10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________________________________________

FORM 10-Q

 ____________________________________________________

(Mark One)

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

For the quarterly period ended June 30, 2011

OR

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

For the transition period from  to

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)

 ____________________________________________________

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  o

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  x    No  o

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

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

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 July 29, 2011
Common stock, $0.01 par value	86,288,485

BOYD GAMING CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED JUNE 30, 2011

TABLE OF CONTENTS

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010	4
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010	5
	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2011 and 2010	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010	7
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	59
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	90
Item 4.	Controls and Procedures	90
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	91
Item 1A.	Risk Factors	91
Item 6.	Exhibits	107
Signature Page		108

PART I. Financial Information

Item 1.     Financial Statements

The accompanying unaudited condensed consolidated financial statements of Boyd Gaming Corporation (and together with its subsidiaries, the “Company,” “we” or “us”) have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and footnote disclosures necessary for complete financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”).

The results for the periods indicated are unaudited, but reflect all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair presentation of financial position, results of operations and cash flows. Results of operations and cash flows for the interim periods presented herein are not necessarily indicative of the results that would be achieved during a full year of operations or in future periods.

When we filed our Annual Report on Form 10-K for the year ended December 31, 2010 with the Securities and Exchange Commission ("SEC") on March 15, 2011, and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 with the SEC on August 5, 2010 (the “Provisional Form 10-K” or “Provisional Form 10-Q”, respectively, or collectively, the “Provisional Forms”), the initial acquisition method accounting for the effective change in control of Borgata Hotel Casino and Spa ("Borgata") was incomplete. The application of acquisition method accounting, required in accordance with the authoritative accounting guidance for business combinations, initially had the following effects on our unaudited condensed consolidated financial statements: (i) our previously held equity interest was measured at a provisional fair value at the date control was obtained; (ii) we recognized and measured the provisional fair value of the identifiable assets and liabilities in accordance with promulgated valuation recognition and measurement provisions; and (iii) we recorded the provisional fair value of the noncontrolling interest held in trust as a separate component of our stockholders' equity.

Since the filing of the Provisional Forms, we have made adjustments to the provisional fair value amounts recognized at the date of effective change in control, or March 24, 2010, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. These adjustments, referred to herein as “measurement period adjustments” materially shifted the value of certain tangible and intangible assets. We have applied the measurement period adjustments retrospectively to the condensed consolidated balance sheet reported as of December 31, 2010, as previously reported in the Provisional Form 10-K; however, the impact on the accompanying condensed consolidated statement of operations for the three and six months ended June 30, 2010, as retrospectively adjusted to the statement as reported on the Provisional Form 10-Q was not material, and was therefore not adjusted for any measurement period adjustments.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010.

3

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands, except share and per share data)

	June 30, 2011		December 31, 2010
ASSETS
Current assets
Cash and cash equivalents	$	175,780	$	145,623
Restricted cash	18,860		19,494
Accounts receivable, net	46,036		47,942
Inventories	14,628		16,029
Prepaid expenses and other current assets	40,197		37,153
Income taxes receivable	—		5,249
Deferred income taxes	9,634		8,149
Total current assets	305,135		279,639
Property and equipment, net	3,315,592		3,383,371
Assets held for development	1,119,938		1,119,403
Debt financing costs, net	31,927		34,993
Restricted investments	47,999		48,168
Other assets, net	75,046		70,425
Intangible assets, net	527,322		539,714
Goodwill, net	213,576		213,576
Total assets	$	5,636,535	$	5,689,289
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt	$	356,711	$	25,690
Non-recourse obligations of variable interest entity	248,128		243,059
Accounts payable	44,955		57,183
Income taxes payable	340		6,504
Accrued liabilities	284,280		278,469
Total current liabilities	934,414		610,905
Long-term debt, net of current maturities	2,823,049		3,193,065
Deferred income taxes	362,899		362,174
Other long-term tax liabilities	47,194		44,813
Other liabilities	73,770		83,589
Commitments and contingencies (Note 10)
Stockholders’ equity
Preferred stock, $0.01 par value, 5,000,000 shares authorized	—		—
Common stock, $0.01 par value, 200,000,000 shares authorized; 86,284,984 and 86,244,978 shares outstanding	863		862
Additional paid-in capital	640,661		635,028
Retained earnings	554,437		560,909
Accumulated other comprehensive loss, net	—		(7,594		)
Total Boyd Gaming Corporation stockholders’ equity	1,195,961		1,189,205
Noncontrolling interest	199,248		205,538
Total stockholders’ equity	1,395,209		1,394,743
Total liabilities and stockholders’ equity	$	5,636,535	$	5,689,289

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

4

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
REVENUES
Operating revenues:
Gaming	$	486,557		$	490,132		$	968,492		$	840,537
Food and beverage	94,585			94,020			186,662			154,002
Room	60,459			58,671			117,050			90,105
Other	33,276			33,813			66,307			57,635
Gross revenues	674,877			676,636			1,338,511			1,142,279
Less promotional allowances	100,474			98,190			199,162			148,698
Net revenues	574,403			578,446			1,139,349			993,581
COST AND EXPENSES
Operating costs and expenses:
Gaming	223,173			229,755			449,782			397,860
Food and beverage	50,080			49,149			97,648			81,791
Room	13,514			13,056			26,335			23,106
Other	27,335			27,006			53,574			46,244
Selling, general and administrative	96,783			99,666			192,571			169,944
Maintenance and utilities	36,773			37,970			74,188			62,109
Depreciation and amortization	48,488			55,408			99,072			95,454
Corporate expense	12,264			13,526			25,544			25,615
Preopening expenses	1,741			1,243			3,572			2,306
Write-downs and other items, net	2,262			1,991			6,969			3,592
Total operating costs and expenses	512,413			528,770			1,029,255			908,021
Operating income from Borgata	—			—			—			8,146
Operating income	61,990			49,676			110,094			93,706
Other expense (income):
Interest income	(20		)	—			(25		)	(4		)
Interest expense	66,694			34,650			123,985			63,657
Fair value adjustment of derivative instruments	48			—			265			—
Loss (gain) on early retirements of debt	—			(1,912		)	20			(3,949		)
Other non-operating expenses from Borgata, net	—			—			—			3,133
Total other expense, net	66,722			32,738			124,245			62,837
Income (loss) before income taxes	(4,732		)	16,938			(14,151		)	30,869
Income taxes	(911		)	(4,912		)	2,197			(9,161		)
Net income (loss)	(5,643		)	12,026			(11,954		)	21,708
Net (income) loss attributable to noncontrolling interest	2,692			(8,644		)	5,482			(9,891		)
Net income (loss) attributable to Boyd Gaming Corporation	$	(2,951	)	$	3,382		$	(6,472	)	$	11,817
Basic net income (loss) per common share:	$	(0.03	)	$	0.04		$	(0.07	)	$	0.14
Weighted average basic shares outstanding	87,204			86,511			87,181			86,471
Diluted net income (loss) per common share:	$	(0.03	)	$	0.04		$	(0.07	)	$	0.14
Weighted average diluted shares outstanding	87,204			86,942			87,181			86,743

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

5

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Six Months Ended June 30, 2011

(Unaudited and in thousands)

				Boyd Gaming Corporation Stockholders’ Equity
													Accumulated
	Other						Additional						Other						Total
	Comprehensive			Common Stock			Paid-in			Retained			Comprehensive			Noncontrolling			Stockholders'
	Income (loss)			Shares	Amount		Capital			Earnings			Loss, Net			Interest			Equity
Balances, January 1, 2011				86,244,978	$	862	$	635,028		$	560,909		$	(7,594	)	$	205,538		$	1,394,743
Net loss	$	(6,472	)	—	—		—			(6,472		)	—			—			(6,472		)
Derivative instruments fair value adjustment, net of taxes of $4,230	7,594			—	—		—			—			7,594			—			7,594
Comprehensive income	1,122
Comprehensive loss attributable to noncontrolling interest	(808		)	—	—		—			—			—			(808		)	(808		)
Comprehensive income attributable to Boyd Gaming Corporation	$	314		—	—		—			—			—			—			—
Stock options exercised				40,006	1		238			—			—			—			239
Tax effect from share-based compensation arrangements				—	—		(558		)	—			—			—			(558		)
Share-based compensation costs				—	—		5,953			—			—			—			5,953
Change in noncontrolling interest in Borgata and LVE				—	—		—			—			—			(5,482		)	(5,482		)
Balances, June 30, 2011				86,284,984	$	863	$	640,661		$	554,437		$	—		$	199,248		$	1,395,209

Six Months Ended June 30, 2010

(Unaudited and in thousands)

			Boyd Gaming Corporation Stockholders’ Equity
											Accumulated
	Other					Additional					Other					Total
	Comprehensive		Common Stock			Paid-in			Retained		Comprehensive			Noncontrolling		Stockholders'
	Income (loss)		Shares	Amount		Capital			Earnings		Loss, Net			Interest		Equity
Balances, January 1, 2010			86,130,454	$	861	$	623,035		$	550,599	$	(18,126	)	$	—	$	1,156,369
Net income	$	11,817	—	—		—			11,817		—			—		11,817
Derivative instruments fair value adjustment, net of taxes of $2,408	4,410		—	—		—			—		4,410			—		4,410
Comprehensive income attributable to Boyd Gaming Corporation	$	16,227	—	—		—			—		—			—		—
Stock options exercised			96,187	1		605			—		—			—		606
Tax effect from share-based compensation arrangements			—	—		(21		)	—		—			—		(21		)
Share-based compensation costs			—	—		5,728			—		—			—		5,728
Change in noncontrolling interest in Borgata			—	—		—			—		—			331,379		331,379
Balances, June 30, 2010			86,226,641	$	862	$	629,347		$	562,416	$	(13,716	)	$	331,379	$	1,510,288

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

6

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

	Six Months Ended
	June 30,
	2011			2010
Cash Flows from Operating Activities
Net income (loss)	$	(11,954	)	$	21,708
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	99,072			95,454
Amortization of debt financing costs	4,304			2,917
Amortization of discounts on senior secured notes	1,626			—
Share-based compensation expense	5,953			5,728
Deferred income taxes	(4,991		)	4,503
Operating and non-operating income from Borgata	—			(5,013		)
Distributions of earnings received from Borgata	—			1,910
Noncash asset write-downs	6,444			—
Loss (gain) on early retirements of debt	20			(3,949		)
Other operating activities	1,556			1,135
Changes in operating assets and liabilities:
Restricted cash	634			554
Accounts receivable, net	(48		)	2,628
Inventories	1,402			(598		)
Prepaid expenses and other current assets	(2,920		)	(2,004		)
Income taxes receivable	(1,023		)	12,102
Other long-term tax assets	647			—
Other assets, net	(1,754		)	870
Accounts payable and accrued liabilities	(2,263		)	9,622
Income taxes payable	123			—
Other long-term tax liabilities	2,382			1,159
Other liabilities	(1,642		)	1,031
Net cash provided by operating activities	97,568			149,757
Cash Flows from Investing Activities
Capital expenditures	(30,874		)	(47,481		)
Net cash effect upon change in controlling interest of Borgata	—			26,025
Decrease in restricted investments	168			—
Other investing activities	55			(164		)
Net cash used in investing activities	(30,651		)	(21,620		)
Cash Flows from Financing Activities
Payments on retirements of long-term debt	—			(28,861		)
Borrowings under bank credit facility	35,920			374,800
Payments under bank credit facility	(35,920		)	(399,300		)
Borrowings under Borgata bank credit facility	365,700			190,983
Payments under Borgata bank credit facility	(406,600		)	(196,400		)
Debt financing costs, net	(828		)	—
Payments under note payable	—			(46,875		)
Proceeds from variable interest entity's issuance of debt	5,250			—
Payments on loans to variable interest entity's members	(181		)	—
Noncontrolling interest distributions by Borgata	—			(15,602		)
Other financing activities	(101		)	89
Net cash used in financing activities	(36,760		)	(121,166		)
Increase in cash and cash equivalents	30,157			6,971
Cash and cash equivalents, beginning of period	145,623			93,202
Cash and cash equivalents, end of period	$	175,780		$	100,173

7

8

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

(Unaudited and in thousands)

	Six Months Ended
	June 30,
	2011		2010
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	128,400	$	69,109
Cash paid (received) for income taxes, net	1,221		(9,761		)
Supplemental Schedule of Noncash Investing and Financing Activities
Payables incurred for capital expenditures	$	4,087	$	6,965
Fair value adjustment on derivative instruments	11,931		7,884
Assets and Liabilities Recorded at Fair Value (net of Cash Received) Due to Change in Controlling Interest of Borgata
Accounts receivable, net	$	—	$	29,099
Inventories	—		4,118
Prepaid expenses and other current assets	—		9,201
Deferred income taxes	—		1,290
Property and equipment, net	—		1,293,792
Intangibles	—		14,000
Indefinite lived intangibles	—		65,000
Other assets, net	—		36,641
Fair value of assets	$	—	$	1,453,141
Current maturities of long-term debt	$	—	$	632,289
Accounts payable	—		8,729
Income taxes payable	—		7,579
Accrued liabilities	—		66,854
Other long-term liabilities	—		40,204
Fair value of liabilities	$	—	$	755,655

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

9

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 in 1988 and has been operating since 1973. 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 controlling interest in a limited liability company. 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) Atlantic City.

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. On April 29, 2011, we and Dania Entertainment Center, LLC (the “Buyer”) entered into an Asset Purchase Agreement (the “Agreement”) for the sale of certain assets and liabilities of the Dania Jai-Alai Business (as defined below).

Pursuant to the terms of the Agreement, we agreed to sell and transfer, and the Buyer agreed to purchase and assume, certain assets and liabilities (“Assets and Liabilities”) related to our Dania Jai Alai pari-mutuel facility, located in Dania Beach, Broward County, Florida at which jai alai and related gaming operations are conducted, including poker and inter-track wagering (the “Dania Jai-Alai Business”), for a purchase price of $80.0 million (the “Purchase Price”), subject to adjustment based on the amount of cash held by the Business as of the closing, including a non-refundable (except under certain limited circumstances) deposit of $5.0 million.

The closing of the transactions contemplated by the Agreement is subject to certain conditions, including without limitation, (i) the receipt of all consents, approvals or authorizations required to permit us to transfer to the Buyer, and the Buyer to acquire from us, certain jai alai permits required to operate jai alai at the Dania facility; (ii) the absence of injunctions, judgments or other legal impediments seeking to prohibit the closing of the transaction; (iii) the expiration or termination of any required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; and (v) other customary closing conditions. In addition to other termination rights and events set forth in the Agreement, the Buyer has the right to terminate the Agreement at any time prior to the closing date based upon the Buyer's due diligence of the Assets and Liabilities. The closing must occur by September 26, 2011 (the “Outside Date”); provided that the Buyer may extend the Outside Date under certain limited circumstances until November 28, 2011 with payment of $2.0 million to us, $1.0 million of which shall be applied to the Purchase Price. We currently anticipate that the closing will occur in the third quarter of 2011; however, there can be no assurance that this transaction will close as scheduled, or at all.

We also own and operate a travel agency in Hawaii, and a captive insurance company, also in Hawaii, that underwrites travel-related insurance.

Additionally, we own 85 acres of land on the Las Vegas Strip, where our multibillion dollar Echelon development project (“Echelon”) 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 Echelon. At such time, however, we did not anticipate the severity or 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. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, we do not expect to resume construction of Echelon for three to five years, as previously disclosed. We also do not believe that financing for a development project like Echelon is currently available.

Basis of Presentation

Interim Condensed Consolidated Financial Statements

As permitted by the rules and regulations of the SEC, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, although we believe that the disclosures made are adequate to make the information reliable. These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year

10

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

ended December 31, 2010.

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly our financial position as of June 30, 2011 and December 31, 2010, and the results of our operations for the three and six months ended June 30, 2011 and 2010, and the results of our cash flows for the six months ended June 30, 2011 and 2010. Our operating results for the three and six months ended June 30, 2011 and 2010, and our cash flows for the six months ended June 30, 2011 and 2010, are not necessarily indicative of the results that would be achieved for the full year or future periods.

Effective Control of Borgata

On March 24, 2010, as a result of the amendment to our operating agreement with MGM Resorts International (“MGM”) (our original 50% partner in Borgata), which provided, among other things, for the termination of MGM's participating rights in the operations of Borgata, we effectively obtained control of Borgata. The amendment to the operating agreement was related to MGM's divestiture of its interest pursuant to a regulatory settlement, as discussed further in Note 2, Consolidation of Certain Interests. This resulting change in control required acquisition method accounting in accordance with the authoritative accounting guidance for business combinations. As a result, we measured our previously held equity interest at a provisional fair value as of March 24, 2010, the date we effectively obtained control.

The financial position of Borgata is presented in our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010; its results of operations for the three months ended June 30, 2011 and 2010 are included in our condensed consolidated statement of operations for the three months ended June 30, 2011 and 2010; its results of operations for the six months ended June 30, 2011 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2011; and its results of operations for the period from March 24 through June 30, 2010 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2010.

Consolidation of Variable Interest Entity

LVE Energy Partners, LLC (“LVE”) is a joint venture between Marina Energy LLC and DCO ECH Energy, LLC. Through our wholly-owned subsidiary, Echelon Resorts LLC ("Echelon Resorts"), we have entered into an Energy Sales Agreement ("ESA") with LVE to design, build, own (other than the underlying real property which is leased from Echelon Resorts) and operate a central energy center and related distribution system for our planned Echelon resort development. In April 2007, we entered into an ESA with LVE to provide chilled and hot water, electricity and emergency electricity generation to Echelon and potentially other joint venture entities associated with the Echelon development project or other third parties.

LVE began construction of the facility in 2007 and expected to provide full energy services to Echelon in 2010, when we originally expected to open. However, LVE suspended construction in January 2009, after our announcement of the delay of Echelon. On April 3, 2009, LVE notified us that, in its view, Echelon Resorts would be in breach of the ESA unless it recommences and proceeds with construction of the Echelon development project 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.

On March 7, 2011, Echelon Resorts and LVE entered into both a purchase option agreement (the "Purchase Option Agreement") and a periodic fee agreement (the "Periodic Fee Agreement"). LVE has agreed not to initiate any litigation with respect to its April 3, 2009 claim of an alleged breach of the ESA and both Echelon Resorts and LVE have mutually agreed that neither LVE nor Echelon Resorts would give notice of, file or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and that any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is in effect. Under the Periodic Fee Agreement, Echelon Resorts has agreed to pay LVE, beginning March 4, 2011, a monthly periodic fee (the “Periodic Fee”) and an operation and maintenance fee until Echelon Resorts either (i) resumes construction of the project or (ii) exercises its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee is fixed at $11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee is estimated to be approximately $10.8 million annually. The operation and maintenance fee cannot exceed $0.6 million per annum without Echelon Resorts' prior approval.

Under the Purchase Option Agreement, Echelon Resorts has the right, at its sole discretion, upon written notice to LVE, to purchase the assets of LVE including the central energy center and the related distribution system for a price of $195.1 million, subject to certain possible adjustments. The ESA will be terminated concurrent with the purchase of the LVE assets.

11

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

New consolidation guidance regarding the variable interest model became effective on January 1, 2010. Under this new qualitative model, the primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the variable interest entity that most significantly impacts the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. Upon adoption, this guidance required us to consolidate LVE for financial statement purposes, as we determined that we are presently the primary beneficiary of the executory contract, the ESA, giving rise to the variable interest.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Boyd Gaming Corporation and its subsidiaries.

In addition, as discussed above, the financial position of Borgata is consolidated in our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010; its results of operations for the three months ended June 30, 2011 are included in our condensed consolidated statement of operations for the three months ended June 30, 2011; its results of operations for the six months ended June 30, 2011 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2011; its results of operations for the period from April 1 through June 30, 2010 are included in our condensed consolidated statement of operations for the three months ended June 30, 2010; and its results of operations for the period from March 24 through June 30, 2010 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2010. At June 30, 2011 and December 31, 2010, approximately $1.41 billion and $1.45 billion, respectively, of our consolidated total assets related to Borgata.

Additionally, the financial position of LVE is consolidated in our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010, and its results of operations for the three and six months ended June 30, 2011 are included in our condensed consolidated statements of operations and cash flows during such periods. At June 30, 2011, approximately $249.6 million of our consolidated total assets related to LVE, however, certain of these assets, approximating $195.9 million, are pledged as security on LVE's outstanding construction loan advances, and an additional $48.0 million of such assets are held in restricted escrow funds in accordance with the underlying terms of LVE's tax-exempt bond financing. At December 31, 2010, approximately $249.7 million of our consolidated total assets related to LVE, however, certain of these assets, approximating $196.4 million, were pledged as security on LVE's outstanding construction loan advances, and an additional $48.2 million of such assets were held in restricted escrow funds in accordance with the underlying terms of LVE's tax-exempt bond financing.

All material intercompany accounts and transactions have been eliminated in consolidation.

Investments in unconsolidated affiliates, which are less than 50% owned and do not meet the consolidation criteria of the authoritative accounting guidance for voting interest, controlling interest or variable interest entities, are accounted for under the equity method. See Note 2, Consolidation of Certain Interests.

Property and Equipment, Net

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.

The estimated useful lives of our major components of property and equipment are:

Building and improvements	10 through 40 years
Riverboats and barges	10 through 40 years
Furniture and equipment	3 through 10 years

Gains or losses on disposals of assets are recognized as incurred, using the specific identification method. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred.

Assets Held for Development

The costs incurred relative to projects under development are carried at cost. Development costs clearly associated with the acquisition, development, and construction of a project are capitalized as a cost of that project, during the periods in which activities necessary to get the property ready for its intended use are in progress. Certain pre-acquisition costs, not qualifying for capitalization, are charged to preopening or other operating expense as incurred.

12

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Debt Financing Costs

Debt financing costs, which include legal, and other direct costs related to the issuance of our outstanding debt, are deferred and amortized to interest expense over the contractual term of the underlying long-term debt using the effective interest method. In the event that our debt is modified, repurchased or otherwise reduced prior to its original maturity date, we ratably reduce the unamortized debt financing costs.

Restricted Investments

In accordance with the terms of the tax-exempt loan agreements, which are the obligations of LVE, unused proceeds are required to be held in escrow pending approval of construction expenditures. These investments are held in an interest-bearing account.

Intangible Assets

Intangible assets include customer relationships, favorable lease rates, gaming license rights and trademarks.

