exist or we are otherwise unable to make sufficient borrowings thereunder, any additional financing that is needed may not be available to us or, if available, may not be on terms favorable to us. As a result, if we are unable to obtain adequate project financing in a timely manner, or at all, we may be forced to sell assets in order to raise capital for projects, limit the scope of, or defer such projects, or cancel the projects altogether. In the event that capital markets do not improve and we are unable to access capital with more favorable terms, additional equity and/or credit support may be necessary to obtain construction financing for the remaining cost of the project.

If we are not ultimately successful in dismissing the action filed against Treasure Chest Casino, we may potentially lose our ability to operate the Treasure Chest Casino property and our business, financial condition and results of operations could be materially adversely affected.

Alvin C. Copeland, the sole shareholder (deceased) of an unsuccessful applicant for a riverboat license at the location of our Treasure Chest Casino (“Treasure Chest”), has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999 and 2000, Copeland unsuccessfully opposed the renewal of the Treasure Chest license and has brought two separate legal actions against Treasure Chest. In November 1993, Copeland objected to the relocation of Treasure Chest from the Mississippi River to its current site on Lake Pontchartrain. The predecessor to the Louisiana Gaming Control Board allowed the relocation over Copeland’s objection. Copeland then filed an appeal of the agency’s decision with the Nineteenth Judicial District Court. Through a number of amendments to the appeal, Copeland unsuccessfully attempted to transform the appeal into a direct action suit and sought the revocation of the Treasure Chest license. Treasure Chest intervened in the matter in order to protect its interests. The appeal/suit, as it related to Treasure Chest, was dismissed by the District Court and that dismissal was upheld on appeal by the First Circuit Court of Appeal. Additionally, in 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chest’s license, an award of the license to him, and monetary damages. The suit was dismissed by the trial court, citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the Louisiana First Circuit Court of Appeal. On September 21, 2002, the First Circuit Court of Appeal reversed the trial court’s decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was partially denied. The Court of Appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds. There was no activity regarding this matter during 2005 and 2006, and the case was set to be dismissed by the court for failure to prosecute by the plaintiffs in mid-May 2007; however on May 1, 2007, the plaintiff filed a motion to set a hearing date related to the motions to dismiss. The hearing was scheduled for September 10, 2007, at which time all parties agreed to postpone the hearing indefinitely. The hearing has not yet been rescheduled. Mr. Copeland has since passed away and his son, the executor of his estate, has petitioned the court to be substituted as plaintiff in the case. On June 9, 2009, the plaintiff filed to have the exceptions set for hearing. The parties decided to submit the exceptions to the court on the previously filed briefs. The court has yet to issues a ruling. We currently are vigorously defending the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it could have a significant adverse effect on our business, financial condition and results of operations.

We are subject to extensive governmental regulation, as well as federal, state and local laws affecting business in general, which may harm our business.

We are subject to a variety of regulations in the jurisdictions in which we operate. Regulatory authorities at the federal, state and local levels have broad powers with respect to the licensing of casino operations and may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines and take other actions, any one of which could have a significant adverse effect on our business, financial condition and results of operations. A more detailed description of the governmental gaming regulations to which we are subject is included in Exhibit 99.1 to this Annual Report on Form 10-K, which is incorporated herein by reference.

Regulation of Smoking

If additional gaming regulations are adopted in a jurisdiction in which we operate, such regulations could impose restrictions or costs that could have a significant adverse effect on us. From time to time, various proposals are introduced in the legislatures of some of the jurisdictions in which we have existing or planned operations that, if

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enacted, could adversely affect the tax, regulatory, operational or other aspects of the gaming industry and our company. Legislation of this type may be enacted in the future. For example, each of New Jersey and Illinois has adopted laws that significantly restrict, or otherwise ban, smoking at our properties in those jurisdictions. The New Jersey and Illinois laws that restrict smoking at casinos, and similar legislation in other jurisdictions in which we operate, could materially impact the results of operations of our properties in those jurisdictions.

Regulation of Directors, Officers, Key Employees and Partners

Our directors, officers, key employees and joint venture partners must meet approval standards of certain state regulatory authorities. If state regulatory authorities were to find a person occupying any such position or a joint venture partner unsuitable, we would be required to sever our relationship with that person or the joint venture partner may be required to dispose of their interest in the joint venture. State regulatory agencies may conduct investigations into the conduct or associations of our directors, officers, key employees or joint venture partners to ensure compliance with applicable standards.

For example, by letter of July 27, 2009 (the “Letter”), the Division of Gaming Enforcement Office of the Attorney General of the State of New Jersey (“Division”) made a formal request to the New Jersey Casino Control Commission (“Commission”) that the Commission reopen the gaming license held by Marina District Development Company, LLC (“MDDC”). MDDC owns and operates the Borgata Hotel Casino and Spa in Atlantic City, New Jersey and is owned 50-50 by us and MGM MIRAGE (“MGM”). In June 2005, the Commission had renewed MDDC’s gaming license for a five year term. The Letter indicated that the Division’s reopening request was for the exclusive purpose of examining the qualifications of MGM, as a qualified holding company of MDDC, in light of the issues raised by the Special Report of the Division to the Commission on its investigation of MGM’s joint venture with Pansy Ho in Macau, Special Administrative Region, People’s Republic of China. The Letter noted that the Division had found that we had no involvement with MGM’s development activities in Macau and also expressed the Division’s confidence that the Commission could thoroughly examine the issues raised in the Special Report as to MGM’s qualifications without negatively affecting the MDDC casino license or us.

The Commission informed us that, pursuant to Section 88(a) of the New Jersey Casino Control Act, the MDDC gaming license was reopened on July 27, 2009, the date of the Letter. This was a procedural step required by the New Jersey Casino Control Act that does not represent a finding as to the issues raised by the Division. MGM will have the opportunity to respond to the Division’s report in an open public proceeding, and MGM is currently involved in constructive settlement discussions with the Division, which have centered on MGM placing its 50% ownership interest in the Borgata Hotel Casino & Spa and related leased land in Atlantic City into a divestiture trust. Any settlement is subject to both Division and Commission approval. Related to securing such approval, on February 2010, we entered into an agreement that, among other things, amended our operating agreement with MGM Mirage Corporation (“MGM”) to permit the transfer of MGM’s 50% ownership interest of the Borgata into a divestiture trust in connection with MGM’s potential settlement agreement with the Division of Gaming Enforcement. The agreement includes the following provisions, among others, that would become effective only upon the transfer of MGM’s interest into the divestiture trust and the approval of the New Jersey Casino Control Commission, that (i) we would receive a priority distribution of approximately $31 million (equal to the excess prior capital contributions made by us) upon successful refinancing of the Borgata credit facility, and (ii) we would receive a payment from the trust equal to the greater of $10 million or 3% of the proceeds from the sale of MGM’s 50% interest in Borgata.

Certain public and private issuances of securities and other transactions that we are party to also require the approval of some state regulatory authorities.

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Regulations Affecting Businesses in General

In addition to gaming regulations, we are also subject to various federal, state and local laws and regulations affecting businesses in general. These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, environmental matters, smoking, employees, currency transactions, taxation, zoning and building codes, and marketing and advertising. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. For example, on July 5, 2006, New Jersey gaming properties, including Borgata, were required to temporarily close their casinos for three days as a result of a New Jersey statewide government shutdown that affected certain New Jersey state employees required to be at casinos when they are open for business. In addition, Nevada recently enacted legislation that eliminated, in most instances, and, for certain pre-existing development projects such as Echelon, reduced, property tax breaks and retroactively eliminated certain sales tax exemptions offered as incentives to companies developing projects that meet certain environmental “green” standards. As a result, we, along with other companies developing projects that meet such standards, may not realize the full tax benefits that were originally anticipated.

Our partner in the limited liability company that owns and operates the Borgata Hotel Casino and Spa in Atlantic City, New Jersey will be divesting its 50% interest and we may not have the ability to approve the new partner.

We own a 50% interest in the limited liability company that operates the Borgata. MGM MIRAGE (“MGM”) currently owns the other 50% interest. As a result of the New Jersey Division of Gaming Enforcement (the “Division”) investigation of MGM’s relationship with its joint venture partner in Macau, MGM is currently involved in settlement discussions with the Division under which MGM would agree to place its 50% ownership interest in Borgata and related leased land in Atlantic City into a divestiture trust.

We are the managing member of the LLC, and have been, and will continue to be responsible for the day-to-day operations of Borgata, including the operations and improvement of the facility and business. Additionally, we hold a right of first refusal on any sale of MGM’s interest in Borgata. However, we believe we will expend managerial resources to effectuate the eventual sale of MGM’s interest from the divesture trust to a new partner, regardless of whether we exercise our right of first refusal. We will not have the ability to select that new partner.

While we believe we will retain direct control of the operations of the Borgata, based on our current and amended operating agreement, a new partner may want to negotiate greater rights or different terms. These negotiations may decrease our ability to directly control the facility and effectively manage our financial risk. Any new partner could have economic or business interests or goals that are inconsistent with our economic or business interests or goals. The ongoing operation of the facility could change if we are required to negotiate agreements with a new partner that contain terms that differ from our existing operating agreement.

Additionally, in the event that capital markets do not improve and Borgata is unable to renegotiate its existing credit facility on favorable terms, additional credit support and/or capital contributions may be necessary to fund the ongoing operations of the Borgata. This additional credit and/or equity may need to be contributed by us or the new partner, or from both. If we are unable to obtain adequate financing in a timely manner, or at all, we may be unable to meet the operating cash flows of the Borgata, and our investment would be at risk. Additionally, any new partner might become bankrupt or not have the financial resources to meet its share of the obligations, which could require us to fund more than our 50% share.

We are subject to extensive taxation policies, which may harm our business.

The federal government has, from time to time, considered a federal tax on casino revenues and may consider such a tax in the future. In addition, gaming companies are currently subject to significant state and local taxes and fees, in addition to normal federal and state corporate income taxes, and such taxes and fees are subject to increase at any time. For example, in June 2006, the Illinois legislature passed certain amendments to the Riverboat Gambling Act, which affected the tax rate at Par-A-Dice. The legislation, which imposes an incremental 5% tax on adjusted gross gaming revenues, was retroactive to July 1, 2005. As a result of this legislation, we were required to pay additional taxes, resulting in a $6.7 million tax assessment in June 2006. Also, in May 2007, Blue Chip received a valuation notice indicating an unanticipated increase of nearly 400% to its assessed property value as of January 1, 2006. At that time, we estimated that the increase in assessed property value could result in a property tax assessment ranging between $4 million and $11 million for the eighteen-month period ended June 30, 2007. We recorded an additional

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charge of $3.2 million during the three months ended June 30, 2007 to increase our property tax liability to $5.8 million at June 30, 2007 as we believed that was the most likely amount to be assessed within the range. We subsequently received a property tax bill related to our 2006 tax assessment for $6.2 million in December 2007. As we have appealed the assessment, Indiana statutes allow for a minimum required payment of $1.9 million, which was paid against the $6.2 million assessment in January 2008. In February 2009, we received a notice of revaluation, which reduced the property’s assessed value by $100 million and the tax assessment by approximately $2.2 million per year. We have subsequently paid the minimum required payment of $1.9 million against 2007 and 2008 provisional bills, which were based on the 2006 valuation notice. We have not received valuation notices for years 2007 through 2009. We believe the assessment for the forty eight-month period ended December 31, 2009 could result in a property tax assessment ranging between $10.7 million and $22.5 million. We have accrued approximately $20.9 million of property tax liability as of December 31, 2009, based on what we believe to be the most likely assessment within our range, once all appeals have been exhausted; however, we can provide no assurances that the estimated amount will approximate the actual amount. The final 2006 assessment, post appeals, as well as the March 1, 2007, 2008 and 2009 assessment notices, which have not been received as of December 31, 2009, could result in further adjustment to our estimated property tax liability at Blue Chip.

If there is any material increase in state and local taxes and fees, our business, financial condition and results of operations could be adversely affected.

On March 27, 2008, the Nevada Supreme Court issued a decision in Sparks Nugget, Inc. vs. The State of Nevada Department of Taxation (the “Department”), holding that food purchased for subsequent use in the provision of complimentary and/or employee meals was exempt from use tax. On April 24, 2008, the Department filed a Petition for Rehearing (the “Petition”) on the decision. Additionally, on the same date the Nevada Legislature filed an Amicus Curiae brief in support of the Department’s position. The Nevada Supreme Court denied the Department’s Petition on July 17, 2008. We paid use tax, over the period November 2000 through May 2008, on food purchased for subsequent use in complimentary and employee meals at our Nevada casino properties and estimate the refund to be in the range of $16.3 million to $18.5 million, including interest. In late 2009, the Department audited our refund claim and subsequently issued a $12.4 million sales tax assessment, plus interest of $7.5 million. The Department continues to deny our refund claim and issued the assessment based on the argument that the complimentary and employee meals at issue are now subject to sales tax. We do not believe the Department’s arguments have any merit and intend to file a motion to dismiss the assessment on both a procedural and technical basis. We are currently in the discovery and deposition stage of the legal proceeding and expect our hearing before the Nevada Administrative Law Judge (“Judge”) to occur within the next six months. Due to uncertainty surrounding the Judge’s decision, we will not record any gain until the tax refund is realized. For periods subsequent to May 2008, although we have received an assessment from the Department, we have not accrued a liability for sales tax on complimentary and employee meals at our Nevada casino properties, as it is not probable, based on both procedural issues and the technical merits of the Department’s arguments, that we will owe this tax.

The global financial crisis and decline in consumer spending may have an effect on our business and financial condition in ways that we currently cannot accurately predict.

The continued credit crisis, economic downturn and related turmoil in the global financial system have had and may continue to have an effect on our business and financial condition. We are not able to predict the duration or severity of the economic downturn. In October 2008, Lehman Commercial Paper, Inc. (“LCPI”), which is one of the lenders under our bank credit facility, filed for bankruptcy. As of October 31, 2008, LCPI’s commitment under our bank credit facility was $62 million, and as of that date, LCPI had funded approximately $26.4 million. Following LCPI’s bankruptcy, its interest under our bank credit facility was purchased by one of our other lenders. Had LCPI’s interest not been purchased, LCPI’s proportionate share of unfunded commitments under our bank credit facility (approximately $35.6 million as of October 31, 2008) would have been unavailable to us. Additionally, on November 2, 2009, another of our existing lenders under our bank credit facility, CIT Group, Inc. (“CIT”), filed for bankruptcy. CIT currently has revolving credit commitments under our bank credit facility of $7.5 million, approximately two thirds of which is funded. It is unlikely that CIT will continue to provide its proportionate funding, and it is not clear whether its interest in our bank credit facility will be purchased by another lender. If a large percentage of our lenders were to file for bankruptcy or otherwise default on their obligations to us, we may not have the liquidity under our bank credit facility to fund our current projects. There is no certainty that our lenders will

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continue to remain solvent or fund their respective obligations under our bank credit facility. If we were required to renegotiate or replace our bank credit facility, there is no assurance that we will be able to secure terms that are as favorable to us as the existing terms in our bank credit facility, if at all.

The significant distress recently experienced by financial institutions has had, and may continue to have, far-reaching adverse consequences across many industries, including the gaming industry. The ongoing credit and liquidity crisis has greatly restricted the availability of capital and has caused the cost of capital (if available) to be much higher than it has traditionally been. Accessing the capital markets in this environment could increase the costs of our projects, which could have an impact on our flexibility to react to changing economic and business conditions and our ability or willingness to fund our development projects. All of these effects could have a material adverse effect on our business, financial condition and results of operations.

We own facilities that are located in areas that experience extreme weather conditions.

Extreme weather conditions may interrupt our operations, damage our properties and reduce the number of customers who visit our facilities in the affected areas. For example, our Treasure Chest Casino, which is located near New Orleans, Louisiana, suffered minor damage and was closed on August 30, 2008 for eight days over Labor Day weekend, as the New Orleans area was under mandatory evacuation orders during Hurricane Gustav. Hurricane Ike resulted in a two-day closure starting September 12, 2008 at Treasure Chest. Although Hurricane Katrina in 2005 caused only minor damage at Treasure Chest, it was closed for 44 days as a result of that hurricane. Additionally, at our Delta Downs Racetrack Casino & Hotel, which is located in Southwest Louisiana, Hurricane Gustav forced us to close for six days, beginning on August 30, 2008, and Hurricane Ike led to a second closure from September 11, 2008 to September 17, 2008. The hurricane closures during the three months ended September 30, 2008 totaled 10 days for Treasure Chest and 13 days for Delta Downs, including two full weekends at both properties. In 2005, Delta Downs suffered significant property damage as a result of Hurricane Rita and closed for 42 days.

While we maintain insurance coverage that may cover certain of the costs that we incur as a result of some extreme weather conditions, our coverage is subject to deductibles and limits on maximum benefits. There can be no assurance that we will be able to fully collect, if at all, on any claims resulting from extreme weather conditions. If any of our properties are damaged or if their operations are disrupted as a result of extreme weather in the future, or if extreme weather adversely impacts general economic or other conditions in the areas in which our properties are located or from which they draw their patrons, our business, financial condition and results of operations could be materially adversely affected.

Our insurance coverage may not be adequate to cover all possible losses that our properties could suffer. In addition, our insurance costs may increase and we may not be able to obtain similar insurance coverage in the future.

Although we have “all risk” property insurance coverage for our operating properties, which covers damage caused by a casualty loss (such as fire, natural disasters, acts of war, or terrorism), each policy has certain exclusions. In addition, our property insurance coverage is in an amount that may be significantly less than the expected replacement cost of rebuilding the facilities if there was a total loss. Our level of insurance coverage also may not be adequate to cover all losses in the event of a major casualty. In addition, certain casualty events, such as labor strikes, nuclear events, acts of war, loss of income due to cancellation of room reservations or conventions due to fear of terrorism, deterioration or corrosion, insect or animal damage and pollution, may not be covered at all under our policies. Therefore, certain acts could expose us to substantial uninsured losses.

We also have “builder’s risk” insurance coverage for our development and expansion projects, including Echelon. Builder’s risk insurance provides coverage for projects during their construction for damage caused by a casualty loss. In general, our builder’s risk coverage is subject to the same exclusions, risks and deficiencies as those described above for our all risk property coverage. Our level of builder’s risk insurance coverage may not be adequate to cover all losses in the event of a major casualty.

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In addition to the damage caused to our properties by a casualty loss, we may suffer business disruption as a result of these events or be subject to claims by third parties that may be injured or harmed. While we carry business interruption insurance and general liability insurance, this insurance may not be adequate to cover all losses in any such event.

We renew our insurance policies (other than our builder’s risk insurance) on an annual basis. The cost of coverage may become so high that we may need to further reduce our policy limits or agree to certain exclusions from our coverage.

Our debt instruments and other material agreements require us to meet certain standards related to insurance coverage. Failure to satisfy these requirements could result in an event of default under these debt instruments or material agreements.

Our facilities, including our riverboats and dockside facilities, are subject to risks relating to mechanical failure and regulatory compliance.

Generally, all of our facilities are subject to the risk that operations could be halted for a temporary or extended period of time, as the result of casualty, forces of nature, mechanical failure, or extended or extraordinary maintenance, among other causes. In addition, our gaming operations, including those conducted on riverboats or at dockside facilities could be damaged or halted due to extreme weather conditions.

We currently conduct our Treasure Chest, Par-A-Dice, Blue Chip and Sam’s Town Shreveport gaming operations on riverboats. Each of our riverboats must comply with United States Coast Guard (“USCG”) requirements as to boat design, on-board facilities, equipment, personnel and safety. Each riverboat must hold a Certificate of Inspection for stabilization and flotation, and may also be subject to local zoning codes. The USCG requirements establish design standards, set limits on the operation of the vessels and require individual licensing of all personnel involved with the operation of the vessels. Loss of a vessel’s Certificate of Inspection would preclude its use as a casino.

USCG regulations require a hull inspection for all riverboats at five-year intervals. Under certain circumstances, alternative hull inspections may be approved. The USCG may require that such hull inspections be conducted at a dry-docking facility, and if so required, the cost of travel to and from such docking facility, as well as the time required for inspections of the affected riverboats, could be significant. To date, the USCG has allowed in-place underwater inspections of our riverboats twice every five years on alternate 2 and 3 year schedules. The USCG may not continue to allow these types of inspections in the future. The loss of a dockside casino or riverboat casino from service for any period of time could adversely affect our business, financial condition and results of operations.

Indiana and Louisiana have adopted alternate inspection standards for riverboats in those states. The standards require inspection by the American Bureau of Shipping Consulting (“ABSC”). We intend to relinquish USCG inspection and elect ABSC inspection for our riverboats at Blue Chip, Treasure Chest and Sam’s Town Shreveport effective by mid-2010. The Par-A-Dice riverboat will remain inspected by the USCG for the foreseeable future. ABSC imposes essentially the same design, personnel, safety, and hull inspection standards as the USCG. Therefore, the risks to our business associated with USCG inspection should not change by reason of inspection by ABSC. Failure of a vessel to meet the applicable USCG or ABSC standards would preclude its use as a casino.

USCG regulations also require us to prepare and follow certain security programs. In 2004, we implemented the American Gaming Association’s Alternative Security Program at our riverboat casinos and dockside facilities. The American Gaming Association’s Alternative Security Program is specifically designed to address maritime security requirements at riverboat casinos and their respective dockside facilities. Only portions of those regulations will apply to our riverboats inspected by ABSC. Changes to these regulations could adversely affect our business, financial condition and results of operations.

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We draw a significant percentage of our customers from limited geographic regions. Events adversely impacting the economy or these regions, including public health outbreaks and man-made or natural disasters, may adversely impact our business.

California, Fremont and Main Street Station draw a substantial portion of their customers from the Hawaiian market. For the year ended December 31, 2009, patrons from Hawaii comprised 66% of the room nights sold at California, 52% at Fremont and 54% at Main Street Station. Decreases in discretionary consumer spending, as well as an increase in fuel costs or transportation prices, a decrease in airplane seat availability, or a deterioration of relations with tour and travel agents, particularly as they affect travel between the Hawaiian market and our facilities, could adversely affect our business, financial condition and results of operations.

Our Las Vegas properties also draw a substantial number of customers from certain other specific geographic areas, including the Southern California, Arizona and Las Vegas local markets. Native American casinos in California and other parts of the United States have diverted some potential visitors away from Nevada, which has had and could continue to have a negative effect on Nevada gaming markets. In addition, due to our significant concentration of properties in Nevada, any man-made or natural disasters in or around Nevada, or the areas from which we draw customers to our Las Vegas properties, could have a significant adverse effect on our business, financial condition and results of operations. Each of our properties located outside of Nevada depends primarily on visitors from their respective surrounding regions and are subject to comparable risk.

The outbreak of public health threats at any of our properties or in the areas in which they are located, or the perception that such threats exist, including pandemic health threats, such as the avian influenza virus, SARS, or the H1N1 flu, among others, could have a significant adverse affect on our business, financial condition and results of operations; likewise, adverse economic conditions that affect the national or regional economies in which we operate, whether resulting from war, terrorist activities or other geopolitical conflict, weather, general or localized economic downturns or related events or other factors, could have a significant adverse effect on our business, financial condition and results of operations.

In addition, to the extent that the airline industry is negatively impacted due to the effects of the recession, outbreak of war, public health threats, terrorist or similar activity, increased security restrictions or the public’s general reluctance to travel by air, our business, financial condition and results of operations could be adversely affected.

Energy price increases may adversely affect our cost of operations and our revenues.

Our casino properties use significant amounts of electricity, natural gas and other forms of energy. In addition, our Hawaiian air charter operation uses a significant amount of jet fuel. While no shortages of energy or fuel have been experienced to date, substantial increases in energy and fuel prices, including jet fuel prices, in the United States have, and may continue to, negatively affect our results of operations. The extent of the impact is subject to the magnitude and duration of the energy and fuel price increases, of which the impact could be material. In addition, energy and gasoline price increases could result in a decline of disposable income of potential customers, an increase in the cost of travel and a corresponding decrease in visitation and spending at our properties, which could have a significant adverse effect on our business, financial condition and results of operations.

Certain of our stockholders own large interests in our capital stock and may significantly influence our affairs.

William S. Boyd, our Executive Chairman of the Board of Directors, together with his immediate family, beneficially owned approximately 38% of the Company’s outstanding shares of common stock as of December 31, 2009. As such, the Boyd family has the ability to significantly influence our affairs, including the election of members of our Board of Directors and, except as otherwise provided by law, approving or disapproving other matters submitted to a vote of our stockholders, including a merger, consolidation, or sale of assets.

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Some of our hotels and casinos are located on leased property. If we default on one or more leases, the applicable lessors could terminate the affected leases and we could lose possession of the affected hotel and/or casino.

We lease certain parcels of land on which The Orleans, Suncoast, Sam’s Town Tunica, Treasure Chest and Sam’s Town Shreveport are located. In addition, we lease other parcels of land on which portions of the California and the Fremont are located. If we were to default on any one or more of these leases, the applicable lessors could terminate the affected leases and we could lose possession of the affected land and any improvements on the land, including the hotels and casinos. This would have a significant adverse effect on our business, financial condition and results of operations as we would then be unable to operate all or portions of the affected facilities.

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We have a significant amount of indebtedness.

We had total consolidated long-term debt, net of current maturities, of approximately $2.6 billion at December 31, 2009. If we pursue, or continue to pursue, any expansion, development, investment or renovation projects, we expect that our long-term debt will substantially increase in connection with related capital expenditures. This indebtedness could have important consequences, including:

• difficulty in satisfying our obligations under our current indebtedness;

• increasing our vulnerability to general adverse economic and industry conditions;

• requiring us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, which would reduce the availability of our cash flows to fund working capital, capital expenditures, expansion efforts and other general corporate purposes;

• limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

• placing us at a disadvantage compared to our competitors that have less debt; and

• limiting, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds. Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could have a significant adverse effect on our business, results of operations and financial condition.

Our debt instruments contain, and any future debt instruments likely will contain, a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things:

• incur additional debt, including providing guarantees or credit support;

• incur liens securing indebtedness or other obligations;

• dispose of assets;

• make certain acquisitions;

• pay dividends or make distributions and make other restricted payments;

• enter into sale and leaseback transactions;

• engage in any new businesses; and

• enter into transactions with our stockholders and our affiliates.

In addition, our bank credit facility requires us to maintain certain ratios, including a minimum interest coverage ratio of 2.00 to 1.00 and a total leverage ratio that adjusts over the life of the bank credit facility. Our future debt agreements could contain financial or other covenants more restrictive than those applicable under our existing instruments.

Our current debt service requirements on our bank credit facility primarily consist of interest payments on outstanding indebtedness. The bank credit facility is a $3.0 billion revolving credit facility that matures in May 2012. Subject to certain limitations, we may, at any time, without the consent of the lenders under our bank credit facility, request incremental commitments to increase the size of the bank credit facility, or request new commitments to add a term loan facility, by up to an aggregate amount of $1.0 billion. We believe that we are in compliance with the bank credit facility covenants as required including the Total Leverage Ratio, which was 6.18 to 1.00 at December 31, 2009.

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Debt service requirements under our current outstanding senior subordinated notes consist of semi-annual interest payments (based upon fixed annual interest rates ranging from 6.75% to 7.75%) and repayment of our senior subordinated notes due on December 15, 2012, April 15, 2014, and February 1, 2016 for each of our 7.75%, 6.75% and 7.125% senior subordinated notes, respectively.

In addition, Borgata has significant indebtedness which could affect its ability to pay dividends back to our Company. Borgata’s amended bank credit agreement allows for certain limited distributions to be made to its partners. Our distributions from Borgata were $60.1 million and $19.6 million during the years ended December 31, 2009 and 2008, respectively. Borgata has significant uses for its cash flows, including maintenance capital expenditures, interest payments, state income taxes and the repayment of debt. Borgata’s cash flows are primarily used for its business needs and are not generally available, except to the extent distributions are paid to us, to service our indebtedness. In addition, Borgata’s amended bank credit facility contains certain covenants, including, without limitation, various covenants: (i) requiring the maintenance of a minimum fixed charge coverage ratio; (ii) establishing a maximum permitted total leverage ratio; (iii) imposing limitations on the incurrence of additional indebtedness and liens; (iv) imposing limitations on transfers, sales and other dispositions; and (v) imposing restrictions on investments, dividends and certain other payments. In the event that Borgata fails to comply with its covenants, it may be prevented from making any distributions to us during such period of noncompliance. Borgata’s amend bank credit agreement matures in January 2011. We may not be able to refinance Borgata’s indebtedness under the bank credit agreement on commercially reasonable terms, or at all.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures and expansion efforts will depend upon our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

It is unlikely that our business will generate sufficient cash flows from operations, or that future borrowings will be available to us under our bank credit facility, in amounts sufficient to enable us to pay our indebtedness as it matures and to fund our other liquidity needs. We believe that we will need to refinance all or a portion of our indebtedness at each maturity, and cannot provide assurances that we will be able to refinance any of our indebtedness, including our bank credit facility, on commercially reasonable terms, or at all. We may have to adopt one or more alternatives, such as reducing or delaying planned expenses and capital expenditures, selling assets, restructuring debt, or obtaining additional equity or debt financing or joint venture partners. These financing strategies may not be effected on satisfactory terms, if at all. In addition, certain states’ laws contain restrictions on the ability of companies engaged in the gaming business to undertake certain financing transactions. Some restrictions may prevent us from obtaining necessary capital.

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ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

Information relating to the location and general characteristics of our properties appears in tabular format under Part I, Item 1, Business – Properties, and is incorporated herein by reference.

As of December 31, 2009, some of our hotel casinos and development projects are located on leased property, including:

• The Orleans, located on 77 acres of leased land.

• Suncoast, located on 49 acres of leased land.

• California, located on 13.9 acres of owned land and 1.6 acres of leased land.

• Fremont, located on 1.4 acres of owned land and 0.9 acres of leased land.

• Sam’s Town Tunica, located on 272 acres of leased land.

• Treasure Chest, located on 14 acres of leased land.

• Sam’s Town Shreveport, located on 18 acres of leased land.

ITEM 3. Legal Proceedings

Copeland. Alvin C. Copeland, the sole shareholder (deceased) of an unsuccessful applicant for a riverboat license at the location of our Treasure Chest Casino (“Treasure Chest”), has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999 and 2000, Copeland unsuccessfully opposed the renewal of the Treasure Chest license and has brought two separate legal actions against Treasure Chest. In November 1993, Copeland objected to the relocation of Treasure Chest from the Mississippi River to its current site on Lake Pontchartrain. The predecessor to the Louisiana Gaming Control Board allowed the relocation over Copeland’s objection. Copeland then filed an appeal of the agency’s decision with the Nineteenth Judicial District Court. Through a number of amendments to the appeal, Copeland unsuccessfully attempted to transform the appeal into a direct action suit and sought the revocation of the Treasure Chest license. Treasure Chest intervened in the matter in order to protect its interests. The appeal/suit, as it related to Treasure Chest, was dismissed by the District Court and that dismissal was upheld on appeal by the First Circuit Court of Appeal. Additionally, in 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chest’s license, an award of the license to him, and monetary damages. The suit was dismissed by the trial court, citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the Louisiana First Circuit Court of Appeal. On September 21, 2002, the First Circuit Court of Appeal reversed the trial court’s decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was partially denied. The Court of Appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds. There was no activity regarding this matter during 2005 and 2006, and the case was set to be dismissed by the court for failure to prosecute by the plaintiffs in mid-May 2007; however on May 1, 2007, the plaintiff filed a motion to set a hearing date related to the motions to dismiss. The hearing was scheduled for September 10, 2007, at which time all parties agreed to postpone the hearing indefinitely. The hearing has not yet been rescheduled. Mr. Copeland has since passed away and his son, the executor of his estate, has petitioned the court to be substituted as plaintiff in the case. On June 9, 2009, the plaintiff filed to have the exceptions set for hearing. The parties decided to submit the exceptions to the court on the previously filed briefs. The court has yet to issues a ruling. We currently are vigorously defending the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it could have a significant adverse effect on our business, financial condition and results of operations.

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We are also parties to various legal proceedings arising in the ordinary course of business. We believe that, except for the Copeland matter discussed above, all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position or results of operations

ITEM 4. Reserved

ITEM 4A. Executive Officers of the Registrant

The following table sets forth the non-director executive officers of Boyd Gaming Corporation as of March 1, 2010:

Name	Age	Position
Paul J. Chakmak	45	Executive Vice President and Chief Operating Officer
Brian A. Larson	54	Executive Vice President, Secretary and General Counsel
Josh Hirsberg	48	Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
Ellie J. Bowdish	42	Vice President and Chief Accounting Officer (Principal Accounting Officer)

Paul J. Chakmak has served as our Executive Vice President and Chief Operating Officer effective January 1, 2008. Mr. Chakmak joined us in February 2004 as our Senior Vice President – Finance and Treasurer, and was appointed Executive Vice President, Chief Financial Officer and Treasurer on June 1, 2006.

Brian A. Larson has served as our Executive Vice President and General Counsel since January 1, 2008 and as our Secretary since February 2001. Mr. Larson became our Senior Vice President and General Counsel in January 1998. He became our Associate General Counsel in March 1993 and Vice President—Development in June 1993.

Josh Hirsberg joined the Company as our Senior Vice President, Chief Financial Officer and Treasurer effective January 1, 2008. Prior to his position with the Company, Mr. Hirsberg served as the Chief Financial Officer for EdgeStar Partners, a Las Vegas-based resort development concern. He previously held several senior-level finance positions in the gaming industry, including Vice President and Treasurer for Caesars Entertainment and Vice President, Strategic Planning and Investor Relations for Harrah’s Entertainment.

Ellie J. Bowdish joined the Company as our Vice President and Chief Accounting Officer effective December 1, 2009. Ms. Bowdish previously served in different positions with First Data Corporation, an electronic commerce and payment solutions company, most recently as the Vice President, Legal and Business Services, of the Prepaid Services business segment and previously as the Vice President, Controller, of the Payment Services business segment.

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Part II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on the New York Stock Exchange under the symbol “BYD.” Information with respect to sales prices and record holders of our common stock is set forth below.

Market Information

The following table sets forth, for the calendar quarters indicated, the high and low sales prices of our common stock as reported by the New York Stock Exchange.

	High		Low
2008
First Quarter	$	34.10	$	18.27
Second Quarter		21.58		12.00
Third Quarter		14.92		7.90
Fourth Quarter		9.78		2.81
2009
First Quarter	$	6.27	$	2.96
Second Quarter		12.86		3.58
Third Quarter		12.77		7.44
Fourth Quarter		11.62		6.93

On March 1, 2010, the closing sales price of our common stock on the NYSE was $7.67 per share. On that date, we had approximately 917 holders of record of our common stock and our directors and executive officers owned approximately 40% of the outstanding shares. There are no other classes of common equity outstanding.

Dividends

Dividends are declared at the discretion of our Board of Directors. In July 2008, our Board of Directors suspended the payment of a quarterly dividend for future periods. We are subject to certain limitations regarding the payment of dividends, such as restricted payment limitations related to our outstanding notes and our bank credit facility. The following table sets forth the cash dividends declared and paid during the three year period ended December 31, 2009.

Payment Date	Record Date	Dividend per Share
March 1, 2007	February 9, 2007	$	0.135
June 1, 2007	May 11, 2007		0.150
September 4, 2007	August 17, 2007		0.150
December 3, 2007	November 16, 2007		0.150
March 3, 2008	February 18, 2008		0.150
June 2, 2008	May 14, 2008		0.150

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Share Repurchase Program

In July 2008, our Board of Directors authorized an amendment to our existing share repurchase program to increase the amount of common stock available to be repurchased to $100 million. We are not obligated to purchase any shares under our stock repurchase program. Through December 31, 2009, we have repurchased $6.9 million in shares of our common stock under the share repurchase program and are authorized to repurchase up to an additional $92.1 million in shares.

Subject to applicable corporate securities laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. Purchases under our stock repurchase program can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund the repurchases under the stock repurchase program with existing cash resources and availability under our bank credit facility.

We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding notes and our bank credit facility.

No purchases under our stock repurchase program were made during the fourth quarter of the fiscal year ended December 31, 2009. In the future, we may acquire our debt or equity securities, through open market purchases, privately negotiated transactions, tender offers, exchange offers, redemptions or otherwise, upon such terms and at such prices as we may determine.

Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, of this Annual Report on Form 10-K contains information concerning securities authorized for issuance under equity compensation plans.

ITEM 6. Selected Financial Data

We have derived the selected consolidated financial data presented below as of December 31, 2009 and 2008 and for the three years in the period ended December 31, 2009 from the audited consolidated financial statements contained elsewhere in this Annual Report on Form 10-K. The selected consolidated financial data presented below as of December 31, 2007 and as of and for the years ended December 31, 2006 and 2005 has been derived from our audited consolidated financial statements not contained herein. Operating results for the periods presented below are not necessarily indicative of the results that may be expected for future years.

	Year Ended December 31,
	2009 (a)		2008 (b)			2007 (c)		2006 (d)		2005 (e)
			(In thousands, except per share data)
OPERATING DATA
Net revenues	$	1,640,986	$	1,780,967		$	1,997,119	$	2,192,634	$	2,161,085
Operating income (loss)		156,193		(153,429	)		354,232		404,650		405,687
Income (loss) from continuing operations before cumulative effect of a change in accounting principle		4,241		(223,005	)		120,908		161,348		164,368
PER SHARE DATA - DILUTED
Income (loss) from continuing operations before cumulative effect of a change in accounting principle	$	0.05	$	(2.54	)	$	1.36	$	1.80	$	1.82
Weighted average diluted common shares		86,517		87,854			88,608		89,593		90,507
Cash dividends declared per common share	$	—	$	0.30 $			0.585	$	0.53	$	0.46

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	December 31,
	2009		2008		2007		2006		2005
	(In thousands)
BALANCE SHEET DATA
Total assets	$	4,459,957	$	4,605,427	$	4,487,596	$	3,901,299	$	4,424,953
Long-term debt, net of current maturities		2,576,911		2,647,058		2,265,929		2,133,016		2,552,795
Total stockholders’ equity		1,156,369		1,143,522		1,385,406		1,109,952		1,098,004

Note references below are to the footnotes accompanying our consolidated financial statements included in Part IV, Item 15, Exhibits and Financial Statement Schedules of this Annual Report on Form 10-K.

(a) 2009 includes the following pre-tax items: $41.8 million of write-downs and other charges, net (see Note 13), $17.8 million of preopening expenses (see Note 1), a $15.3 million gain on the early retirement of debt (see Note 8), a $14.3 million gain related to our share of property damage insurance recoveries at Borgata (see Note 4), $8.9 million of retroactive interest expense related to our contingent payment for Dania Jai-Alai (see Note 6), and $1.8 million of accelerated interest expense related to our bank credit facility amendment (see Note 8).

(b) 2008 includes the following pre-tax items: $385.5 million of write-downs and other charges, net (see Note 13), a $28.6 million gain on the early retirements of debt (see Note 8), $20.3 million of preopening expenses (see Note 1), and a $3.7 million one-time permanent unfavorable tax adjustment related to non-recurring state income tax valuation allowances (see Note 9).

(c) 2007 includes the following pre-tax items: $22.8 million of preopening expenses (see Note 1), a $16.9 million loss on the early retirements of debt (see Note 8), $12.1 million of write-downs and other charges, net (see Note 13), $3.2 million for a one-time retroactive property tax adjustment at Blue Chip (see Note 10) and $1.3 million of one-time permanent tax benefits resulting from a charitable contribution and a state income tax credit (see Note 9).

(d) 2006 includes the following pre-tax items: $20.6 million of preopening expenses, $11.2 million of accelerated depreciation related to the Stardust and related assets, $8.8 million of write-downs and other charges, net, and $6.7 million for a one-time retroactive gaming tax assessment at Par-A-Dice.

(e) 2005 includes the following pre-tax items: $64.6 million of write-downs and other charges, net, a $17.5 million loss on the early retirement of debt, $7.7 million of preopening expenses and $1.5 million of retention tax credits related to the hurricanes that impacted our Louisiana operations.

The following is a listing of significant events affecting our business during the five-year period ended December 31, 2009:

• We began construction on Echelon, our multibillion dollar Las Vegas Strip development project, in the second quarter of 2007. Echelon is located on the former Stardust site, which we closed in November 2006 and demolished in March 2007. On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of our Echelon development project. Due to the continued deterioration in credit market conditions and the economic outlook, it is unlikely that we will resume construction for three to five years. Nonetheless, we remain committed to having a meaningful presence on the Las Vegas Strip. During the delay in construction, we intend to consider alternative development options for Echelon, which may include developing the project in phases, alternative capital structures for the project, scope modifications to the project, or additional strategic partnerships, among others. We can provide no assurances as to when, or if, construction will resume on the project, or if we will be able to obtain alternative sources of financing for the project.

• Our new hotel at Blue Chip Casino, Hotel & Spa opened on January 22, 2009. This expansion added a 22-story hotel, which includes 300 guest rooms, a spa and fitness center, additional meeting and event space, as well as new dining and nightlife venues to the existing property structures.

• In 2008, we completed the launch of our nationwide branding initiative and loyalty program. Players are now able to use their “Club Coast” or “B Connected” cards to earn and redeem points at nearly all of our wholly-owned Boyd Gaming property in Nevada, Illinois, Indiana, Louisiana and Mississippi.

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• The Water Club, an 800-room boutique hotel expansion project at Borgata, opened in June 2008. The expansion includes five swimming pools, a state-of-the-art spa, additional meeting and retail space, and a separate porte-cochere and front desk.

• In February 2007, we completed our exchange of the Barbary Coast Hotel and Casino and its related 4.2 acres of land for approximately 24 acres located north of and contiguous to our Echelon development project on the Las Vegas Strip in a nonmonetary, tax-free transaction. The results of Barbary Coast are classified as discontinued operations for the year ended December 31, 2007.

• In October 2006, we sold the South Coast Hotel and Casino for total consideration of approximately $513 million, consisting of approximately $401 million in cash and approximately 3.4 million shares of our common stock valued at $112 million.

• In January 2006, we expanded our Blue Chip Casino Hotel & Spa through the construction of a single-level boat that allowed us to expand our casino. In connection with this expansion, we also added a new parking structure and enhanced the land-based pavilion.

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Boyd Gaming Corporation (the “Company,” “Boyd Gaming,” “we,” or “us”) is a diversified operator of 15 wholly-owned gaming entertainment properties and a 50% investment in one property. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Louisiana, Mississippi, Indiana and New Jersey, which we aggregate in order to present four Reportable Segments: (i) Las Vegas Locals, (ii) Downtown Las Vegas, (iii) Midwest and South, and (iv) our 50% interest in the limited liability company operating Borgata Hotel Casino & Spa in Atlantic City, New Jersey. In addition, on March 1, 2007, we acquired Dania Jai-Alai, where we operate a pari-mutuel jai-alai facility, and approximately 47 acres of related land located in Dania Beach, Florida. Furthermore, we own 85 acres of land on the Las Vegas Strip, where our Echelon development project is located.

Our main business emphasis is on slot revenues, which are highly dependent upon the volume and spending levels of customers at our properties, which affects our operating results. Gross revenues are one of the main performance indicators of our properties. Our properties have historically generated significant operating cash flow, with the majority of our revenue being cash-based. Our industry is capital intensive; we rely heavily on the ability of our properties to generate operating cash flow in order to repay debt financing and associated interest costs, pay income taxes, fund maintenance capital expenditures, and provide excess cash for future development, acquisitions, purchases of our debt or equity securities, and payment of dividends.

Overall Outlook

We continually work to position our Company for greater success by strengthening our existing operations and growing through capital investment and other strategic initiatives. For instance, in January 2009, we opened our new 22-story hotel at Blue Chip Casino, Hotel & Spa, which includes 300 guest rooms, a spa and fitness center, additional meeting and event space, as well as new dining and nightlife venues. In addition, Borgata’s second hotel, The Water Club, opened in June 2008. The Water Club is an 800-room hotel, featuring five swimming pools, a state-of-the-art spa, and additional meeting room space. In addition, we launched our nationwide branding initiative and loyalty program in 2008. Players are now able to use their “Club Coast” or “B Connected” cards to earn and redeem points at nearly all of our wholly-owned Boyd Gaming property in Nevada, Illinois, Indiana, Louisiana and Mississippi.

Due to a number of factors affecting consumers, including the declining global economy, constricting credit markets, reduced consumer spending, depressed home prices and new U.S. political leadership, the outlook for the gaming industry remains highly unpredictable. Because of these uncertain conditions, we have increasingly focused on managing our operating margins. Our present objective is to manage our cost and expense structure in order to endure the current deterioration in business volumes and maintain compliance with our debt covenants. Nonetheless, we intend to maintain a flexible capital structure for potential strategic transactions that we may undertake in the future.

Development Activities

On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of our multibillion dollar Echelon development project on the Las Vegas Strip. At such time, we did not anticipate the long-term effects of the economic recession and continued economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas Locals region; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. The credit markets have yet to show significant recovery, thereby rendering financing for this type of development unavailable. Based on our current outlook, we do not expect to resume construction for three to five years.

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Nonetheless, we remain committed to having a significant presence on the Las Vegas Strip. During the suspension period, we intend to consider alternative development options for Echelon, which may include developing the project in phases, alternative capital structures for the project, scope modifications to the project, or additional strategic partnerships, among others. We can provide no assurances as to when, or if, construction will resume on the project, or if we will be able to obtain alternative sources of financing for the project. As we develop and explore the viability of alternatives for the project, we will monitor these assets for recoverability. If we are subject to a non-cash write-down of these assets, it could have a material adverse impact on our consolidated financial statements.

As of December 31, 2009, we have incurred approximately $928 million in capitalized costs related to the Echelon project, including land. As part of our delay of the project, we expect to incur approximately $4 million of capitalized costs, principally related to the offsite fabrication of escalators, curtain wall and a skylight. In addition, we expect recurring project costs, consisting primarily of security, property taxes, rent and insurance, of approximately $10 million per annum that will be charged to preopening or other expense as incurred during the project’s suspension period. These capitalized costs and recurring project costs are in addition to other contingencies with respect to our various material commitments.

In addition to the expansion projects mentioned above, we regularly evaluate opportunities for growth through the development of gaming operations in existing or new markets, along with opportunities associated with acquiring other gaming entertainment facilities.

Results of Operations

Years ended December 31, 2009, 2008, and 2007

Summary of Operating Results

Generally, we believe that our operating results for both of the years ended December 31, 2009 and 2008 have been adversely impacted by the weakened global economy. Disruptions in the global financial and stock markets and reduced levels of consumer spending have adversely impacted and may continue to adversely impact our financial results. We believe that recent economic conditions have led to a shift in spending from discretionary items to fundamental costs like housing. We continue to be negatively impacted by a weak housing market and significant declines in housing prices and related home equity; higher airline fares and fees which impact travel costs; increases in unemployment; and ongoing volatility in the equity markets.

The following provides a summary of certain key operating results:

	Year Ended December 31,
	2009		2008			2007
Net revenues	$	1,640,986	$	1,780,967		$	1,997,119
Operating income (loss)		156,193		(153,429	)		354,232
Net income (loss)		4,241		(223,005	)		303,035

Based on the impact of these current economic conditions, we believe that we will continue to experience reduced consumer spending, resulting in lower than historical gaming volumes, room occupancy and rates, and corresponding lower profitability.

Significant specific events that affected our results for the year ended December 31, 2009, as compared to 2008, or that may affect our future results, are described below:

• Write-downs and other charges totaling $41.8 million during 2009, principally consisting of non-cash impairment charges to write-down a joint venture investment and certain portions of our goodwill. See Results of Operations –Write-downs and Other Charges, Net below for a more detailed discussion related to our write-downs and other charges.

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• A $15.3 million gain on the early retirements of portions of our senior subordinated notes in 2009, which had a positive impact on income from continuing operations, but was less than the $28.6 million gain recorded in 2008.

• Our results during 2009 were positively impacted by a $14.3 million gain which represented our share of insurance recoveries resulting from property damage at The Water Club at Borgata.

Significant specific events that affected our results for the year ended December 31, 2008, as compared to 2007, or that may affect our future results, are described below:

• Write-downs and other charges totaling $385.5 million during 2008, principally consisting of non-cash impairment charges to write-down certain portions of our goodwill, intangible assets and other long-lived assets to their fair value. See Results of Operations –Write-downs and Other Charges, Net below for a more detailed discussion related to our write-downs and other charges.

• Increased competition near Blue Chip and, to a lesser extent, construction disruption at the property, which impacted our results.

• A $28.6 million gain on the early retirements of portions of our 7.75% and 6.75% senior subordinated notes in the year ended December 31, 2008, which had a positive impact on income from continuing operations. During the year ended December 31, 2007, we recorded a loss of $16.9 million on the early retirements of our $250 million principal amount 8.75% senior subordinated notes and our former bank credit facility.

Revenues by Category

We derive the majority of our gross revenues from our gaming operations, which produced approximately 75%, 74%, and 75% of gross revenues for the years ended December 31, 2009, 2008, and 2007, respectively. Food and beverage gross revenues, which produced approximately 13%, 13%, and 12% of gross revenues for the years ended December 31, 2009, 2008, and 2007, respectively, represent the next most significant revenue source, followed by room and other, which separately contributed less than 10% of gross revenues during these periods.

	Year Ended December 31,
	2009			Percentage Change		2008			Percentage Change		2007
	(In thousands)
REVENUES
Gaming	$	1,372,091		-7	%	$	1,477,476		-11	%	$	1,666,422
Food and beverage		229,374		-9	%		251,854		-8	%		273,036
Room		122,305		-13	%		140,651		-8	%		153,691
Other		100,396		-15	%		117,574		-9	%		128,870
	$	1,824,166		-8	%	$	1,987,555		-11	%	$	2,222,019
COSTS AND EXPENSES
Gaming	$	664,739		-4	%	$	690,847		-8	%	$	752,047
Food and beverage		125,830		-13	%		144,092		-12	%		163,775
Room		39,655		-10	%		43,851		-6	%		46,574
Other		77,840		-13	%		89,222		-6	%		95,401
	$	908,064		-6	%	$	968,012		-8	%	$	1,057,797
MARGINS
Gaming		51.55	%				53.24	%				54.87	%
Food and beverage		45.14	%				42.79	%				40.02	%
Room		67.58	%				68.82	%				69.70	%
Other		22.47	%				24.11	%				25.97	%

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Gaming

Gaming revenues are significantly comprised of the net win from our slot machine operations and to a lesser extent from table games win. Overall, the $105.4 million, or 7% decrease in gaming revenues during the year ended December 31, 2009 compared to 2008 is due to an 8.6% decrease in slot handle and 9.6% decrease in our table games drop, both of which more than offset a slight increase in slot win percentage during the year. The $188.9 million or 11% decrease in gaming revenue from the year ended December 31, 2008 compared to 2007 is due to a 10.6% decrease in slot handle and a 9.3% decrease in our table games drop. Correspondingly, the number of slot machines and table games at our properties were down approximately 3.7% and 3.6%, respectively, at December 31, 2009 compared to December 31, 2008, and approximately 1.8% and 3.7%, respectively at December 31, 2008 compared to December 31, 2007. Margins were slightly less negatively impacted by the corresponding declines in slot machine and table games volumes, due to cost containment efforts. As noted earlier, we believe the decrease in gaming volumes reflect the ongoing constraints in consumer spending resulting from the weakened economy.

Food and Beverage

Food and beverage revenues declined $22.5 million, or 9% during the year ended December 31, 2009 as compared to 2008, and $21.2 or 8% during the year ended December 31, 2008 compared to 2007. Sales were adversely impacted by lower visitation, declining customer discretionary spending and decreased occupancy at our properties, trending from 2007 through 2009. Margins slightly improved during these respective periods due to cost variability and lower consumption and inventory levels.

Room

Room rates and margins have declined year-over-year due to decreased occupancy and lower average room rates, resulting in a decrease of $18.3 million, or 13% during the year ended December 31, 2009 as compared to 2008, and a decrease of $13.0 or 8% during the year ended December 31, 2008 as compared to 2007. The average daily rates have trended downward and occupancy rates have consistently declined throughout the entire period presented.

Revenues by Reportable Segment

The following table presents our gross revenues, by Reportable Segment (region), for the three years ended December 31, 2009, 2008, and 2007.

	Year Ended December 31,
	2009		2008		2007
	(In thousands)
Gross Revenues
Las Vegas Locals	$	713,354	$	858,241	$	943,117
Downtown Las Vegas		251,000		263,005		277,660
Midwest and South		852,209		857,650		993,112
Reportable Segment Gross Revenues		1,816,563		1,978,896		2,213,889
Other		7,603		8,659		8,130
Gross Revenues	$	1,824,166	$	1,987,555	$	2,222,019

During the year ended December 31, 2009, we continued to contend with a weak economy and a very cautious consumer, specifically in the Las Vegas Locals region. While visitation has stabilized at most of our properties during 2009, we continue to experience significant year-over-year declines in spend per visitor.

Significant factors that affected our Reportable Segment Gross Revenue for 2009, as compared to 2008, are listed below:

• Las Vegas Locals – declined 16.9% during the year ended December 31, 2009, as compared to the same period in 2008, due primarily to lower consumer spending and room rate pressures throughout the entire market, as the overall Las Vegas economy remains one of the hardest-hit metropolitan areas during this economic downturn.

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• Downtown Las Vegas – decreased 4.6% during the year ended December 31, 2009, as compared to the same period in 2008, primarily due to decline in consumer spend and lower pricing on our Hawaiian charter operations.

• Midwest and South – decreased a slight 0.6% during the year ended December 31, 2009, as compared to the same period in 2008, primarily due to declines in gross revenue at two of our Louisiana properties, which were offset somewhat by growth in gross revenues at Blue Chip and Delta Downs.

Significant factors that affected our Reportable Segment Gross Revenues for 2008, as compared to 2007, are listed below:

• Las Vegas Locals – the 9.0% decline was due primarily to the reduction in consumer spending as a result of the economic recession, which has caused significant declines in the local housing market and rising unemployment, which have adversely impacted consumer spending.

• Downtown Las Vegas – the 5.3% decline was due to the reduction in consumer spending as a result of the economic recession and lower Hawaiian charter operations.

• Midwest and South – the 13.6% decline was principally due to the impact of the economic recession on our properties throughout this segment.

Adjusted EBITDA by Reportable Segment

We determine each of our wholly-owned properties’ profitability based upon Property Adjusted EBITDA, which represents each property’s earnings before interest expense, income taxes, depreciation and amortization, deferred rent, preopening expenses, share-based compensation expense, and write-downs and other charges, net, as applicable. Reportable Segment Adjusted EBITDA is the aggregate sum of the Property Adjusted EBITDA for each of the properties included in our Las Vegas Locals, Downtown Las Vegas, and Midwest and South segments and also includes our share of Borgata’s operating income before net amortization, preopening and other items.

During the year ended December 31, 2009, we continued to refine our cost structure, developing a more cost-efficient business model to compete more effectively in these economic conditions. We saw positive results from these efforts, as operating margins show improvements over the prior year.

We have aggregated certain of our properties in order to present the Reportable Segments shown in the table below.

	Year Ended December 31,
	2009		2008		2007
	(In thousands)
Reportable Segment Adjusted EBITDA
Las Vegas Locals	$	155,336	$	218,591	$	275,510
Downtown Las Vegas		46,102		40,657		52,127
Midwest and South		165,534		169,063		214,605
Our share of Borgata’s operating income before net amortization, preopening and other items		59,470		60,520		86,470

Significant factors that affected our Reportable Segment Adjusted EBITDA for 2009, as compared to 2008, are listed below:

• Las Vegas Locals – declined 28.9% during the year ended December 31, 2009, as compared to the same period in 2008, due primarily to the impact of lower levels consumer spending.

• Downtown Las Vegas – increased 13.4% during the year ended December 31, 2009, as compared to the same period in 2008, primarily due to cost control and containment measures.

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• Midwest and South – decreased 2.1% during the year ended December 31, 2009, as compared to the same period in 2008, primarily due to declines in consumer spending, offset by aggressive efforts to control costs throughout the region.

• Our share of Borgata – see Operating Results for Borgata – below for a discussion of the decrease in our share of Borgata’s operating income before net amortization, preopening and other items.

Significant factors that affected our Reportable Segment Adjusted EBITDA for 2008, as compared to 2007, are listed below:

• Las Vegas Locals – the 20.7% decline was due primarily to the reduction in gross revenues as a result of the economic recession, which has caused significant declines in the local housing market and rising unemployment, which have adversely impacted consumer spending.

• Downtown Las Vegas – the 22.0% decline was due to the reduction in gross revenues as a result of the economic recession, as well as a significant reduction in commercial airline seat capacity from Hawaii, which adversely affected leisure travel from this primary feeder market.

• Midwest and South – the 21.2% decline was principally due to the reduction in gross revenues at Blue Chip, which was materially impacted by increased competition and construction disruption, as well as the impact of the economic recession on our properties throughout this segment.

• Our share of Borgata – see Operating Results for Borgata –below for a discussion of the decrease in our share of Borgata’s operating income before net amortization, preopening and other items.

Operating Results for Borgata

The following table sets forth, for the periods indicated, certain operating data for Borgata. We use the equity method to account for our investment in Borgata.

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Gross revenues	$	990,601		$	1,044,463		$	1,034,679
Operating income		146,847			115,308			168,868
Total non-operating expenses		(38,606	)		(32,019	)		(27,536	)
Net income		108,241			83,289			141,332

The following table reconciles the presentation of our share of Borgata’s operating income.

	Year Ended December 31,
	2009			2008		2007
	(In thousands)
Operating income from Borgata as reported on our consolidated statements of operations	$	72,126		$	56,356	$	83,136
Net amortization expense related to our investment in Borgata		1,298			1,298		1,298
Our share of Borgata’s operating income		73,424			57,654		84,434
Our share of Borgata’s preopening expenses		349			2,785		1,558
Our share of Borgata’s other items and write-downs, net		(14,303	)		81		478
Our share of Borgata’s operating income before net amortization, preopening and other items	$	59,470		$	60,520	$	86,470

Our share of Borgata’s operating income before net amortization, preopening and other items decreased 1.7% during the year ended December 31, 2009, as compared to the same period in 2008, which excludes the effect from our $14.4 million share of the gain related to The Water Club insurance settlement, as discussed above. Overall, Borgata’s gross revenues have decreased 5.2% during the year ended December 31, 2009 as compared to 2008, which reflects the overall decline in consumer spending globally, the heightened competition in Atlantic City, specifically as well as the late year effects of the severe winter storms making travel extremely difficult throughout the entire Northeast.

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Our share of Borgata’s operating income before net amortization, preopening and other expenses decreased 30.0% in 2008, as compared to 2007. The decline was primarily due to the economic recession, the heightened competitive environment in Atlantic City as a result of new competition from surrounding jurisdictions, specifically slot operations in Pennsylvania, the addition of new hotel capacity in the Atlantic City market, and higher operating costs related to the opening of The Water Club.

Other Costs and Expenses

The following costs and expenses, as presented in our consolidated statements of operations, are further discussed below:

	Year Ended December 31,
	2009		2008		2007
	(In thousands)
Selling, general and administrative	$	284,937	$	299,662	$	310,926
Maintenance and utilities		92,296		95,963		96,278
Depreciation and amortization		164,427		168,997		165,959
Corporate expense		47,617		52,332		60,143
Preopening expenses		17,798		20,265		22,819
Write-downs and other charges, net		41,780		385,521		12,101

Selling, general and administrative

Selling, general and administrative expenses, as a percentage of gross revenues, were fairly consistent at 15.6%, 15.1% and 14.0% during the years ended December 31, 2009, 2008 and 2007, respectively, due to our ongoing cost containment efforts.

Maintenance and Utilities

Maintenance and utilities expenses were relatively consistent during the years ended December 31, 2009, 2008 and 2007, respectively, as no major maintenance projects were undertaken in any year within that period. The incremental increase in maintenance and utilities, as a percentage of gross revenues of 5.1%, 4.8% and 4.3%, during the years ended December 31, 2009, 2008 and 2007, respectively, reflects an overall increase in energy costs.

Depreciation and Amortization

Depreciation and amortization expense remained relatively flat during the year ended December 31, 2009, as compared to 2008, as there were no significant expansion capital expenditures that were placed into service during 2009, except the new hotel at Blue Chip in January. The increased depreciation of this new building was offset by other fully depreciated assets. Depreciation and amortization expense remained stable during the year ended December 31, 2008, as compared to 2007, as there were no significant expansion capital expenditures that were placed into service during 2008.

Corporate Expense

Corporate expense represents unallocated payroll, professional fees, and various other expenses that are not directly related to our casino hotel operations, in addition to the corporate portion of share-based compensation expense. As part of our cost containment efforts, corporate expense has decreased from the year ended December 31, 2008 to the year ended December 31, 2009. During the year ended December 31, 2007, we commenced design work on our new consolidated players’ club program in order to build and reward customer loyalty and drive cross-property visitation. The incrementally higher corporate expense in 2007 is due, in part, to the initial, up-front design related expenses incurred for the launch of our nationwide branding initiative and loyalty program.

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Preopening Expenses

We expense certain costs of start-up activities as incurred. During the years ended December 31, 2009, 2008 and 2007, we recorded preopening expenses related to our Echelon development project, our new hotel and expansion project at Blue Chip, our expansion project at Dania Jai-Alai, which we indefinitely postponed in February 2008, and our efforts to develop gaming activities in other jurisdictions.

In 2009, preopening expense related to the following items:

• $16.1 million for our Echelon development project;

• $1.4 million for the new hotel at Blue Chip; and

• $0.3 million for other projects.

In 2008, preopening expenses related to the following items:

• $16.3 million for our Echelon development project;

• $1.3 million for the new hotel at Blue Chip;

• $0.9 million for the Dania Jai-Alai project; and

• $1.8 million for other projects.

In 2007, preopening expenses related to the following items:

• $15.6 million for our Echelon development project;

• $5.3 million for the Dania Jai-Alai project; and

• $1.9 million for other projects.

Write-downs and Other Charges, Net

In 2009, write-downs and other charges, net, primarily consist of the following:

• Due to the circumstances regarding the final development plan of Echelon, we reviewed our former investment in the Morgans joint venture for impairment. Considering the subsequent mutual termination of this joint venture, certain of our contributions, primarily related to the architectural and design plans, will ultimately not be realizable, as a result, we recorded an other-than-temporary non-cash impairment charge of $13.5 million during the year ended December 31, 2009 related to such costs.

• In conjunction with an amendment to the Dania Jai-Alai purchase agreement to settle the contingent payment prior to the satisfaction of the legal conditions, we recorded the remaining $28.4 million of the $75 million contingent liability as an additional cost of the acquisition (goodwill). We tested the goodwill for recoverability, which resulted in a non-cash impairment charge of $28.4 million.

In 2008, write-downs and other charges, net, primarily consist of the following:

• An aggregate of $290.2 million in non-cash impairment charges to write-down certain portions of our goodwill, intangible assets and other long-lived assets to their fair value at December 31, 2008. The impairment tests for these assets were principally due to the decline in our stock price that caused our book value to exceed our market capitalization, which was an indication that these assets may not be recoverable. The primary reason for these impairment charges related to the ongoing recession, which caused us to reduce our estimates for projected cash flows, reduced overall industry valuations, and caused an increase in discount rates in the credit and equity markets.

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• An $84.0 million non-cash impairment charge principally related to the write-off of Dania Jai-Alai’s intangible license right, following our decision to indefinitely postpone redevelopment plans to operate slot machines at the facility.

• Hurricane and related expenses of $3.0 million were incurred as a result of damages from the Gulf Coast hurricanes at Treasure Chest and Delta Downs. The property damage incurred by each of the properties did not meet our insurance deductibles; therefore, no claims were filed.

In 2007, write-downs and other charges, net, primarily consist of the following:

• In connection with our Echelon development project on the Las Vegas Strip, we closed the Stardust on November 1, 2006 and demolished the property in March 2007. During 2007, we recorded $11.1 million in property closure costs, the majority of which represents demolition and rubble removal costs.

• We incurred $0.9 million of acquisition-related expenses in connection with our purchase of Dania Jai-Alai on March 1, 2007.

Other Expenses

Interest Expense

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Interest costs	$	123,628		$	142,645		$	159,732
Effects of interest rate swaps		23,580			5,168			(3,499	)
Less:
Capitalized interest		378			37,667			18,060
Interest income		6			1,070			119
Interest cost related to discontinued operations		—			—			600
Interest expense, net	$	146,824		$	109,076		$	137,454
Average note payable and debt balances	$	2,727,126		$	2,485,990		$	2,183,684
Average interest rates		5.4	%		5.9	%		7.1	%

Interest expense, net increased during the year ended December 31, 2009, as compared to 2008, due to a greater impact resulting from higher average note payable and outstanding debt balances, as well as an increase from the effects of our interest rate swaps. This increase was offset by lower average interest rates on our bank credit facility. There was a relatively minor amount of interest capitalized during the year ended December 31, 2009, as compared to 2008, as the Blue Chip addition was completed in January, and our development efforts at Echelon had been suspended since August 2008. Additionally, interest expense during the year ended December 31, 2009 was increased by the interest portion of $8.9 million related to the contingent payment for the January 2009 amendment to the purchase agreement resulting in the finalization of our purchase price for Dania Jai-Alai. Also, incremental interest expense of approximately $2 million was recorded during the year ended December 31, 2009 to ratably reduce the amortization of deferred loan fees related to the reduction in borrowing capacity under our amended bank credit facility. At December 31, 2009, 55% of our debt was based upon variable interest compared to 43% of our debt at December 31, 2008

As of December 31, 2009, we are a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500 million, whereby we receive payments based upon the three-month LIBOR and make payments based upon a stipulated fixed rate. During the year ended December 31, 2009, the effect of our swaps increased our interest expense by $23.6 million, as market interest rates during the period were significantly lower than the 5.1% weighted-average fixed rate associated with these swaps as of December 31, 2009.

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Despite the increase in our average debt balance, interest costs decreased during the year ended December 31, 2008, as compared to 2007, principally due to a decline in market interest rates that reduced our average borrowing rate to 5.9%. Additionally, interest capitalized during the year ended December 31, 2008 increased, and offset expense, due to the improvements related to the new hotel at Blue Chip and the development of Echelon. At December 31, 2008, 43% of our debt was based upon variable interest compared to 35% of our debt at December 31, 2007.

Included in the income (loss) from discontinued operations during 2007 is an allocation of interest expense related to $401 million of debt that was repaid as a result of the South Coast Hotel and Casino disposition, as well as other consolidated interest based on the ratio of: (i) the net assets of our discontinued operations less the debt repaid as a result of the South Coast disposition, to (ii) the sum of total consolidated net assets and consolidated debt of the Company, other than the debt repaid as a result of the disposition. With the February 2007 completion of the Barbary Coast exchange transaction, there were no further allocations of interest to discontinued operations from the South Coast and Barbary Coast transactions.

Loss (Gain) on Early Retirements of Debt

During the year ended December 31, 2009, we purchased and retired $105.3 million principal amount of our senior subordinated notes. The total purchase price of the notes was approximately $89.5 million, resulting in a gain of approximately $15.3 million, net of associated deferred financing fees. The transactions were funded by availability under our bank credit facility.

During the year ended December 31, 2008, we purchased and retired $146.5 million principal amount of our senior subordinated notes. The total purchase price of the notes was approximately $116.5 million, resulting in a gain of approximately $28.6 million, net of associated deferred financing fees. The transactions were funded by availability under our bank credit facility.

On April 16, 2007, we redeemed our $250 million aggregate principal amount of 8.75% senior subordinated notes that were originally due to mature in April 2012. In connection with the redemption of these notes, we terminated our $50 million notional amount fixed-to-floating interest rate swap. During 2007, we recorded a $12.5 million loss on the early retirement of these notes and related interest rate swap.

Change in Value of Derivative Instruments

During the year ended December 31, 2007, we had certain interest rate swaps that we did not designate or otherwise qualify for hedge accounting; therefore, the decline in the fair value of these interest rate swaps of $1.1 million was recorded on our consolidated statements of operations for the year ended December 31, 2007. In July 2007, we terminated all of our interest rate swaps that we did not designate or qualify for hedge accounting. In addition, we entered into forward-starting interest rate swaps with an aggregate notional amount of $750 million to hedge the variability in the cash flows of our floating rate borrowings through June 30, 2011. We have designated and qualified these forward-starting swaps as cash flow hedges in an effort to limit the impact of the change in the market value of these interest rate swaps on our future operating results. We are exposed to credit loss in the event of nonperformance by the counterparties to our interest rate swap agreements; however, we believe that this risk is minimized because we monitor the credit ratings of the counterparties to the agreements.

Other Non-Operating Expenses from Borgata

Borgata’s other non-operating expenses consist of the following:

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Interest expense, net	$	(27,668	)	$	(29,049	)	$	(31,194	)
State income tax (provision) benefit		(10,938	)		(2,970	)		3,658
Other non-operating expenses	$	(38,606	)	$	(32,019	)	$	(27,536	)
		50	%		50	%		50	%
Our share of other non-operating expenses	$	(19,303	)	$	(16,009	)	$	(13,768	)

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Interest expense is incurred based on borrowings under Borgata’s bank credit agreement. The decrease in interest expense during the year ended December 31, 2009 compared to 2008 is due to the combined impact of a reduction in average outstanding borrowings, coupled with a decrease in the blended interest rate under Borgata’s bank credit agreement, which were 2.7% and 4.2% at December 31, 2009 and 2008, respectively. The decrease in interest expenses during the year ended December 31, 2008, as compared to 2007, is primarily due to a decrease in the interest rate on the bank credit facility, which was 4.2% and 6.5% at December 31, 2008 and 2007, respectively. Interest capitalized also declined during the year ended December 31, 2008 as compared to 2007 to $8.8 million from $12.6 million in these periods, respectively.

The increase in state income tax provision during the year ended December 31, 2009 from 2008 is due to a corresponding increase in income and the ineligibility for the New Jersey state job tax credit in 2009. Based on New Jersey state income tax rules, Borgata is eligible for a refundable state tax credit under the New Jersey New Jobs Investment Tax Credit (“New Jobs Tax Credit”) because it made a qualified investment in a new business facility that created new jobs. The realization of the credit is contingent upon maintaining certain employment levels for employees directly related to the qualified investment as well as maintaining overall employment levels. Fluctuations in employment levels for any given year during the credit period may eliminate or reduce the credit. The total net credit related to Borgata’s original investment was approximately $75 million over a five-year period that ended in 2007. Incremental net credits related to Borgata’s public space expansion and hotel expansion are also available. Borgata recorded $5.0 million and $17.4 million, respectively, of net New Jobs Tax Credits in arriving at its state income tax benefit (provision) for the years ended December 31, 2008 and 2007, respectively.

Benefit from (Provision for) Income Taxes

The effective tax rate for continuing operations in 2009 was 20%, as compared to 11% in 2008, and 35% in 2007. The 2009 tax provision includes one-time permanent tax benefits of $3.4 million resulting from favorable audit treatment in connection with certain acquisition costs incurred in prior years and the reversal of interest accrued in connection with unrecognized tax benefits. The state tax provision was adversely impacted by changes in apportionment and exam settlements for approximately $1.7 million. Our state tax provision was also impacted by the geographic mix of our income. The 2008 benefit includes the tax effect of impairment charges and valuation allowances associated with certain state net operating losses. Additionally, the 2008 effective tax rate is materially impacted by the Coast Casinos goodwill impairment charge, which does not provide any tax benefit due to tax attributes attached to the goodwill in connection with the original Coast Casinos, Inc. acquisition. The 2007 tax provision includes one-time permanent tax benefits resulting from a charitable contribution and a state income tax credit.

Income from Discontinued Operations

Barbary Coast

On February 27, 2007, we completed our exchange of the Barbary Coast and its related 4.2 acres of land for a total of approximately 24 acres located north of and contiguous to our Echelon development project on the Las Vegas Strip in a nonmonetary, tax-free transaction with Harrah’s Operating Company, Inc., a subsidiary of Harrah’s Entertainment, Inc. (“Harrah’s”). Harrah’s purchased the 24-acre site in October 2006 from unrelated third parties for aggregate cash consideration of approximately $364 million. Upon the closing of this transaction, during the year ended December 31, 2007, we recorded a non-cash pre-tax gain from discontinued operations of approximately $285 million and wrote-off the $3.7 million carrying value of the Barbary Coast trademark, because, although we retained the trademark, we no longer have underlying cash flows to support its value.

Liquidity and Capital Resources

Working Capital

Historically, we have operated with minimal or negative levels of working capital in order to minimize borrowings and related interest costs under our bank credit facility. The bank credit facility generally provides any necessary funds for our day-to-day operations, interest and tax payments, as well as capital expenditures. On a daily basis, we evaluate our cash position and adjust the bank credit facility balance as necessary, by either borrowing or paying it down with excess cash. We also plan the timing and the amounts of our capital expenditures. We believe that our bank credit facility and cash flows from operating activities will be sufficient to meet our projected operating and

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maintenance capital expenditures for at least the next twelve months. The source of funds for our development projects is derived primarily from cash flows from operations and availability under our bank credit facility, to the extent availability exists after we meet our working capital needs. We could also seek to fund these projects in whole or in part through incremental bank financing and additional debt or equity offerings. If availability does not exist under our bank credit facility, or we are not otherwise able to draw funds on our bank credit facility, additional financing may not be available to us or, if available, may not be on terms favorable to us.

Indebtedness

Bank Credit Facility. On December 21, 2009, we entered into a First Amendment and Consent to First Amended and Restated Credit Agreement (the “amendment”), with certain financial institutions and Bank of America, N.A., as administrative agent. The amendment amends certain terms of our bank credit facility dated as of May 24, 2007. Among other changes, the amendment reduced the revolving commitments under our bank credit facility from $4.0 billion to $3.0 billion and increased the amount of funds available under letters of credit.

At December 31, 2009, we had availability under our bank credit facility of approximately $1.0 billion.

Bank Credit Facility Covenants. The bank credit facility contains certain financial and other covenants, including various covenants (i) requiring the maintenance of a minimum interest coverage ratio of 2.00 to 1.00, (ii) establishing a maximum total leverage ratio (discussed below), (iii) imposing limitations on the incurrence of indebtedness and liens, (iv) imposing limitations on transfers, sales and other dispositions, and (v) imposing restrictions on investments, dividends and certain other payments.

The maximum permitted Total Leverage Ratio is calculated as Consolidated Funded Indebtedness to twelve-month trailing Consolidated EBITDA (all capitalized terms are defined in the bank credit facility). We are in compliance with the bank credit facility covenants at December 31, 2009, including the Total Leverage Ratio, which is 6.18 to 1.00 at December 31, 2009. The following table provides our maximum allowable Total Leverage Ratio during the remaining term of the bank credit facility:

For the Trailing Four Quarters Ending	Maximum Total Leverage Ratio
December 31, 2009	6.50 to 1.00
March 31, 2010	6.75 to 1.00
June 30, 2010	7.00 to 1.00
September 30, 2010	7.25 to 1.00
December 31, 2010	7.25 to 1.00
March 31, 2011	7.00 to 1.00
June 30, 2011	6.75 to 1.00
September 30, 2011	6.50 to 1.00
December 31, 2011	6.00 to 1.00
March 31, 2012	5.50 to 1.00

The foregoing description of the bank credit facility is qualified in its entirety by the full text of the First Amended and Restated Credit Agreement, dated as of May 24, 2007, among the Company and certain other parties, which is incorporated herein by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 and First Amendment and Consent to First Amended and Restated Credit Agreement, dated as of December 21, 2009, which is incorporated herein by reference to Exhibit 10.40 to this Annual Report on Form 10-K for the year ended December 31, 2009.

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Under the terms of the credit facility prior to the Amendment, Boyd Gaming’s ratio to determine maximum funded debt as of March 31, 2011 would have been 6.50 times Consolidated EBITDA for the four quarters ending on such date, and would have been 5.25 times Consolidated EBITDA for the four quarters ending as of the end of each calendar quarter thereafter through March 31, 2012. The Amendment does not modify the existing maximum leverage ratio through September 30, 2010, which ranges from 6.50 to 7.25. For the calendar quarter ending December 31, 2010, the Amendment decreases the maximum leverage ratio from 7.50 to 7.25.

Senior Subordinated Notes. During the year ended December 31, 2009, we purchased and retired $105.3 million principal amount of our senior subordinated notes. The total purchase price of the notes was $89.5 million resulting in a gain of $15.3 million, net of associated deferred financing fees. The transactions were funded by availability under our bank credit facility.

During the year ended December 31, 2008, we purchased and retired $146.5 million principal amount of our senior subordinated notes. The total purchase price of the notes was approximately $116.5 million, resulting in a gain of approximately $28.6 million, net of associated deferred financing fees. The transactions were funded by availability under our bank credit facility.

Note Payable. On March 1, 2007, we acquired Dania Jai-Alai and approximately 47 acres of related land located in Dania Beach, Florida. Dania Jai-Alai is one of four pari-mutuel facilities in Broward County approved under Florida law to operate 2,000 Class III slot machines. We paid approximately $81 million to close this transaction and, agreed that, if certain conditions are satisfied, we would pay an additional $75 million, plus interest accrued at the prime rate (the “contingent payment”), in March 2010 or earlier.

In January 2009, we amended the purchase agreement to settle the contingent payment prior to the satisfaction of the legal conditions. The principal terms of the amendment were as follows.

• We paid $9.4 million to the seller in January 2009, plus $9.1 million of interest accrued from March 1, 2007, the date of the acquisition.

• We issued an 8% promissory note to the seller in the amount of $65.6 million, plus accrued interest. The terms of the note required principal payments of $9.4 million, plus accrued interest, in April 2009 and July 2009, and a final principal payment of $46.9 million, plus accrued interest, due in January 2010. The promissory note was secured by a letter of credit under our bank credit facility, and we have made all scheduled payments on promissory note, including the final payment in January 2010.

Our ability to service our debt will be dependent upon future performance, which will be affected by, among other things, prevailing economic conditions and financial, business and other factors, certain of which are beyond our control. It is unlikely that our business will generate sufficient cash flow from operations to enable us to pay our indebtedness as it matures and to fund our other liquidity needs. We believe that we will need to refinance all or part of our indebtedness at or prior to each maturity; however, we may not be able to refinance any of our indebtedness on commercially reasonable terms, or at all.

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Cash Flows Summary

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Net cash provided by operating activities	$	241,031		$	220,479		$	283,189
Cash flows from investing activities:
Capital expenditures		(157,557	)		(667,400	)		(296,894	)
Net cash paid for Dania Jai-Alai		(9,375	)		—			(80,904	)
Investments in and advances to unconsolidated subsidiaries		(73	)		(5,991	)		(10,297	)
Other		1,877			115			8,352
Net cash used in investing activities		(165,128	)		(673,276	)		(379,743	)
Cash flows from financing activities:
Payments on retirements of long-term debt		(89,482	)		(116,497	)		(260,938	)
Net borrowings under bank credit facility		35,785			528,215			379,600
Payments under note payable		(18,750	)		—			—
Payments to repurchase and retire common stock		(7,950	)		—			—
Payment of dividends on common stock		—			(26,330	)		(51,195	)
Other		(456	)		(140	)		25,391
Net cash provided by (used in) financing activities		(80,853	)		385,248			92,858
Decrease in cash and cash equivalents	$	(4,950	)	$	(67,549	)	$	(3,696	)

Cash Flows from Operating Activities

For 2009, we generated operating cash flow of $241.0 million, compared to $220.5 million in 2008. The primary reason for the increase in operating cash flows was due to a an increase in distributions from Borgata during the year ended December 31, 2009 as compared to 2008, as well as a reduction in asset write-downs. These items were offset by a reduction in operating results from our Reportable Segments and an increase in interest paid.

Borgata’s amended bank credit agreement allows for certain limited distributions to be made to its partners. Our distributions from Borgata were $60.1 million and $19.6 million during the year ended December 31, 2009 and 2008, respectively. Borgata has significant uses for its cash flows, including maintenance capital expenditures, interest payments, state income taxes and the repayment of debt. Borgata’s cash flows are primarily used for its business needs and are not generally available, except to the extent distributions are paid to us, to service our indebtedness. In addition, Borgata’s amended bank credit facility contains certain covenants, including, without limitation, various covenants: (i) requiring the maintenance of a minimum required fixed-charge coverage ratio; (ii) establishing a maximum permitted total leverage ratio; (iii) imposing limitations on the incurrence of additional indebtedness; and (iv) imposing restrictions on investments, dividends and certain other payments. In the event that Borgata fails to comply with its covenants, it may be prevented from making any distributions to us during such period of noncompliance.

For 2008, we generated operating cash flow of $220.5 million, compared to $283.2 million in 2007. The primary reason for the decrease in operating cash flows was due to a decline in operating results in our Midwest and South segment, as well as the sale of the South Coast on October 25, 2006, the closure of the Stardust on November 1, 2006 and the exchange of the Barbary Coast on February 27, 2007. In addition, our distributions from Borgata declined from $70.6 million in 2007 to $19.6 million in 2008 primarily due to a decline in Borgata’s operating results.

As of December 31, 2009 and 2008, we had balances of cash and cash equivalents of $93.2 million and $98.2 million, respectively. We had working capital deficits of $102.6 million and $138.9 million as of December 31, 2009 and 2008, respectively.

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Cash Flows from Investing Activities

Cash paid for capital expenditures on major projects for the years ended December 31, 2009 and 2008 included the following:

• Echelon development project; and

• New hotel project at Blue Chip.

Spending on these and other expansion projects totaled approximately $122 million in 2009 and approximately $597 million in 2008. In addition, we paid approximately $35 million for maintenance capital expenditures in 2009 and approximately $71 million for maintenance capital expenditures in 2008.

Cash paid for capital expenditures on major projects and business acquisitions for the year ended December 31, 2007 included the following:

• Echelon development project;

• New corporate offices; and

• New hotel project at Blue Chip.

Spending on these and other expansion projects totaled $169 million in 2007. We also paid $128 million for maintenance capital expenditures during 2007. In addition, we paid approximately $81 million in 2007 for our acquisition of Dania Jai-Alai.

Cash Flows from Financing Activities

Substantially all of the funding for our acquisitions and our renovation and expansion projects comes from cash flows from operations and debt financing.

During the year ended December 31, 2009, we purchased and retired $105.3 million principal amount of our senior subordinated notes. The total purchase price of the notes was $89.5 million resulting in a gain of $15.3 million, net of associated deferred financing fees. The transactions were funded by availability under our bank credit facility.

During the year ended December 31, 2008, we purchased and retired $146.5 million principal amount of our senior subordinated notes. The total purchase price of the notes was approximately $116.5 million, resulting in a gain of approximately $28.6 million, net of associated deferred financing fees. The transactions were funded by availability under our bank credit facility.

On April 16, 2007, we redeemed our outstanding $250 million aggregate principal amount of 8.75% senior subordinated notes that were due to mature in April 2012 for $261 million. This redemption was funded by availability under our bank credit facility.

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Dividends

Dividends are declared at the discretion of our Board of Directors. We are subject to certain limitations regarding the payment of dividends, such as restricted payment limitations related to our outstanding notes and our bank credit facility. The following table sets forth the cash dividends declared and paid during the years ended December 31, 2009, 2008 and 2007.

Payment Date	Record Date	Dividend per Share
March 1, 2007	February 9, 2007	$	0.135
June 1, 2007	May 11, 2007		0.150
September 4, 2007	August 17, 2007		0.150
December 3, 2007	November 16, 2007		0.150
March 3, 2008	February 18, 2008		0.150
June 2, 2008	May 14, 2008		0.150

In July 2008, our Board of Directors suspended the quarterly dividend for the current and future periods. Dividends paid during the years ended December 31, 2008 and 2007 totaled $26.3 million and $51.2 million, respectively. We did not pay a dividend during the year ended December 31, 2009.

Share Repurchase Program

In July 2008, our Board of Directors authorized an amendment to our existing share repurchase program to increase the amount of common stock available to be repurchased to $100 million. We are not obligated to purchase any shares under our stock repurchase program.

Subject to applicable corporate securities laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. Purchases under our stock repurchase program can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund the repurchases under the stock repurchase program with existing cash resources and availability under our bank credit facility.

We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding notes and our bank credit facility.

In the future, we may acquire our debt or equity securities, through open market purchases, privately negotiated transactions, tender offers, exchange offers, redemptions or otherwise, upon such terms and at such prices as we may determine.

During the year ended December 31, 2009, we repurchased and retired 1.7 million shares of our common stock at an average price of $4.61 per share. We are currently authorized to repurchase up to an additional $92.1 million in shares of our common stock under the share repurchase program. We did not repurchase any stock during the years ended December 31, 2008 or 2007.

Other Items Affecting Liquidity

Recently, there have been significant disruptions in the global capital markets that have adversely impacted the ability of borrowers to access capital, with such disruptions expected to continue for the foreseeable future. Despite these disruptions, we anticipate the ability to fund our capital requirements using cash flows from operations and availability under our bank credit facility, to the extent availability exists after we meet our working capital needs. Any additional financing that is needed may not be available to us or, if available, may not be on terms favorable to us.

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We can provide no assurances that our expansion and development projects will be completed within our current estimates, will commence operations as expected, will include all of the anticipated amenities, features or facilities, or will achieve market acceptance. In addition, our development projects are subject to those additional risks inherent in the development and operation of a new or expanded business enterprise, including potential unanticipated operating problems. If our expansion, development, investment or renovation projects do not become operational within the time frame and project costs currently contemplated or do not successfully compete in their markets, it could have a material adverse effect on our business, financial condition and results of operations. Once our projects become operational, they will face many of the same risks that our current properties face, including, but not limited to, competition, weakened consumer spending and increases in taxes due to changes in legislation.

As of December 31, 2009, we have incurred approximately $928 million in capitalized costs related to the Echelon project, including land. As part of our delay of the project, we expect to incur approximately $4 million of capitalized costs, principally related to the offsite fabrication of escalators, curtain wall and a skylight. In addition, we expect recurring project costs, consisting primarily of security, property taxes, rent and insurance, of approximately $10 million per annum that will be charged to preopening or other expense as incurred during the project’s suspension period. These capitalized costs and recurring project costs are in addition to other contingencies with respect to our various material commitments. See Echelon below for additional discussion.

Echelon

In June 2007, we commenced construction on Echelon, our multibillion dollar Las Vegas Strip development project. On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of our multibillion dollar Echelon development project on the Las Vegas Strip. At such time, we did not anticipate the long-term effects of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas geographical area; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. The credit markets have yet to show significant recovery, thereby rendering financing for this type of development unavailable. Based on our current outlook, we do not expect to resume construction for three to five years.

Nonetheless, we remain committed to having a significant presence on the Las Vegas Strip. During the suspension period, we intend to consider alternative development options for Echelon, which may include developing the project in phases, alternative capital structures for the project, scope modifications to the project, or additional strategic partnerships, among others. We can provide no assurances as to when, or if, construction will resume on the project, or if we will be able to obtain alternative sources of financing for the project.

The change in circumstances implies that the carrying amounts of the assets related to Echelon may not be recoverable; therefore, we performed an impairment test of these assets as of September 30, 2009. This impairment test was comprised of a future undiscounted cash flow analysis, and contemplated several viable alternative plans for the future development of Echelon. The cash inflows related to the revenue projections for the individual components associated with each planned construction scenario, offset by outflows for estimated costs to complete the development and ongoing and maintenance and operating costs. Because no specific strategic plan can be determined with certainty at this time, the analysis considered the net cash flows related to each alternative, weighted against its projected likelihood. The outcome of this evaluation resulted in no impairment of Echelon’s assets, as the estimated weighted net undiscounted cash flows from the project exceeded the carrying value of the assets of approximately $950 million at September 30, 2009. As we further develop and explore the viability of alternatives for the project, we will continue to monitor these assets for recoverability. If we are subject to a non-cash write-down of these assets, it could have a material adverse impact on our consolidated financial statements.

Morgans Las Vegas, LLC. We were a 50% partner in a joint venture with Morgans Hotel Group Co. In December 2009, by mutual agreement with Morgans, the joint venture agreement and hotel management agreements with Morgans were terminated. As a result, certain of our contributions related to the architectural and design plans will not be realizable. Accordingly, we recorded an other-than-temporary noncash impairment charge of $13.5 million during the year ended December 31, 2009 related to such costs. The remaining $4.4 million of our former investment in Morgans represents previously reimbursed allocations of shared development costs related to the

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Echelon master plan. These costs approximate their fair value at December 31, 2009. These costs reverted to our basis in Echelon, reported as construction in progress, as the plans to construct the hotels were terminated contemporaneous with the termination of the joint venture. As we further develop and explore the viability of alternatives to Echelon, we will continue to monitor these assets for recoverability, individually, and in conjunction with the overall Echelon development.

Echelon Place Retail Promenade, LLC. In October 2008, General Growth Properties (“GGP”) exercised its right to require us to purchase its 50% membership interest in our 50/50 joint venture to develop High Street retail promenade at Echelon. We purchased GGP’s membership interest in October 2008 for $9.7 million, which represents the return of GGP’s capital contributions to the venture of $9.5 million, plus accrued interest. We retain all architectural plans and designs for the project. These assets are including in the carrying value of the Echelon development project. As we further develop and explore the viability of alternatives to Echelon, we will continue to monitor these assets for recoverability, individually, and in conjunction with the overall Echelon development.

Energy Services Agreement (“ESA”). In April 2007, we entered into an ESA with a third party, Las Vegas Energy Partners, LLC (“LVE”). LVE will design, construct, own (other than the underlying real property which is leased from Echelon), and operate a central energy center and energy distribution system to provide electricity, emergency electricity generation, and chilled and hot water to Echelon and potentially other joint venture entities associated with the Echelon development project or other third parties. The term of the ESA is 25 years, beginning when Echelon commences commercial operations. Assuming the central energy center is completed and functions as planned, we will pay a monthly service fee, which is comprised of a fixed capacity charge, an escalating operations and maintenance charge, and an energy charge. The aggregate of our monthly fixed capacity charge portion of the service fee will be $23.4 million per annum, payable for a 25-year period commencing in November 2010. Until Echelon commences commercial operations, we may be liable for an “interest during construction” fee, commencing December 1, 2010. We are unable to provide the amount of the fee, if any, at this time, as it has yet to be determined.

LVE has currently suspended construction of the central energy center while Echelon delays its construction of the project. On April 6, 2009, LVE notified us that, in its view, Echelon will be in breach of the ESA unless it recommences and proceeds with construction by May 6, 2009. We believe that LVE’s position is without merit; however, in the event of litigation, we cannot state with certainty the eventual outcome nor estimate the possible loss or range of loss, if any, associated with this matter.

Line Extension and Service Agreement (“LEA”) – In March 2007, we entered into an LEA with Nevada Power Company (currently known as NV Energy) related to the construction of a substation at Echelon and the delivery of power to Echelon. We have assigned most of our obligations under the LEA to LVE (see Energy Services Agreement (“ESA”) above). We have retained an obligation to pay liquidated damages of $5.0 million to NV Energy, in the event that Echelon does not physically accept permanent electric service by January 1, 2012 through the substation to be built by NV Energy pursuant to the LEA. On August 29, 2008, NV Energy issued a letter declaring a force majeure event that extends the time for performance of obligations under the LEA, including its obligation to construct the substation from which Echelon is to accept delivery of permanent electric service. Our contingent liability to pay liquidated damages to NV Energy will be recorded and charged to expense on our consolidated statement of operations when, or if, it becomes probable that we will not be able to accept, in accordance with the terms of the LEA, permanent electric service from a substation when built by NV Energy.

Construction Agreements. We have exercised our rights under our standard form construction contracts to terminate our agreements with our contractors. With the exception of certain custom equipment orders, steel fabrication and crane and hoist rentals, all major construction agreements have been terminated and closed-out with final payments made to the contractors in exchange for final releases.

Design Agreements. We are continuing to evaluate design services that remain to be completed. The majority of our design agreements allow us either to suspend performance of the services under these agreements or to terminate these agreements. In each case, we would be required to pay only for those costs incurred through the date of suspension or termination as well as, in certain agreements, the payment for reasonable demobilization and other costs. Demobilization costs include the removal of rental equipment and the associated termination fees, among

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others. The demobilization and other costs are subject to negotiation; therefore, we are unable to estimate future costs at this time. We have estimated the cost of completion of construction drawings after December 31, 2009 to be $0.3 million; however, we can provide no assurances that actual costs will approximate the estimated costs.

Any demobilization, per diem, and related costs incurred related to the suspension or termination of our construction and design contracts will be charged to the project as preopening expense on our consolidated statement of operations in the period incurred.

Sam’s Town Tunica

Sam’s Town Tunica reported a net operating loss of $2.1 million for the year ended December 31, 2009; therefore, we tested its assets for recoverability. The asset recoverability test required the estimation of its undiscounted future cash flows and the comparison of the aggregate total to the property’s carrying value. The test resulted in no impairment; however, we will continue to monitor the performance of Sam’s Town Tunica and, if necessary, continue to update our asset recoverability test. If future asset recoverability tests indicate that the assets of Sam’s Town Tunica are impaired, we will be subject to a non-cash write-down of its assets, which could have a material adverse impact on our consolidated statements of operations.

Dania Jai-Alai

In March 2007, we acquired Dania Jai-Alai and approximately 47 acres of related land located in Dania Beach, Florida. Dania Jai-Alai is one of four pari-mutuel facilities in Broward County approved under Florida law to operate 2,000 Class III slot machines. In March 2007, we paid approximately $81 million to close this transaction, and agreed to pay, in March 2010 or earlier, a contingent payment of an additional $75 million to the seller, plus interest accrued at the prime rate (the “contingent payment”), if certain legal conditions were satisfied.

In January 2009, we amended the purchase agreement to settle the contingent payment prior to the satisfaction of the legal conditions. The principal terms of the amendment were as follows.

• We paid $9.4 million to the seller in January 2009, plus $9.1 million of interest accrued from the March 1, 2007 date of the acquisition.

• We issued an 8% promissory note to the seller in the amount of $65.6 million, plus accrued interest. The terms of the note require principal payments of $9.4 million, plus accrued interest, in April 2009 and July 2009, and a final principal payment of $46.9 million, plus accrued interest, due in January 2010. The promissory note was secured by a letter of credit under our bank credit facility, and we have made all scheduled payments on the promissory note, including the final payment in January 2010.

The carrying value of the promissory note is $46.9 million as of December 31, 2009. The inputs utilized to value the promissory note are classified as Level 3 in the ASC Topic 820 hierarchal disclosure framework (see Note 1, Summary of Significant Accounting Policies), as it is not traded and does not have an observable market input. We have estimated that the fair value of the note approximates its carrying value, based on a discounted cash flow approach, after giving consideration to the short duration to maturity.

In conjunction with the amendment of the purchase agreement, we recorded the remaining $28.4 million of the $75 million contingent liability as an additional cost of the acquisition (goodwill) during the year ended December 31, 2009. During the year ended December 31, 2009, we tested the goodwill for recoverability, which resulted in a non-cash impairment charge of $28.4 million.

Blue Chip

Increased competition near Blue Chip has impacted our results. Although we have expanded our facility at Blue Chip in an effort to be more competitive in this market, the competition has had, and could continue to have, an adverse impact on the results of operations of Blue Chip.

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Sam’s Town Las Vegas

An existing hotel casino located adjacent to Sam’s Town Las Vegas was redeveloped. This enhanced facility opened during the three months ended September 30, 2008 and has had, and could continue to have, an adverse impact on the results of operations of Sam’s Town Las Vegas.

Borgata

On June 27, 2008, Borgata’s second hotel, The Water Club, held its grand opening. The Water Club is an 800-room hotel, featuring five swimming pools, a state-of-the-art spa, and additional meeting and retail space. Borgata financed the expansion from its cash flows from operations and from its bank credit facility.

On September 23, 2007, The Water Club, then under construction, sustained a fire that caused damage to property with a carrying value of approximately $11.4 million. Borgata’s insurance policies included coverage for replacement costs related to property damage, with the exception of minor amounts principally related to insurance deductibles and certain other limitations. In addition, Borgata had “delay-in-completion” insurance coverage for The Water Club for certain costs, subject to various limitations and deductibles. On August 10, 2009, Borgata reached a final settlement of $40 million with its insurance carrier and recognized a gain of $28.7 million, included in other items and write-downs, net, on its condensed consolidated statement of operations, representing the amount of insurance advances in excess of the $11.3 million carrying value of assets damaged and destroyed by the fire (after its $0.1 million deductible).

In February 2010, we entered into an agreement that, among other things, amended our operating agreement with MGM Mirage Corporation (“MGM”) to permit the transfer of MGM’s 50% ownership interest of the Borgata into a divestiture trust in connection with MGM’s potential settlement agreement with the Division of Gaming Enforcement. The agreement includes the following provisions, among others, that would become effective only upon the transfer of MGM’s interest into the divestiture trust and the approval of the New Jersey Casino Control Commission, that (i) we would receive a priority distribution of approximately $31 million (equal to the excess prior capital contributions made by us) upon successful refinancing of the Borgata credit facility, and (ii) we would receive a payment from the trust equal to the greater of $10 million or 3% of the proceeds from the sale of MGM’s 50% interest in Borgata. Upon approval by the NJCCC, we will effectively control the operations of the Borgata, which will require us to consolidate the noncontrolling interest.

Pennsylvania Land

On September 5, 2007, we entered into an agreement to sell approximately 125 acres of land that we own in Limerick Township, Pennsylvania for $26.5 million, before selling costs, contingent upon certain conditions. In September 2006, we withdrew our application for gaming approval, which led to our decision to sell the land and record a $3.0 million non-cash write-down of the land to its fair value, less estimated costs to sell. The carrying value of the land was $23.2 million at December 31, 2009 and 2008. On November 3, 2008, the agreement to sell such land was terminated; therefore, the carrying value of the land was reclassified from assets held for sale to property and equipment on our consolidated balance sheet at December 31, 2009, since it no longer meets the criteria to be classified as held for sale.

Missouri Land

In April 2008, we entered into an agreement to sell undeveloped land that we own in St. Louis County, Missouri. The sales price was approximately $0.6 million, before selling costs. Our historical cost of the land is $1.5 million; therefore, during the year ended December 31, 2008, we recorded a charge of $0.9 million, which is included in write-downs and other charges on our accompanying consolidated statement of operations. During the three months ended September 30, 2008, the buyer cancelled the sale; therefore, the remaining carrying value of the land has been reclassified from assets held for sale to property and equipment on our accompanying consolidated balance sheet, since it no longer meets the criteria to be classified as held for sale.

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North Las Vegas Gaming Site

In April 2008, we announced that we had formed a joint venture with Olympia Gaming, an affiliate of Olympia Group, to develop a proposed casino, resort and spa within the master-planned community of Park Highlands in North Las Vegas, Nevada, subject to receipt of all required approvals. An application was filed with the City of North Las Vegas to develop a 66-acre mixed-use, regional entertainment center, consisting of 1,200 hotel rooms to be built in three phases. Due to the expiration of certain development time periods set forth in the joint venture agreement, the joint venture has technically expired, requiring several provisions to be renegotiated. If the joint venture is unable to obtain the necessary approvals or certain terms in the agreement cannot be renegotiated, we may change the scope of the project, defer the project, or cancel the project.

Nevada Use Tax Refund Claims

On March 27, 2008, the Nevada Supreme Court issued a decision in Sparks Nugget, Inc. vs. The State of Nevada Department of Taxation (the “Department”), holding that food purchased for subsequent use in the provision of complimentary and/or employee meals was exempt from use tax. On April 24, 2008, the Department filed a Petition for Rehearing (the “Petition”) on the decision. Additionally, on the same date the Nevada Legislature filed an Amicus Curiae brief in support of the Department’s position. The Nevada Supreme Court denied the Department’s Petition on July 17, 2008. We paid use tax, over the period November 2000 through May 2008, on food purchased for subsequent use in complimentary and employee meals at our Nevada casino properties and estimate the refund to be in the range of $16.3 million to $18.5 million, including interest. In late 2009, the Department audited our refund claim and subsequently issued a $12.4 million sales tax assessment, plus interest of $7.5 million. The Department continues to deny our refund claim and issued the assessment based on the argument that the complimentary and employee meals at issue are now subject to sales tax. We do not believe the Department’s arguments have any merit and intend to file a motion to dismiss the assessment on both a procedural and technical basis. We are currently in the discovery and deposition stage of the legal proceeding and expect our hearing before the Nevada Administrative Law Judge (“Judge”) to occur within the next six months. Due to uncertainty surrounding the Judge’s decision, we will not record any gain until the tax refund is realized. For periods subsequent to May 2008, although we have received an assessment from the Department, we have not accrued a liability for sales tax on complimentary and employee meals at our Nevada casino properties, as it is not probable, based on both procedural issues and the technical merits of the Department’s arguments, that we will owe this tax.

Share Repurchase Program

In July 2008, our Board of Directors authorized an amendment to our existing share repurchase program to increase the amount of common stock available to be repurchased to $100 million. We are not obligated to purchase any shares under our stock repurchase program.

Subject to applicable corporate securities laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. Purchases under our stock repurchase program can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund the repurchases under the stock repurchase program with existing cash resources and availability under our bank credit facility.

We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding notes and our bank credit facility.

In the future, we may acquire our debt or equity securities, through open market purchases, privately negotiated transactions, tender offers, exchange offers, redemptions or otherwise, upon such terms and at such prices as we may determine.

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Other Opportunities

We regularly investigate and pursue additional expansion opportunities in markets where casino gaming is currently permitted. For example, we recently announced that we delivered a nonbinding indication of interest to Station Casinos, Inc. We also pursue expansion opportunities in jurisdictions where casino gaming is not currently permitted in order to be prepared to develop projects upon approval of casino gaming. Such expansions will be affected and determined by several key factors, including:

• the outcome of gaming license selection processes;

• the approval of gaming in jurisdictions where we have been active but where casino gaming is not currently permitted;

• identification of additional suitable investment opportunities in current gaming jurisdictions; and

• availability of acceptable financing.

Additional projects may require us to make substantial investments or may cause us to incur substantial costs related to the investigation and pursuit of such opportunities, which investments and costs we may fund through cash flow from operations or availability under our bank credit facility. To the extent such sources of funds are not sufficient, we may also seek to raise such additional funds through public or private equity or debt financings or from other sources. No assurance can be given that additional financing will be available or that, if available, such financing will be obtainable on terms favorable to us. Moreover, we can provide no assurances that any expansion opportunity will result in a completed transaction.

Contractual Obligations and Commitments.

The following table summarizes our contractual obligations as of December 31, 2009.

			Payments Due by Year Ending December 31,
	Total		2010		2011		2012		2013		2014		Thereafter
							(in thousands)
Contractual obligations:
Long-term debt	$	2,577,563	$	652	$	690	$	2,076,462	$	10,341	$	248,668	$	240,750
Operating leases		511,098		17,145		12,162		9,766		9,516		9,528		452,981
Interest on fixed-rate debt (1)		216,080		46,938		46,900		46,859		34,036		22,049		19,298
Purchase obligations:
Entertainment contracts		1,677		1,677		—		—		—		—		—
Construction projects (2)		33,703		29,196		504		236		59		1,236		2,472
Other (3)		141,052		80,487		27,702		27,367		4,416		1,080		—
Other long-term contracts (4)		593,048		6,329		23,704		23,645		23,605		23,398		492,367
Total contractual obligations	$	4,074,221	$	182,424	$	111,662	$	2,184,335	$	81,973	$	305,959	$	1,207,868

⁽¹⁾ Includes interest rate obligations on our fixed rate debt that comprises $0.6 billion of our total December 31, 2009 debt balance of $2.6 billion. Our variable rate debt at December 31, 2009 consists of $1.9 billion in outstanding balances on our bank credit facility. Interest payments for future periods related to the variable rate debt are dependent upon, at our option, LIBOR or the “base rate,” plus an applicable margin in either case. The applicable margin is a percentage per annum (which ranges from 0.625% to 1.625% if we elect to use LIBOR, and 0.0% to 0.375% if we elect to use the base rate) determined in accordance with a specified pricing grid based upon our predefined total leverage ratio. In addition, we incur commitment fees on the unused portion of the bank credit facility that range from 0.200% to 0.350% per annum. At December 31, 2009, the blended interest rate for outstanding borrowings under the bank credit facility was 1.9%.

⁽²⁾ Construction projects consist primarily of purchase obligations related to the Echelon development project.

⁽³⁾ Other consists of various contracts for goods and services, including our contract for Hawaiian air charter operations as well as our payments, including accrued interest, related to Dania Jai-Alai.

⁽⁴⁾ Other long-term obligations relate primarily to our Energy Services Agreement at Echelon and deferred compensation balances.

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Suncoast is situated on approximately 49 acres of leased land. The landlord has the option to require us to purchase the property at the end of 2014 and each year end through 2018, at the fair market value of the real property at the time the landlord exercises the option, subject to certain pricing limitations. If we do not purchase the property if and when required, we would be in default under the lease agreement.

We are required to pay the City of Kenner, Louisiana a boarding fee of $2.50 for each passenger boarding our Treasure Chest riverboat casino during the year. The future minimum payment due in 2010 to the City of Kenner, based upon a portion of actual passenger counts from the prior year, is approximately $2.4 million.

Due to uncertainties surrounding the timing and amount of future cash settlements related to our income tax audits, we cannot establish a reasonably reliable estimate of the amount or period of future cash settlements related to the $32.7 million of other long-term tax liabilities as of December 31, 2009. As we are uncertain as to when, or if, such amounts may be settled, we have excluded the amount from the contractual obligations table above.

Off Balance Sheet Arrangements. Our off balance sheet arrangements mainly consist of unconsolidated investments in Borgata and our Energy Services Agreement with LVE to provide electricity, emergency electricity generation, and chilled and heated water to Echelon. We have not entered into any transactions with special purpose entities, nor have we engaged in any derivative transactions other than interest rate swaps, interest rate collars and interest rate caps. Our investment in Borgata allows us to realize the benefits of owning a full-scale resort in a manner that lessens our initial investment. We do not guarantee financing obtained by Borgata and there are no other provisions of the venture agreements which are unusual or subject us to risks to which we would not be subjected if we had full ownership of the respective properties.

We have entered into certain agreements that contain indemnification provisions, as well as indemnification agreements involving certain of our executive officers and directors. These agreements provide indemnity insurance pursuant to which directors and officers are indemnified or insured against liability or loss under certain circumstances, which may include liability or related loss under the Securities Act and the Exchange Act. In addition, our Restated Articles of Incorporation and Restated Bylaws contain provisions that provide for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by law.

At December 31, 2009, we had outstanding letters of credit totaling $70.8 million.

Critical Accounting Policies

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make estimates and assumptions that affect the reported amounts included in our consolidated financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from the estimates. We believe the following critical accounting policies may require a higher degree of judgment and complexity.

Goodwill and Intangible Assets

We have significant amounts of goodwill and indefinite-life intangible assets on our consolidated balance sheets as of December 31, 2009 and 2008. We evaluate our goodwill, intangible assets and other long-lived assets in accordance with the applications of SFAS No. 142, Goodwill and Other Intangible Assets, now included in ASC Topic 350 and SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets, now included in ASC Topic 360. For goodwill and indefinite-lived intangible assets, we perform an annual impairment test of these assets in the second quarter of each year, which resulted in no impairment charge for the years ended December 31, 2009, 2008 and 2007, and between annual dates in certain circumstances. For assets to be disposed of, we recognize the asset at the lower of carrying value or fair market value, less costs of disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow model. For long-lived assets to be held and used, we review for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We then compare the estimated undiscounted future cash flows of the asset to the carrying value of the

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asset. The asset is not impaired if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically measured using a discounted cash flow model, which is based on the estimated future results of the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples. If an asset is under development, future cash flows include remaining construction costs. All recognized impairment charges are recorded as operating expenses.

In addition, we are required to test these assets for impairment between annual test dates in certain circumstances. As of December 31, 2008, we performed interim impairment tests that resulted in a $165.5 million and a $22.3 million non-cash write-down of goodwill related to our 2004 acquisitions of Coast Casinos, Inc. and Sam’s Town Shreveport, respectively, and an $80.7 million non-cash write-down of our indefinite-life gaming license right at Blue Chip. The impairment test for these assets was principally due to the decline in our stock price that caused our book value to exceed our market capitalization, which was an indication that these assets may not be recoverable. The primary reason for these impairment charges relates to the ongoing recession, which has caused us to reduce our estimates for projected cash flows, has reduced overall industry valuations, and has caused an increase in discount rates in the credit and equity markets.

Management must make various assumptions and estimates in performing its impairment testing. For instance, management must first determine the usage of the asset. To the extent management decides that an asset will be sold or abandoned, it is more likely that impairment may be recognized. Assets must be tested at the lowest level for which identifiable cash flows exist, which means that some assets must be grouped, and management has some discretion in the grouping of assets. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates. If our ongoing estimates of future cash flows are not met, we may have to record additional impairment charges in future accounting periods. Our estimates of cash flows are based on the current regulatory, social and economic climates, recent operating information and budgets of the various properties where we conduct operations. These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, or other events affecting various forms of travel and access to our properties.

See Summary Financial Results – Write-downs and Other Charges, Net, above for a discussion of write-downs and impairment charges recorded during the years ended December 31, 2009, 2008 and 2007.

Long Lived Assets

We evaluate our long-lived assets in accordance with the guidance in the Impairment or Disposal of Long Lived Assets subsection of ASC Topic 360, Property, Plant and Equipment (“ASC Topic 360”). For an asset that is to be disposed of, we recognize the asset at the lower of carrying value or fair market value, less costs of disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow model. For a long-lived asset to be held and used, we review the asset for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We then compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. The asset is not impaired if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically measured using a discounted cash flow model, which is based on the estimated future results of the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples. If an asset is under development, future cash flows include remaining construction costs. All recognized impairment charges are recorded as operating expenses.

Capital Expenditures and Depreciation

We must make estimates and assumptions when accounting for capital expenditures. Whether the expenditure is considered a maintenance expense or a capital asset is a matter of judgment. Our depreciation expense is highly dependent upon the assumptions we make about the estimated useful lives of our assets. We determine the estimated useful lives based upon our experience with similar assets. Whenever events or circumstances occur which change the estimated useful life of an asset, we account for the change prospectively.

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Derivative Instruments

We utilize an investment policy for managing risks associated with our current and anticipated future borrowings, such as interest rate risk and its potential impact on our fixed and variable rate debt. Under this policy, we may utilize derivative contracts that effectively convert our borrowings from either floating-to-fixed or fixed-to-floating. The policy does not allow for the use of derivative financial instruments for trading or speculative purposes. To the extent we employ such financial instruments pursuant to this policy, and the instruments qualify for hedge accounting, we may designate and account for them as hedged instruments. In order to qualify for hedge accounting, the underlying hedged item must expose us to risks associated with market fluctuations and the financial instrument used must be designated as a hedge and must reduce our exposure to market fluctuations throughout the hedged period. If these criteria are not met, a change in the market value of the financial instrument is recognized as a gain (loss) in the period of change. Otherwise, gains and losses are not recognized except to the extent that the hedged debt is disposed of prior to maturity or to the extent that acceptable ranges of ineffectiveness exist in the hedge. Net interest paid or received pursuant to the hedged financial instrument is included in interest expense in the period. We have designated our current interest rate swaps as cash flow hedges. We record them at fair value and measure their effectiveness using the long-haul method. The effective portion of any gain or loss on our interest rate swaps is recorded in other comprehensive income (loss). We use the hypothetical derivative method to measure the ineffective portion of our interest rate swaps. The ineffective portion, if any, is recorded in earnings. We measure the mark-to-market value of our interest rate swaps using a discounted cash flow analysis of the projected future receipts or payments based upon the forward yield curve on the date of measurement. We adjust this amount to measure the fair value of our interest rate swaps by applying a credit valuation adjustment to the mark-to-market exposure profile. In determining the credit valuation adjustment, we consider the credit default swap rates of the Company and its counterparties in each settlement period, as observed on the date of measurement.

Share-Based Employee Compensation

We are required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). This cost is recognized over the period during which an employee is required to provide service in exchange for the award. Compensation costs related to stock option awards are calculated based on the fair value of each major option grant on the date of the grant using the Black-Scholes option pricing model that requires the formation of assumptions to be used in the model, such as expected stock price volatility, risk-free interest rates, expected option lives, dividend yields, and estimated forfeitures. We formed our assumptions using historical experience and observable conditions.

Income Taxes

We are subject to income taxes in the United States and several states in which we operate. We account for income taxes by the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carryforwards, tax credit carryforwards and certain temporary differences. A valuation allowance is recognized if, based upon the weight of the available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized.

Our income tax returns are subject to examination by tax authorities. We regularly assess the potential outcome of these examinations in determining the adequacy of our provision for income taxes and our income tax liabilities. To determine necessary reserves, we must make assumptions and judgments about potential actions by taxing authorities, partially based on past experiences. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental, and we believe we have adequately provided for any reasonable and foreseeable outcomes relating to uncertain tax matters. When actual results of tax examinations differ from our estimates or when potential actions are settled differently than we expected, we adjust the income tax provision and our tax reserves in the current period.

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Self-Insurance Reserves

We are self-insured up to certain stop loss amounts for employee health coverage, workers’ compensation and general liability costs. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not yet reported. In estimating these accruals, we consider historical loss experience and make judgments about the expected levels of costs per claim. We believe our estimates of future liability are reasonable based upon our methodology; however, changes in health care costs, accident frequency and severity and other factors could materially affect the estimate for these liabilities.

Litigation, Claims and Assessments

We utilize estimates for litigation, claims and assessments related to our business and tax matters. These estimates are based upon our knowledge and experience about past and current events, as well as upon reasonable assumptions about future events. Actual results could differ from these estimates.