Amortizing intangible assets: Customer relationships represent the value of repeat business associated with our customer loyalty programs. These intangible assets are being amortized on an accelerated method over their approximate useful life. Favorable lease rates represent the amount by which acquired lease rental rates are favorable to market terms. These favorable lease values are amortized over the remaining lease term, primarily on leasehold land interests, ranging in remaining duration from 41 to 52 years.

Indefinite lived intangible assets: Trademarks are based on the value of our brand, which reflects the level of service and quality we provide and from which we generate repeat business. Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance with these certain jurisdictions. These assets, considered indefinite-lived intangible assets, are not subject to amortization, but instead are subject to an annual impairment test, performed in the second quarter of each year, and between annual test dates in certain circumstances. 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. License rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method.

Long-Term Debt, Net

Long-term debt is reported at amortized cost. The discount on the senior secured notes and the transaction costs paid to the initial purchasers upon issuance of the senior and senior secured notes are recorded as an adjustment to the face amount of our outstanding debt. This resulting difference between the net proceeds upon issuance of the senior and senior secured notes and the face amount of the senior and senior secured notes is accreted to interest expense using the effective interest method.

Noncontrolling Interest

Noncontrolling interest is the portion of the ownership in Borgata not directly attributable to Boyd, as well as the ownership of LVE, none of which is attributable to Boyd, and is reported as a separate component of our stockholders' equity in our condensed consolidated financial statements. Our consolidated net income is reported at amounts that include the amounts attributable to both us and the noncontrolling interest. At June 30, 2011 and December 31, 2010, there was a noncontrolling interest of $214.7 million and $219.3 million, respectively, associated with the portion of ownership in Borgata that is not attributable to the stockholders of Boyd Gaming Corporation. As discussed above, we effectively obtained control of Borgata on March 24, 2010 and began consolidating its financial statements at that date. At June 30, 2011 and December 31, 2010, there was a noncontrolling interest loss of $15.5 million and $13.7 million, respectively, associated with the ownership in LVE that is not attributable to the stockholders of Boyd Gaming Corporation.

Revenue Recognition

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.

Promotional Allowances

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenues and then deducted as promotional allowances. 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 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

The amounts included in promotional allowances for the three and six months ended June 30, 2011 and 2010 are as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In thousands)
Rooms	$	30,718	$	31,973	$	60,822	$	46,612
Food and beverage	41,070		42,801		83,564		72,714
Other	28,686		23,416		54,776		29,372
Total promotional allowances	$	100,474	$	98,190	$	199,162	$	148,698

The estimated costs of providing such promotional allowances for the three and six months ended June 30, 2011 and 2010 are as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In thousands)
Rooms	$	13,044	$	18,236	$	26,117	$	26,196
Food and beverage	37,752		48,456		76,237		78,063
Other	4,189		6,417		7,986		7,985
Total cost of promotional allowances	$	54,985	$	73,109	$	110,340	$	112,244

Gaming Taxes

We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are an assessment of our gaming revenues and are recorded as a gaming expense on the condensed consolidated statements of operations. These taxes totaled approximately $63.5 million and $64.6 million for the three months ended June 30, 2011 and 2010, respectively, and totaled approximately $127.3 million and $118.4 million for the six months ended June 30, 2011 and 2010, respectively.

Earnings per Share

Basic earnings per share is computed by dividing net income applicable to Boyd Gaming Corporation stockholders, excluding net income attributable to noncontrolling interests, by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the additional dilution for all potentially-dilutive securities, such as stock options.

The weighted average number of common and common share equivalent shares used in the calculations of basic and diluted earnings per share for the three and six months ended June 30, 2011 and 2010, consisted of the following amounts:

14

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2011	2010	2011	2010
	(In thousands)
Earnings per share:
Basic weighted average shares outstanding	87,204	86,511	87,181	86,471
Potential dilutive effect	—	431	—	272
Diluted weighted average shares outstanding	87,204	86,942	87,181	86,743

Due to the net loss for the three and six months ended June 30, 2011, the effect of all potential common shares was anti-dilutive, and therefore were not included in the computation of diluted earnings per share. Anti-dilutive options totaling 7.8 million and 6.7 million have been excluded from the computation of diluted earnings per share for the three months ended June 30, 2011, and 2010, respectively. Anti-dilutive options totaling 7.8 million and 8.1 million have been excluded from the computation of diluted earnings per share for the six months ended June 30, 2011 and 2010, respectively.

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 condensed consolidated financial statements include the estimated allowance for doubtful accounts receivable, the estimated useful lives for depreciable and amortizable assets, recoverability of assets held for development, measurement of the fair value of our controlling interest and the noncontrolling interest in Borgata, fair values of acquired assets and liabilities, estimated cash flows in assessing the recoverability of long-lived assets and assumptions relative to the valuation and impairment of goodwill and intangible assets, estimated valuation allowances for deferred tax assets, slot bonus point programs, certain tax liabilities and uncertain tax positions, self-insured liability reserves, share-based payment valuation assumptions, fair values of assets and liabilities measured at fair value, fair values of assets and liabilities disclosed at fair value, fair values of derivative instruments, contingencies and litigation, claims and assessments. Actual results could differ from these estimates.

Recently Issued Accounting Pronouncements

A variety of 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.

Accounting Standards Update 2011-05 Presentation of Comprehensive Income ("Update 2011-05")

In June, 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-05 Presentation of Comprehensive Income, which is an amendment to Topic 220 of the Accounting Standards Codification.

The objective of Update 2011-05 is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. Update 2011-05 provides an entity with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income.

The amendments in Update 2011-05 do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income, nor does the amendment affect how earnings per share is calculated or presented. The amendments in this Update should be applied retrospectively. The amendment will effective for

15

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

our fiscal year, and interim periods within the fiscal year beginning January 1, 2012. Update 2011-05 will not have a material impact on the computation of comprehensive income, but will require a revised presentation thereof.

NOTE 2.    CONSOLIDATION OF CERTAIN INTERESTS

Controlling Interest

Borgata Hotel Casino and Spa

Overview

We and MGM each originally held 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.

In February 2010, we entered into an agreement with MGM to amend the operating agreement to, among other things, facilitate the transfer of MGM's interest in the Holding Company ("MGM Interest") to a divestiture trust (“Divestiture Trust”) established for the purpose of selling the MGM Interest to a third party. The proposed sale of the MGM Interest through the Divestiture Trust was a part of a then-proposed settlement agreement between MGM and the New Jersey Department of Gaming Enforcement (the “NJDGE”). Pursuant to the terms of the amended operating agreement, in connection with the refinancing of the Borgata bank credit facility on August 6, 2010, the Holding Company made a $135.4 million one-time distribution to us, of which $30.8 million was a priority distribution equal to the excess prior capital contributions made by us.

On March 17, 2010, MGM announced that its settlement agreement with the NJDGE had been approved by the New Jersey Casino Control Commission ("NJCCC"). Under the terms of the settlement agreement, MGM agreed to transfer the MGM Interest into the Divestiture Trust and further agreed to sell such interest within a 30-month period. During the first 18 months of such period, MGM has the power to direct the trustee to sell the MGM Interest, subject to the approval of the NJCCC. If the sale has not occurred by such time, the trustee will be solely responsible for the sale of the MGM Interest. The MGM Interest was transferred to the Divestiture Trust on March 24, 2010.

MGM has subsequently announced that it has entered into an amendment with respect to its settlement agreement with the NJDGE, subject to approval by the NJCCC. The amendment provides that the mandated sale of the MGM Interest be increased by an additional 18 months to a total of 48 months.  During the first 36 months (or until March 24, 2013), MGM has the right to direct the Divestiture Trust to sell the MGM Interest. If a sale is not concluded by that time, the Divestiture Trust will be responsible for selling MGM''s Interest during the following 12-month period.  The NJCCC is expected to hold a hearing on the amendment to the settlement on August 8, 2011.

Effective Change in Control

In connection with the amendments to the operating agreements MGM relinquished all of its specific participating rights under the operating agreement, and we retained all authority to manage the day-to-day operations of Borgata. MGM's relinquishment of its participating rights effectively provided us with direct control of Borgata. This resulting change in control required acquisition method accounting in accordance with the authoritative accounting guidance for business combinations.

Acquisition Method Accounting

The application of the acquisition method accounting guidance had the following effects on our condensed consolidated financial statements: (i) our previously held equity interest was measured at a provisional fair value at the date control was obtained; (ii) we recognized and measured the identifiable assets and liabilities in accordance with promulgated valuation recognition and measurement provisions; and (iii) we recorded the noncontrolling interest held in trust for the economic benefit of MGM as a separate component of our stockholders' equity. The provisional fair value measurements and estimates of these items were estimated as of the date we effectively obtained control.

The provisional fair value measurements and estimates of these items have been subsequently refined. We had provisionally recorded these fair values using an earnings valuation multiple model, because, at the time of the preliminary estimate, the Company had not completed its procedures with respect to the independent valuation of the business enterprise and Borgata's tangible and intangible assets. The Company's subsequent valuation procedures have necessitated a revision of the valuation of the provisional assets and liabilities. Thus, upon finalization of our valuation, certain measurement adjustments were identified and retrospectively recorded in the condensed consolidated balance sheet as of December 31, 2010, and certain disclosures were updated to reflect

16

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

the measurement period adjustments, as reflected herein.

Retrospective Adjustment to Condensed Consolidated Balance Sheet

We have retrospectively adjusted the provisional values to reflect the fair valuation, and therefore, the condensed consolidated balance sheet as of December 31, 2010 presented herein reflects the adjustments above.

			December 31, 2010
	As Originally Reported		Acquisition Method Accounting Adjustments			As Retrospectively Adjusted
	(In thousands)
ASSETS
Current assets
Cash and cash equivalents	$	145,623	$	—		$	145,623
Restricted cash	19,494		—			19,494
Accounts receivable, net	47,942		—			47,942
Inventories	16,029		—			16,029
Prepaid expenses and other current assets	37,390		(237		)	37,153
Income taxes receivable	5,249		—			5,249
Deferred income taxes	8,149		—			8,149
Total current assets	279,876		(237		)	279,639
Property and equipment, net	3,471,933		(88,562		)	3,383,371
Assets held for development	1,119,403		—			1,119,403
Debt financing costs, net	38,451		(3,458		)	34,993
Restricted investments	48,168		—			48,168
Other assets, net	70,425		—			70,425
Intangible assets, net	460,714		79,000			539,714
Goodwill, net	213,576		—			213,576
Total assets	$	5,702,546	$	(13,257	)	$	5,689,289
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt	$	25,690	$	—		$	25,690
Non-recourse obligations of variable interest entity	243,059		—			243,059
Accounts payable	57,183		—			57,183
Income taxes payable	6,504		—			6,504
Accrued liabilities	279,779		(1,310		)	278,469
Total current liabilities	612,215		(1,310		)	610,905
Long-term debt, net of current maturities	3,193,065		—			3,193,065
Deferred income taxes	360,342		1,832			362,174
Other long-term tax liabilities	44,813		—			44,813
Other liabilities	85,859		(2,270		)	83,589
Stockholders' equity
Preferred stock	—		—			—
Common stock	862		—			862
Additional paid-in-capital	635,028		—			635,028
Retained earnings	560,909		—			560,909

17

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Accumulated other comprehensive loss, net	(7,594		)	—			(7,594		)
Total Boyd Gaming Corporation stockholders' equity	1,189,205			—			1,189,205
Noncontrolling interest	217,047			(11,509		)	205,538
Total stockholders' equity	1,406,252			(11,509		)	1,394,743
Total liabilities and stockholders' equity	$	5,702,546		$	(13,257	)	$	5,689,289

Bargain Purchase Gain

The fair valuation resulted in the recording of a bargain purchase gain, due to the excess fair value of Borgata over the historical basis of our equity interest in Borgata. Recorded in write-downs and other items, net on the condensed consolidated statement of operations, this gain was recorded as a cumulative adjustment during the six months ended June 30, 2011.

The gain was computed as follows:

	Bargain Purchase Gain
	(In thousands)
Fair value of controlling equity interest	$	397,931
Carrying value of equity investment in Borgata	397,622
Bargain purchase gain	$	309

The fair value of our controlling interest included a $72.4 million control premium, which is reflected in the fair value of the enterprise, and included in the calculation of the bargain purchase gain. A control premium of 10% was applied to the enterprise value members' equity, excluding interest bearing debt, to calculate an indicated value of equity on a controlling basis. While the value of control is somewhat below prevailing market rates, we believe the control premium reflects the value of our influence, mitigated by only a 50% interest and return.

18

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Results of Operations of Borgata

(for the period from March 24, 2010 through June 30, 2010)

reflecting amounts included on a consolidated basis

The results of Borgata, as included in the accompanying condensed consolidated statements of operations from the date we effectively obtained control, March 24, 2010, (specifically, for the period from March 24 through June 30, 2010 for the six months ended June 30, 2010) are presented below. These results of operations do not reflect the retrospective impact from the measurement period adjustments discussed above, as such amounts were not material to either the three and six months ended June 30, 2010.

	Six Months Ended June 30, 2010
	(In thousands)
REVENUES
Operating revenues:
Gaming	$	180,475
Food and beverage	39,140
Room	29,952
Other	11,360
Gross revenues	260,927
Less promotional allowances	57,259
Net revenues	203,668
COSTS AND EXPENSES
Operating costs and expenses:
Gaming	71,073
Food and beverage	19,893
Room	4,224
Other	9,193
Selling, general and administrative	33,300
Maintenance and utilities	18,122
Depreciation and amortization	19,861
Write-downs and other items, net	12
Total operating costs and expenses	175,678
Operating income	27,990
Other expense
Interest expense	6,072
Total other expense, net	6,072
Income before income taxes	21,918
Income taxes	(2,137		)
Net income	$	19,781

19

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Supplemental Pro Forma Information

Pro Forma Condensed Consolidated Statement of Operations

for the six months ended June 30, 2010

The following supplemental pro forma information presents the financial results as if the effective control of Borgata had occurred as of the beginning of the earliest period presented herein, or on January 1, 2010. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what the actual results for the six months ended June 30, 2010 would have been had the consolidation of Borgata been completed as of the earlier date, nor are they indicative of any future results.

20

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	Six Months Ended June 30, 2010
	Boyd Gaming Corp			Borgata						Boyd Gaming Corp
	As Reported			Stub Period			Adjustments			Pro Forma
	(In thousands)
Revenues
Gaming	$	840,537		$	137,831		$	—		$	978,368
Food and beverage	154,002			31,217			—			185,219
Room	90,105			24,154			—			114,259
Other	57,635			9,179			—			66,814
Gross revenues	1,142,279			202,381			—			1,344,660
Less promotional allowances	148,698			44,091			—			192,789
Net revenues	993,581			158,290			—			1,151,871
Costs and expenses
Gaming	397,860			59,861			—			457,721
Food and beverage	81,791			13,500			—			95,291
Room	23,106			2,185			—			25,291
Other	46,244			7,127			—			53,371
Selling, general and administrative	169,944			28,981			—			198,925
Maintenance and utilities	62,109			13,522			—			75,631
Depreciation and amortization	95,454			16,754			—			112,208
Corporate expense	25,615			—			—			25,615
Preopening expenses	2,306			—			—			2,306
Write-downs and other charges	3,592			68			—			3,660
Total costs and expenses	908,021			141,998			—			1,050,019
Operating income from Borgata	8,146			—			(8,146		)	—
Operating income	93,706			16,292			(8,146		)	101,852
Other expense (income)
Interest income	(4		)	—			—			(4		)
Interest expense, net of amounts capitalized	63,657			5,060			—			68,717
Fair value adjustment of derivative instruments	—			—						—
Gain on early retirements of debt	(3,949		)	—			—			(3,949		)
Other non-operating expenses from Borgata, net	3,133			—			(3,133		)	—
Total other expense, net	62,837			5,060			(3,133		)	64,764
Income before income taxes	30,869			11,232			(5,013		)	37,088
Income taxes	(9,161		)	(1,207		)	—			(10,368		)
Net income	21,708			10,025			(5,013		)	26,720
Net income attributable to noncontrolling interest	(9,891		)	—			(5,012		)	(14,903		)
Net income attributable to Boyd Gaming Corporation	$	11,817		$	10,025		$	(10,025	)	$	11,817

The pro forma adjustments reflect the differences resulting from the conversion of the equity method of accounting to a fully consolidated presentation. There were no significant intercompany transactions affecting the statement of operations between the Boyd wholly-owned entities and Borgata which would require elimination during the six months ended June 30, 2010.

21

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Variable Interest

LVE Energy Partners, LLC

The effects of the consolidation of LVE on our financial position as of June 30, 2011 and December 31, 2010, and its impact on our results of operations for the three and six months ended June 30, 2011 are reconciled by respective line items to amounts as reported in our condensed consolidated balance sheets and condensed consolidated statements of operations are presented below.

The primary impact on our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010 was as follows:

	June 30, 2011
	Boyd Gaming Corporation (as historically presented)		LVE, LLC			Eliminations			Boyd Gaming Corporation (as consolidated)
	(In thousands)
ASSETS
Cash and cash equivalents	$	175,765	$	15		$	—		$	175,780
Restricted cash	18,486		374			—			18,860
Accounts receivable, net	46,018		2,412			(2,394		)	46,036
Prepaid expenses and other current assets	39,352		845			—			40,197
Other current assets	24,262		—			—			24,262
Property and equipment, net	3,315,592		—			—			3,315,592
Assets held for development	923,997		195,941			—			1,119,938
Debt financing costs, net	31,927		—			—			31,927
Restricted investments	—		47,999			—			47,999
Other assets	70,657		4,389			—			75,046
Intangible assets, net	527,322		—			—			527,322
Goodwill, net	213,576		—			—			213,576
Total Assets	$	5,386,954	$	251,975		$	(2,394	)	$	5,636,535
LIABILITIES
Current maturities of long-term debt	$	356,711	$	—		$	—		$	356,711
Non-recourse obligations of variable interest entity	—		248,128			—			248,128
Accounts payable	44,901		54			—			44,955
Accrued liabilities	283,253		1,027			—			284,280
Long-term debt, net of current maturities	2,823,049		—			—			2,823,049
Deferred income taxes	362,899		—			—			362,899
Other liabilities	105,452		18,246			(2,394		)	121,304
Total Liabilities	$	3,976,265	$	267,455		$	(2,394	)	$	4,241,326
STOCKHOLDERS' EQUITY
Common stock	$	863	$	—		$	—		$	863
Additional paid-in capital	640,661		—			—			640,661
Retained earnings	554,437		—			—			554,437
Noncontrolling interest	214,728		(15,480		)	—			199,248
Total Liabilities and Stockholders' Equity	$	5,386,954	$	251,975		$	(2,394	)	$	5,636,535

22

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	December 31, 2010
	Boyd Gaming Corporation (as historically presented)			LVE, LLC			Eliminations		Boyd Gaming Corporation (as consolidated)
	(In thousands)
ASSETS
Cash and cash equivalents	$	145,291		$	332		$	—	$	145,623
Restricted cash	19,494			—			—		19,494
Accounts receivable, net	47,537			405			—		47,942
Other current assets	66,580			—			—		66,580
Property and equipment, net	3,383,371			—			—		3,383,371
Assets held for development	923,038			196,365			—		1,119,403
Debt financing costs, net	34,993			—			—		34,993
Restricted investments	—			48,168			—		48,168
Other assets	65,963			4,462			—		70,425
Intangible assets, net	539,714			—			—		539,714
Goodwill, net	213,576			—			—		213,576
Total Assets	$	5,439,557		$	249,732		$	—	$	5,689,289
LIABILITIES
Current maturities of long-term debt	$	25,690		$	—		$	—	$	25,690
Non-recourse obligations of variable interest entity	—			243,059			—		243,059
Accounts payable	56,790			393			—		57,183
Accrued liabilities	277,429			1,040			—		278,469
Long-term debt, net of current maturities	3,193,065			—			—		3,193,065
Deferred income taxes	362,174			—			—		362,174
Other liabilities	115,948			18,958			—		134,906
Total Liabilities	$	4,031,096		$	263,450		$	—	$	4,294,546
STOCKHOLDERS' EQUITY
Common stock	$	862		$	—		$	—	$	862
Additional paid-in capital	635,028			—			—		635,028
Retained earnings	560,909			—			—		560,909
Accumulated other comprehensive loss, net	(7,594		)	—			—		(7,594		)
Noncontrolling interest	219,256			(13,718		)	—		205,538
Total Liabilities and Stockholders' Equity	$	5,439,557		$	249,732		$	—	$	5,689,289

The reduction in accounts receivable, net and other liabilities reflects the elimination of the Periodic Fee booked as a receivable by LVE, which mirrors the payable recorded on Boyd's general ledger. Both the receivable and payable are eliminated in consolidation completely, thereby having no impact on our consolidated balance sheet.

The impact on our condensed consolidated statement of operations for the three months ended June 30, 2011 was as follows:

23

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	Three Months Ended June 30, 2011
	Boyd Gaming Corporation (as historically presented)			LVE, LLC			Eliminations			Boyd Gaming Corporation (as consolidated)
	(In thousands)
REVENUES
Other revenue	$	33,276		$	2,769		$	(2,769	)	$	33,276
COSTS AND EXPENSES
Maintenance and utilities	$	36,739		$	34		$	—		$	36,773
Preopening expenses	4,510			—			(2,769		)	1,741
Operating income	$	59,255		$	2,735		$	—		$	61,990
Other expense
Interest expense	$	61,387		$	5,307		$	—		$	66,694
Loss before income taxes	$	(2,160	)	$	(2,572	)	$	—		$	(4,732	)
Income taxes	(911		)	—			—			(911		)
Net loss	(3,071		)	(2,572		)	—			(5,643		)
Net loss attributable to noncontrolling interest	120			2,572			—			2,692
Net loss attributable to Boyd Gaming Corporation	$	(2,951	)	$	—		$	—		$	(2,951	)

The impact on our condensed consolidated statement of operations for the six months ended June 30, 2011 was as follows:

	Six Months Ended June 30, 2011
	Boyd Gaming Corporation (as historically presented)			LVE, LLC			Eliminations			Boyd Gaming Corporation (as consolidated)
	(In thousands)
REVENUES
Other revenue	$	66,307		$	5,410		$	(5,410	)	$	66,307
COSTS AND EXPENSES
Maintenance and utilities	$	73,257		$	931		$	—		$	74,188
Preopening expenses	8,982			—			(5,410		)	3,572
Operating income	$	105,615		$	4,479		$	—		$	110,094
Other expense
Interest expense	$	118,551		$	5,434		$	—		$	123,985
Loss before income taxes	$	(13,196	)	$	(955	)	$	—		$	(14,151	)
Income taxes	2,197			—			—			2,197
Net loss	(10,999		)	(955		)	—			(11,954		)
Net loss attributable to noncontrolling interest	4,527			955			—			5,482
Net loss attributable to Boyd Gaming Corporation	$	(6,472	)	$	—		$	—		$	(6,472	)

24

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The reduction in other revenue and preopening expenses reflects the elimination of the Periodic Fee paid by Boyd Gaming to LVE. Such fee is recognized as revenue by LVE, but eliminated in consolidation completely, thereby having no impact on our consolidated other revenues. Although this Periodic Fee is eliminated in this consolidation, it is actually paid to LVE directly on a monthly basis.