Recently Issued Accounting Pronouncements

On July 1, 2009, The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles – A Replacement of FASB Statement No. 162, (the “Codification”) (previously “SFAS 168”) became effective. Accordingly, the Financial Accounting Standards Board Accounting Standards Codification^TM (the “ASC”) became the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”). The implementation of the Codification did not initially have an impact on our consolidated financial statements, as it did not modify any existing authoritative GAAP.

Subsequent to the adoption of the Codification, any change to the source of authoritative GAAP will be communicated through an Accounting Standards Update (“ASU”). ASUs will be published by the FASB for all authoritative GAAP promulgated by the FASB, regardless of the form in which such guidance may have been issued prior to release of the Codification. Prior to inclusion in an ASU, the standard-setting organizations and regulatory agencies continue to issue proposed changes to the accounting standards in previous form (e.g., FASB Statements of Financial Accounting Standards, Emerging Issues Task Force (“EITF”) Abstracts, FASB Staff Positions, SEC Staff Accounting Bulletins, etc.).

Variable Interest Entities. In September 2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 167, Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). SFAS 167 is a revision to FASB Interpretation No. 46, Consolidation of Variable Interest Entities (which is currently promulgated in a subsection of ASC Topic 810). The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS 167 is effective for the first annual reporting period beginning after November 15, 2009 and for interim periods within that first annual reporting period. We do not believe that the adoption of SFAS 167 will have a material impact on our consolidated financial statements.

Transfer of Financial Assets. In September 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets – An Amendment to FASB Statement No. 140 (“SFAS 166”). SFAS 166 is a revision of SFAS No. 140, Accounting for Transfers and Servicing Financial Assets and Extinguishments of Liabilities, which is presently included in ASC Topic 860, Transfers and Servicing. SFAS 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. SFAS 166 is effective for fiscal years beginning after November 15, 2009. We do not believe that the adoption of SFAS 166 will have a material impact on our consolidated financial statements.

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Noncontrolling Interests. In December 2007, the FASB issued SFAS No. 160, Accounting for Noncontrolling Interests, (“SFAS 160”), which establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this guidance requires the recognition of a noncontrolling interest (previously referred to as minority interest) as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income or loss attributable to the noncontrolling interest is included in consolidated net income on the face of the income statement. The guidance clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this guidance requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated and requires expanded disclosures regarding the interests of the parent and the interests of the noncontrolling owners. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The adoption of SFAS 160 did not have an initial material impact on our consolidated financial statements

A variety of additional proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our consolidated financial statements.

ITEM 7A. Quantitative and Qualitative Disclosure about Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk, specifically long-term U.S. treasury rates and the applicable spreads in the high-yield investment market and short-term and long-term LIBOR rates, and its potential impact on our long-term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed-rate borrowings and short-term borrowings under our bank credit facility. Borrowings under our bank credit facility are based upon, at our option, LIBOR or the “base rate,” plus an applicable margin in either case. The applicable margin is a percentage per annum (which ranges from 0.625% to 1.625% if we elect to use LIBOR, and 0.0% to 0.375% if we elect to use the base rate) determined in accordance with a specified pricing grid based upon our predefined total leverage ratio. We also attempt to manage the impact of interest rate risk on our long-term debt by utilizing derivative financial instruments in accordance with established policies and procedures. We do not utilize derivative financial instruments for trading or speculative purposes.

During the year ended December 31, 2009, we utilized interest rate swap agreements. Interest differentials resulting from these agreements are recorded on an accrual basis as an adjustment to interest expense. Interest rate swaps related to debt are matched to specific debt obligations.

We are exposed to credit loss in the event of nonperformance by the counterparties to the interest rate swap agreements outstanding at December 31, 2009; however, we believe that this risk is minimized because we monitor the credit ratings of the counterparties to the swaps. If we had terminated our swaps as of December 31, 2009, we would have been required to pay $31.0 million based on the fair values of the derivative instruments.

The following table provides information about our derivative instruments and other financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations. For our debt obligations, the table presents principal cash flows and related weighted-average interest rates by expected maturity dates. For our interest rate swaps, the table presents the notional amounts and weighted-average interest rates by the expected (contractual) maturity dates. The notional amounts are used to calculate the contractual cash flows to be exchanged under the contracts. The weighted-average variable rates are based upon prevailing interest rates.

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The scheduled maturities of our long-term debt and interest rate swap agreements outstanding as of December 31, 2009 for the years ending December 31 are as follows.

	Year Ending December 31,
	Expected Maturity Date																					Fair Value
	2010			2011			2012			2013			2014			Thereafter			Total
Liabilities
Long-term debt (including current portion):
Fixed-rate	$	652		$	690		$	159,562		$	10,341		$	248,668		$	240,750		$	660,663		$	602,938
Average interest rate		5.7	%		5.7	%		7.7	%		5.7	%		6.8	%		7.1	%		7.1	%
Variable-rate	$	—		$	—		$	—		$	1,916,900		$	—		$	—		$	1,916,900		$	1,686,872
Average interest rate		—			—			—			1.9	%		—			—			1.9	%
Interest rate derivatives
Derivative Instruments:
Pay fixed	$	—		$	30,961		$	—		$	—		$	—		$	—		$	30,961		$	29,356
Average receivable rate		—			0.3	%		—			—			—			—			3.0	%
Average payable rate		—			5.1	%		—			—			—			—			5.1	%

As of December 31, 2009, our long-term variable-rate borrowings represented approximately 55% of our total long-term debt. Based on December 31, 2009 debt levels, a 100 basis point change in LIBOR or the base rate would cause our annual interest costs to change by approximately $14.2 million.

The following table provides other information about our long-term debt at December 31, 2009.

	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
			(In thousands)
Bank credit facility	$	1,916,900	$	1,916,900	$	1,686,872	Level 2
7.75% Senior Subordinated Notes Due 2012		158,832		158,832		160,420	Level 1
6.75% Senior Subordinated Notes Due 2014		248,668		248,668		223,801	Level 1
7.125% Senior Subordinated Notes Due 2016		240,750		240,750		206,925	Level 1
Other		12,413		12,413		11,792	Level 3
Total long-term debt	$	2,577,563	$	2,577,563	$	2,289,810

The estimated fair value of our bank credit facility is based on a relative value analysis performed on or about December 31, 2009. The estimated fair values of our senior subordinated notes are based on quoted market prices as of December 31, 2009. Debt included in the “Other” category is fixed-rate debt that is due March 2013 and is not traded and does not have an observable market input; therefore, we have estimated its fair value based on a discounted cash flow approach, after giving consideration to the changes in market rates of interest, creditworthiness of both parties, and credit spreads.

-60-

ITEM 8. Financial Statements and Supplementary Data

The information required by this Item is contained in Item 15(a) of this Annual Report on Form 10-K under Financial Statements. In addition, the audited consolidated financial statements for Marina District Development Company, LLC, d.b.a. Borgata Hotel Casino and Spa, our 50% investment in Atlantic City, as of December 31, 2009 and 2008 and for the three years in the period ended December 31, 2009 are included in Exhibit 99.2 to this Annual Report on Form 10-K and are incorporated herein by reference.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no changes in or disagreements with accountants on accounting and financial disclosures during the three years in the period ended December 31, 2009.

ITEM 9A. Controls and Procedures

As of the end of the period covered by this Report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based on the evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we include a report of management’s assessment of the design and effectiveness of our internal controls as part of this Annual Report on Form 10-K for the fiscal year ended December 31, 2009. Our independent registered public accounting firm also reported on the effectiveness of our internal controls over financial reporting. Management’s report and the independent registered public accounting firm’s attestation report are located below.

There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we assessed the effectiveness of our internal control over financial reporting as of the end of the most recent fiscal year, December 31, 2009, based on the framework set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment under the framework set forth in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of the end of our most recent fiscal year, December 31, 2009.

Our internal control over financial reporting as of December 31, 2009 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in its attestation report which is included below.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Boyd Gaming Corporation and Subsidiaries:

We have audited the internal control over financial reporting of Boyd Gaming Corporation and Subsidiaries (the “Company”) as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2009, of the Company and our report dated March 5, 2010 expressed an unqualified opinion on those financial statements.

/s/ DELOITTE & TOUCHE LLP

Las Vegas, Nevada

March 5, 2010

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ITEM 9B. Other Information

None.

Part III

ITEM 10. Directors, Executive Officers and Corporate Governance

Information required by this item regarding the members of our board of directors and our audit committee, including our audit committee financial expert, is set forth under the captions Board Committees – Audit Committee, Director Nominees, and Section 16(a) Beneficial Ownership Reporting Compliance in our Definitive Proxy Statement to be filed in connection with our 2010 Annual Meeting of Stockholders and is incorporated herein by reference. Information required by this item regarding non-director executive officers of the Company is set forth in Item 4A of Part I of this Annual Report on Form 10-K

Code of Ethics. We have adopted a Code of Business Conduct and Ethics (“Code of Ethics”) that applies to each of our directors, executive officers and employees. Our Code of Ethics is posted on our website at www.boydgaming.com. Any waivers or amendments to our Code of Ethics will be posted on our website.

ITEM 11. Executive Compensation

The information required by this item is set forth under the captions Executive Officer and Director Compensation, Compensation and Stock Option Committee Interlocks and Insider Participation, and Compensation and Stock Option Committee Report in our Definitive Proxy Statement to be filed in connection with our 2010 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is set forth under the captions Ownership of Certain Beneficial Owners and Management and Equity Compensation Plan Information in our Definitive Proxy Statement to be filed in connection with our 2010 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is set forth under the captions Transactions with Related Persons and Director Independence in our Definitive Proxy Statement to be filed in connection with our 2010 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 14. Principal Accounting Fees and Services

Information about principal accounting fees and services, as well as the audit committee’s pre-approval policies appears under the captions Audit and Non-Audit Fees and Audit Committee Pre-Approval of Audit and Non-Audit Services in our Definitive Proxy Statement to be filed in connection with our 2010 Annual Meeting of Stockholders and is incorporated herein by reference.

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Part IV

ITEM 15. Exhibits and Financial Statement Schedules

	Page No.
Financial Statements.
The following financial statements for the three years in the period ended December 31, 2009 are filed as part of this Report:
Report of Independent Registered Public Accounting Firm	65
Consolidated Balance Sheets at December 31, 2009 and 2008	66
Consolidated Statements of Operations for the three years ended December 31, 2009, 2008 and 2007	67
Consolidated Statements of Changes in Stockholders’ Equity for the three years ended December  31, 2009, 2008 and 2007	68
Consolidated Statements of Cash Flows for the three years ended December 31, 2009, 2008 and 2007	69
Notes to Consolidated Financial Statements	71
Audited consolidated financial statements for Marina District Development Company, LLC, d.b.a. Borgata Hotel Casino and Spa, as of December 31, 2009 and 2008 and for the three years in the period ended December 31, 2009 are presented in Exhibit 99.2 and are incorporated herein by reference.

-64-

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Boyd Gaming Corporation and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Boyd Gaming Corporation and Subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Boyd Gaming Corporation and Subsidiaries at December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 5, 2010, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Las Vegas, Nevada

March 5, 2010

-65-

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	December 31,
	2009			2008
Assets
Current assets
Cash and cash equivalents	$	93,202		$	98,152
Restricted cash		16,168			24,309
Accounts receivable, net		18,584			21,375
Inventories		11,392			11,325
Prepaid expenses and other current assets		24,818			40,416
Assets held for sale		—			853
Income taxes receivable		20,807			15,115
Deferred income taxes		7,766			2,903
Total current assets		192,737			214,448
Property and equipment, net		3,159,177			3,249,254
Investments in and advances to Borgata and other unconsolidated subsidiaries, net		394,220			419,389
Other assets, net		78,121			86,597
Intangible assets, net		422,126			422,163
Goodwill, net		213,576			213,576
Total assets	$	4,459,957		$	4,605,427
Liabilities and Stockholders’ Equity
Current liabilities
Current maturities of long-term debt	$	652		$	616
Accounts payable		39,127			50,128
Construction payables		34,128			118,888
Note payable		46,875			—
Accrued liabilities		174,577			183,691
Total current liabilities		295,359			353,323
Long-term debt, net of current maturities		2,576,911			2,647,058
Deferred income taxes		335,159			313,743
Other long-term tax liabilities		32,703			37,321
Other liabilities		63,456			110,460
Commitments and contingencies (Note 10)
Stockholders’ equity
Preferred stock, $.01 par value, 5,000,000 shares authorized		—			—
Common stock, $.01 par value, 200,000,000 shares authorized; 86,130,454 and 87,814,061 shares outstanding		861			878
Additional paid-in capital		623,035			616,304
Retained earnings		550,599			546,358
Accumulated other comprehensive loss, net		(18,126	)		(20,018	)
Total stockholders’ equity		1,156,369			1,143,522
Total liabilities and stockholders’ equity	$	4,459,957		$	4,605,427

The accompanying notes are an integral part of these consolidated financial statements.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Year Ended December 31,
	2009			2008			2007
Revenues
Gaming	$	1,372,091		$	1,477,476		$	1,666,422
Food and beverage		229,374			251,854			273,036
Room		122,305			140,651			153,691
Other		100,396			117,574			128,870
Gross revenues		1,824,166			1,987,555			2,222,019
Less promotional allowances		183,180			206,588			224,900
Net revenues		1,640,986			1,780,967			1,997,119
Costs and expenses
Gaming		664,739			690,847			752,047
Food and beverage		125,830			144,092			163,775
Room		39,655			43,851			46,574
Other		77,840			89,222			95,401
Selling, general and administrative		284,937			299,662			310,926
Maintenance and utilities		92,296			95,963			96,278
Depreciation and amortization		164,427			168,997			165,959
Corporate expense		47,617			52,332			60,143
Preopening expenses		17,798			20,265			22,819
Write-downs and other charges, net		41,780			385,521			12,101
Total costs and expenses		1,556,919			1,990,752			1,726,023
Operating income from Borgata		72,126			56,356			83,136
Operating income (loss)		156,193			(153,429	)		354,232
Other expense (income)
Interest income		(6	)		(1,070	)		(119	)
Interest expense, net of amounts capitalized		146,830			110,146			137,573
Decrease (increase) in value of derivative instruments		—			(425	)		1,130
Loss (gain) on early retirements of debt		(15,284	)		(28,553	)		16,945
Other non-operating expenses		33			—			—
Other non-operating expenses from Borgata, net		19,303			16,009			13,768
Total other expense, net		150,876			96,107			169,297
Income (loss) from continuing operations before income taxes		5,317			(249,536	)		184,935
Benefit from (provision for) income taxes		(1,076	)		26,531			(64,027	)
Income (loss) from continuing operations		4,241			(223,005	)		120,908
Discontinued Operations
Income from discontinued operations (including a gain on disposition of $285,033)		—			—			281,949
Benefit from income taxes		—			—			(99,822	)
Income from discontinued operations		—			—			182,127
Net income (loss)	$	4,241		$	(223,005	)	$	303,035
Basic net income (loss) per common share:
Income (loss) from continuing operations	$	0.05		$	(2.54	)	$	1.38
Income from discontinued operations		—			—			2.08
Net income (loss)	$	0.05		$	(2.54	)	$	3.46
Weighted average basic shares outstanding		86,429			87,854			87,567
Diluted net income (loss) per common share:
Income (loss) from continuing operations	$	0.05		$	(2.54	)	$	1.36
Income from discontinued operations		—			—			2.06
Net income (loss)	$	0.05		$	(2.54	)	$	3.42
Weighted average diluted shares outstanding		86,517			87,854			88,608
Dividends declared per common share	$	—		$	0.30		$	0.585

The accompanying notes are an integral part of these consolidated financial statements.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except share data)

	Other Comprehensive (Income) Loss			Common Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss, Net			Total Stockholders’ Equity
				Shares		Amount
Balances, January 1, 2007				87,105,106		$	871		$	561,298		$	544,080		$	3,703		$	1,109,952
Net income	$	303,035		—			—			—			303,035			—			303,035
Derivative instruments fair value adjustment, net of taxes of $8,274		(14,727	)	—			—			—			—			(14,727	)		(14,727	)
Restricted available for sale securities market adjustment, net of taxes of $59		109		—			—			—			—			109			109
Comprehensive income	$	288,417
Cumulative effect of a change in accounting for uncertainty in income taxes				—			—			—			(105	)		—			(105	)
Our share of Borgata’s cumulative effect of a change in accounting for uncertainty in income taxes				—			—			—			(122	)		—			(122	)
Stock options exercised				641,974			6			15,555			—			—			15,561
Tax benefit from share-based compensation arrangements				—			—			5,528			—			—			5,528
Share-based compensation costs				—			—			17,370			—			—			17,370
Dividends paid on common stock				—			—			—			(51,195	)		—			(51,195	)
Balances, December 31, 2007				87,747,080			877			599,751			795,693			(10,915	)		1,385,406
Net loss	$	(223,005	)	—			—			—			(223,005	)		—			(223,005	)
Derivative instruments fair value adjustment, net of taxes of $5,118		(9,103	)	—			—			—			—			(9,103	)		(9,103	)
Comprehensive loss	$	(232,108	)
Stock options exercised				55,700			1			471			—			—			472
Settlement of restricted stock units				11,281			—			—			—			—			—
Tax benefit from share-based compensation arrangements				—			—			660			—			—			660
Share-based compensation costs				—			—			15,422			—			—			15,422
Dividends paid on common stock				—			—			—			(26,330	)		—			(26,330	)
Balances, December 31, 2008				87,814,061			878			616,304			546,358			(20,018	)		1,143,522
Net income	$	4,241		—			—			—			4,241			—			4,241
Derivative instruments fair value adjustment, net of taxes of $(979)		1,892		—			—			—			—			1,892			1,892
Comprehensive income	$	6,133
Stock options exercised				29,797			—			160			—			—			160
Settlement of restricted stock units				11,281			—			—			—			—			—
Tax effect from share-based compensation arrangements				—			—			(1,384	)		—			—			(1,384	)
Share-based compensation costs				—			—			15,888			—			—			15,888
Common stock repurchased and retired				(1,724,685	)		(17	)		(7,933	)		—			—			(7,950	)
Balances, December 31, 2009				86,130,454		$	861		$	623,035		$	550,599		$	(18,126	)	$	1,156,369

The accompanying notes are an integral part of these consolidated financial statements.

-68-

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2009			2008			2007
Cash Flows from Operating Activities
Net income (loss)	$	4,241		$	(223,005	)	$	303,035
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization		164,427			168,997			165,959
Amortization of debt issuance costs		6,226			4,737			5,180
Share-based compensation expense		15,888			14,024			16,059
Deferred income taxes		15,574			(44,153	)		68,370
Operating and non-operating income from Borgata		(52,823	)		(40,347	)		(69,369	)
Distributions of earnings received from Borgata		60,136			19,579			70,570
Gain on disposition of Barbary Coast		—			—			(285,033	)
Noncash asset write-downs		42,350			382,012			3,744
Loss (gain) on early retirements of debt		(15,284	)		(28,553	)		16,945
Other operating activities		(4,464	)		(435	)		(3,783	)
Changes in operating assets and liabilities:
Restricted cash		8,141			(2,817	)		(8,216	)
Accounts receivable, net		2,791			2,227			3,067
Inventories		(67	)		(56	)		(103	)
Prepaid expenses and other current assets		15,598			(1,613	)		5,915
Income taxes receivable		(5,692	)		2,871			(5,069	)
Other assets		2,549			3,505			(16,238	)
Other current liabilities		(18,538	)		(38,543	)		(32,446	)
Other long-term tax liabilities		(4,618	)		792			39,256
Other liabilities		4,596			1,257			5,346
Net cash provided by operating activities		241,031			220,479			283,189
Cash Flows from Investing Activities
Capital expenditures		(157,557	)		(667,400	)		(296,894	)
Net cash paid for Dania Jai-Alai		(9,375	)		—			(80,904	)
Investments in and advances to unconsolidated subsidiaries		(73	)		(5,991	)		(10,297	)
Other investing activities		1,877			115			8,352
Net cash used in investing activities		(165,128	)		(673,276	)		(379,743	)
Cash Flows from Financing Activities
Payments on retirements of long-term debt		(89,482	)		(116,497	)		(260,938	)
Borrowings under bank credit facility		656,440			1,394,935			817,100
Payments under bank credit facility		(620,655	)		(866,720	)		(437,500	)
Payments under note payable		(18,750	)		—			—
Proceeds from termination of derivative instruments		—			—			5,718
Repurchase and retirement of common stock		(7,950	)		—			—
Payments of dividends on common stock		—			(26,330	)		(51,195	)
Other financing activities		(456	)		(140	)		19,673
Net cash provided by (used in) financing activities		(80,853	)		385,248			92,858
Decrease in cash and cash equivalents		(4,950	)		(67,549	)		(3,696	)
Cash and cash equivalents, beginning of year		98,152			165,701			169,397
Cash and cash equivalents, end of year	$	93,202		$	98,152		$	165,701

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BOYD GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)

(In thousands)

	Year Ended December 31,
	2009			2008			2007
Supplemental Disclosure of Cash Flow Information
Cash paid for interest, net of amounts capitalized	$	142,670		$	110,618		$	135,940
Cash paid (refunded) for income taxes, net		(1,768	)		13,267			60,279
Supplemental Schedule of Noncash Investing and Financing Activities
Payables incurred for capital expenditures	$	35,973		$	122,310		$	79,811
Capitalized share based compensation costs		—			1,398			1,311
Restricted cash received as a deposit for Morgans/LV Investment LLC joint venture		—			672			31,424
Disbursement of restricted cash received as a deposit for Morgans/LV Investment LLC joint venture		—			29,506			—
Restricted cash proceeds from maturities of restricted investments		—			—			8,381
Restricted cash used for the purchase of restricted investments		—			—			6,765
Restricted cash proceeds from sales of restricted investments		—			—			8,589
Increase (decrease) in fair value of derivative instruments		4,952			(14,221	)		(23,001	)
Land acquired in exchange for Barbary Coast		—			—			364,000
Non-monetary portion of land exchange		—			—			18,177
Transfer of investment in an unconsolidated subsidiary to property and equipment		4,427			—			—
Transfer of land to property and equipment, net, from assets held for sale		—			23,188			—
Acquisition of Dania Jai-Alai
Fair value of noncash assets acquired	$	28,352		$	—		$	131,372
Net cash paid		—			—			(80,904	)
Additional cash paid		(9,375	)		—			—
Contingent liability assumed					—			(46,648	)
Termination of contingent liability		46,648			—			—
Note payable issued		(65,625	)		—			—
Liabilities assumed	$	—		$	—		$	3,820

The accompanying notes are an integral part of these consolidated financial statements.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Boyd Gaming Corporation (and together with its subsidiaries, the “Company,” “we” or “us”) was incorporated in the state of Nevada. The Company’s common stock is traded on the New York Stock Exchange under the symbol “BYD”.

We are a diversified operator of 15 wholly-owned gaming entertainment properties and one 50% owned property. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Louisiana, Mississippi, Indiana and New Jersey, which we aggregate in order to present four Reportable Segments: (i) Las Vegas Locals, (ii) Downtown Las Vegas, (iii) Midwest and South, and (iv) our 50% interest in a limited liability company that operates the Borgata Hotel Casino & Spa in Atlantic City, New Jersey.

We also own and operate Dania Jai-Alai, which is a pari-mutuel jai-alai facility with approximately 47 acres of related land located in Dania Beach, Florida, a travel agency in Hawaii, and a captive insurance company, also in Hawaii, that underwrites travel-related insurance. Additionally, we own 85 acres on the Las Vegas Strip, where our Echelon development project is located.

On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of our multibillion dollar Echelon development project on the Las Vegas Strip. At such time, we did not anticipate the long-term effects of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas geographical area; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. The credit markets have yet to show significant recovery, thereby rendering financing for this type of development unavailable. Based on our current outlook, we do not expect to resume construction for three to five years. See Note 10, Commitments and Contingencies – Commitments - Echelon, for a discussion regarding the impact of the ongoing suspension of the Echelon project on our joint venture and other agreements.

Basis of Presentation

On July 1, 2009, The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles – A Replacement of FASB Statement No. 162, (the “Codification”) (previously “SFAS 168”) became effective. Accordingly, the Financial Accounting Standards Board Accounting Standards Codification^TM (the “ASC”) became the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”). The implementation of the Codification did not initially have an impact on our consolidated financial statements, as it did not modify any existing authoritative GAAP.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Boyd Gaming Corporation and its subsidiaries. Investments in unconsolidated affiliates, which are 50%-or-less owned and do not meet the consolidation criteria of Section 15, Variable Interest Entities in Topic 810, Consolidation (“ASC Topic 810”), of the Codification are accounted for under the equity method. All material intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates incorporated into our consolidated financial statements include the estimated allowance for doubtful accounts receivable, the estimated useful lives for depreciable and amortizable assets, fair values of acquired assets and liabilities, estimated cash flows in assessing the recoverability of long-lived assets and goodwill and intangible assets, property closure costs, the estimated valuation allowance for deferred tax assets,

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

certain tax liabilities, our self-insured liability reserves, slot bonus point programs, share-based payment valuation assumptions, fair values of derivative instruments, contingencies and litigation, claims and assessments. Actual results could differ from these estimates.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with maturities of three months or less at their date of purchase, and are on deposit with high credit quality financial institutions. The carrying values of these instruments approximate their fair values due to their short maturities.

Restricted Cash

Restricted cash consists primarily of customer payments related to advanced bookings with our Hawaiian travel agency that are invested with a maximum maturity of 90 days and amounts on deposit for horse racing purposes at Delta Downs.

Accounts Receivable, net

Accounts receivable consist primarily of casino, hotel and other receivables. Accounts receivable are typically non-interest bearing and are initially recorded at cost. Accounts are written off when management deems the account to be uncollectible, based upon historical collection experience, the age of the receivable and other relevant economic factors. An estimated allowance for doubtful accounts is maintained to reduce our receivables to their carrying amount. As a result, the net carrying value approximates fair value. The allowance for doubtful accounts was $4.2 million and $5.4 million at December 31, 2009 and 2008, respectively. Management does not believe that any significant concentrations of credit risk existed as of December 31, 2009.

Inventories

Inventories consist primarily of food and beverage and retail items and are stated at the lower of cost or market. Cost is determined using the weighted-average inventory method.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or, for leasehold improvements, over the shorter of the asset’s useful life or term of the lease. Gains or losses on disposals of assets are recognized as incurred. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred.

Capitalized Interest

Interest costs associated with major construction projects are capitalized as part of the cost of the constructed assets. When no debt is incurred specifically for a project, interest is capitalized on amounts expended for the project using our weighted-average cost of borrowing. Capitalization of interest ceases when the project (or discernible portions of the project) is substantially complete. If substantially all of the construction activities of a project are suspended, capitalization of interest will cease until such activities are resumed. We amortize capitalized interest over the estimated useful life of the related assets. Interest capitalized during the years ended December 31, 2009, 2008 and 2007 was $0.4 million, $37.7 million and $18.1 million, respectively.

Long-Lived Assets

We evaluate our long-lived assets in accordance with the guidance in the Impairment or Disposal of Long Lived Assets subsection of ASC Topic 360, Property, Plant and Equipment (“ASC Topic 360”). For an asset that is to be disposed of, we recognize the asset at the lower of carrying value or fair market value, less costs of disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow model. For a long-lived asset to be held and used, we review the asset for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We then compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. The asset is not impaired if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically measured using a discounted cash flow model, which is based on the estimated future results of the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples. If an asset is under development, future cash flows include remaining construction costs. All recognized impairment charges are recorded as operating expenses. See Note 13, Write-Downs and Other Charges, Net for a discussion of impairment charges related to our long-lived assets.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Investments In and Advances to Borgata and Other Unconsolidated Subsidiaries

We have investments in unconsolidated subsidiaries accounted for under the equity method. Under the equity method, carrying value is adjusted for our share of the investees’ earnings and losses, as well as capital contributions to and distributions from these entities.

We evaluate our investments in unconsolidated subsidiaries for impairment when events or changes in circumstances indicate that the carrying value of such investment may have experienced an other-than-temporary decline in value. If such conditions exist, we compare the estimated fair value of the investment to its carrying value to determine if an impairment is indicated and determines whether such impairment is other than temporary based on its assessment of all relevant factors. Estimated fair value is determined using a discounted cash flow analysis based on estimated future results of the investee.

Debt Issuance Costs

Debt issuance costs incurred in connection with the issuance of long-term debt are capitalized and amortized to interest expense over the term of the related debt agreement. In the event that our debt is modified, repurchased or otherwise reduced prior to its original maturity date, we ratably reduce the unamortized debt issuance costs proportionately.

Goodwill and Intangible Assets

Goodwill represents the excess of purchase price over fair market value of net assets acquired in business combinations. Intangible assets include gaming license rights, trademarks and customer lists. Goodwill and indefinite-lived intangible assets are not subject to amortization, but they are subject to an annual impairment test in the second quarter of each year and between annual test dates in certain circumstances.

Goodwill for relevant reporting units is tested for impairment using a discounted cash flow analysis based on the estimated future results of our reporting units discounted using our weighted-average cost of capital and market indicators of terminal year capitalization rates. The implied fair value of a reporting unit’s goodwill is compared to the carrying value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit to its assets and liabilities and the amount remaining, if any, is the implied fair value of goodwill. If the implied fair value of the goodwill is less than its carrying value then it must be written down to its implied fair value.

License rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method. If the fair value of an indefinite-lived intangible asset is less than its carrying amount, an impairment loss is recognized equal to the difference.

See Note 5, Intangible Assets, Note 6, Goodwill and Note 13, Write-Downs and Other Charges, Net for a discussion of impairment charges related to our goodwill and other intangible assets.

Slot Bonus Point Program

We have established promotional programs to encourage repeat business from frequent and active slot machine customers and patrons. Members earn points based on gaming activity and such points can be redeemed for cash, or to a lesser extent, other free goods and services. We accrue for bonus points expected to be redeemed for cash as a reduction to gaming revenue and accrue for bonus points expected to be redeemed for free goods and services as gaming expense. The accruals are based on estimates and assumptions regarding the mix of cash and other free goods and services that will be redeemed and the costs of providing those benefits. Historical data is used to assist in the determination of the estimated accruals. The slot bonus point accrual is included in accrued liabilities on our consolidated balance sheets.

Income Taxes

Income taxes are recorded under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carryforwards, in accordance with ASC Topic 740 Income Taxes (“ASC Topic 740”). ASC Topic 740 requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

based on the available evidence it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the ASC Topic 740 more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with the usability of operating loss and tax credit carryforwards before expiration, and tax planning alternatives.

Other Long Term Tax Liabilities

FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement 109, as subsequently codified in ASC Topic 740, clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC Topic 740 prescribes a threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Under ASC Topic 740, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC Topic 740 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Self-Insurance Reserves

We are self-insured up to certain stop loss amounts for employee health coverage, workers’ compensation and general liability costs. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not yet reported. In estimating these accruals, we consider historical loss experience and make judgments about the expected levels of costs per claim. Management believes the estimates of future liability are reasonable based upon our methodology; however, changes in health care costs, accident frequency and severity and other factors could materially affect the estimate for these liabilities. Self-insurance reserves are included in other liabilities on our consolidated balance sheets.

Derivative Instruments and Other Comprehensive Income (Loss)

Derivative instruments are recognized on the balance sheet at fair value. Derivatives that are not designated as hedges for accounting purposes must be adjusted to fair value through income. If the derivative qualifies and is designated as a hedge, depending on the nature of the hedge, changes in its fair value will either be offset against the change in fair value of the hedged item through earnings or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings. We utilize derivative instruments to manage interest rate risk on certain of our borrowings. For further information, see Note 12, Derivative Instruments and Other Comprehensive Income (Loss).

Revenue Recognition and Promotional Allowances

Gaming revenue represents the net win from gaming activities, which is the aggregate difference between gaming wins and losses. The majority of our gaming revenue is counted in the form of cash and chips and therefore is not subject to any significant or complex estimation procedures. Cash discounts, commissions and other cash incentives to customers related to gaming play are recorded as a reduction of gross gaming revenues. Room revenue recognition criteria are met at the time of occupancy. Food and beverage revenue recognition criteria are met at the time of service.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Gross revenues include the estimated retail value of rooms, food and beverage, and other goods and services provided to customers on a complimentary basis, or without charge. Such amounts are then deducted as promotional allowances. The estimated departmental cost of providing such promotional allowances is included primarily in gaming expenses as follows:

	Year Ended December 31,
	2009		2008		2007
	(In thousands)
Room	$	29,766	$	25,271	$	23,597
Food and beverage		114,711		123,444		118,968
Other		6,031		8,418		6,906
Total	$	150,508	$	157,133	$	149,471

Promotional allowances also include incentives such as cash, goods and services (such as complimentary rooms and food and beverages) earned in our slot bonus point program. We reward customers, through the use of bonus programs, with points based on amounts wagered or won that can be redeemed for a specified period of time, principally for cash, and to a lesser extent for goods or services, depending upon the property. We record the estimated retail value of these goods and services as revenue and then deduct them as promotional allowances.

Advertising Expense

Direct advertising costs are expensed the first time such advertising appears. Advertising costs from continuing operations are included in selling, general and administrative expenses on the accompanying consolidated statements of operations and totaled $21.2 million, $23.4 million and $25.7 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Corporate Expense

Corporate expense represents unallocated payroll, professional fees, aircraft costs and various other expenses that are not directly related to our casino hotel operations. Corporate expense totaled $47.6 million, $52.3 million and $60.1 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Preopening Expenses

Certain costs of start-up activities are expensed as incurred. During the years ended December 31, 2009, 2008 and 2007, we expensed $17.8 million, $20.3 million and $22.8 million in preopening costs, respectively, including $16.1 million, $16.3 million and $15.6 million, respectively, related to our Echelon development project. The remaining expense incurred in 2009 relates to our new hotel at Blue Chip and efforts to develop gaming activities in other jurisdictions. The remaining expense in 2008 and 2007 relates to these same projects, as well as an expansion project at Dania Jai-Alai.

Share-Based Compensation

We measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions), in accordance with ASC Topic 505, Share-Based Compensation. This cost is recognized over the period during which an employee is required to provide service in exchange for the award. Compensation costs related to stock option awards are calculated based on the fair value of each major option grant on the date of the grant using the Black-Scholes option pricing model that requires the formation of assumptions to be used in the model, such as expected stock price volatility, risk-free interest rates, expected option lives and dividend yields. We formed our assumptions using historical experience and observable conditions.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fair Value of Financial Instruments

On January 1, 2008, we adopted ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”). ASC Topic 820 does not determine or affect the circumstances under which fair value measurements are used, but defines fair value, expands disclosure requirements around fair value and specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These inputs create the following fair value hierarchy:

•   Level 1:	Quoted prices for identical instruments in active markets.
•   Level 2:	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
•   Level 3:	Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. For some products or in certain market conditions, observable inputs may not be available.

We adopted previously issued FASB Staff Position No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP FAS 157-4”), which has been subsequently classified in ASC Topic 820, Section 65, Transition Related to FASB Staff Position No. 157-4, and provides additional guidance for estimating fair value in accordance with ASC Topic 820, when the volume and level of activity for the asset or liability have significantly decreased. This standard also includes guidance on how to identify circumstances that indicate that a transaction is not orderly and emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation techniques used, the objective of a fair value measurement remains the same. FSP FAS 157-4, as applied prospectively, did not have a material impact on our consolidated financial statements.

The fair values of certain of our financial instruments, including cash and cash equivalents, accounts receivable and other current liabilities, approximate their recorded carrying amounts because of their short-term nature. See Note 8, Long-Term Debt and Note 12, Derivative Instruments and Other Comprehensive Income (Loss) for further discussions of the valuations of certain of our financial instruments.

Recently Issued Accounting Pronouncements

Subsequent to the adoption of the Codification, any change to the source of authoritative GAAP will be communicated through an Accounting Standards Update (“ASU”). ASUs will be published by the FASB for all authoritative GAAP promulgated by the FASB, regardless of the form in which such guidance may have been issued prior to release of the Codification. Prior to inclusion in an ASU, the standard-setting organizations and regulatory agencies continue to issue proposed changes to the accounting standards in previous form (e.g., FASB Statements of Financial Accounting Standards, Emerging Issues Task Force (“EITF”) Abstracts, FASB Staff Positions, SEC Staff Accounting Bulletins, etc.).

Variable Interest Entities. In September 2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 167, Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). SFAS 167 is a revision to FASB Interpretation No. 46, Consolidation of Variable Interest Entities (which is currently promulgated in a subsection of ASC Topic 810). The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS 167 is effective for the first annual reporting period beginning after November 15, 2009 and for interim periods within that first annual reporting period. We do not believe that the adoption of SFAS 167 will have a material impact on our consolidated financial statements.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Transfer of Financial Assets. In September 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets – An Amendment to FASB Statement No. 140 (“SFAS 166”). SFAS 166 is a revision of SFAS No. 140, Accounting for Transfers and Servicing Financial Assets and Extinguishments of Liabilities, which is presently included in ASC Topic 860, Transfers and Servicing. SFAS 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. SFAS 166 is effective for fiscal years beginning after November 15, 2009. We do not believe that the adoption of SFAS 166 will have a material impact on our consolidated financial statements.

Noncontrolling Interests, In December 2007, the FASB issued SFAS No. 160, Accounting for Noncontrolling Interests, (“SFAS 160”), which establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this guidance requires the recognition of a noncontrolling interest (previously referred to as minority interest) as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income or loss attributable to the noncontrolling interest is included in consolidated net income on the face of the income statement. The guidance clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this guidance requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated and requires expanded disclosures regarding the interests of the parent and the interests of the noncontrolling owners. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The adoption of SFAS 160 did not have an initial material impact on our consolidated financial statements.

A variety of additional proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our consolidated financial statements.

Subsequent Events

We have evaluated subsequent events through March 5, 2010, which is the issuance date of these consolidated financial statements.

In February 2010, we entered into an agreement that, among other things, amended our operating agreement with MGM Mirage Corporation (“MGM”) to permit the transfer of MGM’s 50% ownership interest of the Borgata into a divestiture trust in connection with MGM’s potential settlement agreement with the Division of Gaming Enforcement. The agreement includes the following provisions, among others, that would become effective only upon the transfer of MGM’s interest into the divestiture trust and the approval of the New Jersey Casino Control Commission, that (i) we would receive a priority distribution of approximately $31 million (equal to the excess prior capital contributions made by us) upon successful refinancing of the Borgata credit facility, and (ii) we would receive a payment from the trust equal to the greater of $10 million or 3% of the proceeds from the sale of MGM’s 50% interest in Borgata. Upon approval by the NJCCC, we will effectively control the operations of the Borgata, which will require us to consolidate the noncontrolling interest.

In addition, see Note 11, Stockholders’ Equity and Stock Incentive Plans, for further discussions of subsequent events.

NOTE 2. ASSETS HELD FOR SALE

Assets Held for Sale

We own approximately 125 acres of land in Limerick Township, Pennsylvania. In September 2006, we withdrew our local application for gaming approval, which led to our decision to sell the land. We recorded a $3.0 million non-cash write-down of the land to its fair value, less estimated costs to sell. On September 5, 2007, we entered into

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

an agreement to sell the land for $26.5 million, before selling costs, contingent upon certain conditions; however, on November 3, 2008, such agreement to sell the land was terminated. The carrying value of the land of $23.2 million was reclassified from assets held for sale to property and equipment on our consolidated balance sheet at December 31, 2008, since it no longer meets the criteria to be classified as held for sale.

Discontinued Operations

Barbary Coast

On February 27, 2007, we completed our exchange of the Barbary Coast hotel and Casino and its related 4.2 acres of land for a total of approximately 24 acres located north of and contiguous to our Echelon development project on the Las Vegas Strip in a nonmonetary, tax-free transaction with Harrah’s Operating Company, Inc., a subsidiary of Harrah’s Entertainment, Inc. (“Harrah’s”). Harrah’s purchased the 24-acre site in October 2006 from unrelated third parties for aggregate cash consideration of approximately $364 million. Upon the closing of this transaction, during the year ended December 31, 2007, we recorded a non-cash pre-tax gain from discontinued operations of approximately $285 million and wrote-off the $3.7 million carrying value of the Barbary Coast trademark, because, although we retained the trademark, we no longer have underlying cash flows to support its value.

Summary Financial Information for Discontinued Operations

The operating results of Barbary Coast for the year ended December 31, 2007 are presented as income from discontinued operations on our consolidated statements of operations, and are summarized as follows (in thousands):

Net revenues	$	10,179
Asset impairment charges		(3,700	)
Operating loss		(2,484	)
Gain on disposition of Barbary Coast		285,033
Income from discontinued operations		281,949
Provision for income taxes		(99,822	)
Net income from discontinued operations		182,127

NOTE 3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following.

	Estimated Life (Years)	December 31,
		2009		2008
		(In thousands)
Land	—	$	686,716	$	686,716
Buildings and improvements	10 through 40		1,980,086		1,863,998
Furniture and equipment	3 through 10		863,854		834,391
Riverboats and barges	10 through 40		167,427		168,427
Construction in progress	—		721,990		820,818
Total property and equipment			4,420,073		4,374,350
Less accumulated depreciation			1,260,896		1,125,096
Total property and equipment, net		$	3,159,177	$	3,249,254

Major items included in construction in progress at December 31, 2009 and 2008 consisted principally of construction costs related to our Echelon development project on the Las Vegas Strip. In addition, land with a carrying value of approximately $450 million at December 31, 2009 and 2008 is related to Echelon (see Note 10, Commitments and Contingencies – Commitments - Echelon).

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Sam’s Town Tunica reported a net operating loss of $2.1 million for the year ended December 31, 2009; therefore, we tested its assets for recoverability. The asset recoverability test required the estimation of its undiscounted future cash flows and the comparison of the aggregate total to the property’s carrying value. The test resulted in no impairment; however, we will continue to monitor the performance of Sam’s Town Tunica and, if necessary, continue to update our asset recoverability test. If future asset recoverability tests indicate that the assets of Sam’s Town Tunica are impaired, we will be subject to a non-cash write-down of its assets, which could have a material adverse impact on our consolidated statements of operations.

NOTE 4. INVESTMENTS IN AND ADVANCES TO BORGATA AND OTHER UNCONSOLIDATED SUBSIDIARIES, NET

Investments in and advances to unconsolidated subsidiaries consist of the following:

	December 31,
	2009			2008
	(In thousands)
Investment in and advances to Borgata (50%):
Cash contributions	$	254,157		$	254,157
Accumulated amortization of 50% of our unilateral equity contribution		(2,311	)		(1,925	)
Deferred gain on sale of asset to Borgata, net		(313	)		(336	)
Capitalized interest, net		31,347			32,283
Equity income		372,985			318,865
Distributed earnings		(262,227	)		(202,091	)
Other advances, net		582			369
Net investment in and advances to Borgata		394,220			401,322
Investment in and advances to Morgans Las Vegas, LLC (50%)		—			17,929
Investment in and advances to Tunica Golf Course, L.L.C. (33.3%)		—			138
Investments in and advances to Borgata and other unconsolidated subsidiaries, net	$	394,220		$	419,389

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Borgata Hotel Casino and Spa

We and MGM MIRAGE, through wholly-owned subsidiaries, each have a 50% interest in Marina District Development Holding Co., LLC (“Holding Company”). The Holding Company owns all the equity interests in Marina District Development Company, LLC, d.b.a. Borgata Hotel Casino and Spa. As the managing venturer, we are responsible for the day-to-day operations of Borgata, including the operation and improvement of the facility and business. Borgata employs a management team and full staff to perform these services for the property. We maintain the oversight responsibility for the operations, but we do not receive a management fee from Borgata. Borgata’s bank credit agreement is secured by substantially all of its real and personal property and is non-recourse to MGM MIRAGE and us.

Our net investment in Borgata differs from our share of the underlying equity in Borgata. In 2004, pursuant to an agreement with MGM MIRAGE related to the funding of Borgata’s project costs, we made a unilateral capital contribution to Borgata of approximately $31 million. We are ratably amortizing $15.4 million (50% of the unilateral contribution, which corresponds to our ownership percentage of Borgata) over 40 years. Also, during Borgata’s initial development, construction and preopening phases, we capitalized the interest on our investment and are ratably amortizing our capitalized interest over 40 years. Additionally, we are ratably accreting a $0.4 million deferred gain related to the sale of our airplane to Borgata over the airplane’s remaining useful life.

Summarized financial information of Borgata is as follows.

Condensed Consolidated Balance Sheet Information

	December 31,
	2009		2008
	(In thousands)
Assets
Current assets	$	95,623	$	110,279
Property and equipment, net		1,366,008		1,431,118
Other assets, net		40,320		36,266
Total assets	$	1,501,951	$	1,577,663
Liabilities and Members’ Equity
Current liabilities	$	82,802	$	103,534
Long-term debt		679,619		740,536
Other liabilities		40,749		22,782
Members’ equity		698,781		710,811
Total liabilities and members’ equity	$	1,501,951	$	1,577,663

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidated Statements of Income Information

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Gaming revenue	$	691,428		$	734,306		$	748,649
Non-gaming revenue		299,173			310,157			286,030
Gross revenues		990,601			1,044,463			1,034,679
Less promotional allowances		213,193			213,974			196,036
Net revenues		777,408			830,489			838,643
Expenses		579,749			633,353			597,127
Depreciation and amortization		78,719			76,096			68,576
Preopening expenses		699			5,570			3,116
Write-downs and other items, net		(28,606	)		162			956
Operating income		146,847			115,308			168,868
Interest expense, net		(27,668	)		(29,049	)		(31,194	)
State income tax (provision) benefit		(10,938	)		(2,970	)		3,658
Net income	$	108,241		$	83,289		$	141,332

Our share of Borgata’s results has been included in our accompanying consolidated statements of operations for the following periods on the following lines:

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Our share of Borgata’s operating income	$	73,424		$	57,654		$	84,434
Net amortization expense related to our investment in Borgata		(1,298	)		(1,298	)		(1,298	)
Operating income from Borgata, as reported on our consolidated financial statements	$	72,126		$	56,356		$	83,136
Other non-operating expenses from Borgata, as reported on our consolidated financial statements	$	19,303		$	16,009		$	13,768

Borgata Tax Credits. Based on New Jersey state income tax rules, Borgata is eligible for a refundable state tax credit under the New Jersey New Jobs Investment Tax Credit (“New Jobs Tax Credit”) because it made a qualified investment in a new business facility that created new jobs. The realization of the credit is contingent upon maintaining certain employment levels for employees directly related to the qualified investment as well as maintaining overall employment levels. Fluctuations in employment levels for any given year during the credit period may eliminate or reduce the credit. The total net credit related to Borgata’s original investment was approximately $75 million over a five-year period that ended in 2007. Incremental net credits related to Borgata’s public space expansion and hotel expansion are also available. Borgata recorded $5.0 million and $17.4 million, respectively, of net New Jobs Tax Credits in arriving at its state income tax benefit (provision) for the years ended December 31, 2008 and 2007. Borgata was not eligible to receive a credit in 2009 due to a reduction in employment levels.

Borgata Expansions. On June 27, 2008, Borgata’s second hotel, The Water Club, held its grand opening. The Water Club is an 800-room hotel, featuring five swimming pools, a state-of-the-art spa, and additional meeting and retail space. Borgata financed the expansion from its cash flows from operations and through borrowings under its bank credit facility.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On September 23, 2007, The Water Club, then under construction, sustained a fire that caused damage to property with a carrying value of approximately $11.4 million. Borgata’s insurance policies included coverage for replacement costs related to property damage, with the exception of minor amounts principally related to insurance deductibles and certain other limitations. In addition, Borgata had “delay-in-completion” insurance coverage for The Water Club for certain costs, subject to various limitations and deductibles. On August 10, 2009, Borgata reached a final settlement of $40 million with its insurance carrier and recognized a gain of $28.7 million, included in other items and write-downs, net, on its condensed consolidated statement of income, representing the amount of insurance advances in excess of the $11.3 million carrying value of assets damaged and destroyed by the fire (after its $0.1 million deductible).

Borgata Distributions. Borgata’s amended bank credit agreement allows for certain limited distributions to be made to its partners. Our distributions from Borgata were $60.1 million, $19.6 million and $70.6 million during the years ended December 31, 2009, 2008 and 2007, respectively. Borgata has significant uses for its cash flows, including maintenance capital expenditures, interest payments, state income taxes and the repayment of debt. Borgata’s cash flows are primarily used for its business needs and are not generally available, except to the extent distributions are paid to us, to service our indebtedness. In addition, Borgata’s amended bank credit facility contains certain covenants, including, without limitation, various covenants: (i) requiring the maintenance of a minimum fixed charge coverage ratio; (ii) establishing a maximum permitted total leverage ratio; (iii) imposing limitations on the incurrence of additional indebtedness and liens; (iv) imposing limitations on transfers, sales and other dispositions; and (v) imposing restrictions on investments, dividends and certain other payments. In the event that Borgata fails to comply with its covenants, it may be prevented from making any distributions to us during such period of noncompliance.

Morgans/LV Investment LLC

We were a 50% partner in a joint venture with Morgans Hotel Group Co., which was terminated effective as of December 31, 2009. We accounted for our investment in Morgans/LV Investment LLC (“Morgans”) under the equity method. We evaluate our equity investments for impairment whenever events or changes in circumstances indicate that the carrying value of such investment may have experienced an “other-than-temporary” decline in value. If such conditions exist, we then compare the estimated fair value of the investment to our carrying value to identify any impairment and determine whether such impairment is other-than-temporary.

Due to the uncertainty regarding the final development plan of Echelon, during the year ended December 31, 2009, we reviewed our former investment in the Morgans joint venture for impairment. This impairment test was comprised of a fair value assessment, using cash flow analyses related to several viable alternative plans for the future development of Echelon, as discussed further in Note 10, Commitments and Contingencies – Commitments - Echelon. Because no specific strategic plan related to Echelon can be determined with certainty at this time, the test weighted several viable alternative plans with significant consideration given to the likelihood of constructing the plans designed pursuant to the joint venture. As a result of this analysis, we did not believe that certain contributions to the joint venture, primarily related to the architectural and design plans to which we have no future interest, title or right to use, will ultimately be realizable. Accordingly, we recorded an other-than-temporary non-cash impairment charge of $13.5 million during the year ended December 31, 2009 related to such costs. The remaining $4.4 million of our investment in Morgans represents previously reimbursed allocations of shared development costs related to the Echelon master plan. These costs approximate their fair value at December 31, 2009. These costs reverted to our basis in Echelon, reported as construction in progress, as the plans to construct the hotels were terminated contemporaneous with the termination of the joint venture. As we further develop and explore the viability of alternatives to Echelon, we will continue to monitor these assets for recoverability, individually, and in conjunction with the overall Echelon development.

For further explanation regarding the suspension and future development of Echelon, see Note 10, Commitments and Contingencies – Commitments – Echelon. For additional information regarding the write-down of our investment, see Note 13, Write-Downs and Other Charges, Net.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Other Unconsolidated Entities

In addition, we have a one-third investment in Tunica Golf Course, L.L.C. (d.b.a. River Bend Links) located in Tunica, Mississippi. We account for our share of the golf course’s net loss under the equity method of accounting. Because we do not have any obligation to fund losses in excess of our investment, our basis was reduced to zero during the year ended December 31, 2009, as our net carrying value was absorbed by our cumulative share of net losses. At December 31, 2008, our net investment in and advances to the golf course was $0.1 million.

NOTE 5. INTANGIBLE ASSETS

Intangible assets consist of the following:

	December 31,
	2009		2008
	(In thousands)
Las Vegas Locals trademarks	$	50,700	$	50,700
Las Vegas Locals customer lists		300		300
Midwest and South license rights		405,365		405,365
Midwest and South customer lists		100		100
Total intangible assets		456,465		456,465
Less accumulated amortization:
License rights		33,939		33,939
Customer lists		400		363
Total accumulated amortization		34,339		34,302
Intangible assets, net	$	422,126	$	422,163

License rights are intangible assets acquired from the purchase of gaming entities that are located in gaming jurisdictions where competition is limited to a specified number of licensed gaming operators. License rights and trademarks are not subject to amortization as we have determined that they have an indefinite useful life.

Customer lists are being ratably amortized over a five-year period. For the years ending December 31, 2009, 2008 and 2007, amortization expense related to the customer lists in each year was approximately $0.1 million. The assets were fully amortized as of December 31, 2009.

The gross amount of intangible assets recorded at December 31, 2009 and 2008 was $1.0 billion, which has been reduced by aggregate impairment losses of $187.9 million and accumulated amortization of $400.0 million at both dates, respectively.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table sets forth the change in our intangible assets, net during the years ended December 31, 2009 and 2008 (in thousands).

Balance, January 1, 2008	$	538,095
Finalization of Dania Jai-Alai purchase priceallocation (see Note 6)		46,648
Write-off of Dania Jai-Alai intangible license right		(81,800	)
Write-down of Blue Chip gaming license right		(80,700	)
Amortization Expense		(80	)
Balance, December 31, 2008		422,163
Amortization Expense		(37	)
Balance, December 31, 2009	$	422,126

Asset Impairment Testing

We perform an annual impairment test of these assets in the second quarter of each year, which resulted in no impairment charge as of the measurement date for the years ended December 31, 2009, 2008 and 2007. In the valuation of these indefinite-lived assets, the income approach was applied, which utilized the relief from royalty and multi-period excess earnings methods. In addition, we are required to test these assets for impairment between annual test dates in certain circumstances. Accordingly, due to the prolonged economic downturn and adverse decline in our market capitalization, as of December 31, 2008, we performed interim impairment tests that resulted in an $80.7 million non-cash write-down of our indefinite-life gaming license right at Blue Chip. The primary reason for this impairment charge relates to the ongoing recession, which has caused us to reduce our estimates for projected cash flows.

NOTE 6. GOODWILL

Goodwill represents the excess of total acquisition costs over the fair market value of net assets acquired in a business combination and consists of the following:

	December 31,
	2009		2008
	(In thousands)
Las Vegas Locals goodwill	$	212,713	$	212,713
Downtown Las Vegas goodwill		6,997		6,997
Total goodwill		219,710		219,710
Less accumulated amortization		6,134		6,134
Goodwill, net	$	213,576	$	213,576

The gross amount of goodwill recorded at December 31, 2009 and 2008 was $429.7 million and $401.4 million, respectively, which has been reduced by aggregate impairment losses of $216.2 million and $187.8 million at those respective dates.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table sets forth the change in our goodwill, net, during the years ended December 31, 2009 and 2008 (in thousands).

Balance, January 1, 2008	$	404,206
Resolution of Coast Casinos, Inc. acquisition related tax reserves (see Note 9)		(2,832	)
Write-down of Coast Casinos, Inc. goodwill		(165,479	)
Write-down of Sam’s Town Shreveport goodwill		(22,319	)
Balance, December 31, 2008		213,576
Dania Jai-Alai goodwill		28,352
Write-down of Dania Jai-Alai goodwill		(28,352	)
Balance, December 31, 2009	$	213,576

In March 2007, we acquired Dania Jai-Alai and approximately 47 acres of related land located in Dania Beach, Florida. Dania Jai-Alai is one of four pari-mutuel facilities in Broward County approved under Florida law to operate 2,000 Class III slot machines. In March 2007, we paid approximately $81 million to close this transaction, and agreed to pay, in March 2010 or earlier, a contingent payment of an additional $75 million to the seller, plus interest accrued at the prime rate (the “contingent payment”), if certain legal conditions were satisfied.

In January 2009, we amended the purchase agreement to settle the contingent payment prior to the satisfaction of the legal conditions. The principal terms of the amendment were as follows.

• We paid $9.4 million to the seller in January 2009, plus $9.1 million of interest accrued from the March 1, 2007 date of the acquisition.

• We issued an 8% promissory note to the seller in the amount of $65.6 million, plus accrued interest. The terms of the note require principal payments of $9.4 million, plus accrued interest, in April 2009 and July 2009, and a final principal payment of $46.9 million, plus accrued interest, due in January 2010. The promissory note was secured by a letter of credit under our bank credit facility, and we have made all scheduled payments on the promissory note, including the final payment in January 2010.

The carrying value of the promissory note, which approximates fair value, is $46.9 million as of December 31, 2009. The inputs utilized to value the promissory note are classified as Level 3 in the ASC Topic 820 hierarchal disclosure framework (see Note 1, Summary of Significant Accounting Policies), as it is not traded and does not have an observable market input. We have estimated that the fair value of the note approximates its carrying value, based on a discounted cash flow approach, after giving consideration to the short duration to maturity.

In conjunction with the amendment to the purchase agreement, we recorded the remaining $28.4 million of the $75 million contingent liability as additional goodwill during the year ended December 31, 2009. However, upon evaluation of this additional goodwill for recoverability, we recorded a non-cash impairment charge of $28.4 million (see Note 13, Write-downs and Other Charges, Net).

Asset Impairment Testing

We perform an annual impairment test of our goodwill in the second quarter of each year, which resulted in no impairment charge as of the measurement date for the years ended December 31, 2009, 2008 and 2007. The impairment test for goodwill included the income, market and cost approaches, as applicable. The income approach incorporated the use of the discounted cash flow method, whereas the market approach incorporated the use of the guideline company method.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition, we are required to test these assets for impairment between annual test dates in certain circumstances. Accordingly, due to the prolonged economic downturn and adverse decline in our market capitalization, as of December 31, 2008, we performed interim impairment tests that resulted in a $165.5 million and $22.3 million non-cash write-down of goodwill related to our 2004 acquisitions of Coast Casinos, Inc. and Sam’s Town Shreveport, respectively. These impairment charges primarily relate to the ongoing recession, which has caused us to reduce our estimates for projected cash flows, has reduced overall industry valuations, and has caused an increase in discount rates in the credit and equity markets.

NOTE 7. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

	December 31,
	2009		2008
	(In thousands)
Payroll and related expenses	$	54,620	$	54,176
Interest		14,523		14,514
Gaming liabilities		50,009		55,009
Accrued expenses and other liabilities		55,425		59,992
Total accrued liabilities	$	174,577	$	183,691

NOTE 8. LONG-TERM DEBT

Long-term debt consists of the following:

	December 31,
	2009		2008
	(In thousands)
Bank credit facility	$	1,916,900	$	1,881,115
7.75% Senior Subordinated Notes due 2012		158,832		203,530
6.75% Senior Subordinated Notes due 2014		248,668		300,000
7.125% Senior Subordinated Notes due 2016		240,750		250,000
Other		12,413		13,029
Total long-term debt		2,577,563		2,647,674
Less current maturities		652		616
Long-term debt, net	$	2,576,911	$	2,647,058

Bank Credit Facility

On December 21, 2009, we entered into a First Amendment and Consent to First Amended and Restated Credit Agreement (the “Amendment”), with certain financial institutions and Bank of America, N.A., as administrative agent. The Amendment amended certain terms of our bank credit facility dated as of May 24, 2007.

The Amendment reduced the revolving commitments under our bank credit facility from $4.0 billion to $3.0 billion and increased the amount of funds available under letters of credit.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Among other things, the Amendment also:

• decreased or increased the maximum total leverage ratios for periods ending December 31, 2010 and thereafter as follows: (i) 7.25 to 1.00 for the four quarters ending December 31, 2010; (ii) 7.00 to 1.00 for the four quarters ending March 31, 2011; (iii) 6.75 to 1.00 for the four quarters ending June 30, 2011; (iv) 6.50 to 1.00 for the four quarters ending September 30, 2011; (v) 6.00 to 1.00 for the four quarters ending December 31, 2011; and (vi) 5.50 to 1.00 for the four quarters ending March 31, 2012;

• provided that if a lender under our bank credit facility becomes the subject of a bankruptcy or similar proceeding or defaults on or refuses to comply with its funding obligations, we may be required to pledge or deposit collateral in an amount not less than such lender’s letter of credit obligations for the benefit of the letter of credit issuer;

• revised the definition of “Consolidated Funded Indebtedness” to (i) exclude cash borrowed by us and pledged or deposited by us as cash collateral pursuant to the funding obligations discussed in the bullet point above; and (ii) include liabilities under any non-appealable judgment;

• provided for variations in GAAP accounting for the purposes of financial covenants and computations, including without limitation, (i) deconsolidation of certain entities that we do not currently consolidate in accordance with GAAP but which are subsequently required to be consolidated for any reason other than direct or indirect majority equity ownership; (ii) exclusion of contracts determined to be leases under GAAP; and (iii) a provision that Echelon and related entities will be considered a project regardless of treatment under GAAP; provided, however, that if the determination is made that Echelon and such related entities should no longer be considered a project in accordance with GAAP, then up to $30 million of pre-opening expenses, impairment charges and exiting and disposal charges incurred after such determination that are otherwise includable in Consolidated EBITDA will be excluded for the purposes of debt covenant calculations and for compliance purposes;

• revised the definition of “Interest Coverage Ratio” (i) to include in the interest computation interest costs associated with derivative instruments not otherwise included in interest expense; and (ii) to exclude from the interest computation (a) non-cash change in value of derivative instruments and (b) gains and losses arising out of the termination of derivative instruments; and

• revised the definition of Consolidated EBITDA to, among other things, (i) modify and clarify provisions relating to inclusion of earnings of the Borgata and non-wholly owned subsidiaries and earnings of entities acquired by us (including acquisitions of substantially all assets of an entity); (ii) exclude interest costs associated with derivative instruments not otherwise included in interest expense; and (iii) exclude non-cash litigation accruals, but include any such amounts at such time as there is a non-appealable judgment or cash payment in respect of a settlement of or judgment in respect of such litigation.

At December 31, 2009, approximately $1.9 billion was outstanding under our revolving credit facility, with $70.8 million allocated to support various letters of credit, leaving remaining availability of approximately $1.0 billion. Due to the decrease in borrowing capacity, we recorded incremental interest expense of approximately $2 million during the year ended December 31, 2009, related to the accelerated amortization of deferred debt costs related to the bank credit facility. Additionally, in conjunction with the Amendment, we incurred approximately $0.8 million in incremental debt costs, which have been deferred and will be amortized over the remaining term of the bank credit facility.

The interest rate on the bank credit facility is based, at our option, upon either LIBOR or the “base rate,” plus, in each case, an applicable margin. The applicable margin is a percentage per annum (which ranges from 0.625% to 1.625% if we elect to use LIBOR, and 0.0% to 0.375% if we elect to use the base rate) determined in accordance with a specified pricing grid based upon our predefined total leverage ratio. In addition, we incur commitment fees on the unused portion of the bank credit facility that range from 0.200% to 0.350% per annum. The bank credit facility is guaranteed by our material subsidiaries and is secured by the capital stock of those subsidiaries.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The blended interest rates for outstanding borrowings under our bank credit facility at December 31, 2009 and 2008 were 1.9% and 2.9%, respectively.

The bank credit facility contains certain financial and other covenants, including: (i) requiring the maintenance of a minimum interest coverage ratio of 2.00 to 1.00; (ii) establishing a maximum total leverage ratio (discussed below); (iii) imposing limitations on the incurrence of indebtedness and liens; (iv) imposing limitations on transfers, sales and other dispositions; and (v) imposing restrictions on investments, dividends and certain other payments.

The maximum permitted Total Leverage Ratio is calculated as Consolidated Funded Indebtedness to twelve-month trailing Consolidated EBITDA (all capitalized terms are defined in the bank credit facility). The following table provides our maximum Total Leverage Ratio during the remaining term of the bank credit facility, as modified by the Amendment.

For the Trailing Four Quarters Ending	Maximum Total Leverage Ratio
December 31, 2009	6.50 to 1.00
March 31, 2010	6.75 to 1.00
June 30, 2010	7.00 to 1.00
September 30, 2010	7.25 to 1.00
December 31, 2010	7.25 to 1.00
March 31, 2011	7.00 to 1.00
June 30, 2011	6.75 to 1.00
September 30, 2011	6.50 to 1.00
December 31, 2011	6.00 to 1.00
March 31, 2012	5.50 to 1.00

We believe that we are in compliance with the bank credit facility covenants at December 31, 2009, including the Total Leverage Ratio, which, at December 31, 2009, was 6.18 to 1.00. At March 31, 2010, assuming our current level of Consolidated Funded Indebtedness remains constant, we estimate that an 8.5% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to 2009, would cause us to exceed our maximum Total Leverage Ratio covenant for that period. However, in the event that we project that our Consolidated EBITDA may decline by 8.5% or more, we could implement certain actions in an effort to minimize the possibility of a breach of the Total Leverage Ratio covenant. These actions may include, among others, reducing payroll, benefits and certain other operating costs, deferring or eliminating certain maintenance, expansion or other capital expenditures, reducing our outstanding indebtedness through repurchases or redemption, and/or increasing cash by selling assets or issuing equity.

This bank credit facility replaced our previous $1.85 billion bank credit facility. We recorded a $4.4 million non-cash loss on the early retirements of debt during the year ended December 31, 2007 for the write-off of unamortized debt fees associated with our former bank credit facility.

Senior Subordinated Notes

7.75% Senior Subordinated Notes due December 2012. On December 30, 2002, we issued $300 million principal amount of 7.75% senior subordinated notes due December 2012. The notes require semi-annual interest payments on June 15 and December 15 of each year, through December 2012, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, incurrence of debt, sales of assets, mergers and consolidations, and limitations on restricted payments (as defined in the indenture governing the notes). We believe that we are in compliance with these covenants at December 31, 2009. After December 15, 2007, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.875% in 2007 to 100% in 2010 and thereafter, plus accrued and unpaid interest.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During the year ended December 31, 2009, we purchased and retired $44.7 million principal amount of our 7.75% senior subordinated notes due December 2012. The total purchase price of the notes was approximately $38.7 million, resulting in a gain of approximately $5.9 million, net of associated deferred financing fees, which is recorded on our consolidated statements of operations for the year ended December 31, 2009. The transactions were funded by borrowings under our bank credit facility.

During the year ended December 31, 2008, we purchased and retired $96.5 million principal amount of our 7.75% senior subordinated notes due December 2012. The total purchase price of the notes was approximately $83.6 million, resulting in a gain of approximately $11.9 million, net of associated deferred financing fees, which is recorded on our consolidated statements of operations for the year ended December 31, 2008. The transactions were funded by borrowings under our bank credit facility.

There were no such transactions during the year ended December 31, 2007.

6.75% Senior Subordinated Notes due April 2014. On April 15, 2004, we issued, through a private placement, $350 million principal amount of 6.75% senior subordinated notes due April 2014. In July 2004, all, except for $50,000 in aggregate principal amount of these notes, were exchanged for substantially similar notes that were registered with the Securities and Exchange Commission. The notes require semi-annual interest payments on April 15 and October 15 of each year, through April 2014, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, incurrence of debt, sales of assets, mergers and consolidations, and limitations on restricted payments (as defined in the indenture governing the notes). We believe that we are in compliance with these covenants at December 31, 2009. After April 15, 2009, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.375% in 2009 to 100% in 2012 and thereafter, plus accrued and unpaid interest.

During the year ended December 31, 2009, we purchased and retired $51.3 million principal amount of our 6.75% senior subordinated notes due April 2014. The total purchase price of the notes was approximately $43.1 million, resulting in a gain of approximately $7.9 million, net of associated deferred financing fees, which is recorded on our consolidated statements of operations for the year ended December 31, 2009. The transactions were funded by borrowings under our bank credit facility.

During the year ended December 31, 2008, we purchased and retired $50.0 million principal amount of our 6.75% senior subordinated notes due April 2014. The total purchase price of the notes was approximately $32.9 million, resulting in a gain of approximately $16.6 million, net of associated deferred financing fees, which is recorded on our consolidated statements of operations for the year ended December 31, 2008. The transactions were funded by borrowings under our bank credit facility.

There were no such transactions during the year ended December 31, 2007.

7.125% Senior Subordinated Notes due February 2016. On January 30, 2006, we issued $250 million principal amount of 7.125% senior subordinated notes due February 2016. The notes require semi-annual interest payments on February 1 and August 1 of each year, through February 2016, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, incurrence of debt, sales of assets, mergers and consolidations, and limitations on restricted payments (as defined in the indenture governing the notes). We believe that we are in compliance with these covenants at December 31, 2009. At any time prior to February 1, 2009, we may redeem up to 35% of the aggregate principal amount of the outstanding notes with the net proceeds from one or more public equity offerings at a redemption price of 107.125% of the principal amount, plus accrued and unpaid interest, subject to certain conditions. At any time prior to February 1, 2011, we may redeem the notes, in whole or in part, pursuant to a “make-whole” call as provided in the indenture governing the notes, plus accrued and unpaid interest. On or after February 1, 2011, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.563% in 2011 to 100% in 2014 and thereafter, plus accrued and unpaid interest.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During the year ended December 31, 2009, we purchased and retired $9.3 million principal amount of our 7.125% senior subordinated notes due February 2016. The total purchase price of the notes was approximately $7.7 million, resulting in a gain of approximately $1.4 million, net of associated deferred financing fees, which is recorded on our consolidated statements of operations for the year ended December 31, 2009. The transactions were funded by borrowings under our bank credit facility.

There were no such transactions during the years ended December 31, 2008 or 2007.

8.75% Senior Subordinated Notes due April 2012. On April 16, 2007, we redeemed our $250 million principal amount of 8.75% senior subordinated notes that were originally due to mature in April 2012 at a redemption price of $1,043.75 per $1,000.00 principal amount of notes. The redemption was funded by borrowings under our former bank credit facility. In connection with the redemption of these notes, we terminated our $50 million notional amount fixed-to-floating interest rate swap. During 2007, we recorded a $12.5 million loss on the early retirement of these notes and the related interest rate swap.

Other Debt. In February 2003, we issued a note in the amount of $16 million to finance the purchase of a company airplane. The note bears interest at the rate of 5.7% per annum. The note is payable in 120 equal monthly installments of principal and interest until March 2013, when the remaining balance becomes due and payable. The note is secured by the airplane.

The following table provides the fair value measurement information about our long-term debt at December 31, 2009. For additional information regarding the fair value hierarchy, see Note 1, Summary of Significant Accounting Policies.

	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
	(In thousands)
Bank credit facility	$	1,916,900	$	1,916,900	$	1,686,872	Level 2
7.75% Senior Subordinated Notes Due 2012		158,832		158,832		160,420	Level 1
6.75% Senior Subordinated Notes Due 2014		248,668		248,668		223,801	Level 1
7.125% Senior Subordinated Notes Due 2016		240,750		240,750		206,925	Level 1
Other		12,413		12,413		11,792	Level 3
Total long-term debt	$	2,577,563	$	2,577,563	$	2,289,810

The estimated fair value of our bank credit facility is based on a relative value analysis performed on or about December 31, 2009. The estimated fair values of our senior subordinated notes are based on quoted market prices as of December 31, 2009. Debt included in the “Other” category is fixed-rate debt that is due March 2013 and is not traded and does not have an observable market input; therefore, we have estimated its fair value based on a discounted cash flow approach, after giving consideration to the changes in market rates of interest, creditworthiness of both parties, and credit spreads.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The scheduled maturities of our long-term debt are as follows (in thousands):

For the Year Ending December 31,
2010	$	652
2011		690
2012		2,076,462
2013		10,341
2014		248,668
Thereafter		240,750
Total long-term debt	$	2,577,563

NOTE 9. INCOME TAXES

A summary of the benefit from (provision for) income taxes is as follows.

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Current
Federal	$	11,550		$	(14,408	)	$	(56,669	)
State		(634	)		(1,924	)		1,207
Total current taxes		10,916			(16,332	)		(55,462	)
Deferred
Federal		(8,765	)		43,948			(7,362	)
State		(3,227	)		(1,085	)		(1,203	)
Total deferred taxes		(11,992	)		42,863			(8,565	)
Benefit from (provision for) income taxes related to continuing operations	$	(1,076	)	$	26,531		$	(64,027	)
Benefit from (provision for) income taxes as reported on our condensed consolidated statements of operations:
Benefit from (provision for) income taxes related to continuing operations	$	(1,076	)	$	26,531		$	(64,027	)
Benefit from (provision for) income taxes related to discontinued operations		—			—			(99,822	)
Total benefit from (provision for) income taxes	$	(1,076	)	$	26,531		$	(163,849	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table provides a reconciliation between the federal statutory rate and the effective income tax rate from continuing operations where both are expressed as a percentage of income.

	Year Ended December 31,
	2009		2008		2007
Tax provision at statutory rate	35.0	%	35.0	%	35.0	%
Acquisition cost contingencies	(54.1	)	—		—
Sate income tax, net of federal benefit	47.2		(0.8	)	—
Compensation-based credits	(29.8	)	0.7		(1.2	)
Company provided benefits	16.6		(0.2	)	0.5
Goodwill impairment	—		(23.2	)	—
Other, net	5.3		(0.9	)	0.3
Total effective income tax rate	20.2	%	10.6	%	34.6	%

The tax items comprising our net deferred tax liabilities are as follows.

	December 31,
	2009			2008
	(In thousands)
Deferred tax liabilities
Difference between book and tax basis of:
Property	$	245,230		$	309,856
Intangible assets		119,593			41,897
Prepaid services and supplies		3,435			4,083
State tax liability, net of federal effect		2,465			2,404
Reserve differential for gaming activities		569			124
Other		7,239			1,826
Gross deferred tax liabilities		378,531			360,190
Deferred tax assets
Share-based compensation		19,994			15,972
Reserve for employee benefits		11,912			9,406
Derivative instruments market adjustment		10,054			11,033
State net operating loss carry-forwards, net of federal effect		8,996			8,135
Preopening expenses		4,308			8,425
Tax credit carryforwards		1,980			—
Provision for doubtful accounts		1,977			2,134
Other		3,970			5,056
Gross deferred tax assets		63,191			60,161
Valuation allowance		(12,053	)		(10,811	)
Deferred tax assets, net of valuation allowance		51,138			49,350
Deferred tax liabilities, net	$	327,393		$	310,840

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The items comprising our deferred income taxes as presented on the consolidated balance sheets are as follows.

	December 31,
	2009		2008
	(In thousands)
Deferred tax liabilities, net	$	327,393	$	310,840
Current deferred tax asset, separately presented		7,766		2,903
Deferred tax liabilities as reported on our consolidated balance sheets	$	335,159	$	313,743

In 2009, the Internal Revenue Service concluded its field examination of our federal income tax returns filed for the years ended December 31, 2003 and December 31, 2004. Additionally, although tax years 2001 and 2002 are closed by statute, the tax returns filed in those years are subject to adjustment, to the extent of net operating loss carrybacks utilized in those years. We reached a partial agreement in connection with the adjustments proposed in the audit and are appealing the unresolved issues. Statute of limitation expirations related to our federal tax returns for the years 2003 through 2006 have been extended to September 15, 2011. The statute of limitations for our remaining federal tax returns will expire over the period September 2011 through September 2013.

We are also currently under examination for various state income and franchise tax matters. As it relates to our material state returns, we are subject to examination for tax years ended on or after December 31, 2001 and the statute of limitations will begin to expire over the period October 2010 through October 2014. Based on our current expectations for the final resolutions of these federal and state income tax matters, we believe that we have adequately reserved for any tax liability; however, the ultimate resolution of these examinations may result in an outcome that is different than our current expectation. We do not believe the ultimate resolution of these examinations will have a material impact on our consolidated financial statements.

As of December 31, 2009 we have state net operating loss carryfowards of approximately $169 million, primarily in the states of Indiana and Louisiana, to reduce future state income taxes. These net operating losses will expire at various dates from December 31, 2013 to December 31, 2030 if not fully utilized. We also have unused federal general business tax credits of approximately $2.0 million which may be carried back to reduce our 2008 tax liability as filed or forward until expiration at December 31, 2029. A valuation allowance has been recorded on a material portion of our state net operating losses in Indiana and Louisiana, along with other deferred tax assets which are not presently expected to be realized. Certain state net operating losses arising from stock option exercises will result in approximately $1.7 million of additional paid in capital, if realized. Our valuation allowance also includes amounts related to goodwill acquired in connection with the purchase of one of our operating properties that was closed in 2007. Realization of a tax benefit associated with this attribute is contingent on the occurrence of future events which, at present, we do not believe likely to occur.

The 2009 tax provision includes one-time permanent tax benefits of $3.4 million resulting from favorable audit treatment in connection with certain acquisition costs incurred in prior years and the reversal of interest accrued in connection with unrecognized tax benefits. The state tax provision was adversely impacted by changes in apportionment and exam settlements for approximately $1.7 million. Our state tax provision was also impacted by the geographic mix of our income. The 2008 tax benefit includes a one-time permanent unfavorable tax adjustment of $3.7 million related to non-recurring state income tax valuation allowances. The 2007 tax provision includes one-time permanent tax benefits of $1.3 million resulting from a charitable contribution and a state income tax benefit.

Other Long-term Tax Liabilities

In July 2006, the FASB issued ASC 740-10 (“FIN 48”), Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement 109, as subsequently codified in ASC Topic 740. ASC Topic 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. ASC Topic 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Under ASC Topic 740, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC Topic 740 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

The total amount of unrecognized tax benefits upon the adoption of FIN 48 on January 1, 2007 was $32.7 million. As a result of the implementation of FIN 48, we recognized a $31.7 million increase in the liability for unrecognized tax benefits which was accounted for as follows (in thousands):

Cumulative effect of reduction in retained earnings	$	105
Additional deferred tax assets		31,639
Total increase in income tax liabilities	$	31,744

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Unrecognized tax benefit, beginning of the year	$	30,485		$	34,750		$	32,744
Additions based on tax positions related to the current year		1,630			2,366			3,168
Additions based on tax positions related to the prior years		6,769			—			—
Reductions for tax positions for prior years		(8,044	)		(1,976	)		(158	)
Reductions for settlements with tax authorities		(1,787	)		(4,655	)		(1,000	)
Unrecognized tax benefit, end of the year	$	29,053		$	30,485		$	34,754

Included in the $29.1 million balance of unrecognized tax benefits at December 31, 2009, are $5.4 million of federally tax effected benefits that, if recognized, would impact the effective tax rate. We recognize accrued interest and penalties related to unrecognized tax benefits in our income tax provision. During the years ended December 31, 2009, 2008 and 2007, we recognized accrued interest and penalties of approximately $(0.8) million, $2.0 million and $2.1 million, respectively. The 2009 reduction in accrued interest was recorded in connection with settlements reached in our Internal Revenue Service examination. We have accrued $3.7 million and $6.8 million of interest and penalties as of December 31, 2009 and 2008, respectively.

During 2009, we reached a partial agreement on certain issues in our Internal Revenue Service examination. As a result of the agreed adjustments, we reduced our unrecognized tax benefits by $5.2 million on a net basis, of which $3.2 million impacted our effective tax rate. Additionally, we reduced the interest accrued on our unrecognized tax benefits by $3.2 million and recorded a $2.4 million benefit to our tax provision. We have also appealed certain issues which remain unresolved at the close of the examination. During the year ended December 31, 2008, we closed the audit of our Coast Casino properties for periods prior to our acquisition on July 1, 2004. As a result, we decreased our unrecognized tax benefits by $4.7 million, none of which impacted our effective tax rate. Pursuant to SFAS 141, in connection with the release of the unrecognized tax benefits, we reduced the amount of goodwill that we recorded upon the purchase of Coast Casinos, Inc. by $2.8 million during the year ended December 31, 2008.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We are in various stages of the examination and appeals process in connection with many of our audits and it is difficult to determine when these examinations will be closed; however, it is reasonably possible that over the next twelve-month period, that we may experience a decrease in our unrecognized tax benefits, as of December 31, 2009, of less than $1.0 million, none of which would impact our effective tax rate. Such reduction is due to the resolution of certain issues, primarily related to the depreciable lives of assets and the treatment of certain state taxes, raised in connection with our federal and state examinations. Other than the resolution of the audits discussed above, we do not anticipate any material changes to our unrecognized tax benefits over the next twelve-month period.

NOTE 10. COMMITMENTS AND CONTINGENCIES

Commitments

Echelon

On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of our multibillion dollar Echelon development project on the Las Vegas Strip. At such time, we did not anticipate the long-term effects of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas geographical area; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. The credit markets have yet to show significant recovery, thereby rendering financing for this type of development unavailable. Based on our current outlook, we do not expect to resume construction for three to five years.

Nonetheless, we remain committed to having a significant presence on the Las Vegas Strip. During the suspension period, we intend to consider alternative development options for Echelon, which may include developing the project in phases, alternative capital structures for the project, scope modifications to the project, or additional strategic partnerships, among others. We can provide no assurances as to when, or if, construction will resume on the project, or if we will be able to obtain alternative sources of financing for the project.

The change in circumstances implies that the carrying amounts of the assets related to Echelon may not be recoverable; therefore, we performed an impairment test of these assets during the year ended December 31, 2009. This impairment test was comprised of a future undiscounted cash flow analysis, and contemplated several viable alternative plans for the future development of Echelon. The cash inflows related to the revenue projections for the individual components associated with each planned construction scenario, offset by outflows for estimated costs to complete the development and ongoing maintenance and operating costs. Because no specific strategic plan can be determined with certainty at this time, the analysis considered the net cash flows related to each alternative, weighted against its projected likelihood. The outcome of this evaluation resulted in no impairment of Echelon’s assets, as the estimated weighted net undiscounted cash flows from the project exceed the current carrying value of the assets of approximately $928 million at December 31, 2009. As we further develop and explore the viability of alternatives for the project, we will continue to monitor these assets for recoverability. If we are subject to a noncash write-down of these assets, it could have a material adverse impact on our consolidated financial statements.

As part of our delay of the project, we expect to incur approximately $4 million of capitalized costs, principally related to the offsite fabrication of escalators, curtain wall and a skylight. In addition, we expect recurring project costs, consisting primarily of security, property taxes, rent and insurance, of approximately $10 million per annum that will be charged to preopening or other expense as incurred during the project’s suspension period.

The following information summarizes the contingencies with respect to our various material commitments, which are in addition to capitalized costs and annual recurring project costs, related to Echelon:

Morgans Las Vegas, LLC – In December 2009, by mutual agreement with Morgans, the joint venture agreement and hotel management agreements with Morgans were terminated. This 50/50 joint venture with Morgans was originally formed to develop, construct and operate the Delano Las Vegas and the Mondrian Las Vegas hotels at Echelon. Under the terms of our amended joint venture agreement, the outside start date for the project was to have been December 31, 2009. Each member had the right to dissolve the joint venture and terminate the joint venture agreement upon twenty days prior written notice any time prior to the outside start date. Upon the dissolution of the joint venture, neither member was entitled to the use of the architectural plans and designs for the Delano Las Vegas and the Mondrian Las Vegas projects; therefore, we recorded an impairment charge of $13.5 million during the year

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

ended December 31, 2009. For further explanation regarding our 50% investments in and advances to Morgans, see Note 1, Summary of Significant Accounting Policies and Note 4, Investments in and Advances to Unconsolidated Subsidiaries, Net. For additional information regarding the write-down of our investment, see Note 13, Write-Downs and Other Charges, Net.

Energy Services Agreement (“ESA”) – In April 2007, we entered into an ESA with a third party, Las Vegas Energy Partners, LLC (“LVE”). LVE will design, construct, own (other than the underlying real property which is leased from Echelon), and operate a central energy center and energy distribution system to provide electricity, emergency electricity generation, and chilled and hot water to Echelon and potentially other joint venture entities associated with the Echelon development project or other third parties. The term of the ESA is 25 years, beginning when Echelon commences commercial operations. Assuming the central energy center is completed and functions as planned, we will pay a monthly service fee, which is comprised of a fixed capacity charge, an escalating operations and maintenance charge, and an energy charge. The aggregate of our monthly fixed capacity charge portion of the service fee will be $23.4 million per annum, payable for a 25-year period commencing in November 2010. Until Echelon commences commercial operations, we may be liable for an “interest during construction” fee, commencing December 1, 2010. We are unable to provide the amount of the fee, if any, at this time, as it has yet to be determined.

LVE has currently suspended construction of the central energy center while Echelon delays its construction of the project. On April 6, 2009, LVE notified us that, in its view, Echelon will be in breach of the ESA unless it recommences and proceeds with construction by May 6, 2009. We believe that LVE’s position is without merit; however, in the event of litigation, we cannot state with certainty the eventual outcome nor estimate the possible loss or range of loss, if any, associated with this matter.

Line Extension and Service Agreement (“LEA”) – In March 2007, we entered into an LEA with Nevada Power Company (currently known as NV Energy) related to the construction of a substation at Echelon and the delivery of power to Echelon. We have assigned most of our obligations under the LEA to LVE (see Energy Services Agreement (“ESA”) above). We have retained an obligation to pay liquidated damages of $5.0 million to NV Energy, in the event that Echelon does not physically accept permanent electric service by January 1, 2012 through the substation to be built by NV Energy pursuant to the LEA. On August 29, 2008, NV Energy issued a letter declaring a force majeure event that extends the time for performance of obligations under the LEA, including its obligation to construct the substation from which Echelon is to accept delivery of permanent electric service. Our contingent liability to pay liquidated damages to NV Energy will be recorded and charged to expense on our consolidated statement of operations when, or if, it becomes probable that we will not be able to accept, in accordance with the terms of the LEA, permanent electric service from a substation when built by NV Energy.

Shangri-La Hotel Management and Technical Services Agreements – In January 2006, we entered into management and technical services agreements with a subsidiary of Shangri-La to manage Shangri-La Las Vegas, one of our three wholly-owned hotels at Echelon. During the year ended December 31, 2009, by mutual agreement with Shangri-La, these agreements were terminated. The termination had no effect on our consolidated financial statements.

Construction Agreements – We have exercised our rights under our standard form construction contracts to terminate our agreements with our contractors. With the exception of certain custom equipment orders, steel fabrication and crane and hoist rentals, all major construction agreements have been terminated and closed-out with final payments made to the contractors in exchange for final releases.

Any demobilization, per diem, and related costs incurred related to the suspension or termination of our construction and design contracts have currently been charged to the project.

Design Agreements – We have engaged limited design services from our consultant team to study the potential phasing and value engineering of the project; other than this work, we have no ongoing design services work. The majority of our design agreements allow us either to suspend performance of the services under these agreements or to terminate these agreements. We have estimated the costs associated with the completion of construction drawings after December 31, 2009 to be approximately $0.4 million; however, we can provide no assurances that actual costs will approximate the estimated costs.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Clark County Fees – In November 2007, we entered into an agreement with Clark County for the development of the project. The agreement requires payment of $5.2 million, allocated among four annual installments, which commenced in January 2008. We have made the first of those payments. In December 2008, Clark County granted us a one year deferral for each of the remaining fixed annual installments due under the development agreement. Furthermore, we are also responsible for our share of the cost of new pedestrian bridges that may be constructed by Clark County, of which our share is estimated to be $8 million. Clark County is in the process of reviewing our request for a further deferral of the remaining payments for up to five years.

Construction Insurance – Effective July 2007, we obtained construction insurance coverage from various insurance carriers for worker’s compensation and employer’s liability, general liability, excess liability, builder’s risk, and related coverage. The policies have varying provisions regarding fixed and variable premiums, prepaid and annual premiums, minimum premiums, and cancellation rights. We believe that each of the policies may be terminated by us, and in each case, we are only liable for the earned premium set forth in each of the policies. All premiums have been fully paid through December 2009. The remaining aggregate premium due under each of the policies is approximately $9.5 million, unless terminated.

LEED Tax Credits – We are pursuing Echelon’s certification under the Leadership in Energy and Environmental Design (“LEED”) Silver Standard (or equivalent) for the project as part of the State of Nevada’s tax incentive program (the “LEED Program”). The LEED Program allows for Echelon to receive an exemption on the non-state, local sales and use tax rate of 5.75% on qualifying construction materials purchased prior to December 31, 2010. As we intend to resume construction of Echelon and qualify for the LEED Silver Standard (or equivalent) certification, we will not record a liability for the abated local portion of sales and use tax on the qualifying construction materials; however, if Echelon does not open or if it fails to qualify for the LEED Silver Standard certification (or equivalent) after its completion, we will accrue and pay the deferral amount of sales and use tax ($9.2 million at December 31, 2009), plus interest at the rate of 6% per annum, which will be recorded as construction in progress on our consolidated balance sheet. We remain eligible for the LEED program, notwithstanding our suspension of the Echelon project.

Other Agreements – Certain other agreements, such as office leases, warehouse leases and certain communications and information technology support services, will be charged to preopening expense as incurred. While we can provide no assurances, we do not believe that any of our other agreements for the project give rise to any material liabilities resulting from the delay of the project. We believe that continuing committed costs under these agreements, on an aggregate basis, will be $0.4 million per month, until terminated.

Leases

In connection with the July 1, 2004 merger with Coast Casinos, we assumed certain land leases. The Orleans is situated on approximately 77 acres of leased land. The lease had an effective commencement date of October 1, 1995, an initial term of 50 years, and includes an option, exercisable by us, to extend the initial term for an additional 25 years. The lease provides for monthly rental payments of $0.2 million through February 2006 and $0.3 million during the 60-month period thereafter. In March 2011, annual rental payments will increase by a compounding basis at a rate of 3.0% per annum. In addition, we have an option to purchase the real property during the two-year period commencing February 2016.

Suncoast is situated on approximately 49 acres of leased land. The initial term of the land lease expires in December 2055. The lease contains three options to extend the term of the lease for 10 years each. The lease provides for monthly rental payments of approximately $0.2 million in 2004 that increase slightly each year. The landlord has the option to require us to purchase the property at the end of 2014 and each year end through 2018, at the fair market value of the real property at the time the landlord exercises the option, subject to certain pricing limitations. If we do not purchase the property if and when required, we would be in default under the lease agreement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition, we have land leases related primarily to California, Fremont, Sam’s Town Tunica, Treasure Chest and Sam’s Town Shreveport. Future minimum lease payments required under noncancelable operating leases, which are primarily land leases, as of December 31, 2009 are as follows (in thousands).

For the Year Ending December 31,
2010	$	17,145
2011		12,162
2012		9,766
2013		9,516
2014		9,528
Thereafter		452,981
Total operating leases	$	511,098

Rent expense for the years ended December 31, 2009, 2008 and 2007 was $18.1 million, $19.8 million and $22.0 million, respectively, and is included in selling, general and administrative expenses on the accompanying consolidated statements of operations.

Contingencies

Copeland

Alvin C. Copeland, the sole shareholder (deceased) of an unsuccessful applicant for a riverboat license at the location of our Treasure Chest Casino (“Treasure Chest”), has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999 and 2000, Copeland unsuccessfully opposed the renewal of the Treasure Chest license and has brought two separate legal actions against Treasure Chest. In November 1993, Copeland objected to the relocation of Treasure Chest from the Mississippi River to its current site on Lake Pontchartrain. The predecessor to the Louisiana Gaming Control Board allowed the relocation over Copeland’s objection. Copeland then filed an appeal of the agency’s decision with the Nineteenth Judicial District Court. Through a number of amendments to the appeal, Copeland unsuccessfully attempted to transform the appeal into a direct action suit and sought the revocation of the Treasure Chest license. Treasure Chest intervened in the matter in order to protect its interests. The appeal/suit, as it related to Treasure Chest, was dismissed by the District Court and that dismissal was upheld on appeal by the First Circuit Court of Appeal. Additionally, in 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chest’s license, an award of the license to him, and monetary damages. The suit was dismissed by the trial court, citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the Louisiana First Circuit Court of Appeal. On September 21, 2002, the First Circuit Court of Appeal reversed the trial court’s decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was partially denied. The Court of Appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds. There was no activity regarding this matter during 2005 and 2006, and the case was set to be dismissed by the court for failure to prosecute by the plaintiffs in mid-May 2007; however on May 1, 2007, the plaintiff filed a motion to set a hearing date related to the motions to dismiss. The hearing was scheduled for September 10, 2007, at which time all parties agreed to postpone the hearing indefinitely. The hearing has not yet been rescheduled. Mr. Copeland has since passed away and his son, the executor of his estate, has petitioned the court to be substituted as plaintiff in the case. On June 9, 2009, the plaintiff filed to have the exceptions set for hearing. The parties decided to submit the exceptions to the court on the previously filed briefs. The court has yet to issues a ruling. We currently are vigorously defending the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it could have a significant adverse effect on our business, financial condition and results of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Nevada Use Tax Refund Claims

On March 27, 2008, the Nevada Supreme Court issued a decision in Sparks Nugget, Inc. vs. The State of Nevada Department of Taxation (the “Department”), holding that food purchased for subsequent use in the provision of complimentary and/or employee meals was exempt from use tax. On April 24, 2008, the Department filed a Petition for Rehearing (the “Petition”) on the decision. Additionally, on the same date the Nevada Legislature filed an Amicus Curiae brief in support of the Department’s position. The Nevada Supreme Court denied the Department’s Petition on July 17, 2008. We paid use tax, over the period November 2000 through May 2008, on food purchased for subsequent use in complimentary and employee meals at our Nevada casino properties and estimate the refund to be in the range of $16.3 million to $18.5 million, including interest. In late 2009, the Department audited our refund claim and subsequently issued a $12.4 million sales tax assessment, plus interest of $7.5 million. The Department continues to deny our refund claim and issued the assessment based on the argument that the complimentary and employee meals at issue are now subject to sales tax. We do not believe the Department’s arguments have any merit and intend to file a motion to dismiss the assessment on both a procedural and technical basis. We are currently in the discovery and deposition stage of the legal proceeding and expect our hearing before the Nevada Administrative Law Judge (“Judge”) to occur within the next six months. Due to uncertainty surrounding the Judge’s decision, we will not record any gain until the tax refund is realized. For periods subsequent to May 2008, although we have received an assessment from the Department, we have not accrued a liability for sales tax on complimentary and employee meals at our Nevada casino properties, as it is not probable, based on both procedural issues and the technical merits of the Department’s arguments, that we will owe this tax.

Blue Chip Property Taxes

In May 2007, Blue Chip received a valuation notice indicating an unanticipated increase of nearly 400% to its assessed property value as of January 1, 2006. At that time, we estimated that the increase in assessed property value could result in a property tax assessment ranging between $4 million and $11 million for the eighteen-month period ended June 30, 2007. We recorded an additional charge of $3.2 million during the three months ended June 30, 2007 to increase our property tax liability to $5.8 million at June 30, 2007 as we believed that was the most likely amount to be assessed within the range. We subsequently received a property tax bill related to our 2006 tax assessment for $6.2 million in December 2007. As we have appealed the assessment, Indiana statutes allow for a minimum required payment of $1.9 million, which was paid against the $6.2 million assessment in January 2008. In February 2009, we received a notice of revaluation, which reduced the property’s assessed value by $100 million and the tax assessment by approximately $2.2 million per year. We have subsequently paid the minimum required payment of $1.9 million against 2007 and 2008 provisional bills, which were based on the 2006 valuation notice. We have not received valuation notices for years 2007 through 2009. We believe the assessment for the forty eight-month period ended December 31, 2009 could result in a property tax assessment ranging between $10.7 million and $22.5 million. We have accrued approximately $20.9 million of property tax liability as of December 31, 2009, based on what we believe to be the most likely assessment within our range, once all appeals have been exhausted; however, we can provide no assurances that the estimated amount will approximate the actual amount. The final 2006 assessment, post appeals, as well as the March 1, 2007, 2008 and 2009 assessment notices, which have not been received as of December 31, 2009, could result in further adjustment to our estimated property tax liability at Blue Chip.

Treasure Chest

We are required to pay to the City of Kenner, Louisiana, a boarding fee of $2.50 for each passenger boarding our Treasure Chest riverboat casino during the year. The future minimum payment due in 2010 to the City of Kenner, based upon a portion of actual passenger counts from the prior year, is approximately $2.4 million.

Legal Matters

We are also parties to various legal proceedings arising in the ordinary course of business. We believe that, except for the Copeland matter discussed above, all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position or results of operations.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 11. STOCKHOLDERS’ EQUITY AND STOCK INCENTIVE PLANS

Share Repurchase Program

In July 2008, our Board of Directors authorized an amendment to our existing share repurchase program to increase the amount of common stock available to be repurchased to $100 million. We are not obligated to purchase any shares under our stock repurchase program.

Subject to applicable corporate securities laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. Purchases under our stock repurchase program can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund the repurchases under the stock repurchase program with existing cash resources and availability under our bank credit facility.

We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding notes and our bank credit facility.

During the year ended December 31, 2009, we repurchased and retired 1.7 million shares of our common stock at an average price of $4.61 per share. We are currently authorized to repurchase up to an additional $92.1 million in shares of our common stock under the share repurchase program. There were no such transactions during the years ended December 31, 2008 and 2007.

In the future, we may acquire our debt or equity securities, through open market purchases, privately negotiated transactions, tender offers, exchange offers, redemptions or otherwise, upon such terms and at such prices as we may determine from time to time.

Dividends

Dividends are declared at our Board’s discretion. We are subject to certain limitations regarding the payment of dividends, such as restricted payment limitations related to our outstanding notes and our bank credit facility. The following table sets forth the cash dividends declared and paid during the three years ended December 31, 2009.

Payment Date	Record Date	Dividend per Share
March 1, 2007	February 9, 2007	$	0.135
June 1, 2007	May 11, 2007		0.150
September 4, 2007	August 17, 2007		0.150
December 3, 2007	November 16, 2007		0.150
March 3, 2008	February 18, 2008		0.150
June 2, 2008	May 14, 2008		0.150

In July 2008, our Board of Directors suspended the quarterly dividend for the current and future periods. Dividends paid during the years ended December 31, 2008 and 2007 totaled $26.3 million and $51.2 million, respectively.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Share-Based Compensation

The following table provides classification detail of the total costs related to our share-based employee compensation plans reported in our consolidated financial statements.

	Year Ended December 31,
	2009		2008		2007
	(In thousands)
Gaming	$	146	$	499	$	571
Food and beverage		15		90		94
Room		5		52		54
Selling, general and administrative		3,125		3,183		2,900
Corporate expense		10,683		8,838		11,183
Preopening expenses		1,914		1,362		1,257
Total share-based compensation expense		15,888		14,024		16,059
Capitalized share-based compensation		—		1,398		1,311
Total share-based compensation costs	$	15,888	$	15,422	$	17,370

Stock Incentive Plan

On May 15, 2008, at our 2008 Annual Meeting of Stockholders, the Company’s stockholders approved an amendment to our 2002 Stock Incentive Plan, increasing the maximum number of shares of Boyd Gaming Corporation’s common stock authorized for issuance over the term of such plan by 5 million shares, from 12 million to 17 million shares. Under our 2002 Stock Incentive Plan, approximately 3.8 million shares remain available for grant at December 31, 2009. The number of authorized but unissued shares of common stock under this plan as of December 31, 2009 was approximately 14.7 million shares.

The following table summarizes our share-based compensation costs by award type.

	Year Ended December 31,
	2009		2008		2007
	(In thousands)
Stock options	$	13,876	$	14,041	$	16,208
Restricted Stock Units		1,588		1,045		848
Career Shares		424		336		314
Total share-based compensation costs		15,888		15,422		17,370
Capitalized share-based compensation costs		—		1,398		1,311
Share-based compensation costs recognized as expense	$	15,888	$	14,024	$	16,059

Stock Options

As of December 31, 2009, we had one stock option plan in effect, which has been approved by our shareholders. Stock options awarded under this plan are granted to our employees and board members.

Options granted under the plan generally become exercisable ratably over a three-year period from the date of grant. Options that have been granted under the plan had an exercise price equal to the market price of our common stock on the date of grant and will expire no later than ten years after the date of grant.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Share-based compensation costs related to stock option awards are calculated based on the fair value of each option grant on the date of the grant using the Black-Scholes option pricing model. The following table discloses the weighted-average assumptions used in estimating the fair value of our significant stock option grants during the years ended December 31, 2009, 2008 and 2007.

	Year Ended December 31,
	2009			2008			2007
Expected stock price volatility		69.6	%		49.5	%		34.3	%
Annual dividend rate		—	%		—	%		1.5	%
Risk-free interest rate		2.1	%		2.2	%		3.7	%
Expected option life (years)		4.3			4.3			4.3
Estmated fair value per share of options granted	$	4.18		$	2.79		$	11.62

Summarized stock option plan activity for the years ended December 31, 2009, 2008 and 2007 is as follows.

	Options		Weighted Average Option Price		Weighted Average Remaining Term (Years)	Aggregate Intrinsic Value (In thousands)
Outstanding at January 1, 2007	6,551,787		$	33.40
Granted	1,918,700			39.66
Cancelled	(158,161	)		38.03
Exercised	(641,076	)		24.27
Outstanding at December 31, 2007	7,671,250			35.63
Granted	1,396,240			7.08
Cancelled	(225,310	)		38.68
Exercised	(55,700	)		8.47
Outstanding at December 31, 2008	8,786,480			31.19
Granted	1,426,992			7.57
Cancelled	(554,018	)		34.01
Exercised	(29,797	)		5.39
Outstanding at December 31, 2009	9,629,657			27.61	6.9	$	3,762
Exercisable at December 31, 2008	5,680,977			34.59	6.2		14
Exercisable at December 31, 2009	6,738,128			33.65	6.0		1,027

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the information about stock options outstanding and exercisable at December 31, 2009.

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted-Average Remaining Contractual Life (Years)	Weighted-Average Exercise Price		Number Exercisable	Weighted-Average Exercise Price
$4.35 -$7.55	2,809,981	9.2	$	7.03	507,224	$	6.35
8.34 - 36.76	2,306,515	4.4		29.34	2,273,849		29.45
38.11 -39.00	1,943,000	7.1		38.78	1,779,334		38.84
39.78 -39.96	2,486,161	6.7		39.87	2,093,721		39.89
41.99 -52.35	84,000	6.1		46.77	84,000		46.77
4.35 - 52.35	9,629,657	6.9		27.61	6,738,128		33.65

The total intrinsic value of in-the-money options exercised during the years ended December 31, 2009, 2008 and 2007 was $0.1 million, $0.6 million and $15.8 million, respectively. The total fair value of options vested during the years ended December 31, 2009, 2008 and 2007 was approximately $15.5 million, $21.5 million and $24.8 million, respectively. As of December 31, 2009, there was approximately $13 million of total unrecognized share-based compensation costs related to unvested stock options, which is expected to be recognized over approximately three years, the weighted-average remaining requisite service period.

Restricted Stock Units

Our amended 2002 Stock Incentive Plan provides for the grant of Restricted Stock Units (“RSUs”). An RSU is an award which may be earned in whole, or in part, upon the passage of time or the attainment of performance criteria and which may be settled for cash, shares, or other securities or a combination of such. The RSUs do not contain voting rights and are not entitled to dividends. The RSUs are subject to the terms and conditions contained in the applicable award agreement and our 2002 Stock Incentive Plan.

We annually award RSUs to certain members of our Board of Directors. Each RSU is fully vested upon grant and is to be paid in shares of common stock upon cessation of service on the Board of Directors. In April 2008, certain of our executive management employees were granted RSUs, totaling approximately 160,000 units. Each of these RSUs represents a contingent right to receive one share of our common stock upon vesting. These RSUs will vest in full upon the sooner to occur of (i) April 16, 2013, or (ii) a date after October 16, 2009, upon which the closing price of the Company’s common stock is $25.98 (which represents 150% of the closing price of our common stock on April 15, 2008) or greater for twenty consecutive trading days beginning on or after October 16, 2009. In November 2009, certain of our executive management employees were granted RSUs, totaling approximately 350,000 units. Each of these RSUs represents a contingent right to receive one share of Boyd Gaming Corporation common stock upon vesting. These RSUs will vest three years from the date of issuance.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Summarized Restricted Stock Unit activity for the years ended December 31, 2009, 2008 and 2007 is as follows.

	RSUs		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2007	17,500		$	43.17
Granted	19,600			43.27
Cancelled	—
Awarded	—
Outstanding at December 31, 2007	37,100
Granted	547,948			10.67
Cancelled	(1,696	)
Awarded	(11,281	)
Outstanding at December 31, 2008	572,071
Granted	421,826			7.94
Cancelled	(12,508	)
Awarded	(11,281	)
Outstanding at December 31, 2009	970,108
Vested at December 31, 2008	56,405
Vested at December 31, 2009	124,589

As of December 31, 2009, there was approximately $5 million of total unrecognized share-based compensation costs related to unvested RSUs, which is expected to be recognized over approximately three years.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Career Shares

Our Career Shares Program is a stock incentive award program for certain executive officers to provide for additional capital accumulation opportunities for retirement and to reward long-service executives. Our Career Shares Program was adopted in December 2006 as part of the overall update of our compensation programs. The Career Shares Program rewards eligible executives with annual grants of Boyd Gaming Corporation stock units, to be paid out at retirement. The payout at retirement is dependent upon the executive’s age at such retirement and the number of years of service with the Company. Executives must be at least 60 years old and have at least 15 years of service to receive a payout at retirement. Career Shares do not contain voting rights and are not entitled to dividends. Career Shares are subject to the terms and conditions contained in the applicable award agreement and our 2002 Stock Incentive Plan.

Summarized Career Shares activity for the years ended December 31, 2009, 2008 and 2007 is as follows.

	Career Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2007	—
Granted	25,896		$	45.95
Cancelled	(1,561	)
Awarded	(898	)
Outstanding at December 31, 2007	23,437
Granted	36,665			33.31
Cancelled	(313	)
Awarded	—
Outstanding at December 31, 2008	59,789
Granted	250,160			5.00
Cancelled	(5,508	)
Awarded	—
Outstanding at December 31, 2009	304,441
Vested at December 31, 2008	10,104
Vested at December 31, 2009	50,736

Subsequent Event – Career Shares

In January 2010, we issued approximately 147,000 Career Shares with a grant date fair value of $8.60 per share and recorded approximately $0.5 million of share-based compensation expense.

NOTE 12. DERIVATIVE INSTRUMENTS AND OTHER COMPREHENSIVE INCOME (LOSS)

We record all derivative instruments on the consolidated balance sheet at fair value. Derivatives that are not designated as hedges for accounting purposes must be adjusted to fair value through income. We have designated all of our current interest rate swaps as cash flow hedges and measure their effectiveness using the long-haul method. If the derivative qualifies and is designated as a hedge, depending on the nature of the hedge, changes in its fair value will either be offset against the change in fair value of the hedged item through earnings or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. The effective portion of any gain or loss on our interest rate swaps is recorded in other comprehensive income (loss). We use the hypothetical derivative method to measure the ineffective portion of our interest rate swaps. Any ineffective portion of a derivative’s change in fair value is immediately recognized in earnings.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We utilize derivative instruments to manage interest rate risk. The net effect of our floating-to-fixed interest rate swaps resulted in an increase in interest expense of $23.6 million and $5.2 million for the years ended December 31, 2009 and 2008, as compared to the contractual rate of the underlying hedged debt, for these periods. The net effect of our floating-to-fixed interest rate swaps resulted in a reduction in interest expense of $3.5 million, as compared to the contractual rate of the underlying hedged debt for the year ended December 31, 2007.

The following table reports the effects of the changes in the mark-to-market valuations of our derivative instruments.

	Year Ended December 31,
	2009		2008		2007
	(In thousands)
Net gains (losses) from cash flow hedges from:
Change in value of derivatives excluded from the assessment of hedge ineffectiveness	$	—	$	—	$	(3,546	)
Ineffective portion of change in value of cash flow hedges		—		425		2,416
Increase (decrease) in value of derivative instruments, as reported on our consolidated statements of operations	$	—	$	425	$	(1,130	)

The following table reports the effects of the changes in the fair valuations of our derivative instruments.

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Derivative instruments fair value adjustment	$	2,871		$	(14,221	)	$	(23,001	)
Tax effect of derivative instruments fair value adjustment		(979	)		5,118			8,274
Net derivative instruments fair value adjustment, as reported on our condensed consolidated statements of stockholders’ equity	$	1,892		$	(9,103	)	$	(14,727	)

A portion of the net derivative instruments market adjustment included in accumulated other comprehensive loss, net, at December 31, 2009 relates to certain derivative instruments that we de-designated as cash flow hedges in connection with breaking certain LIBOR contracts under our previous bank credit facility during the three months ended June 30, 2007. As a result, we expect $1.7 million of deferred net gain related to these derivative instruments, included in accumulated other comprehensive loss, net, at December 31, 2009, will be accreted as a reduction of interest expense on our consolidated statements of operations during the next twelve months.

At December 31, 2009 and 2008, we were a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500 million and $750 million, respectively, whereby we receive payments based upon the three-month LIBOR and make payments based upon a stipulated fixed rate. These derivative instruments are accounted for as cash flow hedges. Our derivative instruments are classified as Level 2, as the LIBOR swap rate is observable at commonly quoted intervals for the full term of the interest rate swaps.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

If we had terminated our interest rate swaps as of December 31, 2009 or 2008, we would have been required to pay a total of $31.0 million or $47.9 million, respectively, based on the settlement values of such derivative instruments, for which the principal terms are presented below (dollars in thousands).

Effective Date	Notional Amount		Fixed Rate Paid		Fair Value of Liability				Maturity Date
					December 31,
					2009		2008
September 28, 2007	$	100,000	5.13	%	$	5,872	$	6,097	June 30, 2011
September 28, 2007		200,000	5.14	%		11,749		12,198	June 30, 2011
September 28, 2007		250,000	4.62	%		—		3,831	June 30, 2009
June 30, 2008		200,000	5.13	%		11,735		12,182	June 30, 2011
Totals	$	750,000			$	29,356	$	34,308

The fair values of our derivative instruments at December 31, 2009 and 2008 include $1.6 million and $13.6 million, respectively, of credit valuation adjustments to reflect the impact of the credit ratings of both the Company and our counterparties, based primarily upon the market value of the credit default swaps of the respective parties. These credit valuation adjustments resulted in a reduction in the fair values of our derivative instruments as compared to their settlement values.

NOTE 13. WRITE-DOWNS AND OTHER CHARGES, NET

Write-downs and other charges, net, are comprised of the following:

	Year Ended December 31,
	2009			2008		2007
	(In thousands)
Asset write-downs	$	42,745		$	382,506	$	16
Hurricane and related items		(1,946	)		3,015		—
Acquisition related expenses		981			—		944
Property closure costs		—			—		11,141
Write-downs and other charges, net	$	41,780		$	385,521	$	12,101

Asset Write-Downs

During the year ended December 31, 2009, asset write-downs primarily consist of the following:

• Non-cash impairment charge of $13.5 million related to the write-down of our former investment in the Morgans joint venture. For further explanation regarding our 50% investments in and advances to Morgans, see Note 4, Investments in and Advances to Borgata and Other Unconsolidated Subsidiaries, Net, and Note 10, Commitments and Contingencies – Commitments - Echelon.

• Non-cash impairment charge of $28.4 million which relates to the write-off of Dania Jai-Alai’s goodwill in connection with the January 2009 amendment to the purchase agreement to settle the contingent payment prior to the satisfaction of certain legal conditions (see Note 6, Goodwill).

During the year ended December 31, 2008, asset write-downs primarily consist of the following:

• Aggregate non-cash impairment charges of $290.2 million to write-down certain portions of our goodwill, intangible assets and other long-lived assets to their fair value. The impairment tests for these assets were principally due to the decline in our stock price that caused our book value to exceed our market capitalization, which was an indication that these assets may not be recoverable. The primary reason for these impairment charges relates to the ongoing recession, which has caused us to reduce our estimates for projected cash flows, has reduced overall industry valuations, and has caused an increase in discount rates in the credit and equity markets.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

• Non-cash impairment charge of $84.0 million, principally related to the write-off of Dania Jai-Alai’s intangible license right, following our decision to indefinitely postpone redevelopment plans to operate slot machines at the facility. Our decision to postpone the development is based on numerous factors, including the introduction of expanded gaming at a nearby Native American casino, the potential for additional casino gaming venues in Florida, and the existing Broward County pari-mutuel casinos performing below our expectations for the market.

Hurricane and Related Items

During the year ended December 31, 2009, we recorded a gain of $2.1 million, net of hurricane related charges, from the recovery and settlement of our business interruption insurance claim related to the closure of Treasure Chest due to the effects of Hurricane Katrina in 2005.

Hurricane and related expenses during the year ended December 31, 2008 consist of repair and maintenance charges as a result of Hurricanes Gustav and Ike. The hurricanes directly impacted two of our three Louisiana operations, with the related closures totaling ten days for Treasure Chest and thirteen days for Delta Downs. The properties suffered minor damage from the hurricanes. No insurance claims have been filed, as the damages did not meet our deductibles for either property.

Property Closure Costs

In connection with our Echelon development project, we closed the Stardust Hotel and Casino in November 2006 and demolished the property in March 2007. During the year ended December 31, 2007, we recorded $11.1 million in property closure costs related to demolition and rubble removal costs.

NOTE 14. EMPLOYEE BENEFIT PLANS

We contribute to multi-employer pension plans under various union agreements. Contributions, based on wages paid to covered employees, totaled approximately $1.0 million, $1.0 million and $1.1 million, respectively, for the years ended December 31, 2009, 2008 and 2007. Our share of the unfunded liability related to multi-employer plans, if any, is not determinable.

We have retirement savings plans under Section 401(k) of the Internal Revenue Code covering our non-union employees. The plans allow employees to defer up to the lesser of the Internal Revenue Code prescribed maximum amount or 100% of their income on a pre-tax basis through contributions to the plans. We expensed our voluntary contributions to the 401(k) profit-sharing plans and trusts of $3.7 million, $8.3 million and $8.6 million for the years ended December 31, 2009, 2008 and 2007, respectively.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 15. EARNINGS PER SHARE

Income (loss) from continuing operations and the weighted-average number of common shares and common share equivalents used in the calculation of basic and diluted earnings per share consist of the following.