NOTE 3.    PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:

	June 30, 2011		December 31, 2010
	(In thousands)
Land	$	576,947	$	576,947
Buildings and improvements	3,308,851		3,309,506
Furniture and equipment	1,143,312		1,131,837
Riverboats and barges	167,505		167,420
Other	25,793		25,423
Total property and equipment	5,222,408		5,211,133
Less accumulated depreciation	1,906,816		1,827,762
Property and equipment, net	$	3,315,592	$	3,383,371

Depreciation expense for the three months ended June 30, 2011 and 2010 was $46.4 million and $55.4 million, respectively. Depreciation expense for the six months ended June 30, 2011 and 2010 was $92.2 million and $95.5 million, respectively. The amounts recorded during the six months ended June 30, 2011 include the effect of certain measurement period adjustments.

Other property and equipment presented in the table above primarily relates to costs capitalized in conjunction with major improvements and that have not yet been placed into service, and accordingly, such costs are not currently being depreciated.

We test certain of these property and equipment assets for recoverability if a recent operating or cash flow loss, combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses, is associated with the use of a long-lived asset. Impairment is the condition that exists when the carrying amount of a long-lived asset exceeds its fair value. An impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. That assessment shall be based on the carrying amount of the asset at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

NOTE 4.    ASSETS HELD FOR DEVELOPMENT

Assets held for development, which is comprised of assets associated with our Echelon development project, consists of the following:

25

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	June 30, 2011		December 31, 2010
	(In thousands)
Echelon Project Infrastructure
Land	$	213,649	$	213,649
Construction and development costs	501,091		500,132
Project management and other costs	115,712		115,712
Professional and design fees	93,545		93,545
Central Energy Facility
Construction and development costs	195,941		196,365
Total assets held for development	$	1,119,938	$	1,119,403

Echelon Project Infrastructure

At June 30, 2011 and December 31, 2010, the capitalized costs related to the Echelon project included land and construction in progress. The construction and development costs consist primarily of site preparation work, underground utility installation and infrastructure and common area development. Professional and design fees include architectural design, development and permitting fees, inspections, consulting and legal fees. We expect to additionally incur approximately $0.3 million to $3.0 million of capitalized costs annually, principally related to such items as transportation of stored offsite steel as well as offsite improvements.

In addition, we expect annual recurring project costs, consisting primarily of monthly charges related to construction of the central energy center, site security, property taxes, rent and insurance, of approximately $15.0 million to $17.0 million 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 commitments, including commitments and contingencies with respect to the ESA entered into between Echelon Resorts and LVE.

We evaluate our investment in assets held for development in accordance with the authoritative accounting guidance on impairment or disposal of long lived assets. For a long-lived asset to be held and used, such as these assets under development, 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. For these assets under development, future cash flows include remaining construction costs.

The suspension of development on the Echelon project implied that the carrying amounts of the assets related to the development may not be recoverable; therefore, at the time of the suspension, we performed an impairment test of these assets, which occurred during the three months ended 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.

One such scenario includes the outright sale of the project as is, which is primarily based upon land value. We considered the land value by analyzing recent sales transactions of sites with similar characteristics such as location, zoning, access, and visibility, to establish a general understanding of the potential comparable sales. The recoverability under this option represented any excess sales price, net of estimated selling costs, from the land over the carrying value of the assets, including land, held for development.

Another scenario is the full development of the project, as designed, at a later date. The cash inflows related to this option represent the revenue projections for the individual components associated with each planned construction element (casino, hotel, food and beverage, retail, convention and other), based upon the estimated respective dates of completion and particular graduated supply absorption rates. These projections are offset by outflows for incurred and estimated costs to complete the development. For costs already incurred, and to compensate for potential losses due to the delay, we adjusted for (i) physical deterioration; (ii) functional obsolescence; and (iii) economic obsolescence. Physical deterioration is impairment to the condition of the asset brought about by “wear and tear,” disintegration, and/or the action of the elements. Functional obsolescence is the impairment in the efficiency of the asset brought about by such factors as inadequacy or change in technology that affect the asset. Economic obsolescence is

26

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

the impairment in the desirability of the asset arising from external economic forces, building code enhancements or changes in supply and demand relationships. For estimated costs to complete, we applied selected construction expense growth rates to our present cost analysis. In addition to these hard and soft construction costs, we estimated outflows for preservation costs that are intended and required to maintain the development site and the existing structures as well as development materials for future use. These net outflows were incrementally added to our estimated operating and ongoing maintenance costs, to establish the undiscounted net cash flow of the project.

Our final scenario is a scaled-down version of the full project, whereby only certain components would be developed. This cash flow projection considered the inflows and outflows discussed above, with relevant curtailment for revenue from, and costs related to, the amenities not completed.

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 the determination that there was no impairment of the assets held for development, as the estimated weighted net undiscounted cash flows from the project exceed the current carrying value of the assets held for development. As we further explore the viability of alternatives for the project, we will continue to monitor these assets for recoverability.

Central Energy Facility

The capitalized construction costs of the central energy facility include labor, materials, construction overhead and capitalized interest, all of which has been directly incurred by LVE. Depreciation is generally recorded on a straight line basis over useful lives of property ranging from 5 to 50 years, but has not commenced on the components of the facility, as it has not been placed in service. The costs of repairs and maintenance, including planned major maintenance activities and minor replacements of property are charged to maintenance expense as incurred.

These assets are tested for recoverability whenever events or changes in circumstances indicate that such amounts may not be recoverable. Impairment is the condition that exists when the carrying amount of a long-lived asset exceeds its fair value. An impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. That assessment shall be based on the carrying amount of the asset at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

The assets of the central energy facility are pledged as collateral to the outstanding debt obligations of LVE, as further discussed in Note 6, Non-recourse Obligations of Variable Interest Entity below.

NOTE 5.    INTANGIBLE ASSETS

Intangible assets consist of the following:

27

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

				June 30, 2011
	Weighted Average Original Life	Gross Carrying Value		Cumulative Amortization			Cumulative Impairment Losses			Intangible Assets, Net
	(In thousands)
Amortizing intangibles:
Customer relationships	3.9 years	$	14,400	$	(7,271	)	$	—		$	7,129
Favorable lease rates	43.8 years	45,370		(7,303		)	—			38,067
		59,770		(14,574		)	—			45,196
Indefinite lived intangible assets:
Trademarks	Indefinite	115,700		—			(5,000		)	110,700
Gaming license rights	Indefinite	567,886		(33,960		)	(162,500		)	371,426
		683,586		(33,960		)	(167,500		)	482,126
		$	743,356	$	(48,534	)	$	(167,500	)	$	527,322
	December 31, 2010
	Weighted Average Original Life	Gross Carrying Value		Cumulative Amortization			Cumulative Impairment Losses			Intangible Assets, Net
		(In thousands)
Amortizing intangibles:
Customer relationships	5 years	$	14,400	$	(400	)	$	—		14,000
Favorable lease rates	43.8 years	45,370		(6,782		)	—			38,588
		59,770		(7,182		)	—			52,588
Indefinite lived intangible assets:
Trademarks	Indefinite	115,700		—			—			115,700
Gaming license rights	Indefinite	567,886		(33,960		)	(162,500		)	371,426
		683,586		(33,960		)	(162,500		)	487,126
December 31, 2010		$	743,356	$	(41,142	)	$	(162,500	)	$	539,714

Customer Relationships

Customer relationships represent the value of repeat business associated with our customer loyalty programs. The value of customer relationships is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to these customers, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: revenue of our rated customers, based on expected level of play; promotional allowances provided to these existing customers; attrition rate related to these customers; operating expenses; general and administrative expenses; trademark expense; discount rate; and the present value of tax benefit.

Favorable Lease Rates

Favorable lease rates represent the rental rates for assumed land leases that are favorable to comparable market rates. The fair value is determined on a technique whereby the difference between the lease rate and the then current market rate for the remaining contractual term is discounted to present value. The assumptions underlying this computation include the actual lease rates, the expected remaining lease term, including renewal options, based on the existing lease; current rates of rent for leases on comparable properties with similar terms obtained from market data and analysis; and an assumed discount rate. The estimates underlying the result covered a term of 41 to 52 years.

Trademarks

Trademarks are based on the value of our brand, which reflects the level of service and quality we provide and from which we

28

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

generate repeat business. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademark, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the Borgata name. We used the following significant projections and assumptions to determine value under the relief from royalty method: revenue from gaming and hotel activities; royalty rate; general and administrative expenses; tax expense; terminal growth rate; discount rate; and the present value of tax benefit. The projections underlying this discounted cash flow model were forecasted for fifteen years.

Gaming License Rights

Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance therein. The value of gaming licenses is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to future gaming revenue, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: gaming revenues; gaming operating expenses; general and administrative expenses; tax expense; terminal value; and discount rate. These projections are modeled for a five year period.

Activity For the Six Months Ended June 30, 2011 and 2010

The following table sets forth the changes in these intangible assets during the six months ended June 30, 2011 and 2010:

	Customer Relationships				Favorable Lease Rates			Trademarks			Gaming License Rights		Intangible Assets, Net
	(In thousands)
Six Months Ended June 30, 2011
Balance December 31, 2010	$	14,000			$	38,588		$	115,700		$	371,426	$	539,714
Additions	—				—			—			—		—
Impairments	—				—			(5,000		)	—		(5,000		)
Amortization	(6,871		)		(521		)	—			—		(7,392		)
Balance June 30, 2011	$	7,129			$	38,067		$	110,700		$	371,426	$	527,322
Six Months Ended June 30, 2010
Balance December 31, 2009	$	—			$	39,632		$	50,700		$	371,426	$	461,758
Additions	14,000				—			65,000			—		79,000
Amortization	—			—	(524		)	—			—		(524		)
Balance June 30, 2010	$	14,000			$	39,108		$	115,700		$	371,426	$	540,234

Future Amortization

Customer relationships are being amortized on an accelerated basis over an approximate four-year period. Favorable lease rates are being amortized on a straight-line basis over a weighted-average useful life of 43.8 years. Future amortization is as follows:

29

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

For the Year Ending December 31,	Customer Relationships		Favorable Lease Rates		Total
	(In thousands)
2011 (remainder)	$	2,391	$	523	$	2,914
2012	3,174		1,043		4,217
2013	1,564		1,043		2,607
2014	—		1,043		1,043
2015	—		1,043		1,043
Thereafter	—		33,372		33,372
	$	7,129	$	38,067	$	45,196

Trademarks and gaming license rights are not subject to amortization, as we have determined that they have an indefinite useful life, however these assets are subject to an annual impairment test.

Impairment Testing

Intangible assets include gaming license rights, trademarks and customer lists. 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.

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. If our estimates of projected cash flows related to these assets are not achieved, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next annual scheduled impairment test. As a result of such test, we may be subject to a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

The results of our annual scheduled impairment test of indefinite-lived intangible assets, performed during the second quarter of 2011, did not require us to record an impairment charge; however, if our estimates of projected cash flows related to these assets are not achieved, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next annual scheduled impairment test. Such test could result in a future a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

During the first quarter of 2011, we performed an interim impairment test over the trademark we recorded in connection with the valuation of Borgata due to our consideration of certain facts and circumstances surrounding an adverse change in the business climate in Atlantic City. We believe our actual results have been adversely impacted by increased regional competition, and that in addition, our projected future results will be further impacted by cannibalization of our business upon the opening of a new property in Atlantic City, which was announced in February 2011. We also believe the refinancing of Borgata's debt and recapitalization of its member equity contributed to the results of this impairment test.

Our analysis consisted of a valuation of the trademark, using the relief from royalty method, as discussed above. The only significant change in our assumptions from the initial fair valuation were revised revenue and profitability projections, reflecting the impact of the changed present and forecasted circumstances. The impairment test shall consist of a comparison of the fair value of trademark with its carrying amount. As a result, we recorded a $5.0 million impairment to the trademark, representing the amount by which the carrying amount exceeded its fair value.

NOTE 6.    NON-RECOURSE OBLIGATIONS OF VARIABLE INTEREST ENTITY

The non-recourse obligations of variable interest entity represent the outstanding debt of LVE, all of which is classified as current, and is comprised of the following:

30

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	June 30, 2011		December 31, 2010
	(In thousands)
Construction and term loan facility	$	120,392	$	120,572
Tax-exempt variable rate bonds	100,000		100,000
Notes payable to members of variable interest entity	27,736		22,487
	$	248,128	$	243,059

Assets serving as collateral for these debt obligations had a carrying value of $243.9 million and $244.5 million at June 30, 2011 and December 31, 2010, respectively, and primarily consist of certain assets held for development and restricted investments. The condensed consolidated statements of operations for the three and six months ended June 30, 2011 includes $2.6 million and $1.0 million of loss, respectively, and the condensed consolidated statement of cash flows for the six months ended June 30, 2011 includes $6.1 million of net operating cash outflows related to this consolidated variable interest entity; however, none of the offsetting consolidated income or operating cash inflows are available to service this debt, which is non-recourse and non-guaranteed by Boyd.

Construction and Term Loan Facility

In December 2007, LVE entered into a construction and term loan facility with two commercial banks with a committed amount of up to $143.5 million, of which $120.4 million was outstanding at June 30, 2011. Proceeds from the construction loan were used to finance the construction of the central energy center and district energy system. The loan is secured by the assets of LVE and does not contain financial covenants. Although LVE's loan is presently in default, and classified as current, the original loan maturities are as follows: $4.2 million in 2011; $83.1 million in 2012 and the remainder in 2013.

The construction loan bears interest at a variable rate based on the London InterBank Offered Rate ("LIBOR"). LVE entered into an interest rate swap with scheduled increases in the notional amount designed to fix the LIBOR portion of the interest rate on this debt until its maturity in November 2013, which was hedged against the outstanding debt. However, due to the construction delays, the outstanding amount of debt did not increase as fast as the contractual increases in notional amount of the swap, which rendered a portion of the swap ineffective. The effective rate on the outstanding construction loan, including the impact of the effective portion of the swap, was approximately 2.4% at June 30, 2011.

Tax-exempt Variable Rate Bonds

In December 2007, LVE issued $100.0 million of tax-exempt variable rate bonds through the State of Nevada Department of Business and Industry, which mature in October 2035. Unused proceeds from the tax-exempt, variable rate bonds are required to be escrowed pending approved construction expenditures. Such unused funds are reported as restricted investments on our consolidated balance sheet.

The tax-exempt variable rate bonds bear interest at rates that are determined by a remarketing agent on a weekly basis. LVE entered into an interest rate swap with a total notional amount of $100.0 million that effectively fixes the underlying interest rate index on these bonds until November 2013. Investors in these bonds receive liquidity and credit support provided by a letter of credit from a commercial bank. This letter of credit expires in November 2013, but can be accelerated by the bank in the event of a default under the construction and term loan facility. The effective interest rate on these bonds, including the impact of the swap and cost of the related letter of credit, was approximately 6.0% at June 30, 2011.

Events of Default

The central energy center and district energy system are being financed by LVE with debt that is non-recourse to us. The outstanding balance of LVE's bank debt is approximately $220.4 million as of June 30, 2011, consisting of borrowing under the construction and term loan facility of $120.4 million and outstanding tax-exempt bonds of $100.0 million. In September 2009, LVE reached an agreement with the banks that are financing the energy facilities to address defaults under the financing agreements. These LVE defaults were caused by construction delay and the termination of an energy services agreement by a hotel operator associated with the project. As a result of these defaults, the banks had previously stopped funding the project. The terms of the September 2009 agreement required the LVE joint venture partners to guarantee the payment of future interest costs by LVE through December 2010. In addition, the LVE joint venture partners had each committed to provide approximately $8.9 million of additional capital as of September 2009 to cover costs related to the termination of the energy services agreement by a hotel operator and interest costs incurred since August 2008 when construction of Echelon was suspended. In turn, the banks waived all existing defaults

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

under the financing agreements and were relieved of their commitment to provide additional funding.

As a result of the ongoing construction delay, the central energy center and district energy system was not completed by the end of 2010 as originally expected. Consequently, the full amount of LVE's debt became due and payable in December 2010. LVE intends to seek additional financing to complete the facility once construction of the resort resumes; however, as of June 30, 2011, LVE was in default under the financing agreements with the banks, and all its debt has been presented as currently due.  

NOTE 7.    ACCRUED LIABILITIES

Accrued liabilities consist of the following:

	June 30, 2011		December 31, 2010
	(In thousands)
Payroll and related expenses	$	82,703	$	73,054
Interest	38,926		51,347
Gaming liabilities	62,244		70,908
Accrued expenses and other liabilities	100,407		83,160
Total accrued liabilities	$	284,280	$	278,469

NOTE 8.    LONG-TERM DEBT

Long-term debt, net of current maturities consists of the following:

	June 30, 2011
	Outstanding Principal		Unamortized Discount			Unamortized Origination Fees			Long-Term Debt, Net
	(In thousands)
Boyd Gaming Long-Term Debt:
Bank credit facility	$	1,425,000	$	—		$	—		$	1,425,000
9.125% senior notes due 2018	500,000		—			(9,175		)	490,825
6.75% senior subordinated notes due 2014	215,668		—			—			215,668
7.125% senior subordinated notes due 2016	240,750		—			—			240,750
Other	11,421		—			—			11,421
	$	2,392,839	$	—		$	(9,175	)	$	2,383,664
Borgata Debt:
Bank credit facility	20,000		—			—			20,000
9.50% senior secured notes due 2015	400,000		(3,644		)	(8,558		)	387,798
9.875% senior secured notes due 2018	400,000		(2,531		)	(9,171		)	388,298
	$	820,000	$	(6,175	)	$	(17,729	)	$	796,096
Less current maturities	356,711		—			—			356,711
Long-term debt, net	$	2,856,128	$	(6,175	)	$	(26,904	)	$	2,823,049

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	December 31, 2010
	Outstanding Principal		Unamortized Discount			Unamortized Origination Fees			Long-Term Debt, Net
	(In thousands)
Boyd Gaming Long-Term Debt:
Bank credit facility	$	1,425,000	$	—		$	—		$	1,425,000
9.125% senior notes due 2018	500,000		—			(9,794		)	490,206
6.75% senior subordinated notes due 2014	215,668		—			—			215,668
7.125% senior subordinated notes due 2016	240,750		—			—			240,750
Other	11,761		—			—			11,761
	$	2,393,179	$	—		$	(9,794	)	$	2,383,385
Borgata Debt:
Bank credit facility	60,900		—			—			60,900
9.50% senior secured notes due 2015	400,000		(3,969		)	(9,319		)	386,712
9.875% senior secured notes due 2018	400,000		(2,648		)	(9,594		)	387,758
	$	860,900	$	(6,617	)	$	(18,913	)	$	835,370
Less current maturities	25,690		—			—			25,690
Long-term debt, net	$	3,228,389	$	(6,617	)	$	(28,707	)	$	3,193,065

Bank Credit Facility

Significant Terms

On December 3, 2010, we entered into an Amendment and Restatement Agreement among certain financial institutions (each a “Lender”), Bank of America, N.A., as administrative agent and letter of credit issuer and Wells Fargo Bank, National Association, as swing line lender (the “Amendment and Restatement Agreement”). Pursuant to the terms of the Amendment and Restatement Agreement, our First Amended and Restated Credit Agreement, dated as of May 24, 2007, as amended by the First Amendment and Consent to First Amended Credit Agreement, dated as of December 21, 2009 (as amended, the “Amended Credit Facility”), was amended and restated to, among other things, (i) reduce the aggregate commitments under the former credit facility and (ii) permit consenting Lenders to extend the maturity date of their commitments, new Lenders to issue revolving commitments and term loans and existing Lenders to increase their commitments (each, an “Extending Lender”) in each case with a maturity date five years from the restatement effective date.

Each of the Extending Lenders permanently reduced their commitments under the former credit facility by up to 50% of the amount thereof. As a result, the aggregate commitments under the Amended Credit Facility were reduced from $3 billion to approximately $1.5 billion (including $500 million of term loans, and excluding $548.8 million in non-extending amounts), which commitments may be increased from time to time by up to $500 million (instead of $1 billion commitment increases provided for under the former credit facility) through additional revolving credit or term loans under the Amended Credit Facility.

Pursuant to the terms of the Amended Credit Facility, the term loans amortize in an annual amount equal to 5% of the original principal amount thereof, which commenced on March 31, 2011, payable on a quarterly basis. The interest rate per annum applicable to revolving and term loans under the Amended Credit Facility are based upon, at the option of the Company, LIBOR or the “base rate,” plus an applicable margin in either case. The applicable margin under the Amended Credit Facility is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio. The applicable margin on the outstanding balance on the Extended Revolving Facility (as defined in our Amended Credit Facility) ranges from 2.50% to 3.50% (if using LIBOR), and from 1.50% to 2.50% (if using the base rate). The applicable margin on the outstanding balance of the loans and commitments of the non-extending lenders continues to range from 0.625% to 1.625% (if using LIBOR), and from 0.0% to 0.375% (if using the base rate). A fee of a percentage per annum (which ranges from 0.250% to 0.500%) determined by the level of the total leverage ratio is payable on the unused portions of the Amended Credit Facility.

The “base rate” under the Amended Credit Facility is the highest of (x) Bank of America's publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) the Eurodollar rate for a one month period plus 1.00%.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The letter of credit fees under the Amended Credit Facility remain the same as those under the Credit Facility; however, the margins payable to Extending Lenders are based on the margins applicable to the Extended Revolving Facility.