	Year Ended December 31,
	2009		2008			2007
Income (loss) from continuing operations	$	4,241	$	(223,005	)	$	120,908
Weighted-average common shares outstanding		86,429		87,854			87,567
Potential dilutive effect		88		—			1,041
Weighted-average common and potential shares outstanding		86,517		87,854			88,608

Anti-dilutive options totalling 8.6 million have been excluded from the computation of diluted earnings per share for the year ended December 31, 2009. Due to the loss from continuing operations for the year ended December 31, 2008, all potential common shares were anti-dilutive, and therefore were not included in the computation of diluted earnings per share. Anti-dilutive options totalling 2.0 million have been excluded from the computation of diluted earnings per share for the year ended December 31, 2007.

NOTE 16. RELATED PARTY TRANSACTIONS

Percentage Ownership

William S. Boyd, our Executive Chairman of the Board of Directors, together with his immediate family, beneficially owned approximately 38% of our outstanding shares of common stock as of December 31, 2009. As such, the Boyd family has the ability to significantly influence our affairs, including the election of members of our Board of Directors and, except as otherwise provided by law, approving or disapproving other matters submitted to a vote of our stockholders, including a merger, consolidation or sale of assets. For each of the years ended December 31, 2009, 2008 and 2007, there were no related party transactions between the Company and the Boyd family.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 17. SEGMENT INFORMATION

We have aggregated certain of our properties in order to present four Reportable Segments: (i) Las Vegas Locals, (ii) Downtown Las Vegas, (iii) Midwest and South, and (iv) Borgata, our 50% investment in Atlantic City. The table below lists the classification of each of our properties.

Las Vegas Locals
Gold Coast Hotel and Casino	Las Vegas, NV
The Orleans Hotel and Casino	Las Vegas, NV
Sam’s Town Hotel and Gambling Hall	Las Vegas, NV
Suncoast Hotel and Casino	Las Vegas, NV
Eldorado Casino	Henderson, NV
Jokers Wild Casino	Henderson, NV
Downtown Las Vegas
California Hotel and Casino	Las Vegas, NV
Fremont Hotel and Casino	Las Vegas, NV
Main Street Station Casino, Brewery and Hotel	Las Vegas, NV
Midwest and South
Sam’s Town Hotel and Gambling Hall	Tunica, MS
Par-A-Dice Hotel Casino	East Peoria, IL
Blue Chip Casino, Hotel & Spa	Michigan City, IN
Treasure Chest Casino	Kenner, LA
Delta Downs Racetrack Casino & Hotel	Vinton, LA
Sam’s Town Hotel and Casino	Shreveport, LA

Effective April 1, 2008, we reclassified the reporting of our Midwest and South segment to exclude the results of Dania Jai-Alai, our pari-mutuel jai-alai facility, since it does not share similar economic characteristics with our other Midwest and South operations; therefore, the results of Dania Jai-Alai are included as part of the “Other” category on the accompanying table. In addition, we reclassified the reporting of corporate expense on the accompanying table in order to exclude it from our subtotal for Reportable Segment Adjusted EBITDA and include it as part of total other operating costs and expenses. Furthermore, corporate expense is now presented to include its portion of share-based compensation expense. Results for Downtown Las Vegas include the results of our travel agency and captive insurance company.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table sets forth, for the periods indicated, certain operating data for our Reportable Segments. All prior period amounts have been reclassified to conform to the current year’s presentation.

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Gross Revenues
Las Vegas Locals	$	713,354		$	858,241		$	943,117
Downtown Las Vegas		251,000			263,005			277,660
Midwest and South		852,209			857,650			993,112
Reportable Segment Gross Revenues		1,816,563			1,978,896			2,213,889
Other (1)		7,603			8,659			8,130
Gross Revenues	$	1,824,166		$	1,987,555		$	2,222,019
Reportable Segment Adjusted EBITDA (2)
Las Vegas Locals		155,336			218,591			275,510
Downtown Las Vegas		46,102			40,657			52,127
Midwest and South		165,534			169,063			214,605
Our share of Borgata’s operating income before net amortization, preopening and other items (2)		59,470			60,520			86,470
Reportable Segment Adjusted EBITDA		426,442			488,831			628,712
Other operating costs and expenses
Depreciation and amortization (3)		165,725			170,295			167,257
Corporate expense (4)		47,617			52,332			60,143
Preopening expenses		17,798			20,265			22,819
Our share of Borgata’s preopening expenses		349			2,785			1,558
Our share of Borgata’s other items and write-downs, net		(14,303	)		81			478
Write-downs and other charges, net		41,780			385,521			12,101
Other (5)		11,283			10,981			10,124
Total other operating costs and expenses		270,249			642,260			274,480
Operating income (loss)		156,193			(153,429	)		354,232
Other non-operating items
Interest expense, net (6)		146,824			109,076			137,454
Decrease (increase) in value of derivative instruments		—			(425	)		1,130
Gain on early retirements of debt		(15,284	)		(28,553	)		16,945
Other non-operating expenses		33			—			—
Our share of Borgata’s other non-operating expenses, net		19,303			16,009			13,768
Total other non-operating costs and expenses		150,876			96,107			169,297
Income (loss) from continuing operations before income taxes	$	5,317		$	(249,536	)	$	184,935

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	December 31,
	2009		2008
	(In thousands)
Total Assets
Las Vegas Locals	$	1,333,898	$	1,397,012
Downtown Las Vegas		147,260		165,279
Midwest and South		1,158,136		1,210,613
Other		38,626		37,971
Total properties’ assets		2,677,920		2,810,875
Corporate entities (7)		1,782,037		1,794,552
Total assets	$	4,459,957	$	4,605,427

	Year Ended December 31,
	2009		2008			2007
	(In thousands)
Additions to Property and Equipment and Other Assets
Las Vegas Locals	$	12,107	$	56,117		$	69,765
Downtown Las Vegas		3,294		3,266			14,081
Midwest and South		21,665		122,965			72,566
Other		185		43			1,065
Discontinued operations		—		—			36
Total properties’ additions		37,251		182,391			157,513
Corporate entities		33,969		527,508			190,866
Total additions to property and equipment and other assets		71,220		709,899			348,379
Change in accrued property additions		86,337		(42,499	)		(51,485	)
Cash-based property additions	$	157,557	$	667,400		$	296,894

(1) Other gross revenues are generated from Dania Jai-Alai.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(2) We determine each of our wholly-owned properties’ profitability based upon Property EBITDA, which represents each property’s earnings before interest expense, income taxes, depreciation and amortization, preopening expenses, write-downs and other charges, share-based compensation expense, deferred rent, change in value of derivative instruments, and gain/loss on early retirements of debt, as applicable. Reportable Segment Adjusted EBITDA for the year ended December 31, 2007 includes a $3.2 million retroactive property tax assessment at Blue Chip. Reportable Segment Adjusted EBITDA is the aggregate sum of the Property EBITDA for each of the properties included in our Las Vegas Locals, Downtown Las Vegas, and Midwest and South segments, and also includes our share of Borgata’s operating income before net amortization, preopening and other items. We calculate our share of Borgata’s operating income as follows:

	Year Ended December 31,
	2009			2008		2007
	(In thousands)
Operating income from Borgata as reported on our consolidated statements of operations	$	72,126		$	56,356	$	83,136
Add back:
Net amortization expense related to our investment in Borgata		1,298			1,298		1,298
Our share of Borgata’s preopening expenses		349			2,785		1,558
Our share of Borgata’s other items and write-downs, net		(14,303	)		81		478
Our share of Borgata’s operating income before net amortization, preopening and other items as reported on the accompanying table	$	59,470		$	60,520	$	86,470

(3)    The following table reconciles the presentation of depreciation and amortization on our consolidated statements of operations to the presentation on the accompanying table.

	Year Ended December 31,
	2009		2008		2007
	(In thousands)
Depreciation and amortization as reported on our consolidated statements of operations	$	164,427	$	168,997	$	165,959
Net amortization expense related to our investment in Borgata		1,298		1,298		1,298
Depreciation and amortization as reported on the accompanying table	$	165,725	$	170,295	$	167,257

(4) Corporate expense represents unallocated payroll, professional fees, aircraft expenses and various other expenses not directly related to our casino and hotel operations, in addition to the corporate portion of share-based compensation expense.

(5) Other operating costs and expenses include Property EBITDA from Dania Jai-Alai, deferred rent, and share-based compensation expense charged to our Reportable Segments.

(6) Interest expense is net of interest income and amounts capitalized. Interest expense for the year ended December 31, 2009 includes $8.9 million of prior period interest expense (from March 1, 2007, the date of the acquisition of Dania Jai-Alai, to December 31, 2008) related to the January 2009 amendment to the purchase agreement resulting in the finalization of our purchase price for Dania Jai-Alai (see Note 6, Goodwill).

(7) Corporate entities include all entities related to our Echelon development project.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 18. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

	Year Ended December 31, 2009
	First			Second		Third		Fourth			Total
				(In thousands, except per share data)
Net Revenues	$	434,845		$	422,950	$	398,243	$	384,948		$	1,640,986
Operating income		27,202			56,158		46,912		25,921			156,193
Net income (loss)		(13,828	)		12,778		6,315		(1,024	)		4,241
Basic and diluted net income (loss) per common share:
Basic net income (loss) per common share		(0.16	)		0.15		0.07		(0.01	)		0.05
Diluted net income (loss) per common share		(0.16	)		0.15		0.07		(0.01	)		0.05
	Year Ended December 31, 2008
	First			Second		Third		Fourth			Total
				(In thousands, except per share data)
Net Revenues	$	471,118		$	460,764	$	426,455	$	422,630		$	1,780,967
Income (loss) from continuing operations		(16,285	)		64,094		45,750		(246,988	)		(153,429	)
Net income (loss)		(32,587	)		21,658		8,698		(220,774	)		(223,005	)
Basic and diluted net income (loss) per common share:
Basic net income (loss) per common share		(0.37	)		0.25		0.10		(2.51	)		(2.54	)
Diluted net income (loss) per common share		(0.37	)		0.25		0.10		(2.51	)		(2.54	)

2. Financial Statement Schedules. Schedules are omitted since they are not applicable, not required or the information required to be set forth therein is included in Consolidated Financial Statements or Notes thereto included in this Report.

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3. Exhibits.

Exhibit Number	Document
2.1	Purchase Agreement, entered into as of June 5, 2006, by and among the Registrant, FGB Development, Inc., Boyd Florida, LLC, The Aragon Group, Inc., Summersport Enterprises, LLLP, the Shareholders of The Aragon Group, Inc., The Limited Partners of Summersport Enterprises, LLLP, and Stephen F. Snyder, as Shareholder Representative With Respect to Dania Jai-alai (incorporated by reference to Exhibit 2.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006).
2.2	Unit Purchase Agreement, dated as of July 25, 2006, as amended, by and among the Registrant, Coast Hotels and Casinos, Inc., Silverado South Strip, LLC, and Michael J. Gaughan (incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K, filed with the SEC on October 31, 2006).
2.3	Agreement for Exchange of Assets and Joint Escrow Instructions, dated as of September 29, 2006, entered into by and between Coast Hotels and Casinos, Inc. and Harrah’s Operating Company, Inc. (incorporated by reference to Exhibit 2.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006).
2.4	Letter Agreement entered into as of February 26, 2007, by and between Coast Hotels and Casinos, Inc. and Harrah’s Operating Company, Inc. amending that certain Agreement for Exchange of Assets and Joint Escrow Instructions previously entered into by and between the parties as of September 29, 2006 (incorporated by reference to Exhibit 2.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007).
2.5	Letter Agreement entered into as of August 11, 2006, by and among the Registrant, FGB Development, Inc., Boyd Florida, LLC, The Aragon Group, Inc., Summersport Enterprises, LLLP, and Stephen F. Snyder, individually and as Shareholder Representative, amending certain provisions of that certain Purchase Agreement previously entered into among the parties as of June 5, 2006 (incorporated by reference to Exhibit 2.3 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006).
2.6**	Second Amendment to the Purchase Agreement entered into as of February 16, 2007, by and among the Registrant, the Aragon Group and the other parties thereto (incorporated by reference to Exhibit 2.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007).
2.7	Third Amendment to the Purchase Agreement and Promissory Note related thereto entered into as of January 15, 2009, by and among Boyd Gaming Corporation, the Aragon Group and the other parties thereto (incorporated by reference to Exhibit 2.7 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008).
3.1	Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on July 14, 2008).
3.2	Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K, filed with the SEC on May 24, 2006).
4.1	Form of Indenture relating to $250,000,000 aggregate principal amount of 8.75% Senior Subordinated Notes due 2012, dated as of April 8, 2002, by and between the Registrant, as Issuer, and Wells Fargo Bank, National Association, as Trustee, including the Form of Note (incorporated by reference to Exhibit 4.8 of the Registrant’s Registration Statement on Form S-4, File No. 333-89774, which was declared effective on June 19, 2002).
4.2	Form of Indenture relating to $300,000,000 aggregate principal amount of 7.75% Senior Subordinated Notes due 2012, dated as of December 30, 2002, by and between the Registrant, as Issuer, and Wells Fargo Bank, National Association, as Trustee, including Form of Note (incorporated by reference to Exhibit 4.10 of the Registrant’s Registration Statement on Form S-4, File No. 333-103023, which was declared effective on May 15, 2003).
4.3	Form of Indenture relating to $350,000,000 aggregate principal amount of 6.75% Senior Subordinated Notes due 2014, dated as of April 15, 2004, by and between the Registrant, as Issuer, and the Initial Purchasers, named therein (incorporated by reference to Exhibit 4.8 of the Registrant’s Registration Statement on Form S-4, File No. 333-116373, which was declared effective on June 25, 2004).
4.4	Form of Indenture relating to senior debt securities (incorporated by reference to Exhibit 4.4 of the Registrant’s Automatic Shelf Registration Statement on Form S-3 dated December 16, 2005).
4.5	Form of Indenture relating to subordinated debt securities (incorporated by reference to Exhibit 4.5 of the Registrant’s Automatic Shelf Registration Statement on Form S-3 dated December 16, 2005).

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Exhibit Number	Document
4.6	Form of Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.6 of the Registrant’s Automatic Shelf Registration Statement on Form S-3 dated December 16, 2005).
4.7	Indenture (including form of Subordinated Debt Securities) with respect to Subordinated Debt Securities, dated as of January 25, 2006, by and between the Registrant, as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.9 of the Registrant’s Current Report on Form 8-K filed with the SEC on January 26, 2006).
4.8	First Supplemental Indenture with respect to the 7.125% Senior Subordinated Notes due 2016, dated as of January 30, 2006, by and between the Registrant, as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.10 of the Registrant’s Current Report on Form 8-K filed with the SEC on January 31, 2006).
10.1	Ninety-Nine Year Lease dated June 30, 1954, by and among Fremont Hotel, Inc., and Charles L. Ronnow and J.L. Ronnow, and Alice Elizabeth Ronnow (incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992).
10.2	Lease Agreement dated October 31, 1963, by and between Fremont Hotel, Inc. and Cora Edit Garehime (incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992)
10.3	Lease Agreement dated December 31, 1963, by and among Fremont Hotel, Inc., Bank of Nevada and Leon H. Rockwell, Jr. (incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992).
10.4	Lease Agreement dated June 7, 1971, by and among Anthony Antonacci, Margaret Fay Simon and Bank of Nevada, as Co-Trustees under Peter Albert Simon’s Last Will and Testament, and related Assignment of Lease dated February 25, 1985 to Sam-Will, Inc. and Fremont Hotel, Inc. (incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992).
10.5	Lease Agreement dated July 25, 1973, by and between CH&C and William Peccole, as Trustee of the Peter Peccole 1970 Trust (incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended June 30, 1995).
10.6	Lease Agreement dated July 1, 1974, by and among Fremont Hotel, Inc. and Bank of Nevada, Leon H. Rockwell, Jr. and Margorie Rockwell Riley (incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992).
10.7	Ninety-Nine Year Lease, dated December 1, 1978, by and between Matthew Paratore, and George W. Morgan and LaRue Morgan, and related Lease Assignment dated November 10, 1987, to Sam-Will, Inc., d.b.a. Fremont Hotel and Casino (incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992).
10.8	Form of Indemnification Agreement (incorporated by reference to the Registrant’s Registration Statement on Form S-1, File No. 33-64006, which was declared effective on October 15, 1993).
10.9*	1993 Flexible Stock Incentive Plan and related agreements (incorporated by reference to the Registrant’s Registration Statement on Form S-1, File No. 33-64006, which was declared effective on October 15, 1993).
10.10*	1993 Directors Non-Qualified Stock Option Plan, as amended (incorporated by reference to Exhibit 4.4 of the Registrant’s Registration Statement on Form S-8, File No. 333-79895, dated June 3, 1999).
10.11*	1993 Employee Stock Purchase Plan and related agreement (incorporated by reference to the Registrant’s Registration Statement on Form S-1, File No. 33-64006, which was declared effective on October 15, 1993).
10.12	401(k) Profit Sharing Plan and Trust (incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992).
10.13*	2000 Executive Management Incentive Plan (incorporated by reference to Appendix A of the Registrant’s Definitive Proxy Statement filed with the SEC on April 21, 2000).

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Exhibit Number	Document
10.14*	1996 Stock Incentive Plan (as amended on May 25, 2000) (incorporated by reference to Exhibit 10.35 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).
10.15	Second Amended and Restated Joint Venture Agreement of Marina District Development Company, dated as of August 31, 2000 (incorporated by reference to Exhibit 10.36 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
10.16	Contribution and Adoption Agreement by and among Marina District Development Holding Co., LLC, MAC, Corp. and Boyd Atlantic City, Inc., effective as of December 13, 2000 (incorporated by reference to Exhibit 10.30 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000).
10.17*	Annual Incentive Plan (incorporated by reference to Exhibit 10.29 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002).
10.18*	Form of Stock Option Award Agreement under the 1996 Stock Incentive Plan (incorporated by reference to Exhibit 10.37 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
10.19*	Form of Stock Option Award Agreement pursuant to the 2002 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008).
10.20*	Form of Restricted Stock Unit Agreement and Notice of Award pursuant to the 2002 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008).
10.21*	The Boyd Gaming Corporation Amended and Restated Deferred Compensation Plan for the Board of Directors and Key Employees (incorporated by reference to Exhibit 10.39 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).
10.22*	Amendment Number 1 to the Amended and Restated Deferred Compensation Plan (incorporated by reference to Exhibit 10.40 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).
10.23*	Amendment Number 2 to the Amended and Restated Deferred Compensation Plan (incorporated by reference to Exhibit 10.41 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).
10.24*	Amendment Number 3 to the Amended and Restated Deferred Compensation Plan (incorporated by reference to Exhibit 10.42 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).
10.25*	Amendment Number 4 to the Amended and Restated Deferred Compensation Plan (incorporated by reference to Exhibit 10.43 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).
10.26	Ground Lease dated as of October 1, 1995, between the Tiberti Company and Coast Hotels and Casinos, Inc. (as successor to Gold Coast Hotel and Casino) (incorporated by reference to an exhibit to Coast Resorts, Inc.’s Amendment No. 2 to General Form for Registration of Securities on Form 10 (Commission File No. 000-26922) filed with the Commission on January 12, 1996).
10.27*	Form of Stock Option Award Agreement Under the Registrant’s Directors’ Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 10.48 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005).
10.28*	Boyd Gaming Corporation’s 2002 Stock Incentive Plan (as amended and restated on May 15, 2008) (incorporated by reference to Appendix A of the Registrant’s Definitive Proxy Statement filed with the SEC on April 2, 2008).
10.29	Joint Venture Agreement dated as of January 3, 2006, between Morgans/LV Investment LLC, Echelon Resorts Corporation and for limited purposes, the Registrant and Morgans Hotel Group, L.L.C. (incorporated by reference to Exhibit 10.51 of the Registrant’s Current Report on Form 8-K filed with the SEC on January 3, 2006).
10.30*	Summary of Compensation Arrangements.
10.31*	Amendment Number 5 to the Amended and Restated Deferred Compensation Plan (incorporated by reference to Exhibit 10.35 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005).
10.32*	Amended and Restated 2000 Executive Management Incentive Plan (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, filed with the SEC on May 24, 2006).

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Exhibit Number	Document
10.33*	Amended and Restated 2002 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K, filed with the SEC on May 24, 2006).
10.34*	Form of Award Agreement for Restricted Stock Units under 2002 Stock Incentive Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006).
10.35	First Amendment to Morgans Las Vegas, LLC Limited Liability Company Agreement, by and between Morgans Las Vegas LLC and Echelon Resorts Corporation, Dated May 15, 2006 (incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006).
10.36	Second Amendment to Morgans Las Vegas, LLC Limited Liability Company Agreement, by and between Morgans LV Investment LLC and Echelon Resorts Corporation, Dated June 30, 2008 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, filed with the SEC on July 1, 2008).
10.37	Third Amendment to Morgans Las Vegas, LLC Limited Liability Company Agreement, by and between Morgans LV Investment LLC and Echelon Resorts Corporation, Dated September 23, 2008 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, filed with the SEC on September 25, 2008).
10.38	Letter Agreement to the Morgans Las Vegas, LLC Limited Liability Company Agreement, dated May 15, 2006 (incorporated by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006).
10.39	First Amended and Restated Credit Agreement, dated as of May 24, 2007, among the Registrant, as Borrower, certain commercial lending institutions as the Lenders, Bank of America, N.A., as the Administrative Agent and L/C Issuer, Wells Fargo Bank, N.A., as the Syndication Agent and Swing Line Lender, and Citibank, N.A., Deutsche Bank Securities Inc., JPMorgan Chase Bank, N.A., Merrill Lynch Bank USA and Wachovia Bank, National Association, as Co-Documentation Agents (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007).
10.40	First Amendment and Consent to First Amended and Restated Credit Agreement, dated as of December 21, 2009, among the Registrant, as Borrower, certain commercial lending institutions as the Lenders, and Bank of America, N.A., as the Administrative Agent for the Lenders.
10.41	Stock Purchase Agreement, entered into as of August 1, 2006, by and between Michael J. Gaughan and the Registrant (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006).
10.42	Form of Term Note issued by the Registrant to Michael J. Gaughan on August 1, 2006 in connection with the Stock Purchase Agreement entered into between the parties on the same date (incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006).
10.43*	Form of Award Agreement for Restricted Stock Units under the 2002 Stock Incentive Plans (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 24, 2006).
10.44*	Form of Career Restricted Stock Unit Award Unit Agreement under the 2002 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on December 13, 2006).
10.45*	Form of Restricted Stock Unit Agreement and Notice of Award Pursuant to the 2002 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007).
10.46*	Change in Control Severance Plan for Tier I, II and III Executives (incorporated by reference to Exhibit 10.46 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006).
21.1	Subsidiaries of the Registrant.
23.1	Consent of Deloitte & Touche LLP.
23.2	Consent of Deloitte & Touche LLP.
24	Power of Attorney (included in Part IV to this Annual Report on Form 10-K).

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Exhibit Number	Document
31.1	Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act Rule 13a-14(a).
31.2	Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act Rule 13a-14(a).
32.1	Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act Rule 13a – 14(b) and 18 U.S.C. § 1350.
32.2	Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act Rule 13a – 14(b) and 18 U.S.C. § 1350.
99.1	Governmental Gaming Regulations.
99.2	Audited Consolidated Financial Statements of Marina District Development Company, LLC, d.b.a. Borgata Hotel Casino and Spa, as of and for the three years in the period ended December 31, 2009.

* Management contracts or compensatory plans or arrangements.

** Certain portions of this exhibit have been granted confidential treatment by the Securities and Exchange Commission.

(b) The exhibits are set forth in subsection (a)(3) above.

(c) The financial statement schedules are set forth in (a)(2) above.

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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 5, 2010.

BOYD GAMING CORPORATION
By:	/s/    ELLIE J. BOWDISH
	Ellie J. Bowdish Vice President and Chief Accounting Officer (Principal Accounting Officer)

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POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Keith E. Smith, Josh Hirsberg and Ellie J. Bowdish, and each of them, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature	Title	Date
/S/    WILLIAM S. BOYD         William S. Boyd	Executive Chairman of the Board of Directors,	March 5, 2010
/S/    MARIANNE BOYD JOHNSON         Marianne Boyd Johnson	Vice Chairman of the Board of Directors, Executive Vice President and Director	March 5, 2010
/S/    KEITH E. SMITH         Keith E. Smith	President, Chief Executive Officer and Director (Principal Executive Officer)	March 5, 2010
/S/    JOSH HIRSBERG         Josh Hirsberg	Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)	March 5, 2010
/S/    ELLIE J. BOWDISH         Ellie J. Bowdish	Vice President and Chief Accounting Officer (Principal Accounting Officer)	March 5, 2010
/S/    ROBERT L. BOUGHNER         Robert L. Boughner	Executive Vice President, Chief Business Development Officer and Director	March 5, 2010
/S/    WIILIAM R. BOYD         William R. Boyd	Vice President and Director	March 5, 2010
/S/    THOMAS V. GIRARDI         Thomas V. Girardi	Director	March 5, 2010
/S/    MAJ. GEN. BILLY G. MCCOY, RET. USAF         Maj. Gen. Billy G. McCoy, Ret. USAF	Director	March 5, 2010
/S/    FREDERICK J. SCHWAB         Frederick J. Schwab	Director	March 5, 2010
/S/    CHRISTINE J. SPADAFOR         Christine J. Spadafor	Director	March 5, 2010
/S/    PETER M. THOMAS         Peter M. Thomas	Director	March 5, 2010
/S/    VERONICA J. WILSON         Veronica J. Wilson	Director	March 5, 2010

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EXHIBIT INDEX

10.30*	Summary of Compensation Arrangements.
10.40	First Amendment and Consent to First Amended and Restated Credit Agreement, dated as of December 21, 2009, among the Registrant, as Borrower, certain commercial lending institutions as the Lenders, and Bank of America, N.A., as the Administrative Agent for the Lenders.
21.1	Subsidiaries of Registrant.
23.1	Consent of Deloitte & Touche LLP.
23.2	Consent of Deloitte & Touche LLP.
24	Power of Attorney (included in Part IV to this Annual Report on Form 10-K).
31.1	Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act Rule 13a-14(a).
31.2	Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act Rule 13a-14(a).
32.1	Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act Rule 13a – 14(b) and 18 U.S.C. § 1350.
32.2	Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act Rule 13a – 14(b) and 18 U.S.C. § 1350.
99.1	Governmental Gaming Regulations.
99.2	Audited Consolidated Financial Statements of Marina District Development Company, LLC, d.b.a. Borgata Hotel Casino and Spa, as of and for the three years in the period ended December 31, 2009.

* Management contracts or compensatory plans or arrangements.

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EX-10.30

EXHIBIT 10.30

SUMMARY OF COMPENSATION ARRANGEMENTS

Annual Base Salary

Our executive officers are “at will” employees. Currently we have no written or oral employment arrangements with our executive officers. A copy or description of any future such employment arrangement will be filed to the extent required.

The table below summarizes the current annual base salary we have with each of our named executive officers and directors. All of the compensation arrangements we have with our executive officers are reviewed and may be modified from time to time by the Compensation and Stock Option Committee of our Board of Directors.

Name	Annual Base Salary
William S. Boyd Chairman of the Board and Executive Chairman	2010: $	1,000,000
Robert L. Boughner Executive Vice President, Chief Business Development Officer and Director	2010: $	1,100,000
Keith E. Smith President, Chief Executive Officer and Director	2010: $	1,100,000
Paul J. Chakmak Executive Vice President and Chief Operating Officer	2010: $	675,000
Marianne Boyd Johnson Vice Chairman and Executive Vice President	2010: $	242,000
Josh Hirsberg Senior Vice President, Chief Financial Officer and Treasurer	2010: $	435,000

Bonus Plans, Director Compensation Arrangements and Other Compensation

The information regarding bonus plans, director compensation arrangements and other compensation is set forth in our most recent definitive Proxy Statement for the Annual Meeting of Stockholders (and any definitive Annual Proxy Statement filed after the date hereof), which information is incorporated herein by reference.

EX-10.40

Exhibit 10.40

FIRST AMENDMENT AND CONSENT TO

FIRST AMENDED AND RESTATED CREDIT AGREEMENT

THIS FIRST AMENDMENT AND CONSENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT is made and dated as of December 21, 2009 (the “Amendment”) among BOYD GAMING CORPORATION, a Nevada corporation (the “Borrower”), the various financial institutions parties hereto (collectively, the “Lenders”), and BANK OF AMERICA, N.A. (“Bank of America”), as administrative agent (in such capacity, the “Administrative Agent”) for the Lenders and amends that certain First Amended and Restated Credit Agreement dated as of May 24, 2007 (as the same may be further amended or modified from time to time, the “Credit Agreement”).

R E C I T A L S

WHEREAS, certain Lenders have requested that the Borrower reduce the Aggregate Revolving Commitments under the Credit Agreement;

WHEREAS, the Borrower has agreed to reduce the Aggregate Revolving Commitments under the Credit Agreement;

WHEREAS, in connection with the reduction of the Aggregate Revolving Commitments, the Borrower has requested the Administrative Agent and the Lenders to amend certain provisions of the Credit Agreement, and the Administrative Agent and the Lenders are willing to do so, on the terms and conditions specified herein; and

WHEREAS, the Required Lenders have agreed, subject to the terms and conditions hereinafter set forth, to amend the Credit Agreement in certain respects as set forth below.

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows:

1. Terms. All terms used herein shall have the same meanings as in the Credit Agreement unless otherwise defined herein.

2. Amendment. The Credit Agreement is hereby amended as follows:

2.1 Amendments to Article I.

2.1.1 Section 1.01 of the Credit Agreement is hereby amended by inserting the following definitions in the appropriate alphabetical order:

“7.75% Notes” means the 7.75% Senior Subordinated Notes due 2012 issued pursuant to that certain Indenture dated as of December 30, 2002 between the Borrower and Wells Fargo Bank, National Association, as trustee.

“Designated Subordinated Debt” means (i) the 7.75% Notes, (ii) the 6.75% Senior Subordinated Notes due 2014 issued pursuant to that certain Indenture dated as of April 15, 2004 between the Borrower and Wells Fargo Bank, National Association, as trustee; and (iii) the 7.125% Senior Subordinated Notes due 2016 issued pursuant to that certain Indenture dated as of January 25, 2006 between Boyd Gaming and Wells Fargo Bank, National Association, as trustee, as supplemented by the First Supplemental Indenture between Boyd Gaming and Wells Fargo Bank, National Association, as trustee; each as amended, modified or supplemented.

“First Amendment” means that certain First Amendment to First Amended and Restated Credit Agreement dated as of December 21, 2009 among the Borrower, the Lenders party thereto and the Administrative Agent.

“First Amendment Effective Date” has the meaning specified in Article III of the First Amendment.”

“Impacted Lender” means (a) a Defaulting Lender or (b) a Lender (i) which has notified the Borrower, the Administrative Agent, the L/C Issuer or any Lender in writing that it does not intend to comply with its funding obligations under this Agreement or (ii) as to which an entity that controls such Lender has become the subject of a bankruptcy or other similar proceeding.

“Net Cash Proceeds” means with respect to the incurrence or issuance of any Indebtedness by the Borrower or any of its Restricted Subsidiaries permitted under Section 7.03 of the Credit Agreement (other than Indebtedness described in subsections (a)-(d) thereof), the cash proceeds received in connection with such transaction, net of underwriting or placement agents’ fees, discounts and commissions and other reasonable and customary out-of-pocket expenses incurred by the Borrower or such Subsidiary in connection therewith.

2.1.2 The definition of the term “Aggregate Revolving Commitments” in Section 1.01 of the Credit Agreement is hereby amended by adding the following sentence to the end thereof: “As of the First Amendment Effective Date, the Aggregate Revolving Commitments are $3,000,000,000.”

2.1.3 The definition of the term “Consolidated EBITDA in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“Consolidated EBITDA” means, for any period, the Borrower and its Restricted Subsidiaries’ consolidated earnings (including net earnings attributable to noncontrolling interests held by third parties in Restricted Subsidiaries) before interest expense, taxes, depreciation, amortization, non-cash rent expense, preopening expenses, share-based compensation expense, non-cash change in value of derivative instruments, interest costs associated with derivative instruments not otherwise included in interest expense, non-cash litigation accruals, charges for the early retirement of debt, non-recurring non-cash losses (or gains), acquisition and merger related charges, and extraordinary items, all as determined in accordance with GAAP (“EBITDA”), plus, cash dividends and distributions paid to the Borrower and its Restricted Subsidiaries from any Person that is not a Restricted Subsidiary, provided that the cumulative amount of such cash dividends and distributions included in Consolidated EBITDA shall not exceed the

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cumulative amount of the Borrower’s and its Restricted Subsidiaries’ share of the Consolidated EBITDA of such Person, plus (or minus) without duplication, the EBITDA during such twelve month period for any Restricted Subsidiary acquired (or disposed of ) by the Borrower or any of its Restricted Subsidiaries (including the acquisition or disposition of substantially all of the assets of a Person by the Borrower or any of its Restricted Subsidiaries) during such period, in either case, plus (or minus) any loss (or gain) arising from a change in GAAP, plus 50% of Borgata EBIT to the extent that on the date of determination Borgata is not a Restricted Subsidiary and no Event of Default under and as defined in Borgata’s bank credit agreement has occurred and is continuing, and plus (after the same shall have been open for at least one full calendar month) the annualized pro forma EBITDA of any new Venture of the Borrower and its Restricted Subsidiaries (including the Dania Jai Alai development project). “Consolidated EBITDA” shall exclude the Consolidated EBITDA of each Unrestricted Subsidiary and all Subsidiaries of any Unrestricted Subsidiary. If and to the extent that any non-cash litigation accruals have not been included in the computation of Consolidated EBITDA, the amount of any non-appealable judgment or the cash payment in respect of any settlement or judgment in respect thereof (net of any assets acquired in connection with such settlement or judgment) in any future period shall be subtracted from Consolidated EBITDA.

2.1.4 The first sentence of the definition of the term “Consolidated Funded Indebtedness” is hereby amended by adding the following clause at the end of clause (a) thereof: “minus the amount of any cash borrowed by the Borrower and pledged or deposited by the Borrower pursuant to Section 2.03(a)(iii) or Section 2.15 as cash collateral” and by adding the following clause immediately prior to the end thereof: “and (d) all liabilities under any non-appealable judgment rendered against the Borrower or any Restricted Subsidiary.”

2.1.5 The first sentence of the definition of the term “Letter of Credit Sublimit” in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: “Letter of Credit Sublimit” means, prior to the First Amendment Effective Date, $250,000,000 and from and after the First Amendment Effective Date, $350,000,000.

2.1.6 The definition of the term “Interest Coverage Ratio” in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“Interest Coverage Ratio” means, for any period, the ratio of (a) twelve month trailing Consolidated EBITDA to (b) the sum of (i) consolidated interest expense (as defined in GAAP) plus (ii) interest costs associated with derivative instruments not otherwise included in interest expense, but excluding any non-cash change in value of derivative instruments and non-cash derivative instruments fair value adjustments, in each case, of the Borrower and its Restricted Subsidiaries for such period. Gains and losses arising out of the termination of derivative instruments shall not constitute interest expense or interest costs. Consolidated interest expense shall exclude the interest expense and any such interest costs of each Unrestricted Subsidiary and all Subsidiaries of Unrestricted Subsidiaries.

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2.1.7 Section 1.03 of the Credit Agreement is hereby amended by adding the following clauses (c) and (d) thereto:

“(c) Notwithstanding the foregoing provisions of this Section 1.03 (i) to the extent that any person or entity listed on Schedule 1.03 which the Borrower does not currently consolidate in accordance with GAAP is required to be consolidated with the Borrower for any reason other than its direct or indirect majority equity ownership, such person or entity shall be deconsolidated for purposes of calculating compliance with the financial covenants in Section 7.10, and (ii) if any contract listed on Schedule 1.03 is, in accordance with GAAP, deemed to be a lease, the resulting accounting impact, if any, of such contract being deemed to be a lease shall be excluded for purposes of calculating compliance with the financial covenants in Section 7.10.

(d) Notwithstanding the foregoing provisions of this Section 1.03, Echelon and related entities will be considered a project for purposes of calculating compliance with the financial covenants in Section 7.10, regardless of its accounting treatment under GAAP; provided, however, that if any determination is made that Echelon and related entities should no longer be considered a project in accordance with GAAP, then up to an aggregate amount of $30,000,000 of pre-opening expenses, impairment charges and exiting and disposal charges incurred after such date and otherwise included in the calculation of Consolidated EBITDA shall be excluded from the calculation of Consolidated EBITDA solely for purposes of calculating compliance with the financial covenants in Section 7.10.”

2.2 Amendments to Article II.

2.2.1 Section 2.03(a)(iii)(F) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“(F) a default of any Lender’s obligations to fund under Section 2.03(c) exists, or any Lender is at such time an Impacted Lender, unless the L/C Issuer has entered into arrangements satisfactory to the L/C Issuer with the Borrower or such Lender to eliminate the L/C Issuer’s risk with respect to such Lender.”

2.2.2 There shall be added to the Credit Agreement immediately after Section 2.05, a new Section 2.05A, reading in its entirety as follows:

“2.05A Mandatory Prepayments.

“(a) Except to the extent otherwise provided in Section 2.06(b), within five Business Days after the incurrence or issuance by the Borrower or any of its Restricted Subsidiaries of any Indebtedness (other than Indebtedness expressly permitted to be incurred or issued pursuant to Section 7.03(a) through (d)), the Borrower shall repay Revolving Loans in an aggregate principal amount equal to 100% of the Net Cash Proceeds from such incurrence or issuance.”

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2.2.3 Section 2.06 of the Credit Agreement is hereby amended by inserting “(a)” immediately before the existing paragraph therein and by adding a new paragraph (b) thereto reading in its entirety as follows:

“(b) From the First Amendment Effective Date through May 24, 2012, the Revolving Credit Commitment shall be automatically and permanently reduced ten Business Days after any mandatory prepayment pursuant to Section 2.05A(a) by an amount of Net Cash Proceeds described in Section 2.05A(a) up to an aggregate amount of commitment reductions of $600,000,000; provided, however, that all of the following shall be excluded from the requirements of this clause (b):

(1) the amount of such Net Cash Proceeds from the incurrence or issuance of any Indebtedness to the extent:

(A) used to repay, repurchase or redeem the Borrower’s 7.75% Notes;

(B) used to repay Revolving Loans made by the Lenders within the previous 180-day period that were used by the Borrower to repay, repurchase or redeem its 7.75% Notes; or

(C) reserved by the Borrower to repay, repurchase or redeem its 7.75% Notes, provided that the Revolving Credit Commitment shall be automatically and permanently reduced to the extent that such proceeds reserved by the Borrower are not so expended within 60 days after the receipt of such Net Cash Proceeds;

(2) the amount of such Net Cash Proceeds from the incurrence or issuance of any senior subordinated notes of the Borrower to the extent:

(A) used to repay, repurchase or redeem any of the Borrower’s Designated Subordinated Debt; or

(B) reserved by the Borrower to repay, repurchase or redeem any of the Borrower’s Designated Subordinated Debt, provided that the Revolving Credit Commitments shall be automatically and permanently reduced to the extent that such proceeds reserved by the Borrower are not so expended within 60 days after the receipt of such Net Cash Proceeds;

(3) the amount of such Net Cash Proceeds from the incurrence or issuance of any Indebtedness to the extent:

(A) utilized by the Borrower to finance an acquisition otherwise permitted hereunder; or

(B) reserved by the Borrower to finance an acquisition otherwise permitted hereunder that is the subject of a binding agreement or letter of intent, provided that, to the extent not so utilized by the Borrower, the Revolving Credit Commitments shall be automatically and permanently reduced by the amount so reserved five Business Days after any termination of such agreement or letter of intent; and

5

(4) up to an aggregate amount of $400,000,000 of such Net Cash Proceeds from the incurrence or issuance of any Indebtedness from and after the First Amendment Effective Date not otherwise excluded from the mandatory commitment requirements of this clause (b) pursuant to the preceding clauses (1), (2) or (3) hereof.”

2.2.4 There shall be added to Article II of the Credit Agreement a new Section 2.15 reading in its entirety as follows:

“2.15 Cash Collateral for L/C Issuer or Swing Line Lender. At any time that any Lender is an Impacted Lender, upon the request of the L/C Issuer or any Swing Line Lender to the Administrative Agent and the Borrower, the Borrower shall promptly pledge and deposit with or deliver to the Administrative Agent as collateral, for the benefit of the L/C Issuer or such Swing Line Lender, as applicable, cash or deposit account balances, in Dollars, in an aggregate amount not less than such Impacted Lender’s Pro Rata Share of the then Outstanding Amount of all L/C Obligations or Swing Line Loans, as applicable, pursuant to documentation in form and substance satisfactory to the Administrative Agent and the L/C Issuer or such Swing Line Lender, as applicable, which arrangements and documents are hereby consented to by the Lenders. The Borrower hereby grants to the Administrative Agent, for the benefit of the L/C Issuer and each Swing Line Lender, as applicable, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Such collateral shall be maintained in blocked accounts at Bank of America. This Section and any agreements or other documents delivered in connection with this Section shall not be prohibited by, or otherwise conflict with, any contrary provision herein, including Sections 2.12, 2.13 and 7.01.”

2.3 Amendments to Article VII.

2.3.1 Section 7.10(b) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(b) Total Leverage Ratio. Permit the Total Leverage Ratio on the last day of any period of four fiscal quarters of the Borrower set forth below to be greater than the ratio set forth below opposite such period:

Four Fiscal Quarters Ending	Maximum Total Leverage Ratio
September 30, 2009	6.50 to 1.00
December 31, 2009	6.50 to 1.00
March 31, 2010	6.75 to 1.00
June 30, 2010	7.00 to 1.00
September 30, 2010	7.25 to 1.00
December 31, 2010	7.25 to 1.00
March 31, 2011	7.00 to 1.00
June 30, 2011	6.75 to 1.00
September 30, 2011	6.50 to 1.00
December 31, 2011	6.00 to 1.00
March 31, 2012	5.50 to 1.00

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2.4 Amendments to Schedules.

2.4.1 There shall be added to the Credit Agreement a new Schedule 1.03 reading in its entirety as set forth on Schedule 1.03 hereto.

2.5 Amendments to Exhibits.

2.5.1 Exhibit D to the Credit Agreement is hereby amended and restated in its entirety to read as set forth on Exhibit D hereto.

3. Consent. By their execution hereof, the parties hereto hereby consent to the execution by the Borrower, the Administrative Agent and the Lenders participating in the Extending Revolving Loan Tranche more particularly described on Exhibit C hereto of an amended and restated Credit Agreement including the terms set forth on Exhibit C hereto and such other terms and provisions as may be needed to fully implement the provisions of Exhibit C.

4. Representations and Warranties. The Borrower represents and warrants to the Administrative Agent and the Lenders that, on and as of the date hereof, and after giving effect to this Amendment:

4.1 Authorization. The execution, delivery and performance by the Borrower of this Amendment has been duly authorized by all necessary action, and this Amendment has been duly executed and delivered by the Borrower.

4.2 Binding Obligation. This Amendment constitutes the legal, valid and binding obligation of the Borrower, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and by principles of equity.

4.3 No Legal Obstacle to Amendment. The execution, delivery and performance of this Amendment will not (a) contravene the Organizational Documents of the Borrower; (b) contravene any contractual restriction binding on or affecting the Borrower or its property which contravention would have a Material Adverse Effect; (c) contravene any court decree, order or Legal Requirement binding on or affecting the Borrower; or (d) result in, or require the creation or imposition of, any Lien on any of the Borrower’s properties. Except as have been obtained prior to the date hereof, no authorization or approval of any governmental authority is required to permit the execution, delivery or performance by the Borrower of this Amendment, or the transactions contemplated hereby.

4.4 Incorporation of Certain Representations. After giving effect to the terms of this Amendment, the representations and warranties of the Borrower set forth in Article V of the Credit Agreement are true and correct in all respects on and as of the date hereof as though made on and as of the date hereof, except as to such representations made as of an earlier specified date.

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4.5 Default. Both before and after giving effect to this Amendment, no Default or Event of Default under the Credit Agreement has occurred and is continuing.

5. Conditions, Effectiveness. This Amendment shall become effective as of the date first written above (the “Amendment Effective Date”) upon satisfaction of each of the following conditions:

(a) The Administrative Agent shall have received a Consent of Lender in the form of Exhibit B executed by the Required Lenders.

(b) All consents, licenses and approvals required in connection with the execution, delivery and performance by each Loan Party of this Amendment shall have been received by the Borrower.

(c) The Administrative Agent shall have received an affirmation letter substantially in the form of Exhibit A from each of the Guarantors.

On the Amendment Effective Date, without further action by any Person, the Aggregate Revolving Commitments shall be reduced to $3,000,000,000.

6. Miscellaneous.

6.1 Effectiveness of the Credit Agreement, the Notes, the Pledge Agreement and other Loan Documents. Except as hereby expressly amended, the Credit Agreement, the Notes, the Pledge Agreement and the other Loan Documents shall each remain in full force and effect, and are hereby ratified and confirmed in all respects on and as of the date hereof.

6.2 Waivers. This Amendment is limited solely to the matters expressly set forth herein and is specific in time and in intent and does not constitute, nor should it be construed as, a waiver or amendment of any other term or condition, right, power or privilege under the Credit Agreement or under any agreement, contract, indenture, document or instrument mentioned therein; nor does it preclude or prejudice any rights of the Administrative Agent or the Lenders thereunder, or any exercise thereof or the exercise of any other right, power or privilege, nor shall it require the Required Lenders to agree to an amendment, waiver or consent for a similar transaction or on a future occasion, nor shall any future waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned in the Credit Agreement, constitute a waiver of any other right, power, privilege or default of the same or of any other term or provision.

6.3 Loan Document. This Amendment is a Loan Document.

6.4 Counterparts. This Amendment may be executed in any number of counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

6.5 Governing Law. This Amendment shall be governed by and construed in accordance with the laws of Nevada.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.

BOYD GAMING CORPORATION
By:	/s/ Keith E. Smith
Name:	Keith E. Smith
Title:	President and Chief Executive Officer
BANK OF AMERICA, N.A.,
as Administrative Agent
By:	/s/ Maurice Washington
Name:	Maurice Washington
Title:	Vice President

9

EXHIBIT A

to First Amendment and Consent

to First Amended and Restated Credit Agreement

December 21, 2009

The Guarantors under the

hereinafter-described

Credit Agreement

Re: Boyd Gaming Corporation

Gentlemen:

Please refer to (1) the First Amended and Restated Credit Agreement, dated as of May 24, 2007 (the “Credit Agreement”), by and among BOYD GAMING CORPORATION, a Nevada corporation (the “Borrower”), the various financial institutions parties thereto (collectively, the “Lenders”), and BANK OF AMERICA, N.A. (“Bank of America”), as administrative agent (in such capacity, the “Administrative Agent”) for the Lenders, (2) the Guaranty dated May 24, 2007 from the addressee in favor of the Lenders and the Administrative Agent (the “Guaranty”) and (3) the Pledge Agreement dated May 24, 2007 from the Borrower and certain of the addressees in favor of the Administrative Agent (the “Pledge Agreement”). Pursuant to that certain First Amendment and Consent dated of even date herewith, a copy of which is attached hereto, certain terms of the Credit Agreement were amended. We hereby request that you (i) acknowledge and reaffirm all of your obligations and undertakings under the Guaranty and, if you are party thereto, the Pledge Agreement, and (ii) acknowledge and agree that the Guaranty and, if you are party thereto, the Pledge Agreement, is and shall remain in full force and effect in accordance with the terms thereof.

Please indicate your agreement to the foregoing by signing in the space provided below, and returning the executed copy to the undersigned.

BANK OF AMERICA, N.A.,
as Administrative Agent
By:	/s/ Maurice Washington
Name:	Maurice Washington
Title:	Vice President

Exhibit A-1

Acknowledged and Agreed to

as of the date hereof:

SAM-WILL, INC.,

a Nevada corporation

By:

Name:

Title:

Exhibit A-2

BOYD TUNICA, INC.,

a Mississippi corporation

By:

Name:

Title:

Exhibit A-3

CALIFORNIA HOTEL FINANCE CORPORATION, a Nevada corporation

By:

Name:

Title:

Exhibit A-4

CALIFORNIA HOTEL AND CASINO,

a Nevada corporation

By:

Name:

Title:

Exhibit A-5

BOYD ATLANTIC CITY, INC.,

a New Jersey corporation

By:

Name:

Title:

Exhibit A-6

ECHELON RESORTS LLC,

a Nevada limited liability company

By:

Name:

Title:

Exhibit A-7

PAR-A-DICE GAMING CORPORATION,

an Illinois corporation

By:

Name:

Title:

Exhibit A-8

BOYD KENNER, INC.,

a Louisiana corporation

By:

Name:

Title:

Exhibit A-9

BOYD LOUISIANA L.L.C.,

a Nevada limited liability company

By:

Name:

Title:

Exhibit A-10

M.S.W., INC.,

a Nevada corporation

By:

Name:

Title:

Exhibit A-11

TREASURE CHEST CASINO, L.L.C.,

a Louisiana limited liability company

By:

Name:

Title:

Exhibit A-12

BLUE CHIP CASINO, LLC,

an Indiana limited liability company

By:

Name:

Title:

Exhibit A-13

BOYD LOUISIANA RACING, INC.,

a Louisiana corporation

By:

Name:

Title:

Exhibit A-14

BOYD RACING, L.L.C.,
a Louisiana limited liability company
By:	BOYD LOUISIANA RACING, INC.,
	a Louisiana corporation, its sole member
	By:
	Name:
	Title:

Exhibit A-15

BOYD SHREVEPORT, L.L.C., a Louisiana limited liability company
By:	BOYD KENNER, INC., a Louisiana corporation, its sole member
	By:
	Name:
	Title:

Exhibit A-16

BOYD RED RIVER, L.L.C., a Louisiana limited liability company
By:	BOYD GAMING CORPORATION, a Nevada corporation, its sole member
	By:
	Name:
	Title:

Exhibit A-17

RED RIVER ENTERTAINMENT OF SHREVEPORT PARTNERSHIP IN COMMENDAM, a Louisiana partnership in commendam
By:	BOYD SHREVEPORT, L.L.C., a Louisiana limited liability, its general partner
	By:	BOYD KENNER, INC., a Louisiana corporation, its sole member
		By:
		Name:
		Title:

Exhibit A-18

COAST CASINOS, INC.,

a Nevada corporation

By:

Name:

Title:

Exhibit A-19

COAST HOTELS AND CASINOS, INC.,

a Nevada corporation

By:

Name:

Title:

Exhibit A-20

EXHIBIT B

to First Amendment and Consent

to First Amended and Restated Credit Agreement

CONSENT OF LENDER

Reference is hereby made to the First Amended and Restated Credit Agreement dated as of May 24, 2007 among Boyd Gaming Corporation, the Lenders party thereto and Bank of America, N.A., as Administrative Agent.

The undersigned Lender hereby consents to the execution and delivery of the First Amendment and Consent to First Amended and Restated Credit Agreement by the Administrative Agent on its behalf, substantially in the form of the most recent draft thereof presented to the undersigned Lender.

Dated:                         , 2009

[Name of Institution]

By:

Name:

Title:

Exhibit B-1

EXHIBIT C

to First Amendment and Consent

to First Amended and Restated Credit Agreement

AMENDMENT AND EXTENSION

The Borrower is not requesting that any Lender agree to extend its commitment or participate in the Extending Revolving Loan Tranche referred to below in connection with the approval of the amendments described herein.

The amendments described herein will permit the Borrower, subject to the willingness of Lenders to participate in the Extending Revolving Loan Tranche after the effectiveness of this amendment, to have two tranches of revolving facilities:

• the Non-Extending Revolving Loan Tranche; and

• the Extending Revolving Loan Tranche.

• Extending Revolving Loan Tranche

• The Borrower shall have the right from time to time after the effective date of this amendment to specify the terms and conditions upon which the Lenders under the Non-Extending Revolving Loan Tranche may extend the maturity applicable to their existing commitments by converting their commitments under the Non-Extending Revolving Loan Tranche to commitments under the Extending Revolving Loan Tranche. In addition, the Credit Agreement will permit the Borrower to increase the commitments under the Extending Revolving Loan Tranche by increasing the commitments of an existing Lender thereunder and/or providing commitments of a new lender, in each case in a manner consistent with the existing incremental facility section of the Credit Agreement. No Lender shall be required to (i) convert its commitments from the Non-Extending Revolving Loan Tranche to the Extending Revolving Loan Tranche without its consent or (ii) increase its commitments and/or provide new commitments under the Extending Revolving Loan Tranche without its consent. In each case, any such consent shall be in the sole and absolute discretion of such Lender.

• Pricing (including any upfront fees) for the Extending Revolving Loan Tranche will be specified by the Borrower and agreed by the Lenders participating in such Tranche and, in the case of the applicable interest rate, will apply uniformly to all Lenders within such Tranche. The pricing (and fees) for the Non-Extending Revolving Loan Tranche will not change.

• Maturity date of the Extending Revolving Loan Tranche will be specified by the Borrower and agreed by the Lenders participating in such Tranche. The maturity date of the Non-Extending Revolving Loan Tranche will remain as provided in the Credit Agreement, i.e., May 24, 2012.

Exhibit C-1

• The covenant levels for the total leverage ratio and interest coverage ratio for periods after the maturity date of the Non-Extending Revolving Loan Tranche shall be specified by the Borrower and agreed by the Lenders participating in the Extending Revolving Loan Tranche.

• Future commitment reductions may be allocated to only those Lenders participating in the Extended Revolving Loan Tranche

• Pro Rata Provisions

• Borrowing of Revolving Loans and Swingline Loans will be pro rata across both Revolving Loan Tranches.

• Participations in Letters of Credit will be pro rata across both Revolving Loan Tranches; provided that participations in any Letter of Credit with an expiry date after May 17, 2012 will be allocated solely to the Extending Revolving Loan Tranche.

Exhibit C-2

EXHIBIT D

to First Amendment and Consent

to First Amended and Restated Credit Agreement

[Form of Compliance Certificate]

EXHIBIT D

FORM OF COMPLIANCE CERTIFICATE

Financial Statement Date:                     ,             

To: Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

Reference is made to that certain First Amended and Restated Credit Agreement, dated as of May 24, 2007 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement”, the terms defined therein being used herein as therein defined), among Boyd Gaming Corporation, a Nevada corporation (the “Borrower”), the Lenders from time to time party thereto, Bank of America, N.A., as Administrative Agent and L/C Issuer and Wells Fargo Bank, N.A. as Swing Line Lender.

The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is the                                                       of the Borrower, and that, as such, he/she is authorized to execute and deliver this Certificate to the Administrative Agent on behalf of the Borrower, and that:

[Use following paragraph 1 for fiscal year-end financial statements]

1. The Borrower has delivered to the Administrative Agent the year-end audited financial statements required by Section 6.01(a) of the Agreement for the fiscal year of the Borrower ended as of the above date, together with the report and opinion of an independent certified public accountant required by such section.

[Use following paragraph 1 for fiscal quarter-end financial statements]

1. The Borrower has delivered to the Administrative Agent the unaudited financial statements required by Section 6.01(b) of the Agreement for the fiscal quarter of the Borrower ended as of the above date. Such financial statements fairly present the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP as at such date and for such period, subject to normal year-end audit adjustments and the absence of footnotes.

2. The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Borrower during the accounting period covered by the submitted financial statements.

Exhibit D-1

3. A review of the activities of the Borrower during such fiscal period has been made under the supervision of the undersigned with a view to determining whether during such fiscal period the Borrower performed and observed all its Obligations under the Loan Documents, and

[select one:]

[to the best knowledge of the undersigned during such fiscal period, the Borrower performed and observed each covenant and condition of the Loan Documents applicable to it.]

—or—

[the following covenants or conditions have not been performed or observed and, to the best knowledge of the undersigned, the following is a list of each such Default and its nature and status:]

4. The representations and warranties of the Borrower contained in Article V of the Agreement, and any representations and warranties of the Borrower that are contained in any document furnished at any time under or in connection with the Loan Documents, are true and correct on and as of the date hereof, except to the extent that [such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date,] —or— [the following representations and warranties are not true as of such date,] and except that for purposes of this Compliance Certificate, the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Agreement shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01 of the Agreement, including the statements in connection with which this Compliance Certificate is delivered.

5. The financial covenant analyses and information set forth on Schedules 1 and 2 attached hereto are true and accurate on and as of the date of this Certificate.

IN WITNESS WHEREOF, the undersigned has executed this Certificate as of                     .

BOYD GAMING CORPORATION

By:

Name:

Title:

Exhibit D-2

For the Quarter/Year ended                             (“Statement Date”)

SCHEDULE 1

to the Compliance Certificate

($ in 000’s)

I. Section 7.10(a) – Interest Coverage Ratio.

A.     Consolidated EBITDA for the four consecutive fiscal quarters ending on above date (“Subject Period”) as set forth on Schedule 2:	$
B.     Consolidated scheduled interest expense plus interest costs associated with derivative instruments not otherwise included in interest expense for Subject Period:	$
C.     Fixed Charge Coverage Ratio (Line I.A. ÷ Line I.B.):	_____ to 1
Minimum required: 2.00 to 1.00

II Section 7.10(b) – Total Leverage Ratio.

A.     Consolidated Funded Indebtedness at Statement Date:	$
B.     Consolidated EBITDA for Subject Period (Line I.A. above):	$
C.     Consolidated Leverage Ratio (Line II.A ÷ Line II.B):	_____ to 1

Maximum permitted:

Four Fiscal Quarters Ending	Maximum Total Leverage Ratio
September 30, 2009	6.50 to 1.00
December 31, 2009	6.50 to 1.00
March 31, 2010	6.75 to 1.00
June 30, 2010	7.00 to 1.00
September 30, 2010	7.25 to 1.00
December 31, 2010	7.25 to 1.00
March 31, 2011	7.00 to 1.00
June 30, 2011	6.75 to 1.00
September 30, 2011	6.50 to 1.00
December 31, 2011	6.00 to 1.00
March 31, 2012	5.50 to 1.00

Exhibit D-3

For the Quarter/Year ended                             (“Statement Date”)

SCHEDULE 2

to the Compliance Certificate

($ in 000’s)

Consolidated EBITDA

(in accordance with the definition of Consolidated EBITDA

as set forth in the Agreement)

Consolidated EBITDA	Quarter Ended	Quarter Ended	Quarter Ended	Quarter Ended	Twelve Months Ended
The Borrower and its Restricted Subsidiaries’ consolidated earnings (including net earnings attributable to noncontrolling interests held by third parties in Restricted Subsidiaries) before interest expense, taxes, depreciation, amortization, non-cash rent expense, preopening expenses, share-based compensation expense, non-cash change in value of derivative instruments, interest costs associated with derivative instruments not otherwise included in interest expense, non-cash litigation accruals, charges for the early retirement of debt, non-recurring non-cash losses (or gains), acquisition and merger related charges, and extraordinary items +cash dividends and distributions paid to the Borrower and its Restricted Subsidiaries from any Person that is not a Restricted Subsidiary, provided that the cumulative amount of such cash dividends and distributions included in Consolidated EBITDA shall not exceed the cumulative amount of the Borrower’s and its Restricted Subsidiaries’ share of the Consolidated EBITDA of such Person, +(-) the EBITDA during the Subject Period for any Restricted Subsidiary acquired (or disposed of) by the Borrower or any of its Restricted Subsidiaries during such period, in each case +(-) any loss (or gain) arising from a change in GAAP

Exhibit D-4

+ 50% of Borgata EBIT to the extent that on the date of determination Borgata is not a Restricted Subsidiary and no Event of Default under and as defined in Borgata’s bank credit agreement has occurred and is continuing

+ (after the same shall have been open for at least one full calendar month) the annualized pro forma EBITDA of any new Venture of the Borrower and its Restricted Subsidiaries (including the Dania Jai Alai development project)

+ If any determination is made that Echelon and related entities should no longer be considered a project in accordance with GAAP, pre-opening expenses, impairment charges and exiting and disposal charges up to an aggregate add back of $30,000,000

-The amount of any non-appealable judgment or the cash payment in respect of any settlement or judgment in respect thereof (net of any assets acquired in connection with such settlement or judgment) , if and to the extent that any non-cash litigation accruals relating thereto have not been included in the computation of Consolidated EBITDA.

=Consolidated EBITDA

Consolidated EBITDA shall exclude the Consolidated EBITDA of each Unrestricted Subsidiary and all Subsidiaries of any Unrestricted Subsidiary.

Exhibit D-5

EX-21.1

EXHIBIT 21.1

BOYD GAMING CORPORATION

LIST OF SUBSIDIARIES:

California Hotel and Casino

d.b.a. California Hotel and Casino

d.b.a. Sam’s Town Hotel, Gambling Hall and Bowling Center

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 88-0121743

Boyd Tunica, Inc.

d.b.a. Sam’s Town Hotel and Gambling Hall

(State of Incorporation or Organization) Mississippi

(IRS Employer Identification Number) 64-0829658

Boyd Kenner, Inc.

(State of Incorporation or Organization) Louisiana

(IRS Employer Identification Number) 88-0319489

Sam-Will, Inc.

d.b.a. Fremont Hotel and Casino

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 88-0203673

Eldorado, Inc.

d.b.a. Eldorado Casino

d.b.a. Jokers Wild Casino

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 88-0093922

MSW, Inc.

d.b.a. Main Street Station Hotel, Casino and Brewery

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 88-0310765

Par-A-Dice Gaming Corporation

d.b.a. Par-A-Dice Hotel Casino

(State of Incorporation or Organization) Illinois

(IRS Employer Identification Number) 37-1268902

Boyd Louisiana L.L.C.

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 86-0880651

Treasure Chest Casino, LLC.

d.b.a. Treasure Chest Casino

(State of Incorporation or Organization) Louisiana

(IRS Employer Identification Number) 72-1248550

Blue Chip Casino, LLC.

d.b.a. Blue Chip Hotel, Casino & Spa

(State of Incorporation or Organization) Indiana

(IRS Employer Identification Number) 35-2087676

Boyd Atlantic City, Inc.

(State of Incorporation or Organization) New Jersey

(IRS Employer Identification Number) 93-1221994

California Hotel Finance Co.

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 88-0217850

Boyd Louisiana Racing, Inc.

(State of Incorporation or Organization) Louisiana

(IRS Employer Identification Number) 88-0494602

Boyd Racing, L.L.C.

d.b.a. Delta Downs Racetrack Casino & Hotel

(State of Incorporation or Organization) Louisiana

(IRS Employer Identification Number) 91-2121472

Coast Casinos, Inc.

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 20-0836222

Coast Hotels and Casinos, Inc.

d.b.a. Gold Coast Hotel and Casino

d.b.a. The Orleans Hotel and Casino

d.b.a. Suncoast Hotel and Casino

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 88-0345706

Boyd Shreveport, L.L.C.

(State of Incorporation or Organization) Louisiana

(IRS Employer Identification Number) 20-0635765

Boyd Red River, L.L.C.

(State of Incorporation or Organization) Louisiana

(IRS Employer Identification Number) 20-0635770

Red River Entertainment of Shreveport Partnership in Commendam

d.b.a. Sam’s Town Hotel and Casino

(State of Incorporation or Organization) Louisiana

(IRS Employer Identification Number) 20-0753582

Boyd Pennsylvania, Inc.

(State of Incorporation or Organization) Pennsylvania

(IRS Employer Identification Number) 51-0559543

Boyd Pennsylvania Partners, LP

(State of Incorporation or Organization) Pennsylvania

(IRS Employer Identification Number) 20-3944905

Echelon Resorts Corporation

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 32-0163131

Echelon Resorts LLC

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 30-0346702

Boyd Florida LLC

(State of Incorporation or Organization) Mississippi

(IRS Employer Identification Number) 35-2271901

FGB Development, Inc.

(State of Incorporation or Organization) Florida

(IRS Employer Identification Number) 20-2310247

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-17941, 333-79895, 333-68130, 333-90840, 333-119850, 333-129421 and 333-153852 on Form S-8, and No. 333-156096 on Form S-3 of our reports dated March 5, 2010, relating to the consolidated financial statements of Boyd Gaming Corporation and Subsidiaries, and the effectiveness of Boyd Gaming Corporation and Subsidiaries’ internal control over financial reporting, appearing in the Annual Report on Form 10-K of Boyd Gaming Corporation for the year ended December 31, 2009.

/s/ DELOITTE & TOUCHE LLP

Las Vegas, Nevada

March 5, 2010

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-17941, 333-79895, 333-68130, 333-90840, 333-119850, 333-129421 and 333-153852 on Form S-8 and No. 333-156096 on Form S-3 of our reports dated February 26, 2010, relating to the financial statements and financial statement schedules of Marina District Development Company, LLC and subsidiary appearing in this Annual Report on Form 10-K of Boyd Gaming Corporation and subsidiaries for the year ended December 31, 2009.

/s/ DELOITTE & TOUCHE LLP

Parsippany, NJ

March 5, 2010

EX-31.1

Exhibit 31.1

BOYD GAMING CORPORATION

CERTIFICATION

I, Keith E. Smith, certify that:

1. I have reviewed this annual report on Form 10-K of Boyd Gaming Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 5, 2010	/s/ Keith E. Smith
	Keith E. Smith President and Chief Executive Officer

EX-31.2

Exhibit 31.2

BOYD GAMING CORPORATION

CERTIFICATION

I, Josh Hirsberg, certify that:

1. I have reviewed this annual report on Form 10-K of Boyd Gaming Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 5, 2010	/s/ Josh Hirsberg
	Josh Hirsberg Senior Vice President, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

BOYD GAMING CORPORATION

CERTIFICATION

In connection with the periodic report of Boyd Gaming Corporation (the “Company”) on Form 10-K for the period ended December 31, 2009 as filed with the Securities and Exchange Commission (the “Report”), I, Keith E. Smith, President and Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Date: March 5, 2010	/s/ Keith E. Smith
	Keith E. Smith President and Chief Executive Officer

EX-32.2

Exhibit 32.2

BOYD GAMING CORPORATION

CERTIFICATION

In connection with the periodic report of Boyd Gaming Corporation (the “Company”) on Form 10-K for the period ended December 31, 2009 as filed with the Securities and Exchange Commission (the “Report”), I, Josh Hirsberg, Senior Vice President, Chief Financial Officer and Treasurer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Date: March 5, 2010	/s/ Josh Hirsberg
	Josh Hirsberg Senior Vice President, Chief Financial Officer and Treasurer

EX-99.1

Exhibit 99.1

GOVERNMENTAL GAMING REGULATIONS

We are subject to extensive regulation under laws, rules and supervisory procedures primarily in the jurisdictions where our facilities are located or docked. If additional gaming regulations are adopted in a jurisdiction in which we operate, such regulations could impose restrictions or costs that could have a significant adverse effect on us. From time to time, various proposals have been introduced in the legislatures of some of the jurisdictions in which we have existing or planned operations that, if enacted, could adversely affect the tax, regulatory, operational or other aspects of the gaming industry and us. We do not know whether such legislation will be enacted. The federal government has also previously considered a federal tax on casino revenues and the elimination of betting on amateur sporting events and may consider such a tax or eliminations on betting in the future. In addition, gaming companies are currently subject to significant state and local taxes and fees in addition to normal federal and state corporate income taxes, and such taxes and fees are subject to increase at any time. Any material increase in these taxes or fees could adversely affect us.

Some jurisdictions, including Nevada, Illinois, Indiana, Louisiana, Mississippi, New Jersey and Florida, empower their regulators to investigate participation by licensees in gaming outside their jurisdiction and require access to periodic reports respecting those gaming activities. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions.

Under provisions of gaming laws in jurisdictions in which we have operations, and under our organizational documents, certain of our securities are subject to restrictions on ownership which may be imposed by specified governmental authorities. The restrictions may require a holder of our securities to dispose of the securities or, if the holder refuses, or is unable, to dispose of the securities, we may be required to repurchase the securities.

The indenture governing our outstanding notes provides that if a holder of a note or beneficial owner of a note is required to be licensed, qualified or found suitable under the applicable gaming laws and is not so licensed, qualified or found suitable within the time period specified by the applicable gaming authority, the holder will be required, at our request, to dispose of its notes within a time period that either we prescribe or such other time period prescribed by the applicable gaming authority, and thereafter, we shall have the right to redeem such holder’s notes.

Nevada

The ownership and operation of casino gaming facilities in Nevada are subject to the Nevada Gaming Control Act and the regulations promulgated by the Nevada Gaming Commission thereunder, which we refer to as the Nevada Act, including various local codes and ordinances. Our gaming operations are subject to the licensing and regulatory control of the Nevada Gaming Commission, which we refer to as the Nevada Commission, the Nevada State Gaming Control Board, which we refer to as the Nevada Board, the Clark County Liquor and Gaming Licensing Board, and the City of Las Vegas, which, with the Nevada Commission and the Nevada Board, we collectively refer to as the Nevada Gaming Authorities.

The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy that are concerned with, among other things:

• the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity;

• the establishment and maintenance of responsible accounting practices and procedures;

• the maintenance of effective controls over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues;

• providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities;

• the prevention of cheating and fraudulent practices;

• the maintenance of a Gaming Compliance and Reporting Plan, including the establishment of a Gaming Compliance Committee and the retention of a Corporate Compliance Officer; and

• the provision of a source of state and local revenues through taxation and licensing fees.

Changes in such laws, regulations and procedures could have an adverse effect on our gaming operations and our business, financial condition and results of operations.

Corporations that operate casinos in Nevada are required to be licensed by the Nevada Gaming Authorities. A gaming license requires the periodic payment of fees and taxes and is not transferable. We are registered by the Nevada Commission

1

as a publicly traded corporation, or a Registered Corporation. As a Registered Corporation, we are required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information which the Nevada Commission may require. We have been found suitable by the Nevada Commission to own the stock of California Hotel and Casino and of Coast Casinos, Inc. California Hotel and Casino is licensed by the Nevada Commission to operate non-restricted gaming activities at the California and Sam’s Town Las Vegas and is additionally registered as a holding company and approved by the Nevada Gaming Authorities to own the stock of Sam-Will, Inc., the operator of the Fremont, Eldorado, Inc., the operator of the Eldorado Casino and Jokers Wild, and M.S.W., Inc., the operator of Main Street Station. Coast Casinos, Inc. is registered as a holding company and approved by the Nevada Gaming Authorities to own the stock of Coast Hotels and Casinos, Inc., the operator of Gold Coast Hotel and Casino, The Orleans Hotel and Casino, Suncoast Hotel and Casino, and the sports pool only at Renata’s Supper Club. In 2003, the Nevada Commission approved Boyd Louisiana Racing Inc. and Boyd Racing L.L.C., d.b.a. Delta Downs Racetrack, Casino & Hotel, to share in the revenue from the conduct of off-track pari-mutuel wagering, under certain conditions, as it pertains to the broadcast of live racing events to licensed Nevada pari-mutuel race books. No person may become a stockholder of, or receive any percentage of profits from, California Hotel and Casino or its subsidiaries or of Coast Casinos, Inc. or its subsidiary without first obtaining licenses and approvals from the Nevada Gaming Authorities, we refer to all of the foregoing entities collectively as the Licensed Subsidiaries. Boyd Gaming and all of its Licensed Subsidiaries have obtained from the Nevada Gaming Authorities the various registrations, approvals, permits and licenses required in order to engage in gaming activities in Nevada.

The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, Boyd Gaming and its Licensed Subsidiaries in order to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors and certain key employees of the Licensed Subsidiaries must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. Our officers, directors and key employees who are actively and directly involved in gaming activities of the Licensed Subsidiaries may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities within 30 days as prescribed by law and, in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position.

If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with us or any of our Licensed Subsidiaries, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require Boyd Gaming or any of its Licensed Subsidiaries to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or questions pertaining to licensing are not subject to judicial review in Nevada.

Boyd Gaming and its Licensed Subsidiaries are required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities and similar financing transactions by the Licensed Subsidiaries must be reported to, and/or approved by, the Nevada Commission.

If it were determined that the Nevada Act was violated by any of the Licensed Subsidiaries, the gaming licenses they hold could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, Boyd Gaming and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act or Regulations at the discretion of the Nevada Commission. Further, a supervisor could be nominated by the Nevada Commission for court appointment to operate our gaming properties and, under certain circumstances, earnings generated during the supervisor’s appointment (except for reasonable rental value of our gaming properties) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any gaming license or the appointment of a supervisor could (and revocation of any gaming license would) materially adversely affect our gaming operations and our business, financial condition and results of operations.

Any beneficial holder of our voting securities, regardless of the number of shares owned, may be required to file an application, be investigated and have his suitability reviewed as a beneficial holder of our voting securities if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation.

The Nevada Act requires any person who acquires more than 5% of our voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of our voting securities apply to the Nevada Commission for a finding of suitability within 30 days after the Chairman of the Nevada Board mails the written

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notice requiring such filing. Under certain circumstances, an “institutional investor,” as defined in the Nevada Act, which acquires more than 10%, but not more than 15%, of our voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of our board of directors, any change in our corporate charter, bylaws, management, policies or operations, or any of our gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding our voting securities for investment purposes only. Activities that are not deemed to be inconsistent with holding voting securities for investment purposes include only:

• voting on all matters voted on by stockholders;

• making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in our management, policies or operations; and

• such other activities as the Nevada Commission may determine to be consistent with such investment intent.

If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation.

Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock of a Registered Corporation beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. We are subject to disciplinary action if, after we receive notice that a person is unsuitable to be a stockholder or to have any other relationship with us, or any of our Licensed Subsidiaries, we:

• pay that person any dividend or interest upon voting securities of Boyd Gaming;

• allow that person to exercise, directly or indirectly, any voting right conferred through securities held by the person;

• pay remuneration in any form to that person for services rendered or otherwise; or

• fail to pursue all lawful efforts to require such unsuitable person to relinquish their voting securities for cash at fair market value.

Additionally, the Clark County Liquor and Gaming Licensing Board has taken the position that it has the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming license.

The Nevada Commission may, at its discretion, require the holder of any debt security of a Registered Corporation to file applications, be investigated and be found suitable to own the debt security of a Registered Corporation. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it:

• pays to the unsuitable person any dividend, interest, or any distribution whatsoever;

• recognizes any voting right by such unsuitable person in connection with such securities;

• pays the unsuitable person remuneration in any form; or

• makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction.

We are required to maintain a current stock ledger in Nevada which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. We are also required to render maximum assistance in determining the identity of the beneficial owner.

We may not make a public offering of our securities without the prior approval of the Nevada Commission if the securities or the proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. Any representation to the contrary is unlawful. In September 2009, the Nevada Commission granted us two years, the maximum time permitted, in which to make public offerings of debt or equity. This two-year approval or continuous or delayed public offering approval, also known as a shelf approval, is subject to certain conditions and expires in September 2011, at which time we will seek to renew the approval. The Nevada

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Commission’s approval may be rescinded for good cause without prior notice upon the issuance of an interlocutory stop order by the Chairman of the Nevada Board.

Changes in control of Boyd Gaming through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Gaming Authorities in a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction.

The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchase of voting securities and corporate defense tactics affecting Nevada gaming licensees, and Registered Corporations that are affiliated with those licensees, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada’s gaming industry and to further Nevada’s policy to:

• assure the financial stability of corporate gaming operators and their affiliates;

• preserve the beneficial aspects of conducting business in the corporate form; and

• promote a neutral environment for the orderly governance of corporate affairs.

Approvals are, in certain circumstances, required from the Nevada Commission before we can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. As a Registered Corporation, the Nevada Act also requires prior approval of a plan of recapitalization proposed by our board of directors in response to a tender offer made directly to our stockholders for the purposes of acquiring control of us.

License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada, Clark County and the City of Las Vegas. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon:

• a percentage of the gross revenues received;

• the number of gaming devices operated; or

• the number of table games operated.

An excise tax is also paid by casino operations upon admission to certain facilities offering live entertainment, including the selling of food, refreshment and merchandise in connection therewith.

Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons, which we refer to as Licensees, and who proposes to become involved in a gaming venture outside of Nevada is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation of the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. Licensees are also subject to disciplinary action by the Nevada Commission if they knowingly violate any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employ a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of personal unsuitability.

The sale of food or alcoholic beverages at our Nevada casinos is subject to licensing, control and regulation by the applicable local authorities. All licenses are revocable and are not transferable. The agencies involved have full power to limit, condition, suspend or revoke any such license, and any such disciplinary action could, and a revocation would, have a significant adverse effect upon the operations of the affected casino or casinos.

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Illinois

We are subject to the jurisdiction of the Illinois gaming authorities as a result of our ownership and operation of Par-A-Dice Hotel Casino in East Peoria, Illinois.

In February 1990, the State of Illinois legalized riverboat gambling. The Illinois Riverboat Gambling Act, which we refer to as the initial Illinois Act, authorizes the five-member Illinois Gaming Board, which we refer to as the Illinois Board, to issue up to ten riverboat gaming owners’ licenses on navigable streams within or forming a boundary of the State of Illinois except for Lake Michigan and any waterway in Cook County, which includes Chicago. Pursuant to the initial Illinois Act, a licensed owner who holds greater than a 10% interest in one riverboat operation could hold no more than a 10% interest in any other riverboat operation. In addition, the initial Illinois Act restricted the location of certain of the ten owners’ licenses. Four of the licenses were to be located on the Mississippi River, one license was to be at a location on the Illinois River south of Marshall County and one license had to be located on the Des Plaines River in Will County. The remaining licenses were not restricted as to location. Currently, nine owners’ licenses are in operation, including one license in each of Alton, Aurora, East Peoria, East St. Louis, Elgin, Metropolis, Rock Island and two licenses in Joliet.

The tenth license that was initially granted to Emerald Casino Inc. – an operator in East Dubuque which we refer to as Emerald Casino – was not renewed by the Illinois Board and was the subject of protracted litigation that concluded. Various appeals in the Illinois Appellate Court for the First and Fourth Districts followed the Illinois Board’s denial of Emerald Casino’s request for renewal of the tenth license on March 6, 2001 and subsequent revocation of the license in December 2005. Although the Illinois Appellate Court ultimately ordered the Illinois Board to issue Emerald Casino’s license for renewal, the Illinois Appellate Court also affirmed the Illinois Board’s decision to revoke that license. The Illinois Supreme Court refused Emerald Casino’s request to review the latter decision, and Emerald Casino announced that it would not pursue any additional appeals in the matter. As a result, the Board authorized a bid process to issue the tenth license to a new operator. On December 6, 2007, the Illinois Department of Central Management Services issued a Request for Proposal to receive bids from investment banking firms to oversee the bid process. Credit Suisse was the successful bidder and oversaw the bid process for the tenth Illinois gaming license. Seven bids were submitted to the Illinois Board to provide gaming operations in Waukegan, Rosemont, Des Plaines, Stickney, Country Club Hills, Calumet City, and Harvey. The Illinois Board selected the Waukegan, Rosemont and Des Plaines sites as the three finalists. On December 22, 2008, the Illinois Board announced that it awarded the tenth Illinois gaming license to Midwest Gaming & Entertainment LLC, which will develop and operate a casino in Des Plaines. The exact date on which this casino’s operations will begin is unknown, and therefore the impact that the tenth Illinois licensed gaming operation may have on the Par-A-Dice Casino cannot be determined at this time.

Furthermore, under the initial Illinois Act, no gambling could be conducted while a riverboat was docked. A gaming excursion could last no more than four hours, and a gaming excursion was deemed to have started when the first passenger boarded a riverboat. Gaming could continue during passenger boarding for a period of up to 30 minutes. Gaming was also allowed for a period of up to 30 minutes after the gangplank or its equivalent was lowered, thereby allowing passengers to exit the riverboat. During the 30-minute exit time period, new passengers were not allowed to board the riverboat. Although riverboats were mandated to cruise, there were certain exceptions. If a riverboat captain reasonably determined that either it was unsafe to transport passengers on the waterway due to inclement weather or the riverboat had been rendered temporarily inoperable by unforeseeable mechanical or structural difficulties or river icing, the riverboat could remain dockside or return to the dock. In those situations, a gaming excursion could commence or continue while the gangplank or its equivalent was raised and remained raised, in which event the riverboat was not considered docked. If a gaming excursion had to begin or continue with the gangplank or its equivalent raised, and the riverboat did not leave the dock, entry of new patrons on to the riverboat was prohibited until the completion of the excursion.

In June of 1999, amendments to the Illinois Act, which we refer to as the Amended Illinois Act, were passed by the legislature and signed into law by the Governor. The Amended Illinois Act redefined the conduct of gaming in the state. Pursuant to the Amended Illinois Act, riverboats can conduct gambling without cruising, and passengers can enter and leave a riverboat at any time. In addition, riverboats may now be located upon any water within Illinois, and not just navigable waterways. There is no longer any prohibition of a riverboat being located in Cook County. Riverboats are now defined as self-propelled excursion boats or permanently moored barges. The Amended Illinois Act requires that only three, rather than four, owners’ licenses, be located on the Mississippi River. The 10% ownership prohibition has also been removed. Therefore, subject to certain Illinois Board rules, individuals or entities could own more than one riverboat operation.

The Amended Illinois Act also allows for the relocation of a riverboat home dock. A licensee that was not conducting riverboat gambling on January 1, 1998, may apply to the Illinois Board for renewal and approval of relocation to a new home dock and the Illinois Board shall grant the application and approval of the new home dock upon the licensee providing to the

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Illinois Board authorization from the new dockside community. Any licensee that relocates in accordance with the provisions of the Amended Illinois Act must attain a level of at least 20% minority ownership of such a gaming operation.

The initial Illinois Act strictly regulates the facilities, persons, associations and practices related to gaming operations. The initial Illinois Act grants the Illinois Board specific powers and duties, and all other powers necessary and proper to fully and effectively execute the initial Illinois Act for the purpose of administering, regulating and enforcing the system of riverboat gaming. The Illinois Board has authority over every person, association, corporation, partnership and trust involved in riverboat gaming operations in the State of Illinois.

The initial Illinois Act requires the owner of a riverboat gaming operation to hold an owner’s license issued by the Illinois Board. Each owner’s license permits the holder to own up to two riverboats; however, gaming participants are limited to 1,200 for any owner’s license. The number of gaming participants will be determined by the number of gaming positions available. Gaming positions are counted as follows:

• electronic gaming devices positions will be determined as 90% of the total number of devices available for play;

• craps tables will be counted as having ten gaming positions; and

• games utilizing live gaming devices, except for craps, will be counted as having five gaming positions.

Each owner’s license initially runs for a period of three years. Thereafter, the license must be renewed annually. Under the Amended Illinois Act, the Board may renew an owner’s license for up to four years. An owner licensee is eligible for renewal upon payment of the applicable fee and a determination by the Illinois Board that the licensee continues to meet all of the requirements of the initial Illinois Act and Illinois Board rules. The owner’s license for Par-A-Dice Riverboat Casino initially expired in February 1995. Since that time the license has been renewed every four years, the maximum time permitted by the Illinois Act. An ownership interest in an owner’s license may not be transferred or pledged as collateral without the prior approval of the Illinois Board.

Pursuant to the Amended Illinois Act, which removed the 10% ownership prohibition, the Illinois Board established certain rules to effectuate this statutory change. In deciding whether to approve direct or indirect ownership or control of an owner’s license, the Illinois Board shall consider the impact of any economic concentration of the ownership or control. No direct or indirect ownership or control shall be approved which will result in undue economic concentration of the ownership of riverboat gambling operations in Illinois. Undue economic concentration means that a person or entity would have actual or potential domination of riverboat gambling in Illinois sufficient to:

• substantially impede or suppress competition among holders of owners’ licenses;

• adversely impact the economic stability of the riverboat casino industry in Illinois; or

• negatively impact the purposes of the initial Illinois Act, including tourism, economic development, benefits to local communities, and State and local revenues.

The Illinois Board will consider the following criteria in determining whether the approval of the issuance, transfer or holding of a license will create undue economic concentration:

• the percentage share of the market presently owned or controlled by the person or entity;

• the estimated increase in the market share if the person or entity is approved to hold the owner’s license;

• the relative position of other persons or entities that own or control owners’ licenses in Illinois;

• the current and projected financial condition of the riverboat gaming industry;

• the current market conditions, including proximity and level of competition, consumer demand, market concentration, and any other relevant characteristics of the market;

• whether the license to be approved has separate organizational structures or other independent obligations;

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• the potential impact on the projected future growth and development of the riverboat gambling industry, the local communities in which licenses are located, and the State of Illinois;

• the barriers to entry into the riverboat gambling industry and if the approval of the license will operate as a barrier to new companies and individuals desiring to enter the market;

• whether the approval of the license is likely to result in enhancing the quality and customer appeal of products and services offered by riverboat casinos in order to maintain or increase their respective market shares;

• whether a restriction on the approval of the additional license is necessary in order to encourage and preserve competition in casino operations; and

• any other relevant information.

The initial Illinois Act does not limit the maximum bet or per patron loss. Minimum and maximum wagers on games are set by the owner licensee. Wagering may not be conducted with money or other negotiable currency. No person under the age of 21 is permitted to wager and wagers may only be received from a person present on the riverboat. With respect to electronic gaming devices, the payout percentage may not be less than 80% nor more than 100%.

An admission tax is imposed on the owner of a riverboat operation. Effective July 1, 2003, additional amendments to the Amended Illinois Act were passed by the legislature and signed into law by the Governor, which we refer to as the Second Amended Illinois Act. Under the Second Amended Illinois Act, for an owner licensee that admitted 2,300,000 persons or fewer in the previous calendar year, the admission tax is $4.00 per person and for a licensee that admitted more than 2,300,000 persons in the previous calendar year, the admission tax is $5.00. Additionally, a wagering tax is imposed on the adjusted gross receipts, as defined in the initial Illinois Act, of a riverboat operation. As of July 1, 2003, pursuant to the Second Amended Illinois Act, the wagering tax was increased as follows: 15% of annual adjusted gross receipts up to and including $25 million; 27.5% of annual adjusted gross receipts in excess of $25 million but not exceeding $37.5 million; 32.5% of annual adjusted gross receipts in excess of $37.5 million but not exceeding $50 million; 37.5% of annual adjusted gross receipts in excess of $50 million but not exceeding $75 million; 45% of annual adjusted gross receipts in excess of $75 million but not exceeding $100 million; 50% of annual adjusted gross receipts in excess of $100 million but not exceeding $250 million; and 70% of annual adjusted gross receipts in excess of $250 million. The owner licensee is required, on a daily basis, to wire the wagering tax payment to the Illinois Board. The wagering tax as outlined in the Second Amended Illinois Act shall no longer be imposed beginning on the earlier of (i) July 1, 2005; (ii) the first date after the effective date of the Second Amended Illinois Act that riverboat gambling operations are conducted pursuant to the dormant tenth license or (iii) the first day that riverboat gambling operations are conducted under the authority of an owner’s license that is in addition to the ten owners’ licenses authorized by the Initial Act. Thereafter, the tax will roll back to the rates as outlined in the Amended Illinois Act.

Effective July 1, 2005, additional amendments to the Second Amended Act were passed by the legislature and signed into law by the Governor, which we refer to as the Third Amended Illinois Act. Under the Third Amended Act, for an owner that admitted 1,000,000 persons or fewer in calendar year 2004, the admission tax is $2.00 and for all other licensees it is $3.00 per person admitted. Additionally, the wagering tax provisions were “rolled back” to the rates as defined in the Amended Illinois Act. Thus, the effective wager tax rates are: 15% of annual adjusted gross receipts up to and including $25 million; 22.5% of annual adjusted gross receipts in excess of $25 million but not exceeding $50 million; 27.5% of annual adjusted gross receipts in excess of $50 million but not exceeding $75 million; 32.5% of annual adjusted gross receipts in excess of $75 million but not exceeding $100 million; 37.5% of annual adjusted gross receipts in excess of $100 million but not exceeding $150 million; 45% of annual adjusted gross receipts in excess of $150 million but not exceeding $200 million; and 50% of annual adjusted gross receipts in excess of $200 million, which we refer to as the Privilege Tax. In addition to payment of the above listed amounts, by June 15 of each year, each owner (other than an owner that admitted 1,000,000 or fewer persons in calendar year 2004) must pay to the Illinois Board the amount, if any, by which the base amount for the licensed owner exceeds the amount of tax paid pursuant to the Third Amended Act. The base amount for a riverboat in East Peoria is $43 million. This obligation terminates on the earliest of (i) July 1, 2007, (ii) the first day after the effective date of the Third Amended Act that riverboat gambling operations are conducted pursuant to a dormant license, (iii) the first day that riverboat gambling operations are conducted under the authority of an owner’s license that is in addition to the ten owners’ licenses initially authorized, or (iv) the first day that a licensee under the Illinois Horse Racing Act of 1975 conducts gaming operations with slot machines or other electronic gaming devices. The obligation to meet these base amount requirements terminated on July 1, 2007.

The Illinois Board has the authority to reduce the above mentioned wagering tax obligation imposed under the Third Amended Act by an amount the Board deems reasonable for acts of God, terrorism, bioterrorism or a condition beyond the

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control of the owner licensee. There can be no assurance that the Illinois legislature will not enact additional legislation regarding admission and wagering tax rates.

Effective May 26, 2006, additional amendments to the Third Amended Act were passed by the legislature and signed into law by the Governor, which we refer to as the Fourth Amended Act. Under the Fourth Amended Act, and for a period of two (2) years beginning May 26, 2006, owner licensees that operate a riverboat with adjusted gross receipts in 2004 greater than $200 million paid – in addition to the amounts referenced above – an amount equal to 3% of the adjusted gross receipts received into the Horse Racing Equity Trust Fund, which we refer to as the Surcharge. This provision affected four owner licensees, but did not apply to Par-A-Dice Hotel Casino in East Peoria, Illinois.

On May 30, 2006, four days after the Fourth Amended Act was signed into law, the four casinos affected by the Surcharge filed a lawsuit in the Circuit Court of the Twelfth Judicial Circuit in Will County, Illinois against the Treasurer of the State of Illinois and the Illinois Racing Board. The four-count Complaint sought a declaratory judgment that the Fourth Amended Act’s Surcharge was unconstitutional and a permanent injunction against its enforcement. On March 26, 2007, the Illinois circuit court granted summary judgment in favor of the four casinos for violation of the Illinois Constitution’s Uniformity Clause, but in favor of the defendants and the racetracks that later intervened on the remaining claims in the complaint. The defendants and the racetracks filed an appeal with the Illinois Supreme Court, which reversed the lower court’s decision and ruled in favor of the State. The affected casinos appealed this decision to the US Supreme Court, and, on June 8, 2009, the U.S. Supreme Court denied the petition for a writ of certiorari.

On June 10, 2009 the same four casinos filed a motion to reopen the judgment based on new evidence in the original trial court in Illinois. The judge denied the petition to reopen the case and the casinos have appealed. Additionally, a civil RICO suit was also filed in the Northern District of Illinois against former governor Rod Blagojevich et al. and John Johnston, owner of Balmoral Park Racetrack and Maywood Park Racetrack. The suit claims that the taxed casinos were the victims of the criminal conduct of the former governor and the conspiracy between the former governor and the named racetracks. The RICO suit is the only suit open at this time. All other court proceedings have been concluded and ruled upon in favor of the State. Par-A-Dice Hotel and Casino is not a party to any of the foregoing lawsuits.

Effective December 15, 2008, the legislature passed and the Governor signed into law amendments that re-enact similar provisions of the Fourth Amended Act, which require the same casinos to pay the Surcharge until the earliest of the following occurs: (i) December 15, 2011; (ii) any organization licensee begins to operate a slot machine or video game of chance under the Illinois Horse Racing Law of 1975 or the initial Illinois Act; (iii) payments begin under subsection (c-5) of Section 13 of the initial Illinois Act or (iv) the wagering tax imposed under Section 13 of the initial Illinois Act is increased to reflect a tax rate that is at least as stringent or more stringent than the wagering tax imposed under the Second Amended Act described above. A second state court claim challenging the constitutionality of the 2008 act remains stalled until the state court dispute over the constitutionality of the 2006 act concludes. The new law does not apply to the Par-A-Dice Hotel and Casino.

Effective June 6, 2006, additional amendments to the Fourth Amended Act were passed by the legislature and signed into law by the Governor, which we refer to as the Fifth Amended Act to restate and clarify the Third Amended Act as to the amount of payments an owner licensee is required to make to the Illinois Board. The Fifth Amended Act now provides that – in addition to any amounts due pursuant to the Privilege Tax – each owner licensee (other than an owner that admitted 1,000,000 or fewer persons in calendar year 2004) must pay to the Illinois Board the amount by which its pre-determined base amount exceeds the amount of “net privilege tax” remitted. The Fifth Amended Act defines “net privilege tax” as all Privilege Taxes paid by a licensed owner to the Illinois Board, less the amount equal to 5% of the adjusted gross receipts generated by an owner licensee that is paid from the State Gaming Fund to the unit of local government designated as the home dock of the owner licensee’s riverboat. As stated above, the requirement to pay the difference between pre-determined base amounts and “net privilege taxes” terminated on July 1, 2007.

In addition to owner’s licenses, the Illinois Board also requires licensing for all vendors of gaming supplies and equipment and for all employees of a riverboat gaming operation. The Illinois Board is authorized to conduct investigations into the conduct of gaming and into alleged violations of the Illinois Act and the Illinois Board rules. Employees and agents of the Illinois Board have access to and may inspect any facilities relating to the riverboat gaming operation.

A holder of any license is subject to the imposition of fines, suspension or revocation of such license, or other action for any act or failure to act by himself or his agents or employees, that is injurious to the public health, safety, morals, good order and general welfare of the people of the State of Illinois, or that would discredit or tend to discredit the Illinois gaming industry or the State of Illinois. Any riverboat operations not conducted in compliance with the initial Illinois Act may constitute an illegal gaming place and consequently may be subject to criminal penalties, which penalties include possible seizure, confiscation and destruction of illegal gaming devices and seizure and sale of riverboats and dock facilities to pay any unsatisfied judgment that

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may be recovered and any unsatisfied fine that may be levied. The initial Illinois Act also provides for civil penalties, equal to the amount of gross receipts derived from wagering on the gaming, whether unauthorized or authorized, conducted on the day of any violation. The Illinois Board may revoke or suspend licenses, as the Illinois Board may see fit and in compliance with applicable laws of the State of Illinois regarding administrative procedures and may suspend an owner’s license, without notice or hearing, upon a determination that the safety or health of patrons or employees is jeopardized by continuing a riverboat’s operation. The suspension may remain in effect until the Illinois Board determines that the cause for suspension has been abated and it may revoke the owner’s license upon a determination that the owner has not made satisfactory progress toward abating the hazard.

If the Illinois Board has suspended, revoked or refused to renew the license of an owner or if a riverboat gambling operation is closing and the owner is voluntarily surrendering its owner’s license, the Illinois Board may petition the local circuit court, which we refer to as the Court, in which the riverboat is situated for appointment of a receiver. The court will have sole jurisdiction over any and all issues pertaining to the appointment of a receiver. The Illinois Board will specify the specific powers, duties and limitations for the receiver, including but not limited to the authority to:

• hire, fire, promote and discipline personnel and retain outside employees or consultants;

• take possession of any and all property, including but not limited to its books, records, and papers;

• preserve or dispose of any and all property;

• continue and direct the gaming operations under the monitoring of the Illinois Board;

• discontinue and dissolve the gaming operation;

• enter into and cancel contracts;

• borrow money and pledge, mortgage or otherwise encumber the property;

• pay all secured and unsecured obligations;

• institute or defend actions by or on behalf of the holder of an owner’s license; and

• distribute earnings derived from gaming operations in the same manner as admission and wagering taxes are distributed under Sections 12 and 13 of the initial Illinois Act.

The Illinois Board will submit at least three nominees to the Court. The nominees may be individuals or entities selected from an Illinois Board approved list of pre-qualified receivers who meet the same criteria for a finding of preliminary suitability for licensure under Sections 3000.230(c)(2)(B) and (C) of the rules promulgated by the Illinois Board. In the event that the Illinois Board seeks the appointment of a receiver on an emergency basis, the Illinois Board will submit at least two nominees selected from the Illinois Board approved list of pre-qualified receivers to the Court and will issue a Temporary Operating Permit to the receiver appointed by the Court. A receiver, upon appointment by the court, will before assuming his or her duties, execute and post the same bond as an owner licensee pursuant to Section 10 of the initial Illinois Act.

The receiver will function as an independent contractor, subject to the direction of the Court; however, the receiver will also provide to the Illinois Board regular reports and provide any information deemed necessary for the Illinois Board to ascertain the receiver’s compliance with all applicable rules and laws. From time to time, the Illinois Board may, at its sole discretion, report to the Court on the receiver’s level of compliance and any other information deemed appropriate for disclosure to the Court. The term and compensation of the receiver shall be set by the Court. The receiver will provide to the Court and the Illinois Board at least 30 days written notice of any intent to withdraw from the appointment or to seek modification of the appointment. Except as otherwise provided by action to the Illinois Board, the gaming operation will be deemed a licensed operation subject to all rules of the Illinois Board during the tenure of any receivership.

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The Illinois Board requires that a “Key Person” of an owner licensee submit a Personal Disclosure or Business Entity Form and be investigated and approved by the Illinois Board. The Illinois Board shall certify for each applicant for or holder of an owner’s license each position, individual or Business Entity that is to be approved by the Illinois Board and maintain suitability as a Key Person. With respect to an applicant for or the holder of an owner’s license, Key Person shall include:

• any Business Entity and any individual with an ownership interest or voting rights of more than 5% in the licensee or applicant, and the trustee of any trust holding such ownership interest or voting rights;

• the directors of the licensee or applicant and its chief executive officer, president and chief operating officer, or their functional equivalents; and

• all other individuals or Business Entities that, upon review of the applicant’s or licensee’s Table of Organization, Ownership and Control (as discussed below), the Illinois Board determines hold a position or a level of ownership, control or influence that is material to the regulatory concerns and obligations of the Illinois Board for the specified licensee or applicant.

In order to assist the Illinois Board in its determination of Key Persons, applicants for or holders of an owner’s license shall provide to the Illinois Board a Table of Organization, Ownership and Control, which we refer to as the Table. The Table will identify in sufficient detail the hierarchy of individuals and Business Entities that, through direct or indirect means, manage, own or control the interest and assets of the applicant or license holder. If a Business Entity identified in the Table is a publicly-traded company, the following information must be provided in the Table:

• the name and percentage of ownership interest of each individual or Business Entity with ownership of more than 5% of the voting shares of the entity, to the extent such information is known or contained in Schedules 13D or 13G filed with the Securities and Exchange Commission;

• to the extent known, the names and percentage of interest of ownership of persons who are relatives of one another and who together (as individuals or through trusts) exercise control over or own more than 10% of the voting shares of the entity; and

• any trust holding more than 5% of the ownership or voting interest in the entity, to the extent such information is known or contained in Schedules 13D or 13G filed with the Securities and Exchange Commission. The Table may be disclosed under the Freedom of Information Act.

Each owner licensee must provide a means for the economic disassociation of a Key Person in the event such economic disassociation is required by an order of the Illinois Board. Based upon findings from an investigation into the character, reputation, experience, associations, business probity and financial integrity of a Key Person, the Illinois Board may enter an order upon the licensee or require the economic disassociation of such Key Person.

Furthermore, each applicant or owner licensee must disclose the identity of every person, association, trust or corporation having a greater than 1% direct or indirect pecuniary interest in an owner licensee or in the riverboat gaming operation with respect to which the license is sought. The Illinois Board may also require an applicant or owner licensee to disclose any other principal or investor and require the investigation and approval of such individuals.

The Illinois Board (unless the investor qualifies as an Institutional Investor) requires a Personal Disclosure Form from any person or entity who or which, individually or in association with others, acquires directly or indirectly, beneficial ownership of more than 5% of any class of voting securities or non-voting securities convertible into voting securities of a publicly-traded corporation which holds an ownership interest in the holder of an owner’s license. If the Illinois Board denies an application for such a transfer and if no hearing is requested, the applicant for the transfer of ownership interest must promptly divest those shares in the publicly-traded parent corporation. The holder of an owner’s license would not be able to distribute profits to a publicly-traded parent corporation until such shares have been divested. If a hearing is requested, the shares need not be divested and profits may be distributed to a publicly-held parent corporation pending the issuance of a final order from the Illinois Board.

An Institutional Investor that, individually or jointly with others, cumulatively acquires, directly or indirectly, 5% or more of any class of voting securities of a publicly-traded licensee or a licensee’s publicly-traded parent corporation shall, within no less than ten days after acquiring such securities, notify the administrator of the Illinois Board, who we refer to as the Administrator, of such ownership and shall provide any additional information as may be required. If an Institutional Investor (as specified above) acquires 10% or more of any class of voting securities of a publicly-traded licensee or a licensee’s publicly-traded parent corporation, then it shall file an Institutional Investor Disclosure Form within 45 days after acquiring such level of

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ownership interest. The owner licensee shall notify the Administrator as soon as possible after it becomes aware that it or its parent is involved in an ownership acquisition by an Institutional Investor. The Institutional Investor also has an obligation to notify the Administrator of its ownership interest.

In addition to Institutional Investor Disclosure Forms, certain other forms may be required to be submitted to the Illinois Board. An owner licensee must submit a Marketing Agent Form to the Illinois Board for each Marketing Agent with whom it intends to do business. A Marketing Agent is a person or entity, other than a junketeer or an employee of a riverboat gaming operation, who is compensated by the riverboat gaming operation in excess of $100 per patron per trip for identifying and recruiting patrons. Key Persons of owner licensees must submit Trust Identification Forms for trusts, excluding land trusts, for which they are a grantor, trustee or beneficiary each time such a trust relationship is established, amended or terminated.

Applicants for and holders of an owner’s license are required to obtain formal approval from the Illinois Board for changes in the following areas:

• Key Persons;

• type of entity;

• equity and debt capitalization of the entity;

• investors or debt holders;

• source of funds;

• applicant’s economic development plan;

• riverboat capacity or significant design change;

• gaming positions;

• anticipated economic impact; or

• agreements, oral or written, relating to the acquisition or disposition of property (real or personal) of a value greater than $1 million.

A holder of an owner’s license is allowed to make distributions to its stockholders only to the extent that such distribution would not impair the financial viability of the gaming operation. Factors to be considered by the licensee include, but are not limited to, the following:

• cash flow, casino cash and working capital requirements;

• debt service requirements, obligations and covenants associated with financial instruments;

• requirements for repairs and maintenance and capital improvements;

• employment or economic development requirements of the Amended Illinois Act; and

• a licensee’s financial projections.

The Illinois Board may waive any licensing requirement or procedure provided by rule if it determines that such waiver is in the best interests of the public and the gaming industry. Also, the Illinois Board may, from time to time, amend or change its rules. In general, uncertainty exists regarding the Illinois gaming regulatory environment due to limited experience in interpreting the Illinois Act.

Additionally, On July 13, 2009, Governor Pat Quinn signed the Video Gaming Act (230 ILCS 40/ Art 5) making video gaming terminals legal in Illinois. The Act allows for video gaming terminals to be placed in certain liquor establishments, truck stops and fraternal/ veterans clubs throughout the state. Under the Video Gaming Act, municipalities are authorized to pass an ordinance prohibiting video gaming within the corporate limits of the municipality and county boards may pass ordinances

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prohibiting video gaming within the unincorporated areas of the county. Although video gaming terminals may not be placed within 1,000 feet of the home dock of a riverboat licensed under the Riverboat Gambling Act, it is unclear at this time what effect the passage of this act may have on the operations of existing license holders.

From time to time, various proposals have been introduced in the Illinois legislature that, if enacted, would affect the taxation, regulation, operation or other aspects of the gaming industry or Boyd Gaming. Some of this legislation, if enacted, could adversely affect the gaming industry or Boyd Gaming, and no assurances can be given as to whether such legislation or similar legislation will be enacted.

One such piece of legislation that may affect the profitability of the gaming industry in Illinois is the Smoke Free Illinois Act, which became effective on January 1, 2008 and bans smoking in nearly all public places in Illinois, including bars, restaurants, work places, schools and casinos. Senate Bill 890, which we refer to as Bill SB890, was introduced on May 25, 2007 in an attempt to exempt the casinos – including Boyd’s Par-A-Dice riverboat casino in East Peoria, Illinois – from the Smoke Free Illinois Act for a period of five years. Although the Senate Executive Committee voted 9-4 to approve a casino exemption on May 30, 2007, the Illinois Senate ultimately voted down Bill SB890 on June 1, 2007. The effect the Smoke Free Illinois Act has had on the profitability of the gaming industry, and our Par-A-Dice casino in particular, remains unclear.

A potential piece of legislation that may have affected the gaming industry in Illinois is House Bill 4194, which we refer to as Bill 4194 that was introduced to the Illinois General Assembly on December 11, 2007. Bill 4194 was an attempt to expand gaming in Illinois by introducing one additional riverboat license, a land-based casino located in Chicago, Illinois, the ability of existing and new casinos to purchase additional gaming positions, and the ability of Illinois horse race tracks to operate slot machines and video poker upon the payment of a per-position fee. Bill 4194 also called for the formation of a new Gaming Board appointed by the Governor and a new Gaming Enforcement Division to monitor gaming operations, conduct background checks, conduct investigations and investigate violations of the Illinois Gaming Act. Although Bill 4194 was not enacted, bills providing for a gaming expansion bill have been introduced in 2010. HB 0091, which we refer to as Bill 0091, was filed on January 27, 2010 and would add four additional owners’ licenses, including one in Chicago. It would also allow for owners licensees to competitively bid for unused gaming positions and would authorize slot machines at horse racetracks. Bill 0091 is pending in the House Executive Committee. HB5110, which we refer to as Bill 5110, was filed on January 29, 2010 and provides for the issuance of a license to operate a riverboat in Danville, Illinois. HB4885, which we refer to as Bill 4885, provides for the issuance of a license to operate a riverboat in a municipality with a population of less than 50,000 and which is more than 50 miles from a licensed riverboat. Bill 5110 and Bill 4885 are pending in the House Rules Committee. SB3371, which we refer to as Bill 3371, would also authorize slot machine gambling at horse racetracks. The terms and any affect of such expansion on the Par-A-Dice Casino are unknown at this time.

Continuing efforts to revise the manner in which the Illinois Board is appointed and operates would affect the gaming industry. SB3384, which we refer to as Bill 3384, was introduced on February 10, 2010. Bill 3384 would end the term of the current members of the Illinois Board and require the Governor to replace them with persons nominated by a specified Nominating Panel. Bill 3384 would prohibit the Illinois Board from taking action with regard to a license until the new members are appointed. Bill 3384 would also require Illinois Board approval for contracts entered into by an owner’s licensee in an aggregate amount of $10,000 or more or for a term exceeding 365 days. Bill 3384 is currently pending in the House Assignments Committee. The impact of efforts to revise the manner and operation of the Illinois Board on the Par-A-Dice Casino is unclear at this time.

Another potential piece of legislation that, if passed, will directly affect the gaming industry is Illinois House Bill 0261, which we refer to as Bill 0261 that was introduced to the Illinois General Assembly on January 23, 2009. Bill 0261 would remove the provisions setting the admission tax rate at $3 per person admitted into a casino for licensees that have been conducting gambling operations since 2004. It would also provide that if a licensed owner of a riverboat in operation on January 1, 2009 has capital projects of at least $45,000,000 that are approved by the Illinois Gaming Board after January 1, 2006 or for which at least $45,000,000 in capital expenditures have been made after January 1, 2006, then no admissions tax will be imposed on admissions to that riverboat; however, if a riverboat does not have admissions tax imposed on it, an additional privilege tax of 1% of adjusted gross receipts will be imposed on that riverboat. On May 26, 2009, the Illinois House voted against concurring with Senate amendments to this bill, which included the provisions described above. This matter was returned to the Senate Assignments Committee on August 15, 2009, where it is pending. As of this time, it appears that Bill 0261 will not have an effect on Par-A-Dice Casino.

Similar bills have recently been filed in the Illinois General Assembly. HB5962, which we refer to as Bill 5962, and SB3574, which we refer to as Bill 3574, also eliminate the admissions tax for certain riverboats. Those that qualify must have been in operation on January 1, 2009, have had capital projects of at least $45,000,000 approved by the Illinois Board in calendar years 2006 through 2009 and at least $45,000,000 in expenditures in calendar years 2006 through 2009. Bill 5962 and Bill 3574

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also impose the additional 1% privilege tax. SB3542, which we refer to as Bill 3542, has similar provisions which apply to riverboats with capital projects of at least $75,000,000 approved by the Illinois Board in calendar years 2006 through 2009. All three bills were introduced on February 10, 2010. Bill 5962 is pending in the House Rules Committee. Bill 3574 and Bill 3542 are pending in the Senate Assignments Committee. As of this time, it appears that these bills will not have an effect on Par-A-Dice Casino.

Additionally, Illinois Senate Bill 1654 , which we refer to as Bill 1654, which was introduced to the Illinois General Assembly on February 19, 2009, would permit the State to enter into a management agreement with a third party to manage or operate the Illinois Lottery. If passed, it would also permit individuals to purchase Illinois lottery tickets on-line. On August 15, 2009, Bill 1654 was referred to the Senate Assignments Committee. However, on July 13, 2009, the Governor approved Public Acts 96-034 and 96-037, which we refer to as Acts 96-034 and 96-037, which permit the State’s entry into a management agreement with a private party to manage the Illinois Lottery. Acts 96-034 and 96-037 also authorize the Illinois Lottery to conduct a pilot program to permit the purchase of Illinois lottery tickets on-line. Both Acts condition online sales upon the issuance of a U.S. Department of Justice memorandum stating that online sales are permitted under the U.S. Unlawful Internet Gambling Enforcement Act of 2006. It is unclear what effect, if any, the private management of the lottery or internet sales of lottery tickets would have on the Illinois gaming industry.

The issue of keeping minors and self-excluded patrons out of Illinois casinos has prompted the Illinois Board to consider issuing a requirement that each Illinois casino check the identification of all patrons entering the casino’s gaming areas. The Illinois Board held a special meeting on December 3, 2007 to allow the public and industry representatives to speak on the issue. The Illinois Board also conducted studies at selected casinos during which the identification of all patrons was checked for a specific period of time. Although the Illinois Board decided to not make identification checks mandatory, it is anticipated that the issue will continue to be of interest to the Illinois Board. Industry leaders in Illinois have expressed concern that mandatory identification checks may adversely affect gaming revenues, as such checks not only invoke privacy concerns, but may affect the number of patrons visiting Illinois casinos by causing some of them to visit casinos in neighboring states that do not perform such checks.

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New Jersey

On June 11, 2003 the New Jersey Casino Control Commission, or NJCCC, found that Marina District Development Company, LLC, a New Jersey limited liability company, which we refer to as the Operating Company, complied with all the requirements of the Casino Control Act for the issuance of a casino license to own and operate the Borgata Hotel Casino and Spa. The effective date of the license was July 2, 2003, the date the NJCCC Commission issued the Operating Company with an Operation Certificate. Such casino license was valid for a one year period and was renewed in June of 2004 for an additional one year period. On June 30, 2005 the casino license of the Operating Company was renewed for a five-year period and is subject to successive five-year renewal periods thereafter.

MDDC is a wholly-owned subsidiary of Marina District Development Holding Company, LLC, which we refer to as the Holding Company, i.e. the Holding Company is the sole member of the Operating Company. Boyd Atlantic City, Inc., or BAC and MAC Corp., a wholly-owned subsidiary of Mirage Resorts, Inc., or MAC, are members of the Holding Company and have 50% ownership interests therein, and BAC is the Managing Member of the Holding Company.

The ownership and operation of casino gaming facilities in New Jersey are subject to the Casino Control Act. In general, the Casino Control Act and the regulations promulgated thereunder contain detailed provisions concerning, among other things:

• the granting of casino licenses;

• the suitability of the approved hotel facility and the amount of authorized casino space and gaming units permitted therein;

• the qualification of natural persons and entities related to the casino licensee;

• the licensing and registration of employees and vendors of casino licensees;

• the rules of the games;

• the selling and redeeming of gaming chips;

• the granting and duration of credit and the enforceability of gaming debts;

• the management control procedures, accountability, and cash control methods and reports to gaming agencies;

• the security standards;

• the manufacture and distribution of gaming equipment;

• the equal opportunity for employees and casino operators, contractors of casino facilities, and others; and

• the advertising, entertainment, and alcoholic beverages.

The NJCCC is empowered under the Casino Control Act to regulate a wide spectrum of gaming and non-gaming related activities and to approve the form of ownership and financial structure of not only a casino licensee, but also its entity qualifiers and intermediary and holding companies.

No casino hotel facility may operate unless the appropriate license and approvals are obtained from the NJCCC, which has broad discretion with regard to the issuance, renewal, revocation, and suspension of such licenses and approvals, which are nontransferable. The qualification criteria with respect to the holder of a casino license include the following:

• its financial stability, integrity and responsibility;

• the integrity and adequacy of its financial resources which bear any relation to the casino project;

• its good character, honesty, and integrity; and

• the sufficiency of its business ability and casino experience to establish the likelihood of creation and maintenance of a successful, efficient casino operation.

The NJCCC may reopen licensing hearings at any time and must reopen a licensing hearing at the request of the New Jersey Division of Gaming Enforcement, or the NJDGE.

To be considered financially stable, a licensee must demonstrate the following ability:

• to pay winning wagers when due;

• to achieve a gross operating profit;

• to pay all local, state, and federal taxes when due;

• to make necessary capital and maintenance expenditures to insure that it has a superior first-class facility; and

• to pay, exchange, refinance or extend debts which will mature and become due and payable during the license term.