Subject to certain conditions, amounts outstanding under the Amended Credit Facility may be prepaid without premium or penalty, and the unutilized portion of any of the commitments may be terminated without penalty.

The blended interest rates for outstanding borrowings under our Amended Credit Facility were 3.2% and 3.3% at June 30, 2011 and December 31, 2010, respectively. At June 30, 2011, approximately $1.43 billion was outstanding under our Amended Credit Facility, with $15.6 million allocated to support various letters of credit, leaving remaining contractual availability of approximately $555.7 million.

Guarantees

The Company's obligations under the Amended Credit Facility, subject to certain exceptions, are guaranteed by certain of the Company's subsidiaries and are secured by the capital stock of certain subsidiaries. In addition, subject to certain exceptions, the Company and each of the guarantors granted the administrative agent first priority liens and security interests on substantially all of their real and personal property (other than gaming licenses and subject to certain other exceptions) as additional security for the performance of the secured obligations under the Amended Credit Facility.

Financial and Other Covenants

The Amended Credit Facility contains certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of a minimum consolidated interest coverage ratio of 2.00 to 1.00, (ii) establishing a maximum permitted consolidated total leverage ratio (discussed below), (iii) establishing a maximum permitted secured leverage ratio (discussed below), (iv) imposing limitations on the incurrence of indebtedness, (v) imposing limitations on transfers, sales and other dispositions and (vi) imposing restrictions on investments, dividends and certain other payments. Subject to certain exceptions, the Company may be required to repay the amounts outstanding under the Amended Credit Facility in connection with certain asset sales and issuances of certain additional secured indebtedness.

The minimum consolidated Interest Coverage Ratio (as defined in our Amended Credit Facility) is calculated as (a) twelve-month trailing Consolidated EBITDA (as defined in our Amended Credit Facility) to (b) consolidated interest expense (as also defined in our Amended Credit Facility).

The maximum permitted consolidated Total Leverage Ratio (as defined in our Amended Credit Facility) is calculated as Consolidated Funded Indebtedness to twelve-month trailing Consolidated EBITDA (all capitalized terms are defined in the Amended Credit Facility). Presently, and through December 31, 2011, our maximum Total Leverage Ratio is set at 7.75 to 1.00. Thereafter, on a scheduled basis in 0.25 basis point increments, the maximum ratio decreases to a low 5.50 to 1.00 at March 15, 2015 through the duration of the term.

The maximum permitted Secured Leverage Ratio (as defined in our Amended Credit Facility) is calculated as Secured Indebtedness to twelve-month trailing Consolidated EBITDA (all capitalized terms are defined in the Amended Credit Facility). Presently, and through March 31, 2012, our maximum Secured Leverage Ratio is set at 4.50 to 1.00. Thereafter, on a scheduled basis in 0.25 basis point increments, the maximum ratio decreases to a low 3.25 to 1.00 at June 30, 2014 through the duration of the term.

Compliance with Financial Covenants

We believe that, at June 30, 2011, we were in compliance with the Amended Credit Facility covenants, including the minimum consolidated Interest Coverage Ratio, the maximum permitted consolidated Total Leverage Ratio and the maximum permitted Secured Leverage Ratio, which, as of that date, were 2.42 to 1.00, 6.95 to 1.00 and 4.14 to 1.00, respectively.

Debt Financing Costs

In conjunction with the Amendment and Restatement Agreement, we incurred approximately $20.6 million in incremental debt financing costs, which have been deferred and are being amortized over the remaining term of the Amended Credit Facility.

Senior Notes

9.125% Senior Notes due December 2018.

Significant Terms

On November 10, 2010, we issued, through a private placement, $500 million aggregate principal amount of 9.125% senior notes

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

due December 2018. The notes require semi-annual interest payments on December 1 and June 1 of each year, which commenced on June 1, 2011. The notes will mature on December 1, 2018 and are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. The notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the indenture governing the notes) to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. We believe that we are in compliance with these covenants at June 30, 2011. In addition, upon the occurrence of a change of control (as defined in the indenture governing the notes), we will be required, unless certain conditions are met, to offer to repurchase the notes at a price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest, if any, to, but not including, the date of purchase. If we sell assets or experience an event of loss, we will be required under certain circumstances to offer to purchase the notes. At any time prior to December 1, 2013, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109.125% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, with the net cash proceeds that we raise in one or more equity offerings. In addition, prior to December 1, 2014, we may redeem the notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. Subsequent to December 1, 2014, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 104.563% in 2014 to 100% in 2016 and thereafter, plus accrued and unpaid interest.

Registration Rights Agreement

In connection with the private placement of the notes, we entered into a registration rights agreement with the initial purchasers in which we agreed to file a registration statement with the SEC to permit the holders to exchange or resell the notes. We must use commercially reasonable efforts to file a registration statement and to consummate an exchange offer within 365 days after the issuance of the notes, subject to certain suspension and other rights set forth in the registration rights agreement. Under certain circumstances, including our determination that we cannot complete an exchange offer, we are required to file a shelf registration statement for the resale of the notes and to cause such shelf registration statement to be declared effective as soon as reasonably practicable (but in no event later than the 365th day following the issuance of the notes) after the occurrence of such circumstances. Subject to certain suspension and other rights, in the event that the registration statement is not filed or declared effective within the time periods specified in the registration rights agreement, the exchange offer is not consummated within 365 days after the issuance of the notes, or the registration statement is filed and declared effective but thereafter ceases to be effective or is unusable for its intended purpose for a period in excess of 30 days without being succeeded immediately by a post-effective amendment that cures such failure, the agreement provides that additional interest will accrue on the principal amount of the notes at a rate of 0.25% per annum during the 90-day period immediately following any of these events and will increase by 0.25% per annum at the end of each subsequent 90-day period, but in no event will the penalty rate exceed 1.00% per annum, until the default is cured. There are no other alternative settlement methods and, other than the 1.00% per annum maximum penalty rate, the agreement contains no limit on the maximum potential amount of consideration that could be transferred in the event we do not meet the registration statement filing requirements. We currently intend to file a registration statement, have it declared effective and consummate any exchange offer within these time periods. Accordingly, we do not believe that payment of additional interest under the registration payment arrangement is probable and, therefore, no related liability has been recorded in the condensed consolidated financial statements.

Senior Subordinated Notes

6.75% Senior Subordinated Notes due April 2014.

Significant Terms

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 SEC. 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 June 30, 2011. Effective 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.

Senior Subordinated Notes

7.125% Senior Subordinated Notes due February 2016.

Significant Terms

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

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 June 30, 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.

Repurchases of Senior Subordinated Notes

We did not repurchase any of our senior subordinated or senior notes during the six months ended June 30, 2011. During the three and six months ended June 30, 2010, we purchased and retired $17.5 million and $33.0 million, respectively, principal amount of our senior subordinated notes. The total purchase price of the notes was $15.5 million and $28.9 million, respectively, resulting in a gain of $1.9 million and $3.9 million, respectively, net of associated deferred financing fees, which is recorded on our condensed consolidated statement of operations for the respective period. The transactions were funded by availability under our former bank credit facility.

Indentures

The indentures governing the senior and senior subordinated notes each include permitted investment clauses, the most restrictive of which limits the amount of permitted investments to a basket of $150 million, increased by a calculated amount including 50% of net income, as defined in the indentures, and net of previous permitted investments. Also, the indentures allow for the incurrence of additional indebtedness, if after giving effect to such incurrence, our coverage ratio (as defined in the indentures, essentially a ratio of consolidated EBITDA to fixed charges, including interest) for a trailing four quarter period on a pro forma basis would be at least 2.0 to 1.0. Such pro forma coverage ratio was above 2.0 to 1.0 at the dates in which these respective tranches of senior and senior subordinated notes were issued; and, at June 30, 2011, after giving effect to the repayment of certain indebtedness, as defined in the indentures, our coverage ratio was above 2.0 to 1.0.

Borgata Bank Credit Facility

Significant Terms

In August 2010, Marina District Finance Company, Inc. (“MDFC”) closed a $950 million debt financing, consisting of the establishment of a $150.0 million new payment priority secured revolving credit facility (the "Borgata bank credit facility") and the issuance of $800 million of aggregate principal amount of notes. MDFC is a wholly-owned subsidiary of MDDC, which develops and owns Borgata, and which is the guarantor of both the Borgata bank credit facility and the notes. The proceeds from the financing were used to (i) pay fees and expenses related to the financing; (ii) repay the former credit facility; and (iii) make a one-time distribution to Borgata's joint venture owners.

The Borgata bank credit facility provides for a $150.0 million payment priority secured revolving credit facility and matures in August 2014. The Borgata bank credit facility is guaranteed on a senior secured basis by MDDC and any future subsidiaries of MDDC and is secured by a first priority lien on substantially all of the assets of the Company, MDDC and any future subsidiaries of MDDC, subject to certain exceptions. The obligations under the Borgata bank credit facility will have priority in payment to payment of the notes.

Neither Boyd Gaming nor any of its wholly-owned subsidiaries is a guarantor of Borgata's new bank credit facility.

Outstanding borrowings under the Borgata bank credit facility accrue interest at a selected rate based upon either: (i) the highest of (a) the agent bank's quoted prime rate, (b) the one-month Eurodollar rate plus 1.00%, and (c) the daily federal funds rate plus 1.50%, and in any event not less than 1.50% (such highest rate, the “base rate”), or (ii) the Eurodollar rate, plus with respect to each of clause (i) and (ii) an applicable margin as provided in the Borgata bank credit facility. In addition, a commitment fee is incurred on the unused portion of the Borgata bank credit facility ranging from 0.50% per annum to 1.00% per annum.

At June 30, 2011, the outstanding balance under the Borgata bank credit facility was $20.0 million, leaving contractual availability of $130.0 million. The interest rate on the outstanding borrowings at June 30, 2011 was 4.4%.

Financial and Other Covenants

The Borgata bank credit facility contains certain financial and other covenants, including, without limitation, (i) establishing a minimum consolidated EBITDA (as defined in the Borgata bank credit facility) of $150 million over each trailing twelve-month period ending on the last day of each calendar quarter; (ii) establishing a minimum liquidity (as defined in the Borgata bank credit

36

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

facility) of $30 million as of the end of each calendar quarter; (iii) imposing limitations on MDFC's ability to incur additional debt; and (iv) imposing restrictions on Borgata's ability to pay dividends and make other distributions, make certain restricted payments, create liens, enter into transactions with affiliates, merge or consolidate, and engage in unrelated business activities.

Compliance with Financial Covenants

We believe that MDFC was in compliance with the Borgata bank credit facility covenants, including minimum consolidated EBITDA and minimum liquidity, which, at June 30, 2011, were $160.2 million and $130.4 million, respectively.

Borgata Senior Secured Notes

9.5% Senior Secured Notes Due 2015.

Significant Terms

In August 2010, MDFC issued, through a private placement, $400 million principal amount of 9.5% senior secured notes due October 2015, at an issue price of 98.943%, resulting in a discount at issuance of $4.1 million. The notes require semi-annual interest payments on April 15 and October 15, which commenced on April 15, 2011. The notes are guaranteed on a senior secured basis by MDDC and any future restricted subsidiaries of MDDC. The notes contain covenants that, among other things, limit MDFC's ability and the ability of MDDC to (i) incur additional indebtedness or liens; (ii) pay dividends or make distributions; (iii) make certain investments; (iv) sell or merge with other companies; and (v) enter into certain types of transactions. MDFC believes that it is in compliance with these covenants at June 30, 2011.

At any time prior to October 15, 2013, the notes may be redeemed at 100% of the principal amount thereof, plus a “make-whole premium” and accrued and unpaid interest. In addition, until October 15, 2013, MDFC may redeem up to 35% of the notes at a redemption price of 109.50% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from certain equity offerings. In addition, at any time prior to October 15, 2013, MDFC may redeem up to an aggregate of 10% of the notes in each twelve month period at a redemption price of 103% of the principal amount thereof plus accrued and unpaid interest, if any, to, but not including, the redemption date. On or after October 15, 2013, MDFC shall have the option to redeem the 2015 Notes, in whole or in part, at redemption prices (expressed as percentages of the principal amount) ranging from 104.75% beginning on October 15, 2013 to 102.375% beginning on October 15, 2014, plus accrued and unpaid interest to the applicable redemption date.

9.875% Senior Secured Notes Due 2018.

Significant Terms

In August 2010, MDFC issued, through a private placement, $400 million principal amount of 9.875% senior secured notes due August 2018, at an issue price of 99.315%, resulting in an original issue discount of $2.7 million. The notes require semi-annual interest payments on February 15 and August 15, which commenced on February 15, 2011. The notes are guaranteed on a senior secured basis by MDDC and any future restricted subsidiaries of MDDC. The notes contain covenants that, among other things, limit MDFC's ability and the ability of MDDC to (i) incur additional indebtedness or liens; (ii) pay dividends or make distributions; (iii) make certain investments; (iv) sell or merge with other companies; and (v) enter into certain types of transactions. MDFC believes that it is in compliance with these covenants at June 30, 2011.

At any time prior to August 15, 2014, the notes may be redeemed at 100% of the principal amount thereof, plus a “make-whole premium” and accrued and unpaid interest. In addition, until August 15, 2013, MDFC may redeem up to 35% of the notes at a redemption price of 109.875% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from certain equity offerings. In addition, at any time prior to August 15, 2013, MDFC may redeem up to an aggregate of 10% of the notes in each twelve month period at a redemption price of 103% of the principal amount thereof plus accrued and unpaid interest, if any, to, but not including, the redemption date. On or after August 15, 2013, MDFC shall have the option to redeem the 2018 Notes, in whole or in part, at redemption prices (expressed as percentages of the principal amount) ranging from 104.938% beginning on August 15, 2014, to 102.469% beginning on August 15, 2015, to 100% beginning on August 15, 2016 and thereafter, plus accrued and unpaid interest, to the applicable redemption date.

The original issue discount has been recorded as an offset to the principal amount of these notes and is being accreted to interest expense over the term of the notes using the effective interest method. The effective interest rate on the 9.50% notes due 2015 notes is 10.2% and on the 9.875% notes due 2018 is 10.3%.

Registration Rights Agreement

Pursuant to the registration rights agreement entered into which the initial purchasers of these senior secured notes at the time of the private placement, on May 27, 2011, MDFC commenced an offer to exchange all of the outstanding $400.0 million aggregate

37

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

principal amount of 9.5% Senior Secured Notes due 2015 and $400.0 million aggregate principal amount of 9.875% Senior Secured Notes due 2018 for new 9.5% Senior Secured Notes due 2015 and 9.875% Senior Secured Notes due 2018, respectively, that have been registered under the Securities Act of 1933. On June 28, 2011, the expiration date of the exchange offer, $396.4 million of the 9.5% Senior Secured Notes due 2015 and $400.0 of the 9.875% Senior Secured Notes due 2018 were validly tendered and accepted for exchange. This amount represents approximately 99.1% of the 9.5% Senior Secured Notes due 2015 and 100% of the 9.875% Senior Secured Notes due 2018, respectively.

NOTE 9. DERIVATIVE INSTRUMENTS

We utilize derivative instruments to manage interest rate risk.

Derivatives that are not designated as hedges for accounting purposes must be adjusted to fair value through income. We designated current interest rate swaps as cash flow hedges through September 30, 2010, and measured 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.

Interest Rate Swap Agreements

The Company has entered into floating-to-fixed interest rate swap arrangements in order to manage interest rate risk relating to its Amended Credit Facility. We were a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500 million, whereby we received payments based upon the three-month LIBOR and made payments based upon a stipulated fixed rate. These interest rate swap agreements modified the Company's exposure to interest rate risk by synthetically converting a portion of the Company's floating-rate debt to a fixed rate. The interest rate swap agreements terminated on June 30, 2011, however, the following presents the activity related to our accounting for the interest rate swaps during the periods in which they were outstanding.

The following table presents the historical fair value of the interest rate swaps recorded in the accompanying condensed consolidated balance sheets as of December 31, 2010, the balance of which are included in other long-term liabilities.

	Notional				December 31,
Effective Date	Amount		Fixed Rate		2010		Maturity Date
September 28, 2007	$	100,000	5.13	%	$	2,374	June 30, 2011
September 28, 2007	200,000		5.14	%	4,751		June 30, 2011
June 30, 2008	200,000		5.13	%	4,746		June 30, 2011
Totals	$	500,000			$	11,871

Hedge Accounting

These derivative instruments were accounted for as cash flow hedges through September 30, 2010. Accounting for cash flow hedging requires determining a division of hedge results deemed effective and deemed ineffective. However, most of the Company's hedges were designed in such a way so as to perfectly offset specifically-defined interest payments, such that no ineffectiveness has occurred, nor would any ineffectiveness occur, as long as the forecasted cash flows of the designated hedged items and the associated swap contracts remain unchanged.

However, on October 1, 2010, in anticipation of the refinancing of our former bank credit facility, we de-designated all of our interest rate swap agreements as cash flow hedges. Concurrent with the de-designation of the hedging relationship, hedge accounting was suspended and the amount remaining in accumulated other comprehensive loss associated with this cash flow hedging relationship was frozen. This amount is being amortized into interest expense over the respective remaining term of the associated debt. Prospectively, all changes in the fair value of these interest rate swaps will be recognized immediately in earnings.

Fair Value

Fair value approximates the amount we would pay if these contracts were settled at the respective valuation dates. Fair value is

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

estimated based upon current, and predictions of future, interest rate levels along a yield curve, the remaining duration of the instruments and other market conditions, and therefore, is subject to significant estimation and a high degree of variability and fluctuation between periods. The fair value is adjusted, to reflect the impact of credit ratings of the counterparties or the Company, as applicable. These adjustments resulted in a reduction in the fair values as compared to their settlement values.

Credit risk relating to derivative counterparties is mitigated by using multiple, highly rated counterparties, and the credit quality of each is monitored on an ongoing basis.

The fair values of our derivative instruments at December 31, 2010 included approximately $0.2 million 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.

Classification of Changes in Fair Value

The effect of derivative instruments on the condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010 was as follows (in thousands):

Derivatives in a Cash Flow Hedging Relationship - Interest Rate Swap Contracts	Gain  Recognized in  OCI on Derivative  (Effective Portion)		Location of Gain  (Loss) Reclassified  from AOCI  into Income  (Ineffective Portion)	Gain (Loss)  Reclassified  from AOCI  into Income  (Ineffective Portion)
Three Months Ended
June 30, 2011	$	—	Interest expense	$	(6,063	)
June 30, 2010	4,869		Interest expense	554
Six Months Ended
June 30, 2011	—		Interest expense	(11,824		)
June 30, 2010	6,818		Interest expense	1,066

Derivatives Not Designated as Hedging Instruments - Interest Rate Swap Contracts	Location of Loss Recognized  in Income on Derivative  (Ineffective Portion)	Loss Recognized in Income on Derivative  (Ineffective Portion)
Three Months Ended June 30, 2011	Fair value adjustment of derivative instruments	$	48
Six Months Ended June 30, 2011	Fair value adjustment of derivative instruments	$	265

The net effect of our floating-to-fixed interest rate swaps resulted in an increase in interest expense of $6.1 million and $5.6 million for the three months ended June 30, 2011 and 2010, respectively, and an increase in interest expense of $11.8 million and $11.2 million for the six months ended June 30, 2011 and 2010, respectively, as compared to the contractual rate of the underlying hedged debt, for these periods.

During the three and six months ended June 30, 2011, due to the de-designation of our interest rate swap agreements as hedges during 2010, we recognized $0.0 million and $0.3 million, respectively, as a loss on the change in the fair value of these swaps. In addition, the Company amortized $6.1 million and accreted $0.6 million during the three months ended June 30, 2011 and 2010, respectively, and amortized $11.8 million and accreted $1.1 million during the six months ended June 30, 2011 and 2010, respectively, in OCI related to these, and other derivatives that were previously de-designated as hedging instruments.

NOTE 10.    COMMITMENTS AND CONTINGENCIES

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Commitments

There have been no material changes to our commitments described under Note 12, Commitments and Contingencies, in our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on March 15, 2011.

Contingencies

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 14, 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 $17.5 million to $19.9 million, including interest. In late 2009, the Department audited and denied our refund claim and subsequently issued a $12.3 million sales tax deficiency assessment, plus interest of $7.5 million. We appealed both the denial of the refund claim as well as the deficiency assessment in a hearing before the Nevada Administrative Law Judge in September 2010. In April 2011, the judge issued a split decision, granting a refund on employee meals and applying a sales tax measure on complimentary meals; however, the ruling barred retroactive application of the sales tax measure to all years included in the refund claim period, effectively overturning the Department's 2009 deficiency assessment. Both we and the Department appealed the decision, with the exception of the portion related to the deficiency assessment, to the Nevada State Tax Commission (the "Commission"). Our Appeals hearing is scheduled for August 8, 2011. The Department did not appeal the Judge's decision overturning the 2009 deficiency assessment and therefore, the ruling on the deficiency assessment is final and non-appealable. Due to uncertainty surrounding the ultimate resolution of the Commission appeal, as well as subsequent appeals to higher levels of the state judicial system, we will not record any gain until both we and the Department have exhausted all appeal options and a final, non-appealable decision has been rendered. For periods subsequent to May 2008, we have not collected, remitted or accrued a liability for sales tax on complimentary and employee meals at our Nevada casino properties, as we do not believe it is 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 provisional bills received in 2007 through 2011, all of which were based on the 2006 valuation notice. In March 2011, we reached a settlement with the assessor, reducing the valuation by an additional $96.0 million and $74.0 million for the 2006 and 2007 tax years, respectively. As a result of the agreement reached on the 2006 and 2007 valuations, we have revised our accrual for years 2008 through 2011 to reflect the expected carryforward effect of the reductions received in the prior year settlements. Such reduction resulted in the reversal of previously accrued property tax expense of approximately $5.9 million during the six months ended June 30, 2011. We are currently in negotiations related to the 2008 and 2009 years but have not received valuation notices for years 2008 through 2011. We believe the assessment for the period from January 1, 2008 through June 30, 2011 could result in a property tax assessment ranging between $14.0 million and $18.0 million. We have accrued, net of the payments discussed above, approximately $18.0 million of property tax liability as of June 30, 2011, 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 assessment notices for the period January 1, 2008 through June 30, 2011, which have not been received as of June 30, 2011, could result in further adjustment to our estimated property tax liability at Blue Chip.