In the event a licensee fails to demonstrate financial stability, the NJCCC may take such action as it deems necessary to fulfill the purposes of the Casino Control Act and protect the public interest, including:

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• issuing conditional license approvals or determinations;

• establishing an appropriate cure period;

• imposing reporting requirements;

• placing restrictions on the transfer of cash or the assumption of liability;

• requiring reasonable reserves or trust accounts;

• denying licensure; or

• appointing a conservator.

Pursuant to the Casino Control Act, NJCCC regulations and precedent, no entity may hold a casino license unless:

• each officer, director, principal employee, person who directly or indirectly holds any beneficial interest or ownership in the licensee;

• each person who in the opinion of the NJCCC has the ability to control or elect a majority of the board of directors of the licensee (other than a banking or other licensed lending institution which makes a loan or holds a mortgage or other loan acquired in the ordinary course of business); and

• any lender, whom the NJCCC may consider appropriate, obtains and maintains qualification approval from the NJCCC. Qualification approval means qualification requirements as a casino key employee, as described below.

An entity qualifier or intermediary or holding company is required to register with the NJCCC and meet the same basic standards for approval as a casino licensee; provided, however, that the NJCCC, with the concurrence of the Director of the NJDGE, may waive compliance by a publicly-traded corporate holding company as to any officer, director, lender, underwriter, agent or employee thereof, or person directly or indirectly holding a beneficial interest or ownership of the securities of such company, where the NJCCC and the Director of the NJDGE are satisfied that such persons are not significantly involved in the activities of the corporate licensee, and in the case of security holders, do not have the ability to control the publicly-traded corporation or elect one or more of its directors.

The NJCCC may require all financial backers, investors, mortgagors, bond holders and holders of notes or other evidence of indebtedness, either in effect or proposed, which bears any relation to the casino project, publicly-traded securities of an entity which holds a casino license or is an entity qualifier, subsidiary, or holding company of a casino licensee (a Regulated Company), to qualify as financial sources.

An Institutional Investor is defined by the Casino Control Act as any:

• retirement fund administered by a public agency for the exclusive benefit of federal, state, or local public employees;

• investment company registered under the Investment Company Act of 1940;

• collective investment trust organized by banks under Part Nine of the Rules of the Comptroller of the Currency;

• closed end investment trust;

• chartered or licensed life insurance company or property and casualty insurance company;

• banking and other chartered or licensed lending institution;

• investment advisor registered under the Investment Advisers Act of 1940; and

• such other persons as the NJCCC may determine for reasons consistent with the policies of the Casino Control Act.

An Institutional Investor is granted a waiver by the NJCCC from financial source or other qualification requirements applicable to a holder of publicly-traded securities, in the absence of a prima facie showing by the NJDGE that there is any cause to believe that the Institutional Investor may be found unqualified, on the basis of NJCCC findings that:

• its holdings were purchased for investment purposes only and, upon request by the NJCCC, it files a certified statement to the effect that is has no intention of influencing or affecting the affairs of the issuer, the casino licensee or its holding or intermediary companies; provided, however, that the Institutional Investor will be permitted to vote on matters put to the vote of the outstanding security holders; and

• if the securities are debt securities of a casino licensee’s holding or intermediary companies or another subsidiary company of the casino licensee’s holding or intermediary companies which is related in any way to the financing of the casino licensee and represent either:

• 20% or less of the total outstanding debt of the company; or

• 50% or less of any issue of outstanding debt of the company;

• the securities are under 10% of the equity securities of a casino licensee’s holding or intermediary companies; or

• if the securities so held exceed such percentages, upon a showing of good cause. The NJCCC may grant a waiver of qualification to an Institutional Investor holding a higher percentage of such securities upon a showing of good cause and if the conditions specified above are met.

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Generally, the NJCCC requires each institutional holder seeking waiver of qualification to execute a certification to the effect that:

• the holder has reviewed the definition of Institutional Investor under the Casino Control Act and believes that it meets the definition of Institutional Investor;

• the securities are those of a publicly-traded corporation;

• the holder purchased the securities for investment purposes only and holds them in the ordinary course of business;

• the holder has no involvement in the business activities of, and no intention of influencing or affecting the affairs of the issuer, the casino licensee, or any affiliate; and

• if the holder subsequently determines to influence or affect the affairs of the issuer, the casino licensee or any affiliate, will provide not less than 30 days’ prior notice of such intent and will file with the NJCCC an application for qualification before taking any such action.

If an Institutional Investor changes its investment intent, or if the NJCCC finds reasonable cause to believe that it may be found unqualified, the Institutional Investor may take no action with respect to the security holdings, other than to divest itself of such holdings, until it has applied for interim casino authorization and has executed a trust agreement pursuant to such an application.

The Casino Control Act imposes certain restrictions upon the issuance, ownership, and transfer of securities of a Regulated Company, and defines the term “security” to include instruments which evidence a direct or indirect beneficial ownership or creditor interest in a Regulated Company including, but not limited to, mortgages, debentures, security agreements, notes and warrants.

If the NJCCC finds that a holder of such securities is not qualified under the Casino Control Act, it has the right to take any remedial action it may deem appropriate, including the right to force divestiture by such disqualified holder of such securities. In the event that certain disqualified holders fail to divest themselves of such securities, the NJCCC has the power to revoke or suspend the casino license affiliated with the Regulated Company which issued the securities. If a holder is found unqualified, it is unlawful for the holder:

• to exercise, directly or through any trustee or nominee, any right conferred by such securities; or

• to receive any dividends or interest upon any such securities or any remuneration, in any form, from its affiliated casino licensee for services rendered or otherwise.

With respect to non-publicly-traded securities, the Casino Control Act and NJCCC regulations require that the corporate charter or partnership agreement of a Regulated Company establish:

• a right in the NJCCC of prior approval with regard to transfers of securities, shares and other interests; and

• an absolute right in the Regulated Company to repurchase at the market price or the purchase price, whichever is the lesser, any such security, share, or other interest in the event that the NJCCC disapproves a transfer.

With respect to publicly-traded securities, such corporate charter or partnership agreement is required to establish that any such securities of the entity are held subject to the condition that, if a holder thereof is found to be disqualified by the NJCCC, such holder shall dispose of such securities.

Whenever any person enters into a contract to transfer any property which relates to an on-going casino operation, including a security of the casino licensee or a holding or intermediary company or entity qualifier, under circumstances which would require that the transferee obtain licensure or be qualified under the Casino Control Act, and that person is not already licensed or qualified, the transferee is required to apply for interim authorization. Furthermore, the closing or settlement date in the contract may not be earlier than the 121st day after the submission of a complete application for licensure or qualification together with a fully executed trust agreement in a form approved by the NJCCC. If, after the report of the NJDGE and a hearing by the NJCCC, the NJCCC grants interim authorization, the property will be subject to a trust. If the NJCCC denies interim authorization, the contract may not close or settle until the NJCCC makes a determination on the qualifications of the applicant. If the NJCCC denies qualification, the contract will be terminated for all purposes, and there will be no liability on the part of the transferor.

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If, as the result of a transfer of publicly-traded securities of a Regulated Company or a financing entity of a Regulated Company, any person is required to qualify under the Casino Control Act, that person is required to file an application for licensure or qualification within 30 days after the NJCCC determines that qualification is required or declines to waive qualification.

The application must include a fully executed trust agreement in a form approved by the NJCCC, or in the alternative, within 120 days after the NJCCC determines that qualification is required, the person whose qualification is required must divest such securities as the NJCCC may require in order to remove the need to qualify.

The NJCCC may grant interim casino authorization where it finds by clear and convincing evidence that:

• statements of compliance have been issued pursuant to the Casino Control Act;

• the casino hotel is an approved hotel in accordance with the Casino Control Act;

• the trustee satisfies qualification criteria applicable to casino key employees, except for residency; and

• interim operation will best serve the interests of the public.

When the NJCCC finds the applicant qualified, the trust will terminate. If the NJCCC denies qualification to a person who has received interim casino authorization, the trustee is required to endeavor, and is authorized, to sell, assign, convey, or otherwise dispose of the property subject to the trust to such persons who are licensed or qualified or shall themselves obtain interim casino authorization.

Where a holder of publicly-traded securities is required, in applying for qualification as a financial source or qualifier, to transfer such securities to a trust in application for interim casino authorization and the NJCCC thereafter orders that the trust become operative:

• during the time the trust is operative, the holder may not participate in the earnings of the casino hotel or receive any return on its investment or debt security holdings; and

• after disposition, if any, of the securities by the trustee, proceeds distributed to the unqualified holder may not exceed the lower of their actual cost to the unqualified holder or their value calculated as if the investment had been made on the date the trust became operative.

The NJCCC may permit a licensee to increase its casino space if the licensee agrees to add a prescribed number of qualifying sleeping units within two years after the commencement of gaming operations in the additional casino space. However, if the casino licensee does not fulfill such agreement due to conditions within its control, the licensee will be required to close the additional casino space, or any portion of thereof that the NJCCC determines should be closed.

The NJCCC is authorized to establish annual fees for the renewal of casino licenses. The renewal fee is based upon the cost of maintaining control and regulatory activities prescribed by the Casino Control Act, and may not be less than $100,000 for a one-year casino license nor less than $200,000 for a four-year casino license. Additionally, casino licenses are subject to potential assessments to fund any annual operating deficits incurred by the NJCCC or the NJDGE. There is also an annual license fee of $500 for each slot machine maintained for use or in use in any casino as well as a tax of 8% on multi-progressive slot machine revenue. Additionally, each casino licensee is also required to pay an annual tax of 8% on its gross casino revenues. Furthermore, there is a $3.00 room tax fee on all rooms, including complimentary rooms, the proceeds of which, commencing in fiscal year 2007, will be primarily deposited into a special fund for use by the Casino Reinvestment Development Authority. There is also a tax of 1.0625% in 2009 on the value of complimentary or reduced price rooms, food, beverages and entertainment.

Each party to an agreement for the management of a casino is required to hold a casino license, and the party who is to manage the casino must own at least 10% of all the outstanding equity securities of the casino licensee. Such an agreement shall provide for:

• the complete management of the casino;

• the sole and unrestricted power to direct the casino operations; and

• a term long enough to ensure the reasonable continuity, stability, independence and management of the casino.

An investment alternative tax imposed on the gross casino revenues of each licensee in the amount of 2.5% is due and payable on the last day of April following the end of the calendar year. A licensee is obligated to pay the investment alternative tax for a period of 50 years. This investment alternative tax may be offset by investment tax credits equal to 1.25% of gross gaming revenue, which are obtained by purchasing bonds issued by, or investing in housing or other development projects approved by, the Casino Reinvestment Development Authority.

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If, at any time, it is determined that a Regulated Company has violated the Casino Control Act, or that any such entity cannot meet the qualification requirements of the Casino Control Act, such entity could be subject to fines or the suspension or revocation of its license or qualification. If a Regulated Company’s license is suspended for a period in excess of 120 days or revoked, or upon the failure or refusal to renew a casino license, the NJCCC could appoint a conservator to operate or dispose of such entity’s casino hotel facilities. The conservator would be required to act under the direct supervision of the NJCCC and would be charged with the duty of conserving, preserving and, if permitted, continuing the operation of such casino hotel. During the period of true conservatorship, a former or suspended casino licensee is entitled to a fair rate of return out of net earnings, if any, on the property retained by the conservator. The NJCCC may also discontinue any conservatorship action and direct the conservator to take such steps as are necessary to affect an orderly transfer of the property of a former or suspended casino licensee.

Casino employees are subject to more stringent requirements than non-casino employees and must meet applicable standards pertaining to financial stability, responsibility, good character, honesty, integrity and New Jersey residency. These requirements have resulted in significant competition among Atlantic City casino operators for the services of qualified employees.

Casinos must follow certain procedures which are outlined in the Casino Control Act when granting gaming credit and recording counter checks which have been exchanged, redeemed or consolidated. Gaming debts arising in Atlantic City in accordance with applicable regulations are enforceable in the courts of the State of New Jersey.

If a patron does not claim money or redeem the representation of debt owed to such patron from a gaming transaction within one year of the date of the transaction, the obligation of the casino licensee to pay the patron shall expire. 25% of the money or the value of the debt shall be paid to the Casino Revenue Fund by the casino licensee, and the remaining 75% shall be retained by the casino licensee, provided the licensee uses the full amount for marketing purposes. Obligations incurred prior to the effective date of April 5, 2009 expire one year after such effective date, at which time 50% of the money or the value of the debt shall be paid to the Casino Revenue Fund, subject to the requirement that each casino licensee was required, on or before June 30, 2009, to make a payment to the Casino Revenue Fund in an amount equal to 25% of the value of the money or debt owed to its patrons as a result of gaming transactions that occurred more than one year prior to the effective date, which payment was credited towards the total obligation to make payments in an amount equal to 50% of the value of such expired gaming related obligations.

On January 15, 2006, the New Jersey State Legislature enacted the Smoke-Free Air Act that became effective April 15, 2006. This law called for smoke-free environments in essentially all indoor workplaces and places open to the public including places of business and service-related activities. The law contains several exceptions including an exemption for all casino floor space and 20% of a hotel’s designated hotel rooms. On February 15, 2007, Atlantic City promulgated a local ordinance that is more restrictive than the aforementioned state law. Specifically this ordinance reduced the casino floor exemption to 25% of a casino’s floor space. As such, smoking will be prohibited on 75% of a casino’s floor space and permitted on 25% of a casino’s floor space subject to the following conditions:

• By April 15, 2007, casinos were required to limit smoking to 25% of their casino floor space, which areas initially were not required to be enclosed and separately ventilated.

• Ultimately, the 25% of the casino floor in which smoking would be permissible was required to be enclosed and separately ventilated. Casinos had five months from April 15, 2007 to submit construction plans for such enclosures to applicable authorities for the issuance of building permits and related required approvals. Once permits were issued, the casinos had 90 days to commence construction of the enclosures. Borgata has set aside special enclosed smoking lounges in order to comply with Atlantic City’s partial smoking ban.

• In April 2008, Atlantic City voted to completely ban smoking on the casino floor, to take effect in October 2008; however, as a consequence of the economic downturn, in October 2008, Atlantic City voted to overturn the temporary smoking ban, returning to the 2007 law restricting smoking to no more than twenty-five percent of the casino floor.

Under the Atlantic City ordinance, smoking will remain permissible in 20% of a hotel’s designated hotel rooms, consistent with state law.

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Louisiana

In the State of Louisiana, we, through our wholly owned subsidiaries, own and operate three gaming properties: Treasure Chest Casino in Kenner, Delta Downs Racetrack, Casino & Hotel in Vinton and Sam’s Town Hotel and Casino in Shreveport. The operation and management of riverboat casinos, slot machine operations at certain racetracks and live racing facilities in Louisiana are subject to extensive state regulation. The Louisiana Riverboat Economic Development and Gaming Control Act, or the Riverboat Act, became effective on July 19, 1991. The Louisiana Pari-Mutuel Live Racing Facility Economic Redevelopment and Gaming Control Act, or the Slots Act, became effective on July 9, 1997. The statutory scheme regulating live and off-track betting, or the Horse Racing Act, has been in existence for decades.

The Riverboat Act states, among other things, that certain of the policies of the State of Louisiana are:

• to develop a historic riverboat industry that will assist in the growth of the tourism market;

• to license and supervise the riverboat industry from the period of construction through actual operation;

• to regulate the operators, manufacturers, suppliers and distributors of gaming devices; and

• to license all entities involved in the riverboat gaming industry.

The Slots Act states, among other things, that certain policies of the State of Louisiana are:

• to revitalize and rehabilitate pari-mutuel racing facilities through the allowance of slot machine operations at certain racetracks; and

• to regulate and license owners of such facilities.

The Horse Racing Act states, among other things, that certain policies of the State of Louisiana are:

• to encourage the development of horse racing with pari-mutuel wagering on a high plane;

• to encourage the development and ownership of race horses;

• to regulate the business of racing horses and to provide the orderly conduct of racing;

• to provide financial assistance to encourage the business of racing horses; and

• to provide a program for the regulation, ownership, possession, licensing, keeping, breeding and inoculation of horses.

Both the Riverboat Act and the Slots Act make it clear, however, that no holder of a license or permit possesses any vested interest in such license or permit and that the license or permit may be revoked at any time.

In a special session held in April 1996, the Louisiana legislature passed the Louisiana Gaming Control Act, or the Gaming Control Act, which created the Louisiana Gaming Control Board, or the Gaming Control Board. Pursuant to the Gaming Control Act, all of the regulatory authority, control and jurisdiction of licensing for both riverboats and slot facilities was transferred to the Gaming Control Board. The Gaming Control Board came into existence on May 1, 1996 and is made up of nine members and two ex-officio members (the Secretary of Revenue and Taxation and the superintendent of Louisiana State Police). It is domiciled in Baton Rouge and regulates riverboat gaming, the land-based casino in New Orleans, racetrack slot facilities and video poker. The Attorney General acts as legal counsel to the Gaming Control Board. Any material alteration in the method whereby riverboat gaming or slot facilities is regulated in the State of Louisiana could have an adverse effect on the operations of the Treasure Chest, Delta Downs and Sam’s Town Shreveport.

Riverboats

The Louisiana legislature also passed legislation requiring each parish (county) where riverboat gaming is currently authorized to hold an election in order for the voters to decide whether riverboat gaming will remain legal in that parish. Treasure Chest is located in Jefferson Parish, Louisiana. Jefferson Parish approved riverboat gaming at a special election held on November 6, 1996. Sam’s Town Shreveport is located in Caddo Parish, Louisiana which approved riverboat gaming at the special election held on November 6, 1996.

The Riverboat Act approved the conducting of gaming activities on a riverboat, in accordance with the Riverboat Act, on twelve separate waterways in Louisiana. The Riverboat Act allows the Gaming Control Board to issue up to fifteen licenses to operate riverboat gaming projects within the state, with no more than six in any one parish. There are presently fifteen licenses issued and thirteen riverboats operating currently. Two riverboats are not operational but are being planned and developed by Pinnacle Entertainment.

Pursuant to the Riverboat Act and the regulations promulgated thereunder, each applicant which desired to operate a riverboat casino in Louisiana was required to file a number of separate applications for a Certificate of Preliminary Approval, all necessary gaming licenses and a Certificate of Final Approval. No final Certificate was issued without all necessary and

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proper certificates from all regulatory agencies, including the U.S. Coast Guard, the U.S. Army Corps of Engineers, local port authorities and local levee authorities.

Both the Treasure Chest project and the Sam’s Town Shreveport project applications for a Certificate of Preliminary Approval were properly filed and each received a Certificate of Preliminary Approval in 1993 (at that time Sam’s Town Shreveport was owned by Harrah’s Entertainment) and both received their original license in 1994. These licenses have been renewed and are subject to certain general operational conditions and are subject to revocation pursuant to applicable laws and regulations.

We and certain of our directors and officers and certain of our key personnel were found suitable to operate riverboat gaming in the State of Louisiana. New directors, officers and certain key employees associated with gaming must also be found suitable by the Gaming Control Board prior to working in gaming-related areas. These approvals may be immediately revoked for a number of causes as determined by the Gaming Control Board. The Gaming Control Board may deny any application for a certificate, permit or license for any cause found to be reasonable by the Gaming Control Board. The Gaming Control Board has the authority to require us to sever our relationships with any persons for any cause deemed reasonable by the Gaming Control Board or for the failure of that person to file necessary applications with the Gaming Control Board.

The current Louisiana riverboat gaming license of Treasure Chest is valid for five years and will expire on May 18, 2010. An application for renewal was filed and a hearing on the renewal is scheduled for March 2010. The Sam’s Town Shreveport license will expire in March of 2010. A hearing on the renewal was held January 19, 2010 and the renewal was approved.

We are involved in legal proceedings with an unsuccessful applicant for the original Treasure Chest riverboat license in Louisiana.

Alvin C. Copeland, the sole shareholder (now deceased) of an unsuccessful applicant for a riverboat license at the location of our Treasure Chest Casino, made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999 and 2000, Copeland unsuccessfully opposed the renewal of the Treasure Chest license and has brought two separate legal actions against us. In November 1993, Copeland objected to the relocation of Treasure Chest Casino from the Mississippi River to its current site on Lake Pontchartrain. The predecessor to the Louisiana Gaming Control Board allowed the relocation over Copeland’s objection. Copeland then filed an appeal of the agency’s decision with the Nineteenth Judicial District Court. Through a number of amendments to the appeal, Copeland improperly attempted to transform the appeal into a direct action suit and sought the revocation of the Treasure Chest license. Treasure Chest intervened in the matter in order to protect its interests. The appeal/suit, as it related to Treasure Chest Casino, was dismissed by the District Court and that dismissal was upheld on appeal by the First Circuit Court of Appeal. Additionally, in 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chest’s license, an award of the license to him and monetary damages. The suit was dismissed by the trial court citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the First Circuit Court of Appeal. On June 21, 2002, the First Circuit Court of Appeal reversed the trial court’s decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was partially denied. The Court of Appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds. There was no activity regarding this matter during 2005 and 2006, and the case was set to be dismissed by the court for failure to prosecute by the plaintiffs in mid-May 2007; however on May 1, 2007, the plaintiff filed a motion to set a hearing date related to the motions to dismiss. The hearing was scheduled for September 10, 2007, at which time all parties agreed to postpone the hearing indefinitely. The hearing has not been rescheduled. Subsequently, Copeland died and his estate has been substituted as the proper party plaintiff. On June 9, 2009, the plaintiff filed to have the exceptions set for hearing. The parties decided to submit the exceptions to the court on the previously filed briefs. The court has yet to issues a ruling. We currently are vigorously defending the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it could have a significant adverse effect on our business, financial condition and results of operations.

Annual fees are currently charged to each riverboat project as follows:

• $50,000 per year for the first year and $100,000 for each year thereafter; and

• 21.5% of net gaming proceeds.

Additionally, each local government may charge a boarding fee or admissions tax. Treasure Chest pays the City of Kenner a fee of $2.50 per passenger boarding the vessel. Sam’s Town Shreveport pays admission taxes of 4.75% of adjusted gross receipts to various local governmental bodies. Any increase in these fees or taxes could have a material and detrimental effect on the operations of Treasure Chest and Sam’s Town.

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Slot Facilities

The Slots Act allows for three separate “eligible facilities” to operate slot machines at live horse racing pari-mutuel facilities (one each in Calcasieu Parish, St. Landry Parish and Bossier Parish). Each facility may, upon proper licensure, operate slot machines in up to 15,000 square feet of gaming space.

Gaming licenses and approvals are issued by the Gaming Control Board, and are subject to revocation for any cause deemed reasonable by the Gaming Control Board. Our operation of slot machines at Delta Downs is subject to strict regulation by the Gaming Control Board and the Louisiana State Police. Extensive regulations concerning accounting, internal controls, underage patrons and other aspects of slot machine operations have been promulgated by the Gaming Control Board. Failure to adhere to these rules and regulations can result in substantial fines and the suspension or revocation of the license to conduct slot machine operations. Any failure to comply with the Louisiana Gaming Control Board’s rules or regulations in the future could ultimately result in the revocation of our license to operate slot machines at Delta Downs.

Annual Fees and taxes currently charged Delta Downs under the Slots Acts are as follows:

• 15% of the annual net slot machine proceeds are dedicated to supplement purses of the live horse race meets held at the facility;

• 3% of the annual net slot machine proceeds dedicated to horse breeders associations;

• 18.5% taxable net slot machine proceeds are paid to the state;

• $0.25 per person attending live racing and off-track betting facilities during those periods when it is conducting race meetings, only on those days when there are scheduled live races at its racetrack (currently Thursdays through Sundays) from the hours of 6:00 p.m. until 12:00 a.m. and during those periods when it is not conducting live racing (i.e., between race meetings) only on Thursdays through Mondays from the hours of 12:00 p.m. until 12:00 a.m. Delta Down’s current license is valid through October of 2011.

Gaming Control Board

At any time, the Gaming Control Board may investigate and require the finding of suitability of any stockholder, beneficial stockholder, officer or director of Boyd Gaming or of any of its subsidiaries. The Gaming Control Board requires all holders of more than a 5% interest in the license holder to submit to suitability requirements. Additionally, if a shareholder who must be found suitable is a corporate or partnership entity, then the shareholders or partners of the entity must also submit to investigation. The sale or transfer of more than a 5% interest in any riverboat or slot project is subject to Gaming Control Board approval.

Pursuant to the regulations promulgated by the Gaming Control Board, all licensees are required to inform the Gaming Control Board of all debt, credit, financing and loan transactions, including the identity of debt holders. Our subsidiaries, Treasure Chest Casino, L.L.C., Boyd Racing, L.L.C., and Red River Entertainment of Shreveport Partnership in Commendam (Sam’s Town Shreveport) are licensees and are subject to these regulations. In addition, the Gaming Control Board, in its sole discretion, may require the holders of such debt securities to file applications and obtain suitability certificates from the Gaming Control Board. Although the Riverboat Act and the Slots Act do not specifically require debt holders to be licensed or to be found suitable, the Gaming Control Board retains the discretion to investigate and require that any holders of debt securities be found suitable under the Riverboat Act or the Slots Act. Additionally, if the Gaming Control Board finds that any holder exercises a material influence over the gaming operations, a suitability certificate will be required. If the Gaming Control Board determines that a person is unsuitable to own such a security or to hold such an indebtedness, the Gaming Control Board may propose any action which it determines proper and necessary to protect the public interest, including the suspension or revocation of the license. The Gaming Control Board may also, under the penalty of revocation of license, issue a condition of disqualification naming the person(s) and declaring that such person(s) may not:

• receive dividends or interest in debt or securities;

• exercise directly or through a nominee a right conferred by the securities or indebtedness;

• receive any remuneration from the licensee;

• receive any economic benefit from the licensee; or

• continue in an ownership or economic interest in a licensee or remain as a manager, director or partner of a licensee.

Any violation of the Riverboat Act, the Slots Act or the rules promulgated by the Gaming Control Board could result in substantial fines, penalties (including a revocation of the license) and criminal actions. Additionally, all licenses and permits issued by the Gaming Control Board are revocable privileges and may be revoked at any time by the Gaming Control Board.

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Live Horse Racing

Pari-mutuel betting and the conducting of live horse race meets in Louisiana are strictly regulated by the Louisiana State Racing Commission, which we refer to as the Racing Commission. The Racing Commission is comprised of thirteen members and is domiciled in New Orleans, Louisiana. In order to be approved to conduct a live race meet and to operate pari-mutuel wagering (including off-track betting), an applicant must show, among other things:

• racing experience;

• financial qualifications;

• moral and financial qualifications of applicant and applicant’s partners, officers and officials;

• the expected effect on the breeding and horse industry;

• the expected effect on the State’s economy; and

• the hope of financial success.

In May 2001, a subsidiary of Boyd Gaming applied for and received approval from the Racing Commission to buy Delta Downs. Approval was also granted to conduct live race meets and to operate pari-mutuel wagering at the Delta Downs facility and to conduct off-track wagering at Delta Downs. The term of these licenses is ten years.

Any alteration in the regulation of riverboat casinos, slot machine operations at certain racetracks, or live racing facilities could have a material adverse effect on the operations of Treasure Chest, Delta Downs, or Sam’s Town Shreveport.

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Mississippi

The ownership and operation of casino gaming facilities in the State of Mississippi, such as those at Sam’s Town Tunica, are subject to extensive state and local regulation, but primarily the licensing and regulatory control of the Mississippi Gaming Commission, or the Mississippi Commission.

The Mississippi Gaming Control Act, or the Mississippi Act, is similar to the Nevada Gaming Control Act. The Mississippi Commission has adopted regulations that are also similar in many respects to the Nevada gaming regulations.

The laws, regulations and supervisory procedures of the Mississippi Commission are based upon declarations of public policy that are concerned with, among other things:

• the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity;

• the establishment and maintenance of responsible accounting practices and procedures;

• the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing for reliable record keeping and requiring the filing of periodic reports with the Mississippi Commission;

• the prevention of cheating and fraudulent practices;

• providing a source of state and local revenues through taxation and licensing fees; and

• ensuring that gaming licensees, to the extent practicable, employ Mississippi residents.

The regulations are subject to amendment and interpretation by the Mississippi Commission. We believe that our compliance with the licensing procedures and regulatory requirements of the Mississippi Commission will not affect the marketability of our securities. Changes in Mississippi laws or regulations may limit or otherwise materially affect the types of gaming that may be conducted and such changes, if enacted, could have an adverse effect on us and our business, financial condition and results of operations.

The Mississippi Act provides for legalized gaming in each of the fourteen counties that border the Gulf Coast or the Mississippi River, but only if the voters in the county have not voted to prohibit gaming in that county.

Currently, gaming is permissible in nine of the fourteen eligible counties in the state and gaming operations have commenced in seven counties. Traditionally, Mississippi law required gaming vessels to be located on the Mississippi River or on navigable waters in eligible counties along the Mississippi River, or in the waters lying south of the counties along the Mississippi Gulf Coast. Recently, however, the Mississippi Legislature amended the Mississippi Act to permit licensees in the three counties along the Gulf Coast to establish land-based casino operations provided the gaming areas do not extend more than 800 feet beyond the nineteen-year mean high water line, except in Harrison County where the 800-foot limit can be extended as far as the southern boundary of Highway 90.

Our Sam’s Town Tunica casino is located on barges situated in a specially constructed basin several hundred feet inland from the Mississippi River. In the past, whether basins such as the one in which our casino barges are located constituted “navigable waters” suitable for gaming under Mississippi law was a controversial issue. The Mississippi Attorney General issued an opinion in July 1993 addressing legal locations for gaming vessels under the Mississippi Act and the Mississippi Commission later approved the location of the casino barges on the Sam’s Town Tunica site as legal under the opinion of the Mississippi Attorney General. Although a competitor requested the Mississippi Commission to review and reconsider its decision, the Mississippi Commission declined to do so and since that date has issued or renewed licenses to Sam’s Town Tunica on several separate occasions. Continued licensing of Sam’s Town Tunica requires demonstration of compliance with the Mississippi Attorney General’s “navigable waters” opinion, a requirement which has been imposed on many Tunica County licensees. We believe that Sam’s Town Tunica is in compliance with the Mississippi Act and the Mississippi Attorney General’s “navigable waters” opinion. However, no assurance can be given that a court ultimately would conclude that our casino barges at Sam’s Town Tunica are located on navigable waters within the meaning of Mississippi law. If the basin in which our Sam’s Town Tunica casino barges presently are located was not deemed navigable waters within the meaning of Mississippi law, such a decision would have a significant adverse effect on us and our business, financial condition and results of operations.

The Mississippi Act permits unlimited stakes gaming on a 24-hour basis and does not restrict the percentage of space which may be utilized for gaming. The Mississippi Act permits substantially all traditional casino games and gaming devices.

We and any subsidiary of ours that operates a casino in Mississippi, which we refer to as a Gaming Subsidiary, are subject to the licensing and regulatory control of the Mississippi Commission. We are registered under the Mississippi Act as

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a publicly traded corporation, or a Registered Corporation, of Boyd Tunica, Inc., the owner and operator of Sam’s Town Tunica, a licensee of the Mississippi Commission. As a Registered Corporation, we are required periodically to submit detailed financial and operating reports to the Mississippi Commission and furnish any other information the Mississippi Commission may require. If we are unable to continue to satisfy the registration requirements of the Mississippi Act, we and any Gaming Subsidiary cannot own or operate gaming facilities in Mississippi. No person may become a stockholder of or receive any percentage of profits from a licensed subsidiary of a Registered Corporation without first obtaining licenses and approvals from the Mississippi Commission. We have obtained such approvals in connection with the licensing of Sam’s Town Tunica.

A Gaming Subsidiary must maintain a gaming license from the Mississippi Commission to operate a casino in Mississippi. Such licenses are issued by the Mississippi Commission subject to certain conditions, including continued compliance with all applicable state laws and regulations. There are no limitations on the number of gaming licenses that may be issued in Mississippi. Gaming licenses require the payment of periodic fees and taxes, are not transferable, are issued for a three-year period (and may be continued for two additional three-year periods) and must be renewed periodically thereafter. Sam’s Town Tunica’s current gaming license expires in December of 2010.

Certain of our officers and employees and the officers, directors and certain key employees of Sam’s Town Tunica must be found suitable or approved by the Mississippi Commission. We believe that we have obtained, applied for or are in the process of applying for all necessary findings of suitability with respect to Boyd Gaming or Sam’s Town Tunica, although the Mississippi Commission, in its discretion, may require additional persons to file applications for findings of suitability. In addition, any person having a material relationship or involvement with us may be required to be found suitable, in which case those persons must pay the costs and fees associated with such investigation. The Mississippi Commission may deny an application for a finding of suitability for any cause that it deems reasonable. Changes in certain licensed positions must be reported to the Mississippi Commission. In addition to its authority to deny an application for a finding of suitability, the Mississippi Commission has jurisdiction to disapprove a change in any corporate position or title and such changes must be reported to the Mississippi Commission. The Mississippi Commission has the power to require us and our Mississippi Gaming Subsidiary to suspend or dismiss officers, directors and other key employees or sever relationships with other persons who refuse to file appropriate applications or whom the authorities find unsuitable to act in such capacities. Determination of suitability or questions pertaining to licensing are not subject to judicial review in Mississippi.

At any time, the Mississippi Commission has the power to investigate and require the finding of suitability of any record or beneficial stockholder of Boyd Gaming. The Mississippi Act requires any person who acquires more than five percent of any class of voting securities of a Registered Corporation, as reported to the Securities and Exchange Commission, or SEC, to report the acquisition to the Mississippi Commission, and such person may be required to be found suitable. Also, any person who becomes a beneficial owner of more than ten percent of any class of voting securities of a Registered Corporation, as reported to the SEC, must apply for a finding of suitability by the Mississippi Commission and must pay the costs and fees that the Mississippi Commission incurs in conducting the investigation. If a stockholder who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners.

The Mississippi Commission generally has exercised its discretion to require a finding of suitability of any beneficial owner of more than five percent of any class of voting securities of a Registered Corporation. However, under certain circumstances, an “institutional investor,” as defined in the Mississippi Commission’s regulations, which acquires more than ten percent, but not more than fifteen percent, of the voting securities of a Registered Corporation may apply to the Mississippi Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Registered Corporation, any change in the corporate charter, bylaws, management, policies or operations, or any of its gaming affiliates, or any other action which the Mississippi Commission finds to be inconsistent with holding the voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes include:

• voting on all matters voted on by stockholders;

• making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in management, policies or operations; and

• such other activities as the Mississippi Commission may determine to be consistent with such investment intent.

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Any person who fails or refuses to apply for a finding of suitability or a license within thirty days after being ordered to do so by the Mississippi Commission may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any person found unsuitable and who holds, directly or indirectly, any beneficial ownership of our securities beyond such time as the Mississippi Commission prescribes, may be guilty of a misdemeanor. We may be subject to disciplinary action if, after receiving notice that a person is unsuitable to be a stockholder or to have any other relationship with us or any Gaming Subsidiary owned by us, the company involved:

• pays the unsuitable person any dividend or other distribution upon such person’s voting securities;

• recognizes the exercise, directly or indirectly, of any voting rights conferred by securities held by the unsuitable person;

• pays the unsuitable person any remuneration in any form for services rendered or otherwise, except in certain limited and specific circumstances; or

• fails to pursue all lawful efforts to require the unsuitable person to divest himself of the securities, including, if necessary, the immediate purchase of the securities for cash at a fair market value.

We may be required to disclose to the Mississippi Commission, upon request, the identities of the holders of our debt or other securities. In addition, under the Mississippi Act, the Mississippi Commission, in its discretion, may require the holder of any debt security of a Registered Corporation to file an application, be investigated and be found suitable to own the debt security if the Mississippi Commission has reason to believe that the ownership of the debt security by the holder would be inconsistent with the declared policies of the State of Mississippi.

Although the Mississippi Commission generally does not require the individual holders of obligations such as notes to be investigated and found suitable, the Mississippi Commission retains the discretion to do so for any reason, including but not limited to, a default, or where the holder of the debt instruments exercises a material influence over the gaming operations of the entity in question. Any holder of debt securities required to apply for a finding of suitability must pay all investigative fees and costs of the Mississippi Commission in connection with such an investigation.

If the Mississippi Commission determines that a person is unsuitable to own a debt security, then the Registered Corporation may be sanctioned, including the loss of its approvals, if without the prior approval of the Mississippi Commission, it:

• pays to the unsuitable person any dividend, interest, or any distribution whatsoever;

• recognizes any voting right by the unsuitable person in connection with those securities;

• pays the unsuitable person remuneration in any form; or

• makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction.

Each Mississippi Gaming Subsidiary must maintain in Mississippi a current ledger with respect to the ownership of its equity securities and we must maintain in Mississippi a current list of our stockholders which must reflect the record ownership of each outstanding share of any class of our equity securities. The ledger and stockholder lists must be available for inspection by the Mississippi Commission at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Mississippi Commission. A failure to make such disclosure may be grounds for finding the record holder unsuitable. We must also render maximum assistance in determining the identity of the beneficial owner.

The Mississippi Act requires that the certificates representing securities of a Registered Corporation bear a legend indicating that the securities are subject to the Mississippi Act and the regulations of the Mississippi Commission. We have received from the Mississippi Commission a waiver of this legend requirement. The Mississippi Commission has the power to impose additional restrictions on the holders of our securities at any time.

Substantially all material loans, leases, sales of securities and similar financing transactions by a Registered Corporation or a Gaming Subsidiary must be reported to or approved by the Mississippi Commission. A Mississippi Gaming Subsidiary may not make a public offering of its securities but may pledge or mortgage casino facilities. A Registered Corporation may not make a public offering of its securities without the prior approval of the Mississippi Commission if any part of the proceeds of the offering is to be used to finance the construction, acquisition or operation of gaming facilities in Mississippi or to retire or extend obligations incurred for those purposes. Such approval, if given, does not constitute a recommendation or approval of the investment merits of the securities subject to the offering. We have received a waiver of the prior approval requirement with respect to public offerings and private placements of securities, subject to certain conditions, including the ability of the Mississippi Commission to issue a stop order with respect to any such offering if the staff determines it would be necessary to do so.

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Under the regulations of the Mississippi Commission, a Gaming Subsidiary may not guarantee a security issued by an affiliated company pursuant to a public offering, or pledge its assets to secure payment or performance of the obligations evidenced by the security issued by the affiliated company, without the prior approval of the Mississippi Commission. A pledge of the stock of a Gaming Subsidiary and the foreclosure of such a pledge are ineffective without the prior approval of the Mississippi Commission. Moreover, restrictions on the transfer of an equity security issued by a Gaming Subsidiary or its holding companies and agreements not to encumber such securities are ineffective without the prior approval of the Mississippi Commission. We have obtained approvals from the Mississippi Gaming Commission for such guarantees, pledges and restrictions in connection with offerings of securities, subject to certain restrictions, but we must obtain separate prior approvals from the Mississippi Commission for pledges and stock restrictions in connection with certain financing transactions. Moreover, the regulations of the Mississippi Commission require us to file a Loan to Licensees report with the Mississippi Gaming Commission within thirty (30) days following certain financing transactions and the offering of certain debt securities. If the Mississippi Commission were to deem it appropriate, the Mississippi Commission could order such transaction rescinded.

Changes in control of us through merger, consolidation, acquisition of assets, management or consulting agreements or any act or conduct by a person by which he or she obtains control, may not occur without the prior approval of the Mississippi Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Mississippi Commission in a variety of stringent standards prior to assuming control of the Registered Corporation. The Mississippi Commission also may require controlling stockholders, officers, directors, and other persons having a material relationship or involvement with the entity proposing to acquire control to be investigated and licensed as part of the approval process relating to the transaction.

The Mississippi legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and other corporate defense tactics that affect corporate gaming licensees in Mississippi and Registered Corporations may be injurious to stable and productive corporate gaming. The Mississippi Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Mississippi’s gaming industry and further Mississippi’s policy to:

• assure the financial stability of corporate gaming operators and their affiliates;

• preserve the beneficial aspects of conducting business in the corporate form; and

• promote a neutral environment for the orderly governance of corporate affairs.

Approvals are, in certain circumstances, required from the Mississippi Commission before a Registered Corporation may make exceptional repurchases of voting securities (such as repurchases which treat holders differently) in excess of the current market price and before a corporate acquisition opposed by management can be consummated. Mississippi’s gaming regulations also require prior approval by the Mississippi Commission of a plan of recapitalization proposed by the Registered Corporation’s board of directors in response to a tender offer made directly to the Registered Corporation’s shareholders for the purpose of acquiring control of the Registered Corporation.

Neither we nor any Gaming Subsidiary may engage in gaming activities in Mississippi while also conducting gaming operations outside of Mississippi without approval of, or a waiver of such approval by, the Mississippi Commission. The Mississippi Commission may require determinations that, among other things, there are means for the Mississippi Commission to have access to information concerning the out-of-state gaming operations of us and our affiliates. We previously have obtained, or otherwise qualified for, a waiver of foreign gaming approval from the Mississippi Commission for operations in other jurisdictions in which we conduct gaming operations and will be required to obtain approval or a waiver of such approval from the Mississippi Commission prior to engaging in any additional future gaming operations outside of Mississippi; provided, however, that such a waiver shall be automatically granted under the Mississippi Commission’s regulations in connection with foreign gaming activities (except for internet gaming activities) conducted (i) within the fifty (50) states or any territory of the United States, (ii) on board any cruise ship embarking from a port located therein, and (iii) in any other jurisdiction in which a casino operator’s license or its equivalent is not required in order to legally conduct gaming operations.

If the Mississippi Commission were to determine that we or Sam’s Town Tunica had violated a gaming law or regulation, the Mississippi Commission could limit, condition, suspend or revoke our approvals and the license of Sam’s Town Tunica, subject to compliance with certain statutory and regulatory procedures. In addition, we, Sam’s Town Tunica and the persons involved could be subject to substantial fines for each separate violation. Because of such a violation, the Mississippi Commission could attempt to appoint a supervisor to operate the casino facilities. Limitation, conditioning or suspension of any gaming license or approval or the appointment of a supervisor could (and revocation of any gaming license or approval would) materially adversely affect us and our business, financial condition and results of operations.

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License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Mississippi and to the counties and cities in which a Gaming Subsidiary’s operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually. Gaming taxes are based upon the following:

• a percentage of the gross gaming revenues received by the casino operation;

• the number of gaming devices operated by the casino; or

• the number of table games operated by the casino.

The license fee payable to the State of Mississippi is based upon “gaming receipts” (generally defined as gross receipts less payouts to customers as winnings) and the current maximum tax rate imposed is eight percent of all gaming receipts in excess of $134,000 per month. The foregoing license fees we pay are allowed as a credit against our Mississippi income tax liability for the year paid. The gross revenues fee imposed by Tunica County in which Sam’s Town Tunica is located equals approximately four percent of the gaming receipts.

The Mississippi Commission’s regulations require as a condition of licensure or license renewal that an existing licensed gaming establishment’s plan include adequate parking facilities in close proximity to the casino complex and infrastructure facilities, such as hotels, which amount to at least 100% of the casino cost. The Mississippi Commission’s current infrastructure requirement applies to new casinos or acquisitions of closed casinos. Sam’s Town Tunica was grandfathered under a prior version of that regulation that required the infrastructure investment to equal only 25% of the casino’s cost.

The sale of alcoholic beverages by Sam’s Town Tunica is subject to licensing, control and regulation by both the local jurisdiction and the Alcoholic Beverage Control Division, or ABC, of the Mississippi State Tax Commission. Sam’s Town Tunica is in an area designated as special resort area, which allows Sam’s Town Tunica to serve alcoholic beverages on a 24-hour basis. If the ABC laws are violated, the ABC has the full power to limit, condition, suspend or revoke any license for the serving of alcoholic beverages or to place such licensee on probation with or without conditions. Any such disciplinary action could (and revocation would) have a significant adverse effect upon us and our business, financial condition and results of operations. Certain of our officers and managers at Sam’s Town Tunica must be investigated by the ABC in connection with our liquor permits and changes in certain key positions must be approved by the ABC.

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Indiana

The Indiana Riverboat Gaming Act, or the Indiana Act, was passed in 1993 and authorized the issuance of up to eleven Riverboat Owner’s Licenses to be operated from counties that are contiguous to the Ohio River, Lake Michigan and Patoka Lake. Five riverboats operate from counties contiguous to the Ohio River and five operate from counties contiguous to Lake Michigan. Subsequent legislation has amended or modified the Indiana Act, including:

• Legislation adopted in May 2003 eliminated the Riverboat Owner’s License for a riverboat to be docked in a county contiguous to Patoka Lake. However, the General Assembly authorized the Indiana Gaming Commission to enter into a contract pursuant to which an Operating Agent can operate a riverboat in Orange County, which is contiguous to Patoka Lake, on behalf of the Indiana Gaming Commission. This contract was awarded to Blue Sky Casino, LLC, d/b/a French Lick Casino & Resort, which commenced operations on November 3, 2006.

• Legislation enacted in April 2007 specified a riverboat cannot be moved from the county in which it was docked on January 1, 2007, to another county.

• In May 2008 the horse track located in Anderson, Indiana commenced slot operations and in June 2008 the horse track located in Shelbyville, Indiana commenced slot operations. Each horse track may install up to 2,000 slot machines (“Racino”). The Indiana Gaming Commission may authorize the installation of additional slot machines at each Racino.

The Indiana Act and rules promulgated thereunder provide for the strict regulation of the facilities, persons, associations and practices related to gaming operations. The Indiana Act vests the seven member Indiana Gaming Commission with the power and duties of administering, regulating and enforcing riverboat gaming in Indiana. In 2005 the Indiana Act was amended to change the residency requirements of Indiana Gaming Commission members requiring only one member, rather than three, reside in counties contiguous to Lake Michigan and to the Ohio River. The Indiana Gaming Commission’s jurisdiction extends to every person, association, corporation, partnership and trust involved in any riverboat gaming operation located in the State of Indiana.

The Indiana Act requires that the owner of a riverboat gambling operation hold a Riverboat Owner’s License issued by the Indiana Gaming Commission. The applicants for a Riverboat Owner’s License must submit a comprehensive application and the substantial owners and key persons must submit personal disclosure forms. The company, substantial owners and key persons must undergo an exhaustive background investigation prior to the issuance of a Riverboat Owner’s License. A person who owns or will own five percent of a Riverboat Owner’s License must automatically undergo the background investigation. The Indiana Gaming Commission may investigate any person with any level of ownership interest. The Operating Agent of an Orange County riverboat and Racino licensees undergo the same background investigation as a Riverboat Licensee. If the holder of a Riverboat license, the Riverboat Licensee or the Operating Agent is a publicly-traded corporation, its Articles of Incorporation must contain language concerning transfer of ownership, suitability determinations and possible divestiture of ownership if a shareholder is found unsuitable.

A Riverboat Owner’s License and Operating Contract entitle the licensee or the Operating Agent to operate one riverboat. The Indiana Act was amended in May 2003 to allow a person to hold up to one hundred percent of two individual Riverboat Owner’s Licenses. In addition, a transfer fee of two million dollars will be imposed on a Riverboat Licensee who purchases or otherwise acquires a controlling interest in a second Indiana Riverboat Owner’s License.

Pursuant to language that became effective on July 1, 2009, each riverboat licensee, Operating Agent and Racino licensee must execute and submit a Power of Attorney and name a Trustee who would operate the casino and related facilities if a statutory event occurs and the Indiana Gaming Commission adopts a resolution authorizing the Trustee to temporarily conduct the riverboat gambling operations. Specifically, the Indiana Gaming Commission may adopt a resolution authorizing a Trustee to temporarily conduct riverboat gambling operations if any of the following occurs: (i) The Indiana Gaming Commission revokes the owner’s license; (ii) the Indiana Gaming Commission declines to the renew the owner’s license; (iii) a proposed transferee is denied a license when attempting to purchase a riverboat and current owner is unable or unwilling to retain ownership of the riverboat; or (iv) a licensee agrees, in writing, to relinquish control of a riverboat to a trustee as approved by the Indiana Gaming Commission. The Power of Attorney and potential Trustees had to be submitted by November 1, 2009. Blue Chip’s Power of Attorney and its proposed Trustee will be approved by the Indiana Gaming Commission at its March 4, 2009, business meeting.

All riverboats must comply with applicable federal and state laws including, but not limited to, U.S. Coast Guard regulations. Each riverboat must be certified to carry at least five hundred passengers and be at least one hundred fifty feet in length. Those riverboats located in counties contiguous to the Ohio River must replicate historic Indiana steamboat passenger

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vessels of the nineteenth century. The Indiana Act does not limit the number of gaming positions allowed on each riverboat. The only limitation on the number of permissible patrons allowed is established by the U.S. Coast Guard Certificate of Inspection in the specification of the riverboat’s capacity. In 2005 the Indiana Act was amended to allow the Indiana Gaming Commission to adopt an alternative certification process if the U.S. Coast Guard discontinues issuing Certifications of Inspections to Indiana riverboats. On June 7, 2007, the Indiana Gaming Commission adopted the Guide for Alternate Certification of Continuously Moored, Self-Propelled, Riverboat Gaming Vessels in the State of Indiana. Vessels with an existing Certificate of Inspection operating as a dockside riverboat casino will be accepted as-is into the Alternative Certification program, subject to satisfactory completion of the United States Coast Guard procedures for becoming a Permanently Moored Vessel and a satisfactory inspection by ABS Consulting. Upon surrendering the United States Coast Guard Certificate of Inspection rules and regulation of the Occupational Health and Safety Administration will apply to the vessel and its crew, including casino personnel.

The Indiana Gaming Commission, after consultation with the Corps, may determine those navigable waterways located in counties contiguous to Lake Michigan or the Ohio River that are suitable for riverboats. If the Corps rescinds approval for the operation of a riverboat gambling facility, the Riverboat Owner’s License issued by the Indiana Gaming Commission is void and the Riverboat Licensee may not commence or must cease conducting gambling operations.

The initial Riverboat Owner’s License ran for a period of five years. Thereafter, the license is subject to renewal on an annual basis upon a determination by the Indiana Gaming Commission that it continues to be eligible to hold a Riverboat Owner’s License pursuant to the Indiana Act and rules promulgated thereunder. After the expiration of the initial license, the Riverboat Owner’s License must be renewed annually with each Riverboat Licensee undergoing a complete reinvestigation every three years. The Indiana Gaming Commission reserves the right to investigate Riverboat Licensees at any time it deems necessary. The initial license was issued to Blue Chip Casino, Inc., the predecessor to Blue Chip Casino, LLC, in August of 1997. Blue Chip underwent a reinvestigation in 2008 and its license was renewed. The license is good for a period of one year and must be renewed annually. Blue Chip’s license was renewed in August 2009 and its next requisite reinvestigation will occur in August 2011. The Operating Contract for an Orange County riverboat is valid for a period of twenty years. However, the Operating Agent is to be reinvestigated every three years to determine continued suitability. In addition, the Indiana Gaming Commission has the right to reinvestigate the Operating Agent at any time it deems necessary. Racino licenses must be renewed annually with a reinvestigation every three years.

Pursuant to legislation enacted in 2009, all riverboat licensees, Operating Agents, and Racino licensees must a submit to the Indiana Gaming Commission for approval a proposed Power of Attorney identifying the person who would temporarily operate the facility on a temporary basis and upon approval of the Indiana Gaming Commission (“Trustee”). The Trustee is to operate the facility if one of the following occurs: (i) the Indiana Gaming Commission revokes the license or the Operating Agreement; (ii) the Indiana Gaming Commission does not renew a license or an Operating Agent contract; (iii) a proposed transferee of a license or Operating Agent is denied a license or an Operating Agent Contract and the licensee or Operating Agent is unwilling to retain ownership of the riverboat or Racino; or (iv) the licensee agrees, in writing, to relinquish control to a trustee approved by the Indiana Gaming Commission. The Indiana Gaming Commission will establish a deadline for all licensees and Operating Agents to submit a proposed Power of Attorney. After the deadline passes the Indiana Gaming Commission may not renew a license or Operating Agent Contract until the Power of Attorney is submitted and the Indiana Gaming Commission has approved the Power of Attorney and the proposed trustee. If the Indiana Gaming Commission adopts a resolution authorizing a trustee to temporarily operate a riverboat or a Racino the licensee will have 180 days from the date the resolution is adopted to sell the riverboat or Racino to a person approved by the Indiana Gaming Commission. If the riverboat or Racino is not sold within 180 days the trustee may sell the riverboat or Racino to a person approved by the Indiana Gaming Commission. All licensees must apply for and hold all other licenses necessary for the operation of a riverboat gambling operation, including, but not limited to, alcoholic beverage licenses and food preparation licenses.

Neither the Riverboat Owner’s License nor the Operating Contract may be leased, hypothecated or have money borrowed or loaned against it. An ownership interest in a Riverboat Owner’s License or an Operating Contract may only be transferred in accordance with the Indiana Act and rules promulgated thereunder.

The Indiana Act does not limit the amount a patron may bet or lose. Minimum and maximum wagers for each game are set by the Riverboat Licensee or an Operating Agent. Wagering may not be conducted with money or other negotiable currency. No person under the age of 21 is permitted to wager on or be present on a riverboat. Wagers may only be taken from a person present on the riverboat. All electronic gaming devices must pay out between eighty and one hundred percent of the amount wagered. In addition, in May 2003, the Indiana General Assembly adopted legislation authorizing twenty-four hour operation for all Indiana riverboats upon application to, and approval by, the Indiana Gaming Commission. The Indiana Gaming Commission had previously allowed only twenty-one hour gaming. As a result of the legislative change and upon receipt of the requisite approval, Blue Chip commenced twenty-four hour gaming on August 1, 2003.

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Pursuant to legislation adopted in May 2003, the Indiana Gaming Commission adopted rules to establish and implement a voluntary exclusion program that requires, among other things, (i) that persons who participate in the voluntary exclusion program be included on a list of persons excluded from all Indiana riverboats, (ii) that persons who participate in the voluntary exclusion program may not seek readmittance to Indiana riverboats, (iii) Riverboat Licensees and Operating Agents must make reasonable efforts, as determined by the Indiana Gaming Commission, to cease all direct marketing efforts to a person participating in the voluntary exclusion program, and (iv) a Riverboat Licensee or Operating Agent may not cash a check of, or extend credit to, a person participating in the voluntary exclusion program. The voluntary exclusion program does not preclude a Riverboat Licensee or Operating Agent from seeking payment of a debt accrued by a person before entry into the voluntary exclusion program. The Indiana Gaming Commission has commenced the voluntary exclusion program and, as of December 2008, 2,921 individuals had requested voluntary exclusion from Indiana riverboats for at least a one year period. Of that number, 3,434 of the individuals were active participants in the program as of February 2010.

The Indiana General Assembly amended the Indiana Act in 2002 to allow riverboats to choose between continuing to conduct excursions or operate dockside. The Indiana Gaming Commission authorized riverboats to commence dockside operations on August 1, 2002. Blue Chip opted to operate dockside and commenced dockside operations on August 1, 2002. Pursuant to the legislation, the tax rate was increased from 20% to 22.5% during any time an Indiana riverboat does not operate dockside. For those riverboats that operate dockside, the following graduated tax rate is applicable: (i) 15% of the first $25 million of adjusted gross receipts, which we refer to as AGR; (ii) 20% of AGR in excess of $25 million, but not exceeding $50 million; (iii) 25% of AGR in excess of $50 million, but not exceeding $75 million; (iv) 30% of AGR in excess of $75 million, but not exceeding $150 million; and (v) 35% of AGR in excess of $150 million, but not exceeding $600 million; (vi) 40% of AGR in excess of $600 million. AGR is based on Indiana’s fiscal year (July 1 of one year through June 30 of the following year). The Operating Agent in Orange County will pay the wagering tax on the same basis as the other ten Indiana riverboats. The Indiana Act requires that Riverboat Licensees pay a $3.00 admission tax for each person. A riverboat that opts to continue excursions pays the admission tax on a per excursion basis while a riverboat that operates dockside pays the admission tax on a per entry basis. Legislation enacted in April 2007 provides the Indiana Gaming Commission with the authority to adopt rules to determine the point at which a patron is considered admitted to a riverboat. The Orange County Operating Agent must pay a $4.00 admission tax for each person that enters the riverboat. Racino licensees must pay the following graduated wagering tax: (i) 25% of the first $100 million; (ii) 30% of AGR in excess of $100 million, but not exceeding $150 million; (iii) 35% of AGR in excess of $150 million, but not exceeding $600 million; (iv) 40% of AGR in excess of $600 million. The Indiana Act provides for the suspension or revocation of a license whose owner does not timely submit the wagering or admission tax. Racino licensees must also pay (i) a 3% county slot machines wagering fee not to exceed $8 million in a fiscal year; (ii) an annual $500,00 problem gambling fee; (iii) 15% of its respective AGR to horsemen’s purses, horsemen’s associations and the gaming integrity fee; and (iv) an annual supplemental fee of 1% AGR to the Operating Agent for the first five years of operation and, thereafter, an annual renewal fee of $100 per slot machine.