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

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

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 issued a ruling denying the exceptions on August 9, 2010. Copeland's counsel indicated a desire to move forward with the litigation and requested that the parties respond to outstanding discovery. Subsequently, on August 11, 2010, Robert J. Guidry, the co-defendant, filed a third party demand against the U.S. Attorney's Office seeking enforcement of Guidry's plea agreement which would limit Guidry's exposure in the case. On September 9, 2010, the U.S. Attorney's Office removed the suit to the U.S. District Court, Middle District of Louisiana. Pending before the District Court are a motion to dismiss for failing to state a cause of action filed by Guidry, asserting the same arguments he tried in state court, which the Company joined, and a motion to dismiss for lack of subject matter jurisdiction filed by the U.S. Attorney, which may result in the case being remanded to state court. The U.S. District Court heard the motions on March 16, 2011. A ruling has not yet been issued. On April 1, 2011, the U.S. Attorney's Office moved for summary judgment, maintaining its jurisdictional argument as well as seeking substantive relief. 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 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.

NOTE 11.    STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS

Share Repurchase Program

We have in the past, and may in the future, 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. 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 six months ended June 30, 2011 or 2010, we did not repurchase any shares of our common stock. We are currently authorized to repurchase up to an additional $92.1 million in shares of our common stock under the share repurchase program.

Dividends

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Dividends are declared at our Board of Director's discretion. We are subject to certain limitations regarding payment of dividends, such as restricted payment limitations related to our outstanding notes and our bank credit facility. In July 2008, our Board of Directors suspended the quarterly dividend for the current and future periods; therefore, we did not declare a dividend during the six months ended June 30, 2011 or 2010.

Share-Based Compensation

We account for share-based awards exchanged for employee services in accordance with the authoritative accounting guidance for share-based payments. Under the guidance, share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, over the employee's requisite service period.

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In thousands)
Gaming	$	52	$	74	$	104	$	148
Food and beverage	10		14		20		28
Room	4		7		9		13
Selling, general and administrative	266		422		531		845
Corporate expense	1,808		2,355		5,289		4,694
Total shared-based compensation expense	$	2,140	$	2,872	$	5,953	$	5,728

NOTE 12.    ACCUMULATED OTHER COMPREHENSIVE LOSS

Comprehensive income includes net income and all other non-stockholder changes in equity, or other comprehensive income. Components of the Company's comprehensive income are reported in the accompanying condensed consolidated statements of stockholders' equity. The cumulative balance of other comprehensive income consists solely of fair value adjustments related to hedged derivative instruments.

A portion of the net derivative instruments market adjustment included in accumulated other comprehensive loss, net, at June 30, 2011 relates to certain derivative instruments that we de-designated as cash flow hedges.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	(In thousands)
Fair value adjustment of derivative instruments	$	6,063		$	4,869		$	11,824		$	6,818
Tax effect	(2,177		)	(1,724		)	(4,230		)	(2,408		)
Fair value adjustment of derivative instruments, net of tax	$	3,886		$	3,145		$	7,594		$	4,410

NOTE 13.    NONCONTROLLING INTEREST

Noncontrolling interest represents: (i) the 50% interest in Borgata, held by the Divestiture Trust for the economic benefit of MGM, which was initially recorded at fair value at the date of the effective change in control, on March 24, 2010; and (ii) all 100% of the members' equity interest in LVE, the variable interest entity which was consolidated in our financial statements effective January 1, 2010, but in which we hold no equity interest. Pursuant to the authoritative accounting guidance for noncontrolling interests, a noncontrolling interest continues to be attributed its share of losses even if that attribution results in a deficit

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

noncontrolling interest balance, as is the case with LVE, as presented below.

Changes in the noncontrolling interest during the six months ended June 30, 2011 are as follows:

	Borgata			LVE			Total
	(In thousands)
Six Months Ended June 30, 2011
Beginning balance, January 1, 2011	$	219,256		$	(13,718	)	$	205,538
Attributable net loss	(4,527		)	(955		)	(5,482		)
Comprehensive loss	—			(808		)	(808		)
Ending Balance, June 30, 2011	$	214,729		$	(15,481	)	$	199,248

LVE

Comprehensive Income

LVE has entered into interest rate derivative contracts in order to hedge exposure to increasing interest rates, and the impact of those rates on the cash flows of its variable-rate debt. LVE's active interest rate swaps are as follows (notional amount in thousands):

Effective Date	Notional Amount		Fixed Rate		Maturity Date
Derivatives Designated as Hedging Instruments:
December 21, 2007	$	131,986	4.59	%	November 1, 2013
Derivatives Not Designated as Hedging Instruments:
December 21, 2007	100,000		3.42	%	November 1, 2013
Totals	$	231,986

The fair value of these derivatives was $18.2 million at June 30, 2011, which represents the amount LVE would have to pay the counterparty to terminate these contracts as of such date.

At inception, these interest rate derivatives were designated as cash flow hedges and determined to be highly effective. The differential to be paid or received as a result of these swaps is accrued as interest rates change and is recognized as an adjustment to interest expense. The change in fair value of the effective portion of these derivative has been recorded in accumulated other comprehensive loss. During the three and six months ended June 30, 2011, LVE recognized $2.1 million and $0.8 million, respectively, in comprehensive loss related to the changes in the fair value of the effective portion of these hedges.

Prior to January 1, 2010, the date LVE is first reflected in our financial condition and results of operations, hedge accounting was discontinued on the interest rate swap related to the taxable debt because it was no longer expected to be highly effective in hedging the exposure to increased interest rates and the impact of those rates on cash flows. The ineffective portion of the swap caused the variable-rate debt to increase at a slower pace than the contractual increases in notional amount of the swap.

NOTE 14.     FAIR VALUE MEASUREMENTS

We have adopted the authoritative accounting guidance for fair value measurements, which 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

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

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.

As required by the guidance for fair value measurements, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.

Balances Measured at Fair Value

The following tables show the fair values of certain of our financial instruments.

	June 30, 2011
	Balance		Level 1		Level 2		Level 3
			(In thousands)
Assets
Cash and cash equivalents	$	175,780	$	175,780	$	—	$	—

	December 31, 2010
	Balance		Level 1		Level 2		Level 3
			(In thousands)
Assets
Cash and cash equivalents	$	145,623	$	145,623	$	—	$	—
Liabilities
Derivative instruments	$	11,871	$	—	$	11,871	$	—

The fair value of our cash and cash equivalents, classified in the fair value hierarchy as Level 1, is based on statements received from our banks at June 30, 2011 and December 31, 2010.

Our derivative instruments are classified in the fair value hierarchy as Level 2 as the LIBOR swap rate is observable at commonly quoted intervals for the full term of the interest rate swaps. See Note 9, Derivative Instruments for further discussion regarding the fair valuation of our interest rate swaps.

Balances Disclosed at Fair Value

The following table provides the fair value measurement information about our long-term debt at June 30, 2011 and December 31, 2010.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	June 30, 2011
	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
	(In thousands)
Bank credit facility	$	1,425,000	$	1,425,000	$	1,332,663	Level 2
9.125% Senior Notes due 2018	500,000		490,825		513,750		Level 1
6.75% Senior Subordinated Notes due 2014	215,668		215,668		214,320		Level 1
7.125% Senior Subordinated Notes due 2016	240,750		240,750		225,660		Level 1
Borgata bank credit facility	20,000		20,000		20,000		Level 2
Borgata 9.50% Senior Secured Notes due 2015	400,000		387,798		416,000		Level 1
Borgata 9.875% Senior Secured Notes due 2018	400,000		388,298		411,000		Level 1
Other	11,421		11,421		10,850		Level 3
Total long-term debt, including current maturities	$	3,212,839	$	3,179,760	$	3,144,243

	December 31, 2010
	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
	(In thousands)
Bank credit facility	$	1,425,000	$	1,425,000	$	1,346,625	Level 2
9.125% Senior Notes due 2018	500,000		490,206		487,755		Level 1
6.75% Senior Subordinated Notes due 2014	215,668		215,668		212,163		Level 1
7.125% Senior Subordinated Notes due 2016	240,750		240,750		217,879		Level 1
Borgata bank credit facility	60,900		60,900		60,900		Level 2
Borgata 9.50% Senior Secured Notes due 2015	400,000		386,712		375,111		Level 1
Borgata 9.875% Senior Secured Notes due 2018	400,000		387,758		379,518		Level 1
Other	11,761		11,761		11,173		Level 3
Total long-term debt, including current maturities	$	3,254,079	$	3,218,755	$	3,091,124

The estimated fair value of the Amended Credit Facility is based on a relative value analysis performed on or about June 30, 2011 and December 31, 2010, respectively. The estimated fair value of Borgata's bank credit facility at June 30, 2011 and December 31, 2010 approximates its carrying value due to the short-term nature and variable repricing of the underlying Eurodollar loans comprising the Borgata bank credit facility. The estimated fair values of our senior subordinated and senior notes and Borgata's senior secured notes are based on quoted market prices as of June 30, 2011 and December 31, 2010, respectively. 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.

There were no transfers between Level 1 and Level 2 measurements during the six months ended June 30, 2011 or the year ended December 31, 2010.

Fair Value of Non-Recourse Obligations of Variable Interest Entity

At June 30, 2011 and December 31, 2010, the carrying value of LVE's long-term debt approximates its fair value due to the prevailing interest rates on the debt, which are comparable to market.

NOTE 15.    WRITE-DOWNS AND OTHER ITEMS, NET

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

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011			2010		2011			2010
	In thousands
Impairment of trademark	$	—		$	—	$	5,000		$	—
Measurement period adjustments	(103		)	—		(473		)	—
Asset write-downs	852			12		929			12
Acquisition related expenses	370			1,979		370			3,580
Tunica flood expenses, net of recoveries	1,143			—		1,143			—
Total write-downs and other items, net	$	2,262		$	1,991	$	6,969		$	3,592

Impairment of Trademark

As discussed in Note 5, Intangible Assets, during the six months ended June 30, 2011,we recorded a $5.0 million impairment to the trademark, based upon the performance of an interim impairment test in connection with the valuation of Borgata.

Measurement Period Adjustments

In connection with the valuation procedures we performed on Borgata, we recorded measurement adjustments of $0.1 million and $0.5 million during the three and six months ended June 30, 2011, which were primarily comprised of a $0.3 million bargain purchase gain.

Asset Write-Downs

During the three months ended June 30, 2011 and 2010, we recognized a loss of $0.9 million and $0.0 million in connection with the disposal of certain property and equipment in the ordinary course of business. During the six months ended June 30, 2011, we recognized a loss of $0.9 million and $0.0 million in connection with the disposal of certain property and equipment in the ordinary course of business.

Acquisition Related Expenses

During the three months ended June 30, 2011 and 2010, we recorded $0.4 million and $2.0 million of expenses related to evaluating various acquisition possibilities and other business development activities. During the six months ended June 30, 2011 and 2010, we recorded $0.4 million and $3.6 million of expenses related to evaluating various acquisition possibilities and other business development activities.

Tunica Flood Expenses, Net of Recoveries

Due to flooding of the Mississippi River and temporary closure of the property in May 2011, during the three and six months ended June 30, 2011, we recorded $1.1 million of Tunica flood expenses, net of recoveries.

NOTE 16.    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) Atlantic City. The table below lists the classification of each of our properties.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Las Vegas Locals
Gold Coast Hotel and Casino	Las Vegas, Nevada
The Orleans Hotel and Casino	Las Vegas, Nevada
Sam's Town Hotel and Gambling Hall	Las Vegas, Nevada
Suncoast Hotel and Casino	Las Vegas, Nevada
Eldorado Casino	Henderson, Nevada
Jokers Wild Casino	Henderson, Nevada
Downtown Las Vegas
California Hotel and Casino	Las Vegas, Nevada
Fremont Hotel and Casino	Las Vegas, Nevada
Main Street Station Casino, Brewery and Hotel	Las Vegas, Nevada
Midwest and South
Sam's Town Hotel and Gambling Hall	Tunica, Mississippi
Par-A-Dice Hotel Casino	East Peoria, Illinois
Blue Chip Casino, Hotel & Spa	Michigan City, Indiana
Treasure Chest Casino	Kenner, Louisiana
Delta Downs Racetrack Casino & Hotel	Vinton, Louisiana
Sam's Town Hotel and Casino	Shreveport, Louisiana
Atlantic City
Borgata Hotel Casino & Spa	Atlantic City, New Jersey

Results of Operations - Adjusted EBITDA

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 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.

Results for Downtown Las Vegas include the results of our travel agency and captive insurance company. 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.

We reclassify 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. 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. Other operating costs and expenses include Property EBITDA from Dania Jai-Alai, deferred rent, and share-based compensation expense charged to our Reportable Segments. Interest expense is net of interest income and amounts capitalized.

The following table sets forth, for the periods indicated, certain operating data for our Reportable Segments, and reconciles Adjusted EBITDA to operating income (loss), as reported in our accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In thousands)
Gross Revenues
Las Vegas Locals	$	167,346	$	169,658	$	338,792	$	343,555
Downtown Las Vegas	62,911		61,007		124,538		120,720
Midwest and South	203,526		205,466		410,616		413,522
Atlantic City	239,609		238,924		461,525		260,927
Reportable Segment Gross Revenues	673,392		675,055		1,335,471		1,138,724
Other	1,485		1,581		3,040		3,555
Gross revenues	$	674,877	$	676,636	$	1,338,511	$	1,142,279
Reportable Segment Adjusted EBITDA
Las Vegas Locals	$	38,570	$	36,810	$	78,213	$	77,223
Downtown Las Vegas	9,366		9,310		18,370		17,682
Midwest and South	42,276		35,590		83,487		74,869
Atlantic City	38,657		42,960		70,339		56,043
Reportable Segment Adjusted EBITDA	$	128,869	$	124,670	$	250,409	$	225,817
Other operating costs and expenses
Depreciation and amortization	$	48,488	$	55,408	$	99,072	$	95,454
Corporate expense	12,264		13,526		25,544		25,615
Preopening expenses	1,741		1,243		3,572		2,306
Our share of Borgata's other items and write-downs, net	—		—		—		34
Write-downs and other items, net	2,262		1,991		6,969		3,592
Other	2,124		2,826		5,158		5,110
Total other operating costs and expenses	66,879		74,994		140,315		132,111
Operating income	$	61,990	$	49,676	$	110,094	$	93,706

Operating Income from Borgata

The following table reconciles our operating income from Borgata, as reported in our condensed consolidated statements of operations, to the Atlantic City Reportable Segment Adjusted EBITDA, as reported above:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	In thousands
Operating income from Borgata	$	—	$	—	$	—	$	8,146
Our share of Borgata's write-downs and other items, net	—		—		—		34
Our share of Borgata's operating income before net amortization, preopening and other items	—		—		—		8,180
Borgata EBITDA(1)	38,657		42,960		70,339		47,863
Adjusted EBITDA, Atlantic City	$	38,657	$	42,960	$	70,339	$	56,043

(1) As discussed above, Borgata's results of operations for the three and six months ended June 30, 2011 and for the period from March 24 through June 30, 2010 are included in our condensed consolidated statements of operations for the three and six

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

months ended June 30, 2011 and 2010, respectively.

Total Assets

The Company's total assets, by Reportable Segment, consisted of the following amounts at June 30, 2011 and December 31, 2010:

	June 30, 2011		December 31, 2010
	(In thousands)
Assets
Las Vegas Locals	$	1,253,016	$	1,284,160
Downtown Las Vegas	133,977		136,868
Midwest and South	1,090,603		1,117,959
Atlantic City	1,413,434		1,433,265
Total Reportable Segment assets	3,891,030		3,972,252
Corporate	1,457,118		1,428,763
Other	288,387		288,274
Total assets	$	5,636,535	$	5,689,289

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

NOTE 17.    CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In contemplation of the registration of our 9.125% Senior Notes due 2018 under the Securities Act of 1933, separate condensed consolidating financial information for our subsidiary guarantors and non-guarantors of this debt is presented below. The non-guarantors primarily represent special purpose entities, tax holding companies, our less significant operating subsidiaries and our less than wholly-owned subsidiaries.

The tables below present the condensed consolidating balance sheets as of June 30, 2011 and December 31, 2010 and the condensed consolidating statements of operations for the three and six month periods ended June 30, 2011 and 2010 and the condensed consolidating statements of cash flows for the six months ended June 30, 2011 and 2010.

Condensed Consolidating Balance Sheets

	June 30, 2011
	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
					(In thousands)
Assets
Cash and cash equivalents	$	76,513	$	74,481	$	3,926		$	20,860		$	—		$	175,780
Other current assets	42,220		22,711		18,673			45,751			—			129,355
Property and equipment, net	107,365		1,895,308		76,698			1,236,221			—			3,315,592
Assets held for development	—		923,997					195,941			—			1,119,938
Investments in subsidiaries	3,715,764		334,221		32			4,570			(4,054,587		)	—
Intercompany receivable	—		2,063,821		66,146						(2,129,967		)	—
Other assets, net	37,161		19,908		2,966			94,937			—			154,972
Intangible assets, net	—		460,193		—			67,129			—			527,322
Goodwill, net	—		212,794		782			—			—			213,576
Total assets	$	3,979,023	$	6,007,434	$	169,223		$	1,665,409		$	(6,184,554	)	$	5,636,535
Liabilities and Stockholders' Equity
Current liabilities	$	41,040	$	164,305	$	17,526		$	106,704		$	—		$	329,575
Intercompany payable	349,820		1,386,606		255,615			—			(1,992,041		)	—
Current maturities of long-term debt	356,002		709		—			—			—			356,711
Non-recourse obligations	—		—		—			248,128			—			248,128
Long-term debt, net of current maturities	2,016,241		10,712		—			796,096			—			2,823,049
Other long-term liabilities	19,959		403,406		1,538			58,960			—			483,863
Preferred stock	—		—		—			—			—			—
Common stock	863		31,128		32			—			(31,160		)	863
Additional paid-in capital	640,661		2,972,069		41,724			476,733			(3,490,526		)	640,661
Retained earnings (deficit)	554,437		1,038,499		(147,212		)	(21,212		)	(870,075		)	554,437
Total Boyd Gaming Corporation stockholders' equity (deficit)	1,195,961		4,041,696		(105,456		)	455,521			(4,391,761		)	1,195,961
Noncontrolling interest	—		—		—			—			199,248			199,248
Total stockholders' equity (deficit)	1,195,961		4,041,696		(105,456		)	455,521			(4,192,513		)	1,395,209
Total liabilities and stockholders' equity	$	3,979,023	$	6,007,434	$	169,223		$	1,665,409		$	(6,184,554	)	$	5,636,535

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Condensed Consolidating Balance Sheets, continued

	December 31, 2010
	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)		Eliminations			Consolidated
						(In thousands)
Assets
Cash and cash equivalents	$	11,231		$	88,282	$	3,679		$	42,431	$	—		$	145,623
Other current assets	10,395			61,829		15,246			46,546		—			134,016
Property and equipment, net	111,921			1,939,834		77,949			1,253,667		—			3,383,371
Assets held for development	—			923,038		—			196,365		—			1,119,403
Investments in subsidiaries	3,373,486			424,707		—			5,185		(3,803,378		)	—
Intercompany receivable	50,824			—		69,931					(120,755		)	—
Other assets, net	73,420			46,885		2,979			89,836		(59,534		)	153,586
Intangible assets, net	—			460,714		—			79,000		—			539,714
Goodwill, net	—			212,794		782			—		—			213,576
Total assets	$	3,631,277		$	4,158,083	$	170,566		$	1,713,030	$	(3,983,667	)	$	5,689,289
Liabilities and Stockholders' Equity
Current liabilities	$	39,663		$	175,870	$	17,462		$	109,161	$	—		$	342,156
Intercompany payable	—			472,795		246,144					(718,939		)	—
Current maturities of long-term debt	25,000			690		—			—		—			25,690
Non-recourse obligations	—			—		—			243,059		—			243,059
Long-term debt, net of current maturities	2,346,623			11,072		—			835,370		—			3,193,065
Other long-term liabilities	30,786			399,148		1,538			59,104		—			490,576
Preferred stock	—			—		—			—		—			—
Common stock	862			30,298		32			—		(30,330		)	862
Additional paid-in capital	635,028			2,320,477		41,724			421,472		(2,783,673		)	635,028
Retained earnings (deficit)	560,909			747,734		(136,334		)	44,864		(656,264		)	560,909
Accumulated other comprehensive loss	(7,594		)	—		—			—		—			(7,594		)
Total Boyd Gaming Corporation stockholders' equity (deficit)	1,189,205			3,098,509		(94,578		)	466,336		(3,470,267		)	1,189,205
Noncontrolling interest	—			—		—			—		205,538			205,538
Total stockholders' equity (deficit)	1,189,205			3,098,509		(94,578		)	466,336		(3,264,729		)	1,394,743
Total liabilities and stockholders' equity	$	3,631,277		$	4,158,084	$	170,566		$	1,713,030	$	(3,983,668	)	$	5,689,289

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Condensed Consolidating Statements of Operations

	Three months ended June 30, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Net revenues	$	38,350		$	377,443		$	14,204		$	185,525		$	(41,119	)	$	574,403
Costs and expenses
Operating	—			203,551			14,537			96,014			—			314,102
Selling, general and administrative	—			62,073			2,011			32,699			—			96,783
Maintenance and utilities	—			20,316			1,038			15,419			—			36,773
Depreciation and amortization	2,004			29,204			732			16,548			—			48,488
Corporate expense	22,511			11,611			653			—			(22,511		)	12,264
Preopening expenses	240			(3,007		)	4,416			92			—			1,741
Write-downs and other items, net	397			1,116			—			749			—			2,262
Total costs and expenses	25,152			324,864			23,387			161,521			(22,511		)	512,413
Equity in earnings of subsidiaries	15,397			(2,842		)	—			—			(12,555		)	—
Operating income	28,595			49,737			(9,183		)	24,004			(31,163		)	61,990
Other expense (income)
Interest expense, net	39,847			198			(6		)	26,635			—			66,674
Fair value adjustment of derivative instruments	48			—			—			—			—			48
Total other expense, net	39,895			198			(6		)	26,635			—			66,722
Income (loss) before income taxes	(11,300		)	49,539			(9,177		)	(2,631		)	(31,163		)	(4,732		)
Income taxes	8,349			(10,691		)	1,611			(180		)				(911		)
Net income (loss)	(2,951		)	38,848			(7,566		)	(2,811		)	(31,163		)	(5,643		)
Net loss attributable to controlling interest	—			—			—			—			2,692			2,692
Net income (loss) attributable to Boyd Gaming Corporation	$	(2,951	)	$	38,848		$	(7,566	)	$	(2,811	)	$	(28,471	)	$	(2,951	)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Condensed Consolidating Statements of Operations, continued

	Three months ended June 30, 2010
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Net revenues	$	34,310		$	375,466		$	16,088		$	186,892		$	(34,310	)	$	578,446
Costs and expenses
Operating	—			208,469			14,052			96,445			—			318,966
Selling, general and administrative	—			65,693			2,132			31,841			—			99,666
Maintenance and utilities	—			21,257			1,067			15,646			—			37,970
Depreciation and amortization	3,134			32,927			1,111			18,236			—			55,408
Corporate expense	24,368			(14,055		)	3,213			—			—			13,526
Preopening expenses	76			(98		)	1,265			—			—			1,243
Write-downs and other items, net	1,979			—			—			12			—			1,991
Total costs and expenses	29,557			314,193			22,840			162,180			—			528,770
Equity in earnings of subsidiaries	18,106			8,299			—			—			(26,405		)	—
Operating income	22,859			69,572			(6,752		)	24,712			(60,715		)	49,676
Other expense (income)
Interest expense, net	28,879			183			—			5,588			—			34,650
Gain on early retirements of debt	(1,912		)	—			—			—			—			(1,912		)
Total other expense, net	26,967			183			—			5,588			—			32,738
Income (loss) before income taxes	(4,108		)	69,389			(6,752		)	19,124			(60,715		)	16,938
Income taxes	7,490			(11,581		)	1,016			(1,837		)	—			(4,912		)
Net income (loss)	3,382			57,808			(5,736		)	17,287			(60,715		)	12,026
Net loss attributable to noncontrolling interest	—			—			—			—			(8,644		)	(8,644		)
Net income (loss) attributable to Boyd Gaming Corporation	$	3,382		$	57,808		$	(5,736	)	$	17,287		$	(69,359	)	$	3,382

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Condensed Consolidating Statements of Operations, continued

	Six months ended June 30, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Net revenues	$	76,700		$	758,920		$	28,583		$	357,256		$	(82,110	)	$	1,139,349
Costs and expenses
Operating	—			411,161			29,053			187,125			—			627,339
Selling, general and administrative	—			124,750			4,275			63,546			—			192,571
Maintenance and utilities	—			40,484			1,937			31,767			—			74,188
Depreciation and amortization	4,028			58,101			1,529			35,414			—			99,072
Corporate expense	48,685			—			1,333			—			(24,474		)	25,544
Preopening expenses	495			(699		)	9,094			92			(5,410		)	3,572
Write-downs and other items, net	369			835			—			5,765			—			6,969
Total costs and expenses	53,577			634,632			47,221			323,709			(29,884		)	1,029,255
Equity in earnings of subsidiaries	30,180			(5,265		)	—			—			(24,915		)	—
Operating income	53,303			119,023			(18,638		)	33,547			(77,141		)	110,094
Other expense (income)
Interest expense, net	79,570			344			—			44,046			—			123,960
Fair value adjustment of derivative instruments	265			—			—			—			—			265
Loss on early retirements of debt	20			—			—			—			—			20
Total other expense, net	79,855			344			—			44,046			—			124,245
Income (loss) before income taxes	(26,552		)	118,679			(18,638		)	(10,499		)	(77,141		)	(14,151		)
Income taxes	20,080			(21,595		)	3,221			491						2,197
Net income (loss)	(6,472		)	97,084			(15,417		)	(10,008		)	(77,141		)	(11,954		)
Net loss attributable to noncontrolling interest	—			—			—			—			5,482			5,482
Net income (loss) attributable to Boyd Gaming Corporation	$	(6,472	)	$	97,084		$	(15,417	)	$	(10,008	)	$	(71,659	)	$	(6,472	)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Condensed Consolidating Statements of Operations, continued

	Six months ended June 30, 2010
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Net revenues	$	69,826		$	755,808		$	34,105		$	203,668		$	(69,826	)	$	993,581
Costs and expenses
Operating	—			416,540			28,078			104,383			—			549,001
Selling, general and administrative	—			132,150			4,494			33,300			—			169,944
Maintenance and utilities	—			41,901			2,086			18,122			—			62,109
Depreciation and amortization	6,416			66,811			2,366			19,861			—			95,454
Corporate expense	47,268			—			6,785			—			(28,438		)	25,615
Preopening expenses	156			(74		)	2,224			—			—			2,306
Write-downs and other items, net	3,580			—			—			12			—			3,592
Total costs and expenses	57,420			657,328			46,033			175,678			(28,438		)	908,021
Equity in earnings of subsidiaries	40,830			14,165			—			—			(46,849		)	8,146
Operating income	53,236			112,645			(11,928		)	27,990			(88,237		)	93,706
Other expense (income)
Interest expense, net	57,213			368			—			6,072			—			63,653
Gain on early retirements of debt	(3,949		)	—			—			—			—			(3,949		)
Other non-operating expenses, net	3,133			—			—			—			—			3,133
Total other expense, net	56,397			368			—			6,072			—			62,837
Income (loss) before income taxes	(3,161		)	112,277			(11,928		)	21,918			(88,237		)	30,869
Income taxes	14,978			(24,016		)	2,014			(2,137		)	—			(9,161		)
Net income (loss)	11,817			88,261			(9,914		)	19,781			(88,237		)	21,708
Noncontrolling interest	—			—			—			—			(9,891		)	(9,891		)
Net income (loss) attributable to Boyd Gaming Corporation	$	11,817		$	88,261		$	(9,914	)	$	19,781		$	(98,128	)	$	11,817

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Condensed Consolidating Statements of Cash Flows

	Six months ended June 30, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations		Consolidated
							(In thousands)
Cash flows from operating activities
Net cash from operating activities	$	64,350		$	7,102		$	464		$	25,652		$	—	$	97,568
Cash flows from investing activities
Capital expenditures	—			(20,563		)	(217		)	(10,094		)	—		(30,874		)
Investments in subsidiaries, net	787			—			—			(787		)	—		—
Other investing activities	55			—			—			168			—		223
Net cash from investing activities	842			(20,563		)	(217		)	(10,713		)	—		(30,651		)
Cash flows from financing activities
Borrowings under bank credit facility	35,920			—			—			365,700			—		401,620
Payments under bank credit facility	(35,920		)	—			—			(406,600		)	—		(442,520		)
Payments on long-term debt	—			(340		)	—			—			—		(340		)
Proceeds from issuance of non-recourse obligations	—			—			—			5,250			—		5,250
Debt financing cosst, net	(149		)	—			—			(679		)	—		(828		)
Other financing activities	239			—			—			(181		)	—		58
Net cash from financing activities	90			(340		)	—			(36,510		)	—		(36,760		)
Net change in cash and cash equivalents	65,282			(13,801		)	247			(21,571		)	—		30,157
Cash and cash equivalents, beginning of period	11,231			88,282			3,679			42,431			—		145,623
Cash and cash equivalents, end of period	$	76,513		$	74,481		$	3,926		$	20,860		$	—	$	175,780

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Condensed Consolidating Statements of Cash Flows

	Six months ended June 30, 2010
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Cash flows from operating activities
Net cash from operating activities	$	107,356		$	(5,277	)	$	(1,216	)	$	38,471		$	10,423		$	149,757
Cash flows from investing activities
Capital expenditures	(8,021		)	(34,002		)	(342		)	(5,116		)	—			(47,481		)
Investments in subsidiaries, net	—			223			—			(525		)	—			(302		)
Net cash upon change in control of Borgata				26,025						26,025			(26,025		)	26,025
Other investing activities	138			—			—			—			—			138
Net cash from investing activities	(7,883		)	(7,754		)	(342		)	20,384			(26,025		)	(21,620		)
Cash flows from financing activities
Borrowings under bank credit facility	374,800			—			—			190,983			—			565,783
Payments under bank credit facility	(399,300		)	—			—			(196,400		)	—			(595,700		)
Payments under note payable	(46,875		)	—			—			—			—			(46,875		)
Distributions to noncontrolling interest	—			—			—			(31,204		)	15,602			(15,602		)
Proceeds from stock options exercised	606			—			—			—			—			606
Payments on long-term debt	(28,861		)	(321		)	—			—			—			(29,182		)
Other financing activities	99			—			—			(295		)	—			(196		)
Net cash from financing activities	(99,531		)	(321		)	—			(36,916		)	15,602			(121,166		)
Net change in cash and cash equivalents	(58		)	(13,352		)	(1,558		)	21,939			—			6,971
Cash and cash equivalents, beginning of period	363			88,071			4,768			—			—			93,202
Cash and cash equivalents, end of period	$	305		$	74,719		$	3,210		$	21,939		$	—		$	100,173

NOTE 18.    SUBSEQUENT EVENTS

We have evaluated all events or transactions that occurred after June 30, 2011. During this period, the following material subsequent events occurred.

Pending Acquisition of IP Casino Resort Spa

On August 4, 2011, as required by the Agreement for Purchase and Sale with Imperial Palace of Mississippi, LLC and Key Largo Holdings, LLC (collectively, the “Seller”), we made a non-refundable (except under certain circumstances) earnest money deposit of $10 million. Pursuant to the agreement, the Seller agreed to sell and transfer, and we agreed to purchase and assume, certain assets and liabilities, respectively, related to the IP Casino Resort Spa in Biloxi, Mississippi, on an as-is basis (except as otherwise provided in the agreement), for a purchase price of $278 million in cash. The $10 million earnest money deposit will be credited against the purchase price upon the closing. Following the closing of the transaction, we will also make charitable contributions to the Engelstad Family Foundation equal to an aggregate of $10 million, which funds are intended to be distributed on behalf of, and in the name of, the Company, over five years to local and regional Biloxi charitable organizations to be designated by the Company. In addition, following the closing, we intend to perform certain capital improvement projects with respect to the IP Casino Resort Spa with costs estimated to be $44 million.

The closing of the transactions contemplated by the agreement is subject to the satisfaction or waiver of certain conditions, including, without limitation, (i) the receipt of certain consents, approvals or authorizations required to consummate the transactions

57

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

contemplated by the Agreement and other licenses and permits required to operate the Property; (ii) the absence of injunctions, judgments or other legal impediments seeking to prohibit the Closing; (iii) the expiration or termination of any required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; and (iv) other customary closing conditions.

In addition to certain other termination rights, the agreement may be terminated by either us or the Seller if the closing has not occurred by the date that is six months following the date of the agreement. We currently anticipate that the closing will occur before the end of the year.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

Boyd Gaming Corporation (the “Company,” “Boyd Gaming,” “we” or “us”) is a multi-jurisdictional gaming company that has been operating for approximately 35 years.

We are a diversified operator of 15 wholly-owned gaming entertainment properties and one controlling interest in a limited liability company. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Louisiana, Mississippi, Indiana and New Jersey, which we aggregate in order to present the following four reportable segments:

Las Vegas Locals
Gold Coast Hotel and Casino	Las Vegas, Nevada
The Orleans Hotel and Casino	Las Vegas, Nevada
Sam's Town Hotel and Gambling Hall	Las Vegas, Nevada
Suncoast Hotel and Casino	Las Vegas, Nevada
Eldorado Casino	Henderson, Nevada
Jokers Wild Casino	Henderson, Nevada
Downtown Las Vegas
California Hotel and Casino	Las Vegas, Nevada
Fremont Hotel and Casino	Las Vegas, Nevada
Main Street Station Casino, Brewery and Hotel	Las Vegas, Nevada
Midwest and South
Sam's Town Hotel and Gambling Hall	Tunica, Mississippi
Par-A-Dice Hotel Casino	East Peoria, Illinois
Blue Chip Casino, Hotel & Spa	Michigan City, Indiana
Treasure Chest Casino	Kenner, Louisiana
Delta Downs Racetrack Casino & Hotel	Vinton, Louisiana
Sam's Town Hotel and Casino	Shreveport, Louisiana
Atlantic City
Borgata Hotel Casino & Spa	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. As discussed under "Other Items Affecting Liquidity", on April 29, 2011, we and Dania Entertainment Center, LLC entered into an asset purchase agreement for the sale of certain assets and liabilities of Dania Jai-Alai.

We also own and operate a travel agency in Hawaii, and a captive insurance company, also in Hawaii, that underwrites travel-related insurance.

Additionally, we own 85 acres of land on the Las Vegas Strip, where our multibillion dollar Echelon development project (“Echelon”) 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 Echelon. At such time, however, we did not anticipate the severity or 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. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, we do not expect to resume construction of Echelon for three to five years, as previously disclosed. We also do not believe that financing for a development project like Echelon is currently available.

Our Properties

We operate gaming entertainment properties, most of which also include hotel, dining, retail and other amenities. 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.

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Our properties have historically generated significant operating cash flow, with the majority of our revenue being cash-based. While we do provide casino credit, subject to certain gaming regulations and jurisdictions, most of our customers wager with cash and pay for non-gaming services by cash or credit card.

Our industry is capital intensive; we rely heavily on the ability of our properties to generate operating cash flow in order to fund maintenance capital expenditures, fund acquisitions, provide excess cash for future development, repay debt financing and associated interest costs, purchase our debt or equity securities, pay income taxes and pay dividends.

Our Strategy

Our overriding strategy is to increase shareholder value. We follow several strategic initiatives on which we are focused to improve and grow our business.

Strengthening our Balance Sheet: We remain committed to finding opportunities to strengthen our balance sheet. We took an important step in this direction when we reached an agreement in April 2011 to sell Dania Jai-Alai for $80 million. This asset is not consistent with our current growth strategy, and by selling it, we will raise a significant amount of capital that can be used to repay debt.

Operating Efficiently: We also remain committed to operating more efficiently. We will endeavor to prevent unneeded expense from returning to the business. The efficiencies of our business model position us to flow a substantial portion of revenue gains directly to the bottom line. Margin improvements will remain a driver of profit growth for the Company going forward.

Evaluating Acquisition Opportunities: Another key component of our strategy could be acquisitions. We will evaluate potential transactions in a way that is strategic, deliberate, and disciplined. Our intention is to pursue opportunities that are a good fit for our business, deliver a solid return for shareholders, and are available at the right price.

Maintaining our Brand: Finally, the ability of our employees to deliver great customer service remains a key differentiator for our Company and our brands. Our employees are a big reason that our customers continue to choose our properties over the competition across the country.

Our Focus

As we have come to appreciate over the recent past, we cannot control the national economy, the pace of the recovery or the spending habits of the consumer. What we can control is our focus - and our focus will remain on: (i) ensuring our existing operations are managed as efficiently as possible and remain positioned for growth; (ii) our capital structure and strengthening our balance sheet, not just by paying down debt, but also by strengthening our operations and diversifying our asset base; and (iii) our growth strategy, which is built on finding those assets that are a good strategic fit and provide an appropriate return to our shareholders.

Overall Outlook

We believe that our key operating results for each of the three and six months ended June 30, 2011 and 2010 have begun to show positive trends. Although over the course of the past several years, the severe economic recession has had a profound effect on consumer confidence, and has shifted spending away from discretionary items, such as leisure, hospitality, gaming and entertainment activities, these recent quarterly results indicate that we have realized some stabilizing trends in our business. Generally, the job market is strengthening, as the national unemployment rate has continued to decline throughout 2011. As the job market recovers and expands, we believe that consumer confidence will strengthen further.

We continually work to position our Company for greater success by strengthening our existing operations and growing through capital investment and other strategic initiatives. We have established a nationwide branding initiative and loyalty program. Previously, players were able to use their “Club Coast” or “B Connected” cards to earn and redeem points at nearly all of our wholly-owned Boyd Gaming properties in Nevada, Illinois, Indiana, Louisiana and Mississippi. In June 2010, we launched an enhanced, multi-property player loyalty program under the “B Connected” brand, which replaced the “Club Coast” program. Customers under the “Club Coast” program were able to keep all earned benefits and club points they had previously earned under the program. The new “B Connected” club, among other benefits, extends the time period over which players may qualify for promotion and increases the credits awarded to reel slot and table games players.

In addition to the “B Connected” player loyalty program, we launched the “B Connected Mobile” program in July 2010. “B Connected Mobile,” the first multi-property, loyalty program-based iPhone application of its kind in the gaming industry, is a personalized mobile application that delivers customized offers and information directly to a customer's iPhone, iPod Touch or iPad. The application further expands the benefits of the “B Connected” program. “B Connected Mobile,” a GPS powered feature,

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provides real-time personalized information when a customer visits a Boyd property, including: hotel, dining and gaming offers, such as “Best Rates Available” on hotel rooms for “B Connected” members, instant access to event information, schedules and special offers at all Boyd Gaming properties using “B Connected,” a search engine that allows customers to find Boyd Gaming casinos that have their favorite machines and displays the games' locations on a casino floor map, the ability to track “B Connected” point balances in real time, and the ability to make immediate hotel or restaurant reservations.

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 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. As we do not yet believe that a significant level of economic recovery has occurred along the Las Vegas Strip, we do not expect to resume construction of Echelon for three to five years, as previously disclosed. We also believe financing for a development project like Echelon continues to be unavailable.

Nonetheless, we remain committed to having a significant presence on the Las Vegas Strip. During the suspension period, we continue 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.

LVE Energy Partners, LLC (“LVE”) is a joint venture between Marina Energy LLC and DCO ECH Energy, LLC. Through our wholly-owned subsidiary, Echelon Resorts LLC ("Echelon Resorts"), we have entered into an Energy Sales Agreement ("ESA") with LVE, to design, build, own (other than the underlying real property which is leased from Echelon Resorts) and operate a central energy center and related distribution system for our planned Echelon resort development. Pursuant to the ESA, LVE will provide chilled and hot water, electricity and emergency electricity generation 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 (the “Annual Fixed Capacity Charge”). The Annual Fixed Capacity Charge, which will be payable for a 25-year period, was to commence in November 2010. However, LVE has suspended construction of the central energy center and the obligation to pay the Fixed Capacity Charge has not commenced.

On April 3, 2009, LVE notified us that, in its view, Echelon Resorts will be in breach of the ESA unless it recommences and proceeds with construction of the Echelon development project 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.

On March 7, 2011, Echelon Resorts and LVE entered into both a purchase option agreement (the "Purchase Option Agreement") and a periodic fee agreement (the "Periodic Fee Agreement"). LVE has agreed not to initiate any litigation with respect to its April 3, 2009 claim of an alleged breach of the ESA and both Echelon Resorts and LVE have mutually agreed that neither LVE nor Echelon Resorts would give notice of, file or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and that any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is in effect. Under the Periodic Fee Agreement, Echelon Resorts agreed to pay LVE, beginning on March 4, 2011, a monthly periodic fee (the “Periodic Fee”) and an operation and maintenance fee until Echelon Resorts either (i) resumes construction of the project or (ii) exercises its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee is fixed at $11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee is estimated to be approximately $10.8 million annually. The operation and maintenance fee cannot exceed $0.6 million per annum without Echelon Resorts' prior approval. We have posted a letter of credit in the amount of $6.0 million to secure Echelon Resorts' obligation to pay the Periodic Fee and the operation and maintenance fee.

Under the Purchase Option Agreement, Echelon Resorts has the right, at its sole discretion, upon written notice to LVE, to purchase the assets of LVE including the central energy center and the related distribution system for a price of $195.1 million, subject to certain possible adjustments. The ESA will be terminated concurrent with the purchase of the LVE assets.

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As of June 30, 2011, we have incurred approximately $924.0 million in capitalized costs related to the Echelon project, including land, and not including approximately $195.9 million associated with the construction costs of the central energy facility. As part of the delay of the project, we expect to additionally incur approximately $0.3 million to $3.0 million of capitalized costs annually, principally related to such items as offsite fabrication of a skylight and curtain wall as well as offsite improvements. In addition, we expect annual recurring project costs, consisting primarily of monthly charges related to construction of the central energy center, site security, property taxes, rent and insurance, of approximately $15.0 million to $17.0 million that will be charged to preopening or other expense as incurred during the project's suspension period.

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.

Other Events

Effective Control of Borgata

On March 24, 2010, as a result of the amendment to our operating agreement with MGM Resorts International (“MGM”) (our original 50% partner in Borgata), which provided, among other things, for the termination of MGM's participating rights in the operations of Borgata, we effectively obtained control of Borgata. The amendment to the operating agreement was related to MGM's divestiture of its interest pursuant to a regulatory settlement.

As discussed above, due to our controlling interest in Borgata, we measured our previously held equity interest at a provisional fair value. Additionally, the financial position of Borgata is presented in our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010; its results of operations for the three months ended June 30, 2011 are included in our condensed consolidated statement of operations for the three months ended June 30, 2011; its results of operations for the six months ended June 30, 2011 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2011; its results of operations for the three months ended June 30, 2010 are included in our condensed consolidated statement of operations for the three months ended June 30, 2010; and its results of operations for the period from March 24 through June 30, 2010 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2010.

At the date we obtained effective control, and applied the acquisition method of accounting, we were required to make significant estimates and assumptions regarding the provisional fair values of Borgata's assets and liabilities. This method also allowed us to refine these estimates over a one-year measurement period to reflect new information obtained about facts and circumstances that existed as of the date of effective control, which, if known, would have affected the measurement of the amounts recognized as of that date. Any changes to the provisional valuation during this one-year period are referred to as “measurement period adjustments”. We recorded certain measurement period adjustments and retrospectively included the effects of those adjustments in the condensed consolidated balance sheet as of December 31, 2010 included herein.

RESULTS OF OPERATIONS

Summary of Operating Results

Three and six months ended June 30, 2011 and 2010

Throughout the discussion in this section, our results of operations for the six months ended June 30, 2010 are presented considering the pro forma effect of the consolidation of Borgata as if such had occurred on January 1, 2010, rather than March 24, 2010. This presentation is for the purposes of comparability, and all such results reflecting this pro forma are identified as such.

We believe that our key operating results for each of the three and six months ended June 30, 2011 and 2010 have begun to show positive trends. Although over the course of the past several years, the severe economic recession has had a profound effect on consumer confidence, and has shifted spending away from discretionary items, such as leisure, hospitality, gaming and entertainment activities, these recent quarterly results indicate that we have realized some stabilizing trends in our business. Generally, the job market is strengthening, as the national unemployment rate has continued to decline throughout 2011. As the job market recovers and expands, we believe that consumer confidence will strengthen further. These and other positive trends reflect recoveries in our wholly-owned businesses.

Specifically, in our Las Vegas Locals region, visitor counts have been increasing or stable over the past eighteen months. Our Downtown Las Vegas segment is benefiting from the present strength of its Hawaiian customer base. The economy in the Midwest and South region has progressed a bit ahead of both the national and certainly of Las Vegas economies. Although we have gained market share and increased non-gaming revenues in Atlantic City, the entire market continues to experience a difficult period, due to increased local and regional competition, resulting in increased promotional slot credits and table games incentives.

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The following provides a summary of certain key operating results:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011			2010		2011			2010		2010
									Actual		Pro Forma
	(In thousands)
Net revenues	$	574,403		$	578,446	$	1,139,349		$	993,581	$	1,151,870
Operating Income	61,990			49,676		110,094			93,706		101,851
Net income (loss) attributable to Boyd Gaming Corporation	(2,951		)	3,382		(6,472		)	11,817		11,817

Net revenues

Net revenues were $574.4 million for the three months ended June 30, 2011, compared to $578.4 million for the comparable period in the prior year. The decline was relatively flat, as most regions of our business continue to stabilize. As discussed below, we saw marginal growth in our Downtown and Midwest and South regions, which was slightly offset by a slight decline in our Las Vegas Locals segment, and more significantly by a decrease in Atlantic City. While our Las Vegas Locals and Midwest and South segments experienced slight year-over-year declines in net revenues, our Downtown segment experienced a year-over-year increase.

Giving consideration to the pro forma effect of the consolidation of Borgata, net revenues were $1.14 billion compared to $1.15 billion for the six months ended June 30, 2011 and 2010, respectively, a slight decline, which was primarily driven by the competitive pressures in Atlantic City.

Operating income

Operating income increased by 24.8% to $62.0 million during the three months ended June 30, 2011 compared to the corresponding period of the prior year primarily due to improved operating gaming margins, our ongoing cost containment efforts and lower depreciation and amortization expense, as discussed below.

For largely the same reasons, operating income increased by 8.1% to $110.1 million during the six months ended June 30, 2011 as compared to $101.9 million in the comparable period of the prior year, as adjusted to reflect the pro forma consolidation of Borgata during such entire period.

Net income (loss) attributable to Boyd Gaming Corporation

Net loss attributable to Boyd Gaming was $3.0 million for the three months ended June 30, 2011, compared to net income of $3.4 million for the corresponding period of the prior year, due primarily to increased interest expense on higher outstanding debt balances, and higher average interest rates related to our refinancing activities in 2010 and the adverse effect of unitary state income taxes.

Net loss attributable to Boyd Gaming was $6.5 million for the six months ended June 30, 2011compared to net income of $11.8 million for the six months ended June 30, 2010. The decrease in this period is also due to higher interest costs, as interest expense increased significantly, as further discussed below.

Operating Revenues

Three and six months ended June 30, 2011 and 2010

The following analysis discusses our operating revenues, on a consolidated basis, which is further supplemented by operating segment detail below.

We derive the majority of our gross revenues from our gaming operations, which produced approximately 72% of gross revenues for the three months ended June 30, 2011 and 2010, and 72% and 73% of gross revenues for the six months ended June 30, 2011 and 2010, respectively. Food and beverage gross revenues, which produced approximately 14% of gross revenues for all of the three months ended June 30, 2011 and 2010, and the six months ended June 30, 2011 and 2010, respectively, represent the next most significant revenue source, followed by room and other, both of which separately contributed less than 10% of gross revenues during these respective periods.

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	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010			2010
										Actual			Pro Forma
	(In thousands)
REVENUES
Gaming	$	486,557		$	490,132		$	968,492		$	840,537		$	978,368
Food and beverage	94,585			94,020			186,662			154,002			185,219
Room	60,459			58,671			117,050			90,105			114,259
Other	33,276			33,813			66,307			57,635			66,814
	$	674,877		$	676,636		$	1,338,511		$	1,142,279		$	1,344,660
COSTS AND EXPENSES
Gaming	$	223,173		$	229,755		$	449,782		$	397,860		$	457,721
Food and beverage	50,080			49,149			97,648			81,791			95,291
Room	13,514			13,056			26,335			23,106			25,291
Other	27,335			27,006			53,574			46,244			53,371
	$	314,102		$	318,966		$	627,339		$	549,001		$	631,674
MARGINS
Gaming	54.1		%	53.1		%	53.6		%	52.7		%	53.2		%
Food and beverage	47.1		%	47.7		%	47.7		%	46.9		%	48.6		%
Room	77.7		%	77.8		%	77.5		%	74.4		%	77.9		%
Other	17.9		%	20.1		%	19.2		%	19.8		%	20.1		%

Three Months Ended June 30, 2011 and 2010

Gaming

Gaming revenues are significantly comprised of the net win from our slot machine operations and table games win. The $3.6 million, or 0.7%, decrease in gaming revenues during the three months ended June 30, 2011 as compared to the corresponding period of the prior year was due primarily to a 0.5% decrease in slot win, including a 1.9% decrease in slot handle, as well as a 1.5% decrease in table game win, including a 0.4% decrease in table game drop.

Food and Beverage

Food and beverage revenues increased 0.6% during the three months ended June 30, 2011 as compared to the corresponding period of the prior year, due to a corresponding increase in average covers and tickets.

Room

Room revenues increased 3.0% during the three months ended June 30, 2011 as compared to the corresponding period of the prior year, due to increased ADR and occupancy driven by destination and convention business.

Other

Other revenues have decreased 1.6% during the three months ended June 30, 2011 as compared to the corresponding period of the prior year, due primarily to timing of events.

Six Months Ended June 30, 2011 and 2010

Gaming

Gaming revenues decreased by $9.9 million, or 1.0%, during the six months ended June 30, 2011 as compared to the corresponding period of the prior year, due primarily to a 3.5% decrease in table game win, including a 2.2% decrease in table game drop, offset by a 0.3% increase in slot win, despite a 1.0% decrease in slot handle.

Food and Beverage

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Food and beverage revenues increased 0.8% during the six months ended June 30, 2011 as compared to the corresponding period of the prior year, due to a corresponding increase in average covers and tickets, which reflect increased convention and meeting business.

Room

Room revenues increased 2.4% during the six months ended June 30, 2011 as compared to the corresponding period of the prior year, primarily due to increased overall average daily rates and occupancy.

Other

Other revenues have decreased 0.8% during the six months ended June 30, 2011 as compared to the corresponding period of the prior year, primarily due to a slight decline in retail sales.

Revenues and Adjusted EBITDA by Reportable Segment

We determine each of our properties' profitability based upon Adjusted EBITDA, which represents earnings before interest expense, income taxes, depreciation and amortization, deferred rent, preopening expenses, share-based compensation expense, and write-downs and other items, as applicable. Reportable Segment Adjusted EBITDA is the aggregate sum of the Adjusted EBITDA for each of the properties comprising our Las Vegas Locals, Downtown Las Vegas, Midwest and South and Atlantic City segments and also includes our share of Borgata's operating income, (during the period in which it was accounted for under the equity method of accounting), before net amortization, preopening and other items.

The following table presents our gross revenues and Adjusted EBITDA, by Reportable Segment, for the three and six months ended June 30, 2011 and 2010.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In thousands)
Gross revenues
Las Vegas Locals	$	167,346	$	169,658	$	338,792	$	343,555
Downtown Las Vegas	62,911		61,007		124,538		120,720
Midwest and South	203,526		205,466		410,616		413,522
Atlantic City	239,609		238,924		461,525		260,927
Reportable Segment Gross Revenues	673,392		675,055		1,335,471		1,138,724
Other	1,485		1,581		3,040		3,555
Gross revenues	$	674,877	$	676,636	$	1,338,511	$	1,142,279
Adjusted EBITDA
Las Vegas Locals	$	38,570	$	36,810	$	78,213	$	77,223
Downtown Las Vegas	9,366		9,310		18,370		17,682
Midwest and South	42,276		35,590		83,487		74,869
Atlantic City	38,657		42,960		70,339		47,863
Our share of Borgata's operating income before net amortization, preopening and other items	—		—		—		8,180
Adjusted EBITDA	$	128,869	$	124,670	$	250,409	$	225,817

Significant factors that affected our Reportable Segment Gross Revenues and Adjusted EBITDA for the three and six months ended June 30, 2011, as compared to the corresponding period of the prior year, are listed below:

Three months ended June 30, 2011 and 2010

Las Vegas Locals

Gross revenues declined slightly by 1.4% while Adjusted EBITDA increased 4.8% during the three months ended June 30, 2011, as compared to the corresponding period of the prior year, which reflect the stabilization of business volumes and the positive ongoing effects of our cost control measures. Growth in our convention and meeting business increased more than 20% during

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the second quarter. We continued to experience strong operating performances particularly at The Orleans, and multiple properties also reported year-over-year Adjusted EBITDA gains in the second quarter. Our management teams continue to focus on operating efficiently while maintaining a high level of customer service. During this quarter, our Las Vegas Locals business posted an Adjusted EBITDA margin of 23.0%, which represents a 130 basis-point increase over the second quarter of 2010.

Downtown Las Vegas

Gross revenues and Adjusted EBITDA increased 3.1% and 0.6%, respectively, during the three months ended June 30, 2011, as compared to the corresponding period of the prior year, due primarily to growth from our Hawaiian customers, offset by significantly higher fuel costs at our Hawaiian charter operation. Our Hawaiian customer base is essential to our downtown operations, and we continue to invest in them.

Midwest and South

Gross revenues declined to $203.5 million during the three months ended June 30, 2011, from $205.5 million, or by 0.9% , as compared to the three months ended June 30, 2010, while Adjusted EBITDA increased by 18.8% during the same respective periods. Results were impacted by strong performances at Treasure Chest, Delta Downs and Par-A-Dice, which wer offset by the closure of our property Sam's Town Hotel and Gambling Hall in Tunica during the month of May as a result of the flooding of the Mississippi River. All other five properties in this region posted positive growth during this period, as Adjusted EBITDA margin improved by 350 basis points due to improved flow through.

Atlantic City

Borgata's gross revenues for the three months ended June 30, 2011 were $239.6 million, up 0.3% from $238.9 million in the three months ended June 30, 2010, while Adjusted EBITDA declined 10.0% to $38.7 million from $43.0 million during the same respective periods. Competition remains elevated in the region, and we have responded by increasing investments in our customer base. In table games, the hold rate was 13%, in line with our long-term expectations; however, this rate was 80 basis points below prior-year levels. Slot win rose slightly, and table game volume was flat year-over-year.

Six Months Ended June 30, 2011 and 2010

Las Vegas Locals

Gross revenues declined 1.4% and Adjusted EBITDA increased 1.3% during the six months ended June 30, 2011, as compared to the corresponding period of the prior year, reflecting improved performance at The Orleans, and successful marketing initiatives. The region also experienced an increase in convention and meeting business.

Downtown Las Vegas

Gross revenues and Adjusted EBITDA increased 3.2% and 3.9%, respectively, during the six months ended June 30, 2011, as compared to the corresponding period of the prior year, due primarily to growth from our Hawaiian customers. Greater efficiencies in our operations contributed to strong flow-through in our results, which were also partially offset by significantly higher fuel costs at our Hawaiian charter operation. Jet fuel prices have risen sharply, and fierce competition on Hawaiian air routes limited our ability to increase fares.

Midwest and South

Gross revenues declined slightly by 0.7% during the six months ended June 30, 2011, as compared to the corresponding period of the prior year, reflecting the impact of severe winter weather, which resulted in reduced business volumes despite an increase in market share. Adjusted EBITDA increased by 11.5% during the six months ended June 30, 2011, as compared to the corresponding period of the prior year, as our business continues to grow across this region, particularly due to highly effective marketing and overall economic strength in southern Louisiana.

Atlantic City

Results were not consolidated fully during the six months ended June 30, 2010, however, on a comparable pro forma basis, gross revenues declined to $461.5 million from $463.3 million and Adjusted EBITDA declined to $70.3 million from $81.0 million, for the six months ended June 30, 2011 and 2010, respectively. Overall, results during the the current six months were adversely impacted by promotional spend, which increased to 23.8% of gross gaming revenue for the six months ended June 30, 2011 from 21.9% for the six months ended June 30, 2010. This spend represented increased promotional slot credit and table game incentives in response to the increasingly competitive environment in the Atlantic City and Eastern Pennsylvania gaming markets.

Other Costs and Expenses

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

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	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010	2010
							Actual	Pro Forma
	(In thousands)
Selling, general and administrative	$	96,783	$	99,666	$	192,571	169,944	198,925
Maintenance and utilities	36,773		37,970		74,188		62,109	75,631
Depreciation and amortization	48,488		55,408		99,072		95,454	112,208
Corporate expense	12,264		13,526		25,544		25,615	25,615
Preopening expenses	1,741		1,243		3,572		2,306	2,306
Write-downs and other items, net	2,262		1,991		6,969		3,592	3,660

The results for the three and six months ended June 30, 2011 and for the three months ended June 30, 2010, as reported above, reflect the consolidation of Borgata for the entire periods while the results for the six months ended June 30, 2010 reflect the consolidation of Borgata for the period from March 24, 2010 through June 30, 2010. The "Pro Forma" column in the six months ended June 30, 2010 column above reflects the results of operations as if Borgata had been consolidated for such entire period, and thus, for purposes of comparability, will be the basis for the six month analytical discussions below.

Three months ended June 30, 2011 and 2010

Selling, general and administrative

Selling, general and administrative expenses, as a percentage of gross revenues, declined to 14.3% during the three months ended June 30, 2011 from 14.7% during the three months ended June 30, 2010, due to disciplined and targeted marketing spend, and our ongoing cost containment efforts.

Maintenance and Utilities

Maintenance and utilities expenses, as a percentage of gross revenues, decreased to 5.4% during the three months ended June 30, 2011 from 5.6% during the three months ended June 30, 2010, due primarily to our consolidation of LVE, from which we recorded the unreimbursed expenses associated with the central energy facility at Echelon. Excluding the consolidation of LVE, maintenance and utilities expenses were relatively consistent during the three months ended June 30, 2011, as compared to the corresponding period of the prior year, as no major maintenance projects were undertaken in either period.

Depreciation and Amortization

Depreciation and amortization expense declined as a percentage of gross revenues during the three months ended June 30, 2011, as compared to the corresponding period of the prior year, representing 7.2% and 8.2%, respectively, as certain property and equipment became fully depreciated and there were no significant expansion capital expenditures placed into service.

Corporate Expense

Corporate expense represents unallocated payroll, professional fees, rent and various other administrative expenses that are not directly related to our casino and/or hotel operations, in addition to the corporate portion of share-based compensation expense. The decrease in corporate expense, as a percentage of gross revenues of 1.8% and 2.0%, during the three months ended June 30, 2011 and 2010, respectively, primarily reflects the benefits from certain marketing initiatives earned during the quarter, which offset our overall marketing spend.

Preopening Expenses

We expense certain costs of start-up activities as incurred. During the three months ended June 30, 2011 and 2010, we recorded preopening expenses related to our Echelon development project, expenses related to our efforts to develop gaming activities in other jurisdictions and expenses related to other business development activities. The Period Fees, as discussed above, are included in the expenses related to our Echelon development project during the three months ended June 30, 2011; however, such amounts were eliminated upon the consolidation of LVE and not reflected in total preopening expenses.

Write-downs and Other Items, Net

During the three months ended June 30, 2011, write-downs and other charges primarily related to the insurance costs associated with the closure of Sam's Town Tunica during the month of May, as well as certain costs incurred in relation to acquisition activities. During the three months ended June 30, 2010, we recorded $2.0 million of expenses related to the evaluation of various acquisition

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opportunities and other business development activities.

Six months ended June 30, 2011 and 2010

Selling, general and administrative

Selling, general and administrative expenses, as a percentage of gross revenues, declined to 14.4% during the six months ended June 30, 2011 from 14.8% during the six months ended June 30, 2010, due to disciplined and targeted marketing spend, and our ongoing cost containment efforts.

Maintenance and Utilities

Maintenance and utilities expenses, as a percentage of gross revenues, decreased to 5.5% during the six months ended June 30, 2011 from 5.6% during the six months ended June 30, 2010, due primarily to our consolidation of LVE, from which we recorded the unreimbursed expenses associated with the central energy facility at Echelon. Excluding the consolidation of LVE, maintenance and utilities expenses were relatively consistent during the six months ended June 30, 2011, as compared to the corresponding period of the prior year, as no major maintenance projects were undertaken in either period.

Depreciation and Amortization

Depreciation and amortization expense declined as a percentage of gross revenues during the six months ended June 30, 2011, as compared to the corresponding period of the prior year, representing 7.4% and 8.3%, respectively, as there were no significant expansion capital expenditures and certain property and equipment became fully depreciated.

Corporate Expense

Corporate expense represents unallocated payroll, professional fees, rent and various other administrative expenses that are not directly related to our casino and/or hotel operations, in addition to the corporate portion of share-based compensation expense.

Corporate expense, as a percentage of gross revenues, was flat at 1.9% during the six months ended June 30, 2011 and 2010, reflecting the offset of increased share-based compensation costs due to a one-time adjustment to a specific vesting provision with benefits of certain marketing initiatives.

Preopening Expenses

We expense certain costs of start-up activities as incurred. During the six months ended June 30, 2011 and 2010, we recorded preopening expenses related to our Echelon development project, expenses related to our efforts to develop gaming activities in other jurisdictions and expenses related to other business development activities. The Period Fees, as discussed above, are included in the expenses related to our Echelon development project during the six months ended June 30, 2011; however, such amounts were eliminated upon the consolidation of LVE and not reflected in total preopening expenses.

Write-downs and Other Items, Net

During the six months ended June 30, 2011, we recorded a $5 million impairment of the trademark valued under the acquisition accounting for Borgata, $1.1 million associated with the insurance costs related to the temporary closure of Tunica, $0.9 million of asset disposal costs, which were partially offset by the bargain purchase gain recorded upon the change in control of Borgata and various other measurement period adjustments. During the six months ended June 30, 2010, write-downs and other items, net primarily consisted of $3.6 million of direct expenses related to evaluating various acquisition opportunities and other business development activities.

Operating Income from Borgata

Three and six months ended June 30, 2011 and 2010

Our share of Borgata's operating income represents the amounts recorded in our consolidated financial statements under the equity method, which is partially reflected in the six months ended June 30, 2010, as part of that period was prior to our consolidation of the operating results of Borgata .

Other Expense (Income)

Interest Expense

The following table presents our interest expense for the three and six months ended June 30, 2011 and 2010.

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	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010			2010
										Actual			Pro Forma
	(In thousands)
Interest on long-term debt
Boyd Gaming Corporation	$	33,997		$	23,496		$	68,116		$	46,428		$	46,428
Borgata	21,328			5,588			38,611			6,072			11,132
Effects of interest rate swaps	6,063			5,566			11,824			11,157			11,157
Interest on non-recourse debt obligations of variable interest entity	5,306			—			5,434			—			—
Interest expense	$	66,694		$	34,650		$	123,985		$	63,657		$	68,717
Average long-term debt balance
Boyd Gaming Corporation	$	2,392,925		$	2,567,973		$	2,393,267		$	2,604,377		$	2,604,377
Borgata	$	800,026		$	628,581		$	815,733		$	653,246		$	653,246
Average interest rates
Boyd Gaming Corporation	6.7		%	4.5		%	6.7		%	4.4		%	4.4		%
Borgata	9.5		%	2.9		%	9.6		%	2.8		%	2.8		%

The results for the three and six months ended June 30, 2011 and for the three months ended June 30, 2010, as reported above, reflect the consolidation of Borgata for the entire periods while the results for the six months ended June 30, 2010 reflect the consolidation of Borgata for the period from March 24, 2010 through June 30, 2010. The "Pro Forma" column in the six month ended June 30, 2010 column above reflects the results of operations as if Borgata had been consolidated for such entire period, and thus, for purposes of comparability, will be the basis for the six month analytical discussions below.

Three months ended June 30, 2011 and 2010

Interest expense was $66.7 million for the three months ended June 30, 2011, a 92% increase as compared to the corresponding period of the prior year. The increase was primarily due to higher average interest rates on higher average outstanding Borgata debt balances, offset by lower Boyd debt balances during the three months ended June 30, 2011, compared to the corresponding period of the prior year. Average outstanding note balances and interest rates during this period are reflected in the table above. Interest on the non-recourse debt obligations also increased, due to the consolidation of LVE in 2010.

During the three months ended June 30, 2011 and 2011, we were a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500 million, whereby we received payments based upon the three-month LIBOR and made payments based upon a stipulated fixed rate. As market interest rates during the period were significantly lower than the 5.1% weighted-average fixed rate associated with these swaps, the effect of the swaps increased our interest expense by $6.1 million and $5.6 million for the three months ended June 30, 2011 and 2010, respectively. Our interest rate swap agreements expired on June 30, 2011.

Six months ended June 30, 2011 and 2010

Interest expense was $124.0 million for the six months ended June 30, 2011, an 80% increase as compared to the corresponding period of the prior year. The increase was primarily due to higher average interest rates on higher average outstanding Borgata debt balances, offset by lower Boyd debt balances during the six months ended June 30, 2011, compared to the corresponding period of the prior year. Average outstanding debt balances and interest rates during this period are reflected in the table above. Interest on the non-recourse debt obligations also increased, due to the consolidation of LVE in 2010.

During the six months ended June 30, 2011 and 2011, we were a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500 million, whereby we received payments based upon the three-month LIBOR and made payments based upon a stipulated fixed rate. As market interest rates during the period were significantly lower than the 5.1% weighted-average fixed rate associated with these swaps, the effect of the swaps increased our interest expense by $11.8 million and $11.2 million for the six months ended June 30, 2011 and 2010, respectively. Our interest rate swap agreements expired on

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June 30, 2011.

Fair Value Adjustment of Derivative Instruments

During 2010, in anticipation of the execution of our Amended Credit Facility, we de-designated all of our interest rate swap agreements as cash flow hedges. Concurrent with the de-designation of the hedging relationship, hedge accounting was suspended and the amount remaining in accumulated other comprehensive loss associated with this cash flow hedging relationship was frozen. This amount is being amortized into interest expense over the respective remaining term of the associated debt. Prospectively, all changes in the fair value of these interest rate swaps will be recognized immediately in earnings. This mark-to-market adjustment resulted in a realized loss of $0.0 million and $0.3 million during the three and six months ended June 30, 2011.

Gain on Early Retirements of Debt

We did not repurchase any of our senior subordinated or senior notes during the six months ended June 30, 2011. During the three and six months ended June 30, 2010, we purchased and retired $17.5 million and $33.0 million, respectively, principal amount of our senior subordinated notes. The total purchase price of the notes was $15.5 million and $28.9 million, respectively, resulting in a gain of $1.9 million and $3.9 million, respectively, net of associated deferred financing fees, which is recorded on our condensed consolidated statement of operations for the respective period. The transactions were funded by availability under our former bank credit facility.

Income Taxes

The effective tax rate during the three months ended June 30, 2011 was -19.25%, as compared to 29.0% during the three months ended June 30, 2010. The effective tax rate during the six months ended June 30, 2011 was 15.5%, as compared to 29.7% during the six months ended June 30, 2010. Our 2011 and 2010 tax benefit and provision, respectively, were favorably impacted by permanent adjustments related to our consolidating interests in the Borgata and LVE. We consolidate Borgata's and LVE's income or loss for financial statement purposes; however, under federal income tax statutes, we only receive a benefit from or are subject to income tax on our fifty percent interest in the Borgata and we exclude LVE's income in its entirety. In 2011 our tax benefit was adversely impacted by certain recurring permanent adjustments that are unaffected by our loss from continuing operations. Additionally, in 2011, and to a lesser extent in 2010, our state tax provision was adversely impacted by a statutory change in state income tax rates, changes in apportionment and the geographic mix of our income.

Adjusted Earnings (Loss) and Adjusted EPS

We believe that Adjusted Earnings (Loss) and Adjusted Earnings Per Share ("EPS") are important supplemental measures of operating performance to investors, and management believes that Adjusted Earnings (Loss) and Adjusted EPS are widely used measures of performance in the gaming industry. We use Adjusted Earnings (Loss) and Adjusted EPS in this Quarterly Report on Form 10-Q because we believe they are useful to investors in allowing greater transparency related to significant measures used by management in its financial and operational decision-making. Management believes it is appropriate to adjust net income (loss) attributable to Boyd Gaming Corporation for certain adjustments, which are eliminated from net income (loss) in order to enable investors to isolate the core operating results of the Company.

Adjusted Earnings (Loss) is net income (loss) before preopening expenses, adjustments to property tax accruals, net, change in value of derivative instruments, write-downs and other items, net, gain on early retirements of debt, and our share of Borgata’s other items and write-downs, net.

The following tables present our Adjusted Earnings (Loss) and Adjusted Earnings per Share for the three and six months ended June 30, 2011 and 2010.

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	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
	(In thousands)
Net income (loss) attributable to Boyd Gaming Corporation	$	(2,951	)	$	3,382		$	(6,472	)	$	11,817
Adjustments related to Boyd Gaming:
Preopening expenses, excluding impact of LVE	4,418			1,243			8,890			2,306
Adjustments to property tax accruals, net	(772		)	—			(3,538		)	—
Write-downs and other items, net	—			—			(309		)	—
Change in fair value of derivative instruments	48			—			265			—
(Gain) loss on early retirements of debt, net	—			(1,912		)	20			(3,949		)
Acquisition related expenses	370			1,979			370			3,580
Tunica flood expenses, net of recoveries	1,143						1,143
Adjustments related to Borgata:
Preopening expenses	92						92
Write-downs and other items, net	749			12			5,765			12
Valuation adjustments related to consolidation, net	367			—			(327		)	—
Our share of Borgata's write-downs and other items, net	—			—			—			34
Total adjustments	6,415			1,322			12,371			1,983
Income tax effect for above adjustments	(2,093		)	(468		)	(3,745		)	(702		)
Impact on noncontrolling interest, net	(604		)	(6		)	(2,599		)	(6		)
Adjusted earnings (loss)	$	767		$	4,230		$	(445	)	$	13,092

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	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Basic net income (loss) per common share	$	(0.03	)	$	0.04		$	(0.07	)	$	0.14
Adjustments related to Boyd Gaming:
Preopening expenses, excluding impact of LVE	0.05			0.01			0.10			0.03
Adjustments to property tax accruals, net	(0.01		)	—			(0.04		)	—
Write-downs and other items, net	—			—			—			—
Change in fair value of derivative instruments	—			—			—			—
(Gain) loss on early retirements of debt, net	—			(0.02		)	—			(0.05		)
Acquisition related expenses	0.01			0.02						0.04
Tunica flood expenses, net of recoveries	0.01						0.01
Adjustments related to Borgata:
Preopening expenses	—			—			—			—
Write-downs and other items, net	0.01			—			0.07			—
Valuation adjustments related to consolidation, net	—			—			—			—
Our share of Borgata's write-downs and other items, net	—			—			—			—
Total adjustments	$	0.07		$	0.01		$	0.14		$	0.02
Income tax effect for above adjustments	(0.02		)	—			(0.04		)	(0.01		)
Impact on noncontrolling interest, net	(0.01		)	—			(0.03		)	—
Adjusted earnings (loss) per share	$	0.01		$	0.05		$	—		$	0.15

Adjusted earnings per share for the three months ended June 30, 2011 were computed using our diluted weighted average shares outstanding, although the presentation on our condensed consolidated statement of operations for such period does not consider the effect of common stock equivalents, as such were anti-dilutive to the net loss, as reported. However, as such net loss has been adjusted to the earnings per share amount, the dilutive effect is considered in the per share calculation above.

During the three and six months ended June 30, 2011 and 2010, the following items were included in the calculation of Adjusted Earnings and Adjusted EPS:

Adjustments Related to Boyd Gaming Corporation

Preopening Expenses, Excluding Impact of Consolidation of LVE

Preopening expenses are comprised of costs primarily related to maintenance of our Echelon development project and expenditures for the exploration of new business development initiatives.

Adjustments to Property Tax Accruals

Property tax accruals have been adjusted based on assessments from the relevant taxing authorities and changes in our estimate of past liabilities related to such assessments.

Write-Downs and Other Items, net

Write-downs and other items, net, is comprised of the bargain purchase gain recorded in connection with the valuation procedures on Borgata.

Change in Fair Value of Derivative Instruments

Change in fair value of derivative instruments is comprised of the charge to earnings for the change in fair value of our interest rate swaps that were de-designated as cash flow hedges during 2010.

(Gain) Loss on Early Retirements of Debt

(Gain) loss on early retirements of debt represents the difference between the principal amount of our senior subordinated notes repurchased and the purchase price of such notes.

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Acquisition Related Expenses

Acquisition related expenses are comprised of certain costs incurred related to the evaluation of various acquisition opportunities and other business development activities.

Tunica Flood Expenses, net of Recoveries

These expenses relate to the insurance and other direct and non-reimbursable costs associated with the closure of Sam's Town Tunica during the month of May 2011 due to the flooding of the Mississippi River.

Adjustments Related to Borgata

Preopening Expenses

Preopening expenses at Borgata related to costs incurred to open a new retail outlet during the quarter.

Write -Downs and Other Items, net

Write-downs and other items represent the net losses upon the disposition or sale of certain assets as well as an impairment charge related to the trademark which resulted from a decline in revenue projections specific to Borgata.

Valuation Adjustments Related to Consolidation, net

These adjustments represent the aggregate impact of the measurement activity associated with the changes from historical value to fair value of Borgata, upon consolidation, primarily representing depreciation and amortization expense resulting from the recordation of certain tangible and intangible assets.

LIQUIDITY AND CAPITAL RESOURCES

Financial Position

The significant change in our financial position relates to the classification of certain non-extending balances due under our Amended Credit Facility as a current liability, as such amounts come due within the next twelve months. We are evaluating our options with respect to funding repayment of this indebtedness when it becomes due, which include, borrowing against the availability under our Amended Credit Facility, securing new indebtedness, using portions of our available cash or any combination of these options.

At June 30, 2011, we reported LVE's total assets and total liabilities of $249.6 million and $265.1 million, respectively in our condensed consolidated balance sheet. However, LVE's financial position, including its working capital and indebtedness, are not discussed herein as such indebtedness is non-recourse to us and will not require our working capital or free cash flows in order to service such. Therefore, the assets and liabilities of LVE are completely disregarded from the discussion below, due to the irrelevance to our overall 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 Amended Credit Facility. As of June 30, 2011 and December 31, 2010, we had balances of cash and cash equivalents of $175.8 million and $145.6 million, respectively. In addition, we had working capital deficits of $381.3 million and $87.5 million as of June 30, 2011 and December 31, 2010, respectively, which has increased due to the classification of certain of our debt obligations becoming due in May 2012.

We and Borgata separately manage our working capital positions, including our cash and indebtedness levels. Our respective bank credit facilities generally provide 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 balance under our respective bank credit facilities 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 each believe that our borrowing capacity under our respective bank credit facilities, subject to restrictive covenants, and cash flows from operating activities will be sufficient to meet our projected operating and maintenance capital expenditures for at least the next twelve months. The source of funds for the repayment of our debt or our development projects is derived primarily from cash flows from operations and availability under our respective bank credit facilities, to the extent availability exists after we meet our respective working capital needs, and subject to restrictive covenants.

We or Borgata could also seek to secure additional working capital, repay our respective current debt maturities, or fund our respective development projects, in whole or in part, through incremental bank financing and additional debt or equity offerings. If availability does not exist under our respective bank credit facilities, or we are not otherwise able to draw funds on our respective bank credit facilities, additional financing may not be available to either us or Borgata, and if available, may not be on terms favorable to either us or Borgata.

Indebtedness

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Our indebtedness primarily consists of amounts outstanding under our $1.5 billion Amended Credit Facility (including $500 million of term loans, and excluding the non-extending amounts of $331.0 million) and $956.4 million aggregate principal amount of our senior and senior subordinated notes, which are the obligations of Boyd, and a $150 million bank credit facility and $800 million aggregate principal amount of senior secured notes, all of which are the obligations of Borgata.

Bank Credit Facility

Significant Terms

On December 3, 2010, we entered into an Amendment and Restatement Agreement with certain financial institutions (each a “Lender”), including Bank of America, N.A., as administrative agent and letter of credit issuer, and Wells Fargo Bank, National Association, as swing line lender (the “Amendment and Restatement Agreement”). Pursuant to the terms of the Amendment and Restatement Agreement, our First Amended and Restated Credit Agreement, dated as of May 24, 2007, as amended by the First Amendment and Consent to First Amended Credit Agreement, dated as of December 21, 2009 (as amended, the “Amended Credit Facility”), was amended and restated to, among other things, (i) reduce the aggregate commitments under the former credit facility and (ii) permit consenting Lenders to extend the maturity date of their commitments, new Lenders to issue revolving commitments and term loans and existing Lenders to increase their commitments (each, an “Extending Lender”) in each case with a maturity date five years from the restatement effective date.

Each of the Extending Lenders permanently reduced their commitments under the Amended Credit Facility by up to 50% of the amount thereof. As a result, the aggregate commitments under the Amended Credit Facility were reduced from $3 billion to approximately $1.5 billion (including $500 million of term loans, and excluding $331.0 million in non-extending amounts), which commitments may be increased from time to time by up to $500 million (instead of $1 billion commitment increases provided for under the former credit facility) through additional revolving credit or term loans under the Amended Credit Facility.

Pursuant to the terms of the Amended Credit Facility, the term loans amortize in an annual amount equal to 5% of the original principal amount thereof, which commenced on March 31, 2011, payable on a quarterly basis. The interest rate per annum applicable to revolving and term loans under the Amended Credit Facility are based upon, at our option, LIBOR or the “base rate,” plus an applicable margin in either case. The applicable margin under the Amended Credit Facility is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio. The applicable margin on the outstanding balance on the Extended Revolving Facility ranges from 2.50% to 3.50% (if using LIBOR), and from 1.50% to 2.50% (if using the base rate). The applicable margin on the outstanding balance of the loans and commitments of the non-extending lenders continues to range from 0.625% to 1.625% (if using LIBOR), and from 0.0% to 0.375% (if using the base rate). A fee of a percentage per annum (which ranges from 0.250% to 0.500%) determined by the level of the total leverage ratio is payable on the unused portions of the Amended Credit Facility.

The “base rate” under the Amended Credit Facility is the highest of (x) Bank of America's publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) the Eurodollar rate for a one month period plus 1.00%.

The letter of credit fees under the Amended Credit Facility remain the same as those under the Credit Facility; however, the margins payable to Extending Lenders are based on the margins applicable to the Extended Revolving Facility.

Subject to certain conditions, amounts outstanding under the Amended Credit Facility may be prepaid without premium or penalty, and the unutilized portion of any of the commitments may be terminated without penalty.

The blended interest rates for outstanding borrowings under our Amended Credit Facility were 3.2% and 3.3% at June 30, 2011 and December 31, 2010, respectively. At June 30, 2011, approximately $1.43 billion was outstanding under our Amended Credit Facility, with $15.6 million allocated to support various letters of credit, leaving remaining contractual availability of approximately $555.7 million.

Guarantees

Our obligations under the Amended Credit Facility, subject to certain exceptions, are guaranteed by certain of our subsidiaries and are secured by the capital stock of certain subsidiaries. In addition, subject to certain exceptions, we and each of the guarantors granted the administrative agent first priority liens and security interests on substantially all of our real and personal property (other than gaming licenses and subject to certain other exceptions) as additional security for the performance of the secured obligations under the Amended Credit Facility.

Financial and Other Covenants

The Amended Credit Facility contains certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of a minimum consolidated interest coverage ratio of 2.00 to 1.00, (ii) establishing a maximum permitted consolidated total leverage ratio (discussed below), (iii) establishing a maximum permitted secured leverage ratio (discussed below), (iv) imposing limitations on the incurrence of indebtedness, (v) imposing limitations on transfers, sales and other

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dispositions and (vi) imposing restrictions on investments, dividends and certain other payments. Subject to certain exceptions, we may be required to repay the amounts outstanding under the Amended Credit Facility in connection with certain asset sales and issuances of certain additional secured indebtedness.

The minimum consolidated Interest Coverage Ratio (as defined in our Amended Credit Facility) is calculated as (a) twelve-month trailing Consolidated EBITDA (as defined in our Amended Credit Facility) to (b) consolidated interest expense (as also defined in our Amended Credit Facility).

The maximum permitted consolidated Total Leverage Ratio (as defined in our Amended Credit Facility) is calculated as Consolidated Funded Indebtedness to twelve-month trailing Consolidated EBITDA (all capitalized terms are defined in the Amended Credit Facility). Presently, and through December 31, 2011, our maximum Total Leverage Ratio is set at 7.75 to 1.00. Thereafter, on a scheduled basis in 0.25 basis point increments, the maximum ratio decreases to a low 5.50 to 1.00 at March 15, 2015 through the duration of the term.

The maximum permitted Secured Leverage Ratio (as defined in our Amended Credit Facility) is calculated as Secured Indebtedness to twelve-month trailing Consolidated EBITDA (all capitalized terms are defined in the Amended Credit Facility). Presently, and through March 31, 2012, our maximum Secured Leverage Ratio is set at 4.50 to 1.00. Thereafter, on a scheduled basis in 0.25 basis point increments, the maximum ratio decreases to a low 3.25 to 1.00 at June 30, 2014 through the duration of the term.

Compliance with Financial Covenants

We believe that we were in compliance with the Amended Credit Facility covenants, including the minimum consolidated Interest Coverage Ratio, the maximum permitted consolidated Total Leverage Ratio and the maximum permitted Secured Leverage Ratio, which, at June 30, 2011, were 2.42 to 1.00, 6.95 to 1.00 and 4.14 to 1.00, respectively.

At June 30, 2011, assuming our twelve-month trailing Consolidated EBITDA remains constant, we estimate that we could draw an additional $276 million of the availability under our Amended Credit Facility and maintain compliance with our Total Leverage Ratio.

Debt Financing Costs

In conjunction with the Amendment and Restatement Agreement, we incurred approximately $20.6 million in incremental debt financing costs, which have been deferred and are being amortized over the remaining term of the Amended Credit Facility.

Senior Notes

9.125% Senior Notes due December 2018

Significant Terms

On November 10, 2010, we issued, through a private placement, $500 million aggregate principal amount of 9.125% senior notes due December 2018. The notes require semi-annual interest payments on December 1 and June 1 of each year, which commenced on June 1, 2011. The notes will mature on December 1, 2018 and are fully and unconditionally guaranteed, in a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. The notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the indenture governing the notes) to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. We believe that we are in compliance with these covenants at June 30, 2011. At any time prior to December 1, 2013, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109.125% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, with the net cash proceeds that we raise in one or more equity offerings. In addition, prior to December 1, 2014, we may redeem the notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. Subsequent to December 1, 2014, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 104.563% in 2014 to 100% in 2016 and thereafter, plus accrued and unpaid interest.

Registration Rights Agreement

In connection with the private placement of the notes, we entered into a registration rights agreement with the initial purchasers in which we agreed to file a registration statement with the SEC to permit the holders to exchange or resell the notes. We must use commercially reasonable efforts to file a registration statement and to consummate an exchange offer within 365 days after the issuance of the notes, subject to certain suspension and other rights set forth in the registration rights agreement. Under certain circumstances, including our determination that we cannot complete an exchange offer, we are required to file a shelf registration statement for the resale of the notes and to cause such shelf registration statement to be declared effective as soon as reasonably practicable (but in no event later than the 365th day following the issuance of the notes) after the occurrence of such circumstances.

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Subject to certain suspension and other rights, in the event that the registration statement is not filed or declared effective within the time periods specified in the registration rights agreement, the exchange offer is not consummated within 365 days after the issuance of the notes, or the registration statement is filed and declared effective but thereafter ceases to be effective or is unusable for its intended purpose for a period in excess of 30 days without being succeeded immediately by a post-effective amendment that cures such failure, the agreement provides that additional interest will accrue on the principal amount of the notes at a rate of 0.25% per annum during the 90-day period immediately following any of these events and will increase by 0.25% per annum at the end of each subsequent 90-day period, but in no event will the penalty rate exceed 1.00% per annum, until the default is cured. There are no other alternative settlement methods and, other than the 1.00% per annum maximum penalty rate, the agreement contains no limit on the maximum potential amount of consideration that could be transferred in the event we do not meet the registration statement filing requirements. We currently intend to file a registration statement, have it declared effective and consummate any exchange offer within these time periods. Accordingly, we do not believe that payment of additional interest under the registration payment arrangement is probable and, therefore, no related liability has been recorded in the condensed consolidated financial statements.

Senior Subordinated Notes

6.75% Senior Subordinated Notes due April 2014

Significant Terms

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 of the notes, except for $50,000 in aggregate principal amount of these notes, were exchanged for substantially similar notes that were registered with the SEC. 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 June 30, 2011. 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.

7.125% Senior Subordinated Notes due February 2016

Significant Terms

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 June 30, 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.

Indentures

The indentures governing the senior and senior subordinated notes each include permitted investment clauses, the most restrictive of which limits the amount of permitted investments to a basket of $150 million, increased by a calculated amount including 50% of net income, as defined in the indentures, and net of previous permitted investments. Also, the indentures allow for the incurrence of additional indebtedness, if after giving effect to such incurrence, our coverage ratio (as defined in the indentures, essentially a ratio of consolidated EBITDA to fixed charges, including interest) for a trailing four quarter period on a pro forma basis would be at least 2.0 to 1.0. Such pro forma coverage ratio was above 2.0 to 1.0 at the dates in which these respective tranches of senior and senior subordinated notes were issued; and, at June 30, 2011, after giving effect to the repayment of certain indebtedness, as defined in the indentures, our coverage ratio was above 2.0 to 1.0.

Repurchases of Senior Subordinated Notes

We did not repurchase any of our senior subordinated or senior notes during the six months ended June 30, 2011. During the three and six months ended June 30, 2010, we purchased and retired $17.5 million and $33.0 million, respectively, principal amount of our senior subordinated notes. The total purchase price of the notes was $15.5 million and $28.9 million, respectively, resulting in a gain of $1.9 million and $3.9 million, respectively, net of associated deferred financing fees, which is recorded on our condensed consolidated statement of operations for the respective period. The transactions were funded by availability under our former bank credit facility.

Borgata Bank Credit Facility

Significant Terms

In August 2010, Marina District Finance Company, Inc. (“MDFC”) closed a $950 million debt financing, consisting of the establishment of a $150.0 million new payment priority secured revolving credit facility (the "Borgata bank credit facility") and the issuance of $800 million of aggregate principal amount of notes. MDFC is a wholly-owned subsidiary of MDDC, which

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develops and owns Borgata, and which is the guarantor of both the Borgata bank credit facility and the notes. The proceeds from the financing were used to (i) pay fees and expenses related to the financing; (ii) repay the former credit facility; and (iii) make a one-time distribution to Borgata's joint venture owners.

The Borgata bank credit facility provides for a $150.0 million payment priority secured revolving credit facility and matures in August 2014. The Borgata bank credit facility is guaranteed on a senior secured basis by MDDC and any future subsidiaries of MDDC and is secured by a first priority lien on substantially all of the assets of MDFC, MDDC and any future subsidiaries of MDDC, subject to certain exceptions. The obligations under the Borgata bank credit facility have priority in payment to payment of the notes.

Neither Boyd Gaming nor any of its wholly-owned subsidiaries is a guarantor of Borgata's new bank credit facility.

Outstanding borrowings under the Borgata bank credit facility accrue interest at a selected rate based upon either: (i) the highest of (a) the agent bank's quoted prime rate, (b) the one-month Eurodollar rate plus 1.00%, and (c) the daily federal funds rate plus 1.50%, and in any event not less than 1.50% (such highest rate, the “base rate”), or (ii) the Eurodollar rate, plus with respect to each of clause (i) and (ii) an applicable margin as provided in the Borgata bank credit facility. In addition, a commitment fee is incurred on the unused portion of the Borgata bank credit facility ranging from 0.50% per annum to 1.00% per annum.

At June 30, 2011, the outstanding balance under the Borgata bank credit facility was $20.0 million, leaving contractual availability of $130.0 million. The interest rate on the outstanding borrowings at June 30, 2011 was 4.4%.

Financial and Other Covenants

The Borgata