In April 2007 the Indiana General Assembly amended the manner in which riverboats are to be taxed for property tax purposes. Retroactive to March 1, 2006, riverboats are to be taxed based on the lowest valuation as determined by an application of each of the following methodologies: (i) cost approach; (ii) sales comparison approach; and (iii) income capitalization approach. Alternatively the Riverboat Licensee and the respective Township Assessor may reach an agreement regarding the value of the riverboat. All Indiana state excise taxes, use taxes and gross retail taxes apply to sales made on a riverboat. In 2004 the Indiana Supreme Court ruled that vessels purchased out of the State of Indiana and brought into the State of Indiana would be subject to Indiana sales tax. Additionally, the Supreme Court declined to hear an Indiana Tax Court case that determined wagering tax payments made by a riverboat could not be deducted from the riverboat’s adjusted gross income.

The Indiana Gaming Commission is authorized to conduct investigations into gambling games, the maintenance of equipment, and violations of the Indiana Act as it deems necessary. The Indiana Gaming Commission may subject a Riverboat Licensee, an Operating Agent or a Racino licensee to fines, suspension or revocation of its license or Operating Contract for any conduct that violates the Indiana Act, rules promulgated thereunder or that constitutes a fraudulent act.

The Riverboat Licensee, Operating Agent and Racino licensees must carry insurance in types and amounts as required by the Indiana Gaming Commission. By rule promulgated by the Indiana Gaming Commission, neither a Riverboat Licensee, Operating Agent nor a Racino licensee may enter into or perform any contract or transaction in which it transfers or receives consideration that is not commercially reasonable or that does not reflect the fair market value of goods and services rendered or received. All contracts are subject to disapproval by the Indiana Gaming Commission and contracts should reflect the potential for disapproval.

The Indiana Act places special emphasis on minority and women business enterprise participation in the riverboat industry. The Indiana Gaming Commission recently hired consultants who performed a Statistical Analysis of the Utilization

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of minority and women business enterprises by Riverboat Licensees and the Operating Agents. Based on the results of that Statistical Analysis Riverboat Licensees, Operating Agents and Racino licensees must establish goals of expending ten and nine-tenths percent of the total dollars spent on construction expenditures with women business enterprises. The Indiana Gaming Commission encourages the purchase of goods and services in the following categories from minority and women business enterprises based on the capacity measurement determined by the Statistical Analysis: (i) Twenty-three and two-tenths percent with minority-owned construction firms; (ii) four and two-tenths percent with minority-owned procurement firms; (iii) two and five-tenths percent with women-owned procurement firms; (iv) eleven and two-tenths percent with minority-owned professional services firms; (v) seven and eight-tenths percent with women-owned professional services firms; (vi) two and nine-tenths percent of other expenditures with minority-owned firms; and (vii) one and eight-tenths percent with other women-owned firms. Riverboat Licensees, Operating Agents and Racino licensees may be subject to a disciplinary action for failure to meet the minority and women business enterprise expenditure goals.

By rule promulgated by the Indiana Gaming Commission, a Riverboat Licensee or affiliate may not enter into a debt transaction in excess of $1 million without the prior approval of the Indiana Gaming Commission. A debt transaction is any transaction that will result in the encumbrance of assets. Unless waived, approval of debt transactions requires consideration by the Indiana Gaming Commission at two business meetings. The Indiana Gaming Commission, by resolution, has authorized the Executive Director, subject to subsequent approval by the Indiana Gaming Commission, to approve debt transactions after a review of the documents and consultation with the Chair and the Indiana Gaming Commission’s outside financial analyst.

A rule promulgated by the Indiana Gaming Commission requires the reporting of currency transactions to the Indiana Gaming Commission after the transactions are reported to the federal government. Indiana rules also require that Riverboat Licensees track and maintain logs of transactions that exceed $3,000. The Indiana Gaming Commission has promulgated a rule that prohibits distributions, excluding distributions for the payment of taxes, by a Riverboat Licensee to its partners, shareholders, itself or any affiliated entity if the distribution would impair the financial viability of the riverboat gaming operation. The Indiana Gaming Commission has also promulgated a rule mandating Riverboat Licensees to maintain a cash reserve to protect patrons against defaults in gaming debts. The cash reserve is to be equal to a Riverboat Licensee’s average payout for a three-day period based on the riverboat’s performance the prior calendar quarter. The cash reserve can consist of cash on hand, cash maintained in Indiana bank accounts and cash equivalents not otherwise committed or obligated.

The Indiana Act prohibits contributions to a candidate for a state legislative or local office or to a candidate’s committee or to a regular party committee by:

• a person who owns at least one percent of a Riverboat Licensee, Operating Agent or Racino licensee;

• a person who is an officer of a Riverboat Licensee, Operating Agent or Racino Licensee;

• a person who is an officer of a person that owns at least one percent of a Riverboat Licensee, Operating Agent or Racino Licensee; or

• a person who is a political action committee of a Riverboat Licensee, Operating Agent, or Racino Licensee.

The prohibition against political contributions extends for three years following a change in the circumstances that resulted in the prohibition.

Individuals employed on a riverboat and in certain positions must hold an occupational license issued by the Indiana Gaming Commission. Suppliers of gaming equipment and gaming or revenue tracking services must hold a supplier’s license issued by the Indiana Gaming Commission. By rule promulgated by the Indiana Gaming Commission, Riverboat Licensees, Operating Agents and Racino Licensees who employ non-licensed individuals in positions requiring licensure or who purchase supplies from a non-licensed entity may be subject to a disciplinary action.

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Florida

In the State of Florida, we, through wholly owned indirect subsidiaries, own and operate one gaming facility, the Dania Jai-Alai Fronton in Dania, Broward County, Florida. Jai-Alai is a Spanish ball game that under Florida law allows the operator of the Fronton, to accept pari-mutuel wagers on the outcome of the game. Pari-mutuel wagering on Jai-Alai games is subject to extensive state regulation under Chapter 550 of the Florida Statutes and Chapter 61D of the Florida Administrative Code. The statutory scheme regulating the conduct of Jai-Alai games has been in existence since the 1930s.

Two separate pari-mutuel permits operate at the Dania Jai-Alai Fronton. The main Jai-Alai permit, presently owned by our indirect subsidiary, now known as The Aragon Group, which we refer to as Aragon, was issued by the State of Florida in 1953; and under law, that permit was originally authorized to operate only during the winter tourist season, running from December 1 through the following April 30. In 1980, the Florida legislature enacted a law that allowed for the creation of a summer Jai-Alai permit in both Miami-Dade and Broward Counties, which permit was authorized to operate from May 1 through November 30. After passage of the law authorizing summer Jai-Alai activities, a summer Jai-Alai license was issued by the State of Florida to the predecessor to the current owner of the permit, now known as Summersport Enterprises, LLC, which we refer to as Summersport. Summersport is one of our indirect subsidiaries. By holding both permits, year round Jai-Alai operations were authorized for the Dania Jai-Alai Fronton. Through subsequent legislative changes, the restriction on the number of days the Jai-Alai permit owned by Aragon could operate was lifted, thereby allowing year round operation under that permit. The restriction on the operational days for the summer Jai-Alai permit was not lifted, however, and therefore remains in effect. Presently, through our indirect subsidiaries, we own and operate under both of the permits.

In addition to conducting pari-mutuel wagering on Jai-Alai games, the following additional forms of gaming are authorized at the Dania Jai-Alai Fronton:

• simulcast wagering on pari-mutuel events, including wagering on all of the other pari-mutuel sports authorized under Florida law, such as thoroughbred and harness horse racing and greyhound racing; and

• poker and dominoes under a special cardroom license held by certain Florida pari-mutuel permit holders including Aragon and Summersport.

See the “Slot Machine Gaming” section below for a discussion of the possibility of slot machine gaming at the Dania Jai-Alai Fronton if and when a slot machine license is effective at such facility.

Jai-Alai and other pari-mutuel wagering activities

Conducting Jai-Alai games and accepting pari-mutuel wagering on those games is strictly regulated by the Florida Division of Pari-Mutuel Wagering, which we refer to as the Pari-Mutuel Division. The Pari-Mutuel Division is an executive branch administrative agency, with the director serving at the pleasure of the Governor. All actions taken by the Pari-Mutuel Division are subject to the provisions of the Florida Administrative Procedures Act as contained in Chapter 120 of the Florida Statutes.

The Pari-Mutuel Division’s authority is granted under Chapter 550 of the Florida Statutes. Chapter 550 of the Florida Statutes imposes a number of statutory duties on the Pari-Mutuel Division, including the duty to:

• adopt rules for the control, supervision and direction over all applicants, permit holders and licensees and over the conduct of all pari-mutuel activities and events to assure compliance with the provisions of Chapter 550 and to otherwise protect the interest of the public by assuring the integrity of the outcome of the pari-mutuel events;

• oversee the making and distribution of all pari-mutuel pools;

• collect taxes and require compliance with all financial reporting requirements; and

• conduct investigations of applicants for permits and licenses to assure compliance with the moral and financial qualifications set forth in Chapter 550.

Other provisions of Chapter 550, including but not limited to Florida Statute 550.615, grant Jai-Alai permit holders, including Aragon and Summersport, the right to accept pari-mutuel wagers on other pari-mutuel events that are conducted live at other pari-mutuel facilities within and without the State of Florida. The foregoing sections, which grant additional rights to pari-mutuel wagering, list many exceptions to the general rule authorizing the simulcasting of signals. These exceptions include restrictive provisions designed to protect a permitholder’s live meet from the forced transmission of a simulcast signal within the live permitholder’s “market area.” Nonetheless, both Aragon and Summersport are actively

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engaged in the business of accepting wagers on simulcast events conducted by consenting facilities that have elected not to enforce the “market area” restrictions or which are conducted by consenting facilities outside of the “market area.”

There is a question whether Florida Statute 550.615 remains valid law in Florida. On September 6, 2007, the Florida Supreme Court declared that subsection (6) of Florida Statute 550.615 was unconstitutional (because it was deemed a “special law” and not a general law) and therefore void. However, the Court failed to address how its ruling operated in tandem with Florida Statute 550.71, which affirmatively states that if a provision of a statute under Chapter 550 is deemed to be invalid, then the statute as a whole is void and has no effect. In a concurring opinion, two Florida Supreme Court justices believed that in light of Florida Statute 550.71, all of Florida Statute 550.615 was invalid. While these justices’ opinions are not legally authoritative, their comments make the validity of Florida Statute 550.615 and its effect on the right to accept pari-mutuel wagers on pari-mutuel events conducted at other pari-mutuel facilities more ambiguous. A future ruling on the validity of Florida Statute 550.615 may have an impact on Aragon and Summersport’s ability to accept wagers on simulcast events conducted by consenting facilities.

Poker and domino activities under Cardroom license

In 1996, the Florida legislature first authorized the issuance of Cardroom licenses to the holders of pari-mutuel permits, subject to a local option approval by the county commission in the Florida county where the pari-mutuel permitholder conducted its business. Section 849.086 of the Florida Statutes contains the statutory authority for cardroom activities and also contains the applicable regulatory framework. Cardroom activity was authorized by the Broward County Commission in 1996 and shortly thereafter both Aragon and Summersport applied for and received from the Pari-Mutuel Division Cardroom licenses. Initially, poker games only were authorized under section 849.086, however, during the 2007 session of the legislature, this section was expanded to include dominoes as an authorized game. In addition, the 2007 legislation made other important changes to the regulatory scheme under which cardrooms operate, including increasing the maximum bet to $5.00 with three raises per round, modifying the days of operation of cardrooms so that cardroom activities may now occur on days when no live pari-mutuel activities are being conducted, loosening the limitations on tournament play, authorizing giveaways and jackpots and increasing the annual license fee per table to $1,000. A bill was passed in 2009, which, among other things, removed certain wager and buy-in limits (including the $5.00 maximum bet implemented by the 2007 legislature) and permitted cardroom operators to operate cardrooms for 18 hours per day Monday through Friday and 24 hours per day on Saturday, Sunday and certain holidays. The 2009 legislative changes will only take effect if certain conditions are met, which include, among other things, that the Governor of Florida and the Seminole Tribe of Florida execute an Indian Gaming Compact pursuant to the Indian Gaming Regulatory Act of 1988, and that the compact is ratified by the Florida Legislature. On August 31, 2009, the Governor and the Tribe executed an Indian Gaming Compact; however, the Florida Legislature has not yet ratified the compact. See the “Las Vegas-Style ‘Banked’ Table Games” section below.

Slot Machine Gaming

In November 2004, voters in the State of Florida amended the Constitution of the State of Florida to allow the voters of Miami-Dade and Broward Counties to decide whether to approve slot machine gaming within existing pari-mutuel facilities in their respective county. Our Fronton is located in Broward County and therefore met the initial qualification threshold contained in the constitutional amendment. Broward County voters approved the local referendum in March 2005. Accordingly, if and when our slot machine license is effective, slot machine gaming may be lawfully conducted at the facility known as the Dania Jai-Alai Fronton.

The regulatory scheme for slot machine gaming is contained within Chapter 551 of the Florida Statutes, which law became effective on January 4, 2006. Although there are pari-mutuel facilities in numerous other counties in the State of Florida, the legislation, tracking the constitutional amendment, also restricted slot machine gaming to pari-mutuel facilities in Miami-Dade and Broward Counties, if voters in such county approved the local referendum. Further, only existing pari-mutuel facilities can be approved locations for slot machine gaming.

As originally adopted, the 2006 law governing slot machine gaming included the following material features:

• the facility may be operated 365 days per year, 16 hours per day;

• the maximum number of machines is 1,500 Vegas-style (Class III) slot machines per facility;

• the annual license fee is $3 million;

• the tax payable to the State of Florida is 50% of net slot revenue;

• the machines will not accept coins or currency, but are ticket in/ticket out;

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• the minimum age to play the machines is 21 years;

• ATMs are not permitted within the facility; and

• the Pari-Mutuel Division is required to enforce the provisions of Chapter 551, including through use of its investigatory and police powers.

Beginning in late 2006, slot machine gaming began at other pari-mutuel facilities in Broward County, with Gulfstream Park, a thoroughbred racing facility located in Hallandale, Florida, which opened in October 2006; Mardi Gras Gaming, a greyhound racing facility also located in Hallandale, Florida, which opened in December 2006; and Pompano Park, a harness horse racing facility located in Pompano Beach, Florida, which opened in April 2007. In January 2007, Aragon was granted a slot machine license by the Pari-Mutuel Division. Due to various factors, we postponed our plans to install and operate slot machines at our Dania Jai Alai Fronton facility and decided not to renew Aragon’s slot machine license, which was in good standing and expired June 30, 2008. The non-renewal itself would not prevent Aragon from obtaining a slot machine license in the future.

Based upon the initial activity at the other facilities, the legislature in 2007 made several amendments to Chapter 551, including:

• the increase of authorized slot machines to 2,000 per facility;

• allowing ATMs to be placed within the pari-mutuel wagering areas of the facility;

• authorizing off-site storage facilities for slot machines; and

• increasing the hours of operation to18 hours per weekday and 24 hours per weekend day.

The foregoing described legislative changes became effective on July 4, 2007.

In 2009, the legislature made additional amendments to Chapter 551, including the following:

• revising the annual license fee to $2.5 million for the 2010-2011 fiscal year; and $2 million for each year thereafter;

• revising the tax rate for slot machine licensees to 35% of net slot revenue; and

• providing for minimum annual tax revenue from the operation of slot machines, that, if not met by the aggregate amount of tax paid by all slot licensees for the year, must be paid on a pro rata basis by facilities licensed to operate slot machines during the applicable year.

The foregoing described legislative changes will only take effect if certain conditions are met, which include, among other things, that the Governor of Florida and the Seminole Tribe of Florida execute an Indian Gaming Compact pursuant to the Indian Gaming Regulatory Act of 1988, and that the compact is ratified by the Florida Legislature. On August 31, 2009, the Governor and the Tribe executed an Indian Gaming Compact; however, the Florida Legislature has not yet ratified the compact. See the “Las Vegas-Style ‘Banked’ Table Games” section below.

Las Vegas-Style “Banked” Table Games

Florida has a significant Seminole Indian tribal community (“Tribe”). The Tribe operates seven casinos throughout the state of Florida. One of the Tribe’s largest casinos is the Seminole Hard Rock Hotel & Casino in Hollywood, FL. This casino is only a few miles away from the Dania Jai-Alai Fronton.

In November 2007, the Tribe signed a tribal-state compact with Governor Charlie Crist that allowed Las Vegas-style “banked” table games — such as blackjack and baccarat — to be played in its casinos statewide. These forms of “banked” games are otherwise prohibited by Florida law. Under the compact, the state also pledged that it would prohibit Florida pari-mutuels to offer these games. In return for this exclusive right, the Tribe promised substantial remuneration to the state. The U.S. Department of Interior, federal overseer of Indian affairs, approved the compact, and “banked” table games began at Tribe casinos in 2008. Since this gaming has commenced, Florida pari-mutuels, including the Dania Jai-Alai Fronton, have been economically affected.

Leaders in the Florida House of Representative challenged the compact in court, alleging that the unauthorized, unilateral negotiation of the compact by the governor was prohibited under state law and violated the state’s separation of powers. In July 2008, the Florida Supreme Court upheld the legislature’s challenge. The Florida Supreme Court also held that by

34

authorizing the Tribe to conduct “banked” table games that were illegal through the state, the compact (and the Tribe) violated state law. In light of the ruling, Florida Attorney General Bill McCollum has asked that the games be suspended, but the tribal casino controlling agency, the National Indian Gaming Commission, has not done so. The Tribe contends that once the compact was read into the Federal Register by the U.S. Department of Interior, it became federal law that would now preempt any conflicting Florida law. Accordingly, the Tribe has continued to operate its “banked” table games.

On December 18, 2008, pari-mutuel Gulfstream Park Racing Association filed a motion with the Florida Supreme Court to requesting that the Court order Tribe to suspend its “banked” table games. Other pari-mutuels, such as Isle Casino and Racing at Pompano Park, and Mardi Gras Gaming, have lobbied lawmakers to allow “banked” games at all pari-mutuels in exchange for partial revenues from such gaming flowing back to the state.

The Florida legislature addressed the issue in its 2009 legislative session. On June 15, 2009, Governor Charlie Crist approved a bill providing terms and conditions for an Indian Gaming Compact between the State of Florida and the Tribe. Sections of the bill setting forth the terms and conditions for the Indian Gaming Compact became effective on June 15, 2009. Other sections of the bill, amending pari-mutuel statutes, will only become effective if: (1) the Governor and an authorized representative of the Tribe execute an Indian Gaming Compact pursuant to the Indian Gaming Regulatory Act of 1988 and the requirements of the recently-enacted act; (2) the Indian Gaming Compact is ratified by the Florida legislature; and (3) the Indian Gaming Compact is approved or deemed approved, and not voided pursuant to the terms of the act, by the Department of the Interior. If the foregoing conditions are met, such sections will take effect on the date that the Indian Gaming Compact is published in the Federal Register. Pursuant to the new law, the Governor’s authority to negotiate and execute an Indian Gaming Compact on behalf of the State of Florida with the Tribe expired at 11:59 pm on August 31, 2009. Prior to this deadline, the Governor and the Tribe did approve an Indian Gaming Compact; however, the Florida legislature has refused to ratify the compact in its current form. After what was considered as hitting an impasse with the Tribe in negotiations, leaders in the Florida House of Representatives have requested assistance from the National Indian Gaming Commission in the matter. Whether or not the Indian Gaming Compact or a further modified version hereof, is ratified by the Florida legislature, and, the 2009 amendments to the pari-mutuel statutes become law, may have a significant economic impact on the Dania Jai Alai Fronton.

35

EX-99.2

Exhibit 99.2

Marina District Development Company, LLC and Subsidiary

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

Consolidated Financial Statements

for the Years Ended December 31, 2009, 2008 and 2007

and Report of Independent Registered Public Accounting Firm

Marina District Development Company, LLC and Subsidiary

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm	1
Consolidated Balance Sheets at December 31, 2009 and 2008	2
Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008 and 2007	3
Consolidated Statements of Changes in Member Equity for the Years Ended December 31, 2009, 2008 and 2007	4
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007	5
Notes to Consolidated Financial Statements	6

  Deloitte & Touche LLP 100 Kimball Drive Parsippany, NJ 07054 USA   Tel: +1 973 602 6000 Fax: +1 973 602 5050 www.deloitte.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Member of

Marina District Development Company, LLC and subsidiary

Atlantic City, New Jersey

We have audited the accompanying consolidated balance sheets of Marina District Development Company, LLC and subsidiary (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in member equity and cash flows for the three years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards as established by the Auditing Standards Board (United States) and in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Marina District Development Company, LLC and subsidiary at December 31, 2009 and 2008, and the results of their operations and their cash flows for the three years then ended in conformity with accounting principles generally accepted in the United States of America.

February 26, 2010

Member of

Deloitte Touche Tohmatsu

Marina District Development Company, LLC and Subsidiary

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

Consolidated Balance Sheets
(In thousands)
	December 31,
	2009		2008
Assets
Current assets
Cash and cash equivalents	$	46,894	$	43,690
Accounts receivable, net		30,601		35,145
Income tax receivable		1,600		15,633
Inventories		4,427		5,499
Prepaid expenses		10,781		9,128
Deferred income taxes		1,320		1,184
Total current assets		95,623		110,279
Property and equipment, net		1,366,008		1,431,118
Investment in ACES		5,515		5,888
Deferred financing fees, net		4,389		8,323
Other assets, net		30,416		22,055
Total assets	$	1,501,951	$	1,577,663
Liabilities and Member Equity
Current liabilities
Accounts payable	$	8,861	$	10,490
Construction payables		—		3,378
Income tax payable		8,009		3,323
Accrued payroll and related		19,116		21,728
Accrued interest		790		1,640
Accrued gaming liabilities		19,906		20,334
Accrued and other liabilities		26,120		31,509
Deferred gain from insurance proceeds		—		11,132
Total current liabilities		82,802		103,534
Long-term debt		679,619		740,536
Deferred income taxes		14,082		8,963
Other long-term tax liabilities		10,102		10,171
Other liabilities		16,565		3,648
Commitments and contingencies (Note 8)
Member equity		698,781		710,811
Total liabilities and member equity	$	1,501,951	$	1,577,663

The accompanying notes are an integral part of these consolidated financial statements.

2

Marina District Development Company, LLC and Subsidiary

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

Consolidated Statements of Operations
(In thousands)
	Year Ended December 31,
	2009			2008		2007
Revenues
Gaming	$	691,428		$	734,306	$	748,649
Food and beverage		143,410			147,334		141,061
Room		113,143			110,616		100,898
Other		42,620			52,207		44,071
Gross revenues		990,601			1,044,463		1,034,679
Less promotional allowances		213,193			213,974		196,036
Net revenues		777,408			830,489		838,643
Costs and expenses
Gaming		280,620			311,387		304,984
Food and beverage		64,217			66,494		61,012
Room		11,940			13,863		12,436
Other		34,908			39,784		33,218
Selling, general and administrative		128,164			130,503		123,873
Maintenance and utilities		59,900			71,322		61,604
Depreciation and amortization		78,719			76,096		68,576
Preopening expenses		699			5,570		3,116
Write-downs and other items, net		(28,606	)		162		956
Total		630,561			715,181		669,775
Operating income		146,847			115,308		168,868
Interest expense, net of amounts capitalized		27,668			29,049		31,194
Income before provision for (benefit from) state income taxes		119,179			86,259		137,674
Provision for (benefit from) state income taxes		10,938			2,970		(3,658	)
Net income	$	108,241		$	83,289	$	141,332

The accompanying notes are an integral part of these consolidated financial statements.

3

Marina District Development Company, LLC and Subsidiary

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

	Capital Contributions		Retained Earnings			Total Member Equity
Balances, January 1, 2007	$	477,507	$	189,226		$	666,733
Cumulative effect of a change in accounting principle		—		(244	)		(244	)
Distributions		—		(141,140	)		(141,140	)
Net income		—		141,332			141,332
Balances, December 31, 2007		477,507		189,174			666,681
Distributions		—		(39,159	)		(39,159	)
Net income		—		83,289			83,289
Balances, December 31, 2008		477,507		233,304			710,811
Distributions		—		(120,271	)		(120,271	)
Net income		—		108,241			108,241
Balances, December 31, 2009	$	477,507	$	221,274		$	698,781

The accompanying notes are an integral part of these consolidated financial statements.

4

Marina District Development Company, LLC and Subsidiary

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

Consolidated Statements of Cash Flows

(In thousands)

	Year Ended December 31,
	2009			2008			2007
Cash Flows from Operating Activities
Net income	$	108,241		$	83,289		$	141,332
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		78,719			76,096			68,576
Gain from insurance recoveries		(28,735	)		—			—
Amortization of deferred financing fees		4,069			2,216			2,057
Deferred income taxes		3,931			2,208			5,788
Provision for doubtful accounts		8,021			4,643			5,866
Other operating activities		3,208			117			812
Changes in operating assets and liabilities
Accounts receivable		(3,477	)		(593	)		(4,742	)
Income tax receivable / payable		18,719			10,961			(2,299	)
Inventories		1,072			(1,113	)		(324	)
Prepaid expenses		(1,653	)		(1,326	)		(3,794	)
Other assets		(10,369	)		(5,692	)		(3,749	)
Other current liabilities		(10,908	)		(3,736	)		(4,272	)
Other long-term tax liabilities		(69	)		467			4,917
Other liabilities		13,969			(807	)		(5,525	)
Net Cash provided by Operating Activities		184,738			166,730			204,643
Cash Flows from Investing Activities
Acquisition of property and equipment		(15,107	)		(161,876	)		(237,313	)
Insurance proceeds for replacement assets		17,603			15,397			7,000
Investment in ACES		(2,707	)		(3,753	)		(1,929	)
Net Cash used in Investing Activities		(211	)		(150,232	)		(232,242	)
Cash Flows from Financing Activities
Financing fees		(135	)		(4,351	)		(302	)
Borrowings under bank credit agreements		851,283			1,815,596			843,000
Payments under bank credit agreements		(912,200	)		(1,797,760	)		(674,900	)
Distributions paid		(120,271	)		(39,159	)		(141,140	)
Net Cash provided by (used in) Financing Activities		(181,323	)		(25,674	)		26,658
Net (decrease) increase in cash and cash equivalents		3,204			(9,176	)		(941	)
Cash and cash equivalents, beginning of year		43,690			52,866			53,807
Cash and cash equivalents, end of year	$	46,894		$	43,690		$	52,866
Supplemental Disclosure of Cash Flow Information
Cash paid for interest, net of amounts capitalized	$	24,449		$	30,522		$	26,988
Cash refunded for income taxes, net	$	(11,713	)	$	(10,199	)	$	(7,146	)
Supplemental Schedule of Non-Cash Investing Activities
Payables for capital expenditures	$	—		$	3,378		$	39,173

The accompanying notes are an integral part of these consolidated financial statements.

5

Marina District Development Company, LLC and Subsidiary

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Marina District Development Company, LLC, d.b.a. Borgata, (“MDDC, LLC”) and Marina District Finance Company, Inc. (“MDFC”), its wholly-owned subsidiary, collectively referred to herein as the “Company”, “we”, or “us”. The Company is a wholly-owned subsidiary of Marina District Development Holding Co., LLC (“Holding Company” or “Parent”). Holding Company is jointly owned by MAC, Corp. (“MAC”), a wholly-owned subsidiary of MGM MIRAGE, and Boyd Atlantic City, Inc. (“BAC”), a wholly-owned subsidiary of Boyd Gaming Corporation. Our purpose is to develop, own, and operate a hotel casino and spa facility at Renaissance Pointe in Atlantic City, New Jersey.

We opened Borgata on July 3, 2003 with approximately 2,000 hotel rooms, a 125,000 square foot casino, and other amenities. On June 30, 2006, we opened our first expansion (“Public Space Expansion”). The Public Space Expansion consists of approximately 35,000 square feet of additional casino space and substantial additions of non-gaming amenities including three additional fine dining restaurants, a second nightclub, and a multi-concept quick service dining facility. In June 2008, operations commenced related to our second expansion (“Rooms Expansion”). The centerpiece of the Rooms Expansion is a new hotel tower, The Water Club, a signature hotel by Borgata, containing approximately 800 guest rooms and suites, built on a portion of the existing surface parking lot, near the existing porte cochere. In addition to the hotel, which has access separate from our existing hotel tower, the Rooms Expansion includes a new spa, additional meeting room space, and a new parking structure. BAC and MAC did not make further capital contributions to us for the expansion projects as we financed the projects from our cash flow from operations and from borrowings under our bank credit facility.

Pursuant to the Operating Agreement (the “Operating Agreement”), BAC, as the managing venturer of the Holding Company, has oversight responsibility for the management of Borgata which includes the design, development, and construction as well as the day-to-day operations. We do not record a management fee to BAC, as our management team directly performs these services or negotiates contracts to provide for these services. As a result, the costs of these services are directly borne by the Company and are reflected in our accompanying consolidated financial statements.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with maturities of three months or less at their date of purchase. The carrying value of these investments approximates their fair value due to their short maturities.

6

Accounts Receivable, net

Accounts receivable consist primarily of casino, hotel and other receivables, net of an allowance for doubtful accounts of $24.6 million and $21.3 million at December 31, 2009 and 2008, respectively. The allowance for doubtful accounts is estimated based upon our collection experience and the age of the receivables.

Inventories

Inventories consist primarily of food and beverage and retail items and are stated at the lower of cost or market. Cost is determined using the average cost method.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets (see Note 2). Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred. Losses on disposal of assets are recognized when such assets are impaired while gains are recognized as realized.

Capitalized Interest

Interest costs, primarily associated with our expansion projects, are capitalized as part of the cost of our constructed assets. Interest costs, which include commitment fees, letter of credit fees and the amortized portion of deferred financing fees, are capitalized on amounts expended for the respective projects using our weighted-average cost of borrowing. Capitalization of interest ceases when the respective project, or discernible portions of the projects, are substantially complete. We amortize capitalized interest over the estimated useful life of the related asset. Capitalized interest for the years ended December 31, 2009, 2008 and 2007 was less than $0.1 million, $8.8 million and $12.6 million, respectively.

Deferred Financing Fees

Deferred financing fees incurred in connection with the issuance of long-term debt are amortized over the terms of the related debt agreement.

Revenue and Promotional Allowances

Gaming revenue represents the net win from gaming activities, which is the difference between gaming wins and losses. All other revenue is recognized as the service is provided. The majority of our gaming revenue is counted in the form of cash and chips and therefore is not subject to any significant or complex estimation procedures. Gross revenues include the estimated retail value of rooms, food and beverage, and other goods and services provided to customers on a complimentary basis. Such amounts are then deducted as promotional allowances. The estimated costs and expenses of providing these promotional allowances are charged to the gaming department in the following amounts (in thousands):

7

	Year Ended December 31,
	2009		2008		2007
Room	$	24,250	$	23,876	$	17,801
Food and beverage		45,806		51,148		49,728
Other		11,070		17,247		12,656
Total	$	81,126	$	92,271	$	80,185

Promotional allowances also include incentives such as cash, goods and services (such as complimentary rooms and food and beverages) earned in our slot club and other gaming programs. We reward customers, through the use of loyalty programs, with points based on amounts wagered that can be redeemed for a specified period of time, principally for restricted free play slot machine credits and complimentary goods or services. We record the estimated retail value of these incentives as revenue and then deduct them as a promotional allowance. For the years ended December 31, 2009, 2008 and 2007, these incentives were $65.4 million, $63.3 million and $60.4 million, respectively.

Income Taxes

We are treated as a partnership for federal income tax purposes; therefore, federal income taxes are the responsibility of MAC and BAC. In New Jersey, casino partnerships are subject to state income taxes under the Casino Control Act; therefore, we are required to record New Jersey state income taxes (see Note 7). In 2004, we were granted permission by the state of New Jersey, pursuant to a ruling request, to file a consolidated New Jersey corporation business tax return with MAC and BAC. The amounts reflected in our consolidated financial statements are on a stand-alone basis; however, we file a state consolidated tax return with MAC and BAC. The amounts due to MAC and BAC are a result of the tax attributes MAC and BAC have contributed to the consolidated state tax return. A reconciliation of the components of our stand-alone state income taxes payable is presented below (in thousands):

	December 31,
	2009			2008
Amounts receivable – state	$	(134	)	$	(650	)
Amounts payable to MAC and BAC		8,143			3,973
Income taxes payable	$	8,009		$	3,323

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and notes. Significant estimates incorporated into our accompanying consolidated financial statements include the estimated useful lives for depreciable and amortizable assets, the estimated allowance for doubtful accounts receivable, the estimate for available tax credits, the estimated liabilities for our self-insured medical plan, slot club programs, contingencies and litigation, claims and assessments. Actual results could differ from those estimates and assumptions.

8

Preopening Expenses

We expense certain costs of start-up activities as incurred. Preopening expenses were $0.7 million, $5.6 million and $3.1 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Advertising Expense

Advertising costs are expensed the first time such advertising appears. Total advertising costs, included in selling, general and administrative expenses on the accompanying consolidated statements of operations, were $12.0 million, $13.5 million and $10.6 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Employee Benefit Plans

We contribute to pension plans under various union agreements. Contributions, based on wages paid to covered employees, totaled approximately $5.8 million, $6.0 million and $5.9 million for the years ended December 31, 2009, 2008 and 2007, respectively.

We have a retirement savings plan under Section 401(k) of the Internal Revenue Code covering our non-union employees. The plan allows employees to defer up to the lessor of the Internal Revenue Code prescribed maximum amount or 100% of their income on a pre-tax basis through contributions to the plan. We expensed our voluntary contributions to the 401(k) plan of $1.7 million, $3.3 million and $3.4 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Self Insurance

We are currently self insured up to $75 million, $1 million, $0.3 million, and $0.3 million with respect to each catastrophe related property damage claim, non-catastrophe related property damage claim, general liability claim, and non-union employee medical case, respectively. We have accrued $6.8 million and $4.3 million for such claims at December 31, 2009 and 2008, respectively, and incurred expenses of approximately $19.6 million, $18.1 million and $14.9 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Recently Issued Accounting Standards

Subsequent to the adoption of the Codification, any change to the source of authoritative GAAP will be communicated through an Accounting Standards Update (“ASU”). ASUs will be published by the FASB for all authoritative GAAP promulgated by the FASB, regardless of the form in which such guidance may have been issued prior to release of the Codification. Prior to inclusion in an ASU, the standard-setting organizations and regulatory agencies continue to issue proposed changes to the accounting standards in previous form (e.g., FASB Statements of Financial Accounting Standards, Emerging Issues Task Force (“EITF”) Abstracts, FASB Staff Positions, SEC Staff Accounting Bulletins, etc.).

In September 2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 167, Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). SFAS 167 is a revision to FASB Interpretation No. 46, Consolidation of Variable Interest Entities (which is currently promulgated in a subsection of Codification Topic 810). The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS 167 is effective for the first annual reporting period beginning after November 15,

9

2009 and for interim periods within that first annual reporting period. We do not believe that the adoption of SFAS 167 will have a material impact on our consolidated financial statements.

In September 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets – An Amendment to FASB Statement No. 140 (“SFAS 166”). SFAS 166 is a revision of SFAS No. 140, Accounting for Transfers and Servicing Financial Assets and Extinguishments of Liabilities, which is presently included in Codification Topic 860, Transfers and Servicing. SFAS 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. SFAS 166 is effective for fiscal years beginning after November 15, 2009. We do not believe that the adoption of SFAS 166 will have a material impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Accounting for Noncontrolling Interests, (“SFAS 160”), which establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this guidance requires the recognition of a noncontrolling interest (previously referred to as minority interest) as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income or loss attributable to the noncontrolling interest is included in consolidated net income on the face of the income statement. The guidance clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this guidance requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated and requires expanded disclosures regarding the interests of the parent and the interests of the noncontrolling owners. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We do not believe that the adoption of SFAS 160 will have a material impact on our consolidated financial statements.

A variety of additional proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our consolidated financial statements.

Note 2. Property and Equipment

Property and equipment consists of the following (in thousands):

	Estimated Life	December 31,
	(Years)	2009		2008
Land	—	$	87,301	$	87,301
Building and improvements	3-40		1,388,396		1,380,474
Furniture and equipment	3-7		287,936		276,877
Construction in progress	—		8,100		16,596
Total			1,771,733		1,761,248
Less accumulated depreciation			405,725		330,130
Property and equipment, net		$	1,366,008	$	1,431,118

10

Depreciation expense was $76.7 million, $74.9 million and $67.9 million for the years ended December 31, 2009, 2008 and 2007, respectively. At December 31, 2009, construction in progress in the above table consists of various maintenance capital projects currently in process.

Note 3. Write-downs and Other Items

A summary of total write-downs and other charges, net is as follows (in thousands):

	Year Ended December 31,
	2009			2008		2007
Loss on disposal of assets	$	129		$	1	$	607
Gain from insurance recoveries		(28,735	)		—		—
Fire related write-downs and other items, net		—			161		349
Total write-downs and other items, net	$	28,606		$	162	$	956

On September 23, 2007, The Water Club, our 800-room boutique hotel expansion then under construction, sustained a fire that caused damage to property with a carrying value of approximately $11.4 million. Our insurance policies included coverage for replacement costs related to property damage, with the exception of minor amounts principally related to insurance deductibles and certain other limitations. In addition, we carried “delay-in-completion” insurance coverage for The Water Club for certain costs, subject to various limitations and deductibles. On August 10, 2009, we reached a final settlement of $40 million with our insurance carrier and recognized a gain of $28.7 million, included in write-downs and other items, net on our consolidated statement of income, representing the amount of insurance advances in excess of the $11.3 million carrying value of assets damaged and destroyed by the fire (after our $0.1 million deductible).

Note 4. Investment in ACES

In 2006, we entered into an agreement with two other Atlantic City casinos to form Atlantic City Express Service, LLC (“ACES”). With each member having a 33.3% interest, this New Jersey limited liability company was formed for the purpose of contracting with New Jersey Transit to operate express rail service between Manhattan and Atlantic City. Each member has guaranteed, jointly and severally, liability for all terms, covenants and conditions of the ACES agreement with New Jersey Transit consisting primarily of the necessary operating and capital expenses of ACES. The responsibilities of the managing member will rotate annually among the members.

We currently account for our share of ACES under the equity method of accounting. As of December 31, 2009 and 2008, we made cumulative capital contributions totaling $8.4 million and $5.7 million, respectively, which are included on the accompanying consolidated balance sheets. ACES commenced operations in February 2009. Our share of ACES’ operating loss was approximately $2.7 million for the year ended December 31, 2009 and is included in selling, general and administrative expenses on the accompanying consolidated statements of operations. Our share of ACES’ preopening expenses was $0.4 million, $0.1 million and $0.1 million for the years ended December 31, 2009, 2008 and 2007, respectively, and are included in preopening expenses on the accompanying consolidated statements of operations.

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Note 5. Related Parties

Pursuant to the Operating Agreement, MAC is solely responsible for any investigation, analyses, clean-up, detoxification, testing, monitoring, or remediation related to Renaissance Pointe. MAC is also responsible for their allocable share of expenses related to master plan and government improvements at Renaissance Pointe. The related amounts due from MAC for these types of expenditures incurred by us were less than $0.1 million at December 31, 2009 and 2008, respectively. Reimbursable expenditures incurred were $0.5 million, $0.6 million and $0.5 million for the years ended December 31, 2009, 2008 and 2007, respectively.

We entered into a series of ground lease agreements with MAC totaling 19.0 acres (see Note 8), that provides the land on which our existing employee parking garage, the Public Space Expansion, the Rooms Expansion, and a modified surface parking lot reside. The lease terms extend until December 31, 2070 with the exception of the surface parking lot lease which could be terminated by either party upon 30 days written notice. The related amounts due to MAC for these types of expenditures were $0 at December 31, 2009 and 2008. Related rent incurred was $6.5 million, $6.1 million and $6.0 million for the years ended December 31, 2009, 2008 and 2007, respectively, portions of which were related to our Rooms Expansion were included in preopening expense in the accompanying consolidated statements of operations.

Pursuant to the ground lease agreements, we are responsible for reimbursing MAC for related property taxes paid on our behalf. The related amounts due to MAC for these types of expenditures were $0 at December 31, 2009 and 2008, respectively. Related property tax incurred was $12.2 million, $11.7 million and $6.2 million for the years ended December 31, 2009, 2008 and 2007, respectively, portions of which were related to our Rooms Expansion were capitalized on the accompanying consolidated balance sheets and portions of which were included in selling, general and administrative in the accompanying consolidated statements of operations.

We reimburse BAC for compensation paid to employees performing services for us on a full-time basis and for out-of-pocket costs and expenses incurred related to travel. BAC is also reimbursed for various payments made on our behalf, primarily related to third party insurance premiums. The related amounts due to BAC for these types of expenditures paid by BAC were $0.8 million and $0.5 million for the years ended December 31, 2009 and 2008, respectively. Reimbursable expenditures during the years ended December 31, 2009, 2008 and 2007 were $7.4 million, $9.2 million and $10.9 million, respectively, which were included in selling, general and administrative in the accompanying consolidated statements of operations.

The related party balances are non-interest bearing and are included in either accounts receivable or accrued and other liabilities on the accompanying consolidated balance sheets.

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Note 6. Debt

Amounts outstanding under our bank credit agreement are as follows (in thousands):

	December 31,
	2009		2008
Revolving line of credit	$	679,619	$	740,536
Less current maturities		—		—
Total long-term debt	$	679,619	$	740,536

On February 15, 2006, the First Amendment was made to our First Amended and Restated Credit Agreement among MDFC, MDDC, Canadian Imperial Bank of Commerce and certain other financial institutions (the “Credit Parties”). The amended bank credit agreement modified our existing amended bank credit agreement and consists of a $750 million revolving credit facility that matures on January 31, 2011. Availability under the revolving credit facility was used to repay in full the outstanding term loan component of the previous bank credit agreement. On February 27, 2007, we increased the revolving credit facility to $850 million. On December 10, 2008, the Second Amendment was made to our First Amended and Restated Credit Agreement among the Credit Parties. The amended bank agreement modified our existing amended bank credit agreement and provides for adjustments to certain financial covenants. The Second Amendment also reduced the revolving credit facility to $800 million with further reductions of $10 million per quarter commencing on March 31, 2009 and ending on December 31, 2010 resulting in the revolving credit facility of $720 million maturing on January 31, 2011. At December 31, 2009, $679.6 million was outstanding under the revolving credit facility leaving availability of $80.4 million. The carrying amount of debt approximates its fair value at December 31, 2009 and 2008.

The interest rate on the revolving credit facility is based upon either (i) the agent bank’s quoted base rate or (ii) the Eurodollar rate, plus an applicable margin. The applicable margin is a percentage per annum (which ranges from 1.00% to 2.50% if we elect to use the base rate and 2.25% to 3.75% if we elect to use the Eurodollar rate) determined in accordance with a specified pricing grid based upon our predefined leverage ratio. In addition, we incur a commitment fee on the unused portion of the revolving credit facility that ranges from 0.25% to 0.5% per annum. The blended interest rates for outstanding borrowings under the bank credit agreements at December 31, 2009 and 2008 were 2.7% and 4.2%, respectively. The bank credit agreement is secured by substantially all of our real and personal property and is non-recourse to MAC and BAC.

The bank credit agreement contains certain financial and other covenants, including, without limitation, various covenants (i) establishing a maximum permitted total leverage ratio, (ii) establishing a minimum required fixed charge coverage ratio, (iii) imposing limitations on the incurrence of additional secured indebtedness, and (iv) imposing restrictions on investments, dividends and certain other payments. We believe that we are in compliance with the covenants related to the bank credit agreement at December 31, 2009.

The scheduled maturities of long-term debt for the years ending December 31 are as follows (in thousands):

2010	$	—
2011		679,619
Total	$	679,619

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Note 7. Income Taxes

A summary of the provision for (benefit from) state income taxes is as follows (in thousands):

	Year Ended December 31,
	2009		2008		2007
State
Current	$	7,007	$	762	$	(9,446	)
Deferred		3,931		2,208		5,788
Provision for (benefit from) state income taxes	$	10,938	$	2,970	$	(3,658	)

The following table provides reconciliation between the state statutory rate and the effective income tax rate where both are expressed as a percentage of income.

	Year Ended December 31,
	2009		2008		2007
Tax provision at state statutory rate	9.0	%	9.0	%	9.0	%
New jobs investment tax credit	0.0		(5.8	)	(12.7	)
Other, net	0.2		0.2		1.0
Total state income tax provision (benefit)	9.2	%	3.4	%	(2.7	)%

The components comprising the Company’s net deferred state tax liability are as follows (in thousands):

	December 31,
	2009			2008
Deferred state tax assets:
Provision for doubtful accounts	$	1,882		$	1,918
Gaming taxes		1,607			1,099
Reserve for employee benefits		628			250
Preopening expense		32			—
State tax credit carryforwards		—			1,395
Other		562			1,282
Gross deferred state tax asset		4,711			5,944
Deferred state tax liabilities:
Difference between book and tax basis of property		16,408			12,817
Reserve differential for gaming activities		164			87
Other		901			819
Gross deferred state tax liability		17,473			13,723
Net deferred state tax liability	$	(12,762	)	$	(7,779	)

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The items comprising our deferred income taxes as presented on the accompanying consolidated balance sheets are as follows (in thousands):

	December 31,
	2009			2008
Current deferred income tax asset	$	1,320		$	1,184
Non-current deferred income tax liability		(14,082	)		(8,963	)
Net deferred state tax liability	$	(12,762	)	$	(7,779	)

In connection with our formation in 2000, MAC contributed assets consisting of land and South Jersey Transportation Authority bonds with a tax basis of approximately $9.2 million and $13.8 million, respectively. The recorded book value of those assets was $90 million. Pursuant to the Operating Agreement and Tax Sharing Agreement between MAC and BAC, any subsequent gain or loss associated with the sale of the MAC contributed property would be allocated directly to MAC for both state and federal income tax purposes. As such, no state deferred tax liability has been recorded in connection with the book and tax basis differences related to the MAC contributed property.

New Jersey New Jobs Investment Tax Credit

Based on New Jersey state income tax rules, we are eligible for a refundable state tax credit under the New Jersey New Jobs Investment Tax Credit (“New Jobs Tax Credit”) because we made a qualified investment in a new business facility that created new jobs. The realization of the credit is contingent on maintaining certain employment levels for employees directly related to the qualified investment as well as maintaining overall employment levels. Fluctuations in employment levels for any given year during the credit period may eliminate or reduce the credit. The total net credit related to our original investment was approximately $75 million over a five-year period that ended in 2007. Incremental net credits related to our Public Space Expansion and our Rooms Expansion are also available. We have recorded $5.0 million and $17.4 million of net New Jobs Tax Credits in arriving at our state income tax benefit (provision) on the accompanying consolidated statements of operations for the years ended December 31, 2008 and 2007, respectively. We were not eligible to receive a credit in 2009 due to a reduction in employment levels.

Adoption of FIN 48

Under FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006 for public companies and applies to all tax positions accounted for in accordance with SFAS No. 109.

The total amount of unrecognized tax benefits upon our early adoption of FIN 48 on January 1, 2007 was $6.5 million. As a result of the implementation of FIN 48, we recognized a $2.0 million increase in the liability for unrecognized tax benefits which was accounted for as follows (in thousands):

Reduction in retained earnings (cumulative effect)	$	244
Additional deferred tax assets		1,736
Increase in other tax liabilities	$	1,980

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A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2009			2008			2007
Unrecognized tax benefit, January 1	$	7,789		$	8,220		$	6,523
Additions based on tax positions related to the current year		333			252			1,684
Additions based on tax positions related to prior years		1,852			55			26
Reductions based on tax positions settled with taxing authorities		(121	)		—			—
Reductions based on tax positions related to prior years		(1,139	)		(738	)		(13	)
Unrecognized tax benefit, December 31	$	8,714		$	7,789		$	8,220

Included in the $8.7 million balance of unrecognized tax benefits at December 31, 2009 are $5.8 million of tax benefits that, if recognized, would affect the effective tax rate and $2.9 million of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.

We recognize accrued interest and penalties related to unrecognized tax benefits in the income tax provision. During the years ended December 31, 2009, 2008 and 2007, we recognized accrued interest and penalties of approximately $(0.3) million, $0.9 million, and $1.0 million, respectively. The 2009 reduction in accrued interest was recorded in connection with the state tax impact of settlements reached in our Internal Revenue Service examination. We had $1.8 million and $2.6 million for the payment of interest and penalties accrued at December 31, 2009 and 2008, respectively.

We are subject to state taxation in New Jersey and our state tax returns are subject to examination for tax years ended on or after December 31, 2001. Our state tax return for the year ended December 31, 2001 is open to the extent of a net operating loss carryforward utilized in subsequent years. Statute expirations, related to state income tax returns filed for years prior to December 31, 2006 have been extended to December 31, 2010. The statute of limitations for all remaining state income tax returns will begin to expire over the period October 2011 through October 2014. As we are a partnership for federal income tax purposes, we are not subject to federal income tax. The federal tax liabilities of MAC and BAC would be affected by any tax adjustments resulting from federal audits.

We are currently under examination for federal income tax purposes related to the tax returns filed for the years ended December 31, 2003 and 2004. Any adjustments related to the federal examination would affect MAC and BAC, as we are not subject to federal income tax. Additionally, New Jersey state income tax returns for the years ended December 31, 2003 through December 31, 2006 are under audit by the New Jersey Division of Taxation. As the Division of Taxation has not started field work in connection with their audit, it is difficult to determine when these examinations will be closed. Although our state audit has not begun, we have recorded the expected state tax impact, to our unrecognized tax benefits, of certain federal adjustments that have been settled with the Internal Revenue Service, for which the state and federal tax treatment are consistent. The adjustments primarily relate to the appropriate class lives of certain depreciable assets. As it relates to years under audit and unaudited open years, we do not anticipate any material changes, over the next 12 month period, to our unrecognized tax benefits as of December 31, 2009.

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Note 8. Commitments and Contingencies

Future Minimum Lease Payments

Future minimum lease payments required under noncancelable operating leases (principally for land, see Note 5) as of December 31, 2009 are as follows (in thousands):

2010	$	7,102
2011		6,802
2012		6,103
2013		5,734
2014		5,598
Thereafter		313,477
Total	$	344,816

For the years ended December 31, 2009, 2008 and 2007, total rent expense was $12.7 million, $13.8 million and $13.5 million, respectively, portions of which were related to our Rooms Expansion were included in preopening expense in the accompanying consolidated statements of operations.

Utility Contract

In 2005, we amended our executory contracts with a wholly-owned subsidiary of a local utility company extending the end of the terms to 20 years from the opening of our Rooms Expansion. The utility company provides us with electricity and thermal energy (hot water and chilled water). Obligations under the thermal energy executory contract contain both fixed fees and variable fees based upon usage rates. The fixed fee components under the thermal energy executory contract are currently estimated at approximately $11.3 million per annum. We also committed to purchase a certain portion of our electricity demand at essentially a fixed rate which is estimated at approximately $4.8 million per annum. Electricity demand in excess of the commitment is subject to market rates based on our tariff class.

Investment Alternative Tax

The New Jersey Casino Control Act provides, among other things, for an assessment of licensees equal to 1.25% of their gross gaming revenues in lieu of an investment alternative tax equal to 2.5% of gross gaming revenues. Generally, we may satisfy this investment obligation by investing in qualified eligible direct investments, by making qualified contributions or by depositing funds with the New Jersey Casino Reinvestment Development Authority (“CRDA”). Funds deposited with the CRDA may be used to purchase bonds designated by the CRDA or, under certain circumstances, may be donated to the CRDA in exchange for credits against future CRDA investment obligations. CRDA bonds have terms up to fifty years and bear interest at below market rates.

Our CRDA obligations for the years ended December 31, 2009, 2008 and 2007 were $8.7 million, $9.2 million and $9.4 million, respectively, of which valuation provisions of $5.1 million, $5.8 million and $5.3 million, respectively, are included in selling general and administrative expenses on the accompanying consolidated statements of operations due to the respective underlying agreements.

Grant and Donations Agreement

In June 2004, Borgata and the eleven other casinos in the Atlantic City gaming market (collectively, the “Casinos”) entered into a Grant and Donations Agreement with the New Jersey Sports & Exposition

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Authority (the “NJSEA”) and the CRDA in the interest of deferring or preventing the proliferation of competitive gaming at New Jersey racing tracks through January 1, 2009.

Under the terms of the Grant and Donations Agreement, the Casinos paid to the NJSEA $34 million to be used for certain authorized purposes as defined by the Grant and Donations Agreement. The $34 million was paid by the Casinos over a four-year period as follows: $7 million was paid October 15, 2004; $8 million was paid October 15, 2005; $9 million was paid on October 15, 2006; and $10 million was paid on October 15, 2007. For each year, each casino’s share of the $34 million equated to a percentage representing its gross gaming revenue for the twelve months ending June 30th prior to the October 15 payment date compared to the gross gaming revenues for that period for all Casinos. The Casinos, individually and collectively, were responsible for the payment of all amounts due. As a result, we expensed our pro rata share of the $34 million totaling $4.7 million on a straight-line basis over the applicable term of the Grant and Donations Agreement. Based upon the gross gaming revenues for all Casinos for the twelve months ended June 30, 2007, our share of the $10 million paid on October 15, 2007 was approximately 14.5%, or $1.5 million. We recorded an expense of $1.0 million for each of the years ended December 31, 2008 and 2007, respectively, which is included in selling general and administrative expenses on the accompanying consolidated statements of operations.

Also under the terms of the Grant and Donations Agreement, the CRDA approved donations in the aggregate amount of $62 million from the Casino’s North Jersey Obligations (pursuant to the New Jersey Casino Control Act) for certain uses as defined by the Grant and Donations Agreement including casino projects approved pursuant to rules of the CRDA. The CRDA shall credit 100% of the donations received from each casino against that casino’s obligation to purchase bonds. The donation shall provide that each casino’s share of the $62 million will equate to a percentage representing its gross gaming revenue for the twelve months ended June 30, 2004 compared to the gross gaming revenues for that period for all Casinos. Each casino’s respective annual donation shall be made first from uncommitted current and future funds in the North Jersey Project Fund established in accordance with the CRDA Urban Revitalization Act of that Casino and shall be credited as fulfilling said obligation on behalf of the particular casino making the payment. To the extent such North Jersey Project funds of that casino are not adequate to pay a Casino’s share of the required donations, then that casino’s other uncommitted current and future North Jersey Obligations shall be utilized. As a result, we expensed our pro rata share of the $62 million on a straight-line basis over the applicable term of the Grant and Donations Agreement; however, our Rooms Expansion project qualified, pursuant to rules of the CRDA, for eligibility to receive future credits of approximately $6.8 million under this Grant and Donations Agreement. Based upon the gross gaming revenues for all Casinos for the twelve months ended June 30, 2004, our share of the $62 million was approximately 12.0%, or $7.4 million. We recorded an expense of $1.6 million for each of the years ended December 31, 2008 and 2007, which is included in selling general and administrative expenses on the accompanying consolidated statements of operations. Based on current gross gaming revenue projections, we expect it will take approximately 12 years to fully fund these obligations as the third quarter of 2006 was the first quarter we were subject to fund North Jersey Obligations.

Purse Enhancement Agreement

In August 2008, Borgata and the ten other casinos in the Atlantic City gaming market (collectively, the “Casinos”) entered into a Purse Enhancement Agreement with the NJSEA and the CRDA in the interest of further deferring or preventing the proliferation of competitive gaming at New Jersey racing tracks through December 31, 2011. In addition to the continued prohibition of casino gaming in New Jersey outside of Atlantic City, legislation was enacted to provide for the deduction of certain promotional gaming credits from the calculation of the tax on casino gross revenue.

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Under the terms of the Purse Enhancement Agreement, the Casinos shall make scheduled payments to the NJSEA totaling $90 million to be used for certain authorized purposes (the “Authorized Uses”) as defined by the Purse Enhancement Agreement. In the event any of the $90 million is not used by NJSEA for the Authorized Uses by January 1, 2012, the unused funds shall be returned by NJSEA to the Casinos pro rata based upon the share each casino contributed. For each year, each casino’s share of the scheduled payments will equate to a percentage representing its gross gaming revenue for the prior calendar year compared to the gross gaming revenues for that period for all Casinos. Each casino, solely and individually, shall be responsible for its respective share of the scheduled amounts due. In the event that any casino shall fail to make its payment as required, the remaining Casinos shall have the right, but not the obligation, to cure a payment delinquency. As a result, we will expense our pro rata share of the $90 million, estimated to be approximately $14.9 million in total using our actual and forecasted market share of gross gaming revenue, on a straight line basis over the applicable term of the Purse Enhancement Agreement. We recorded an expense of $4.8 million for the year ended December 31, 2009 which is included in the selling, general and administrative expenses on the accompanying consolidated statements of income.

Legal Matters

We are subject to various claims and litigation in the normal course of business. In our opinion, all pending legal matters are either adequately covered by insurance, or if not insured, will not have a material adverse impact on our financial position, results of operations or cash flows.

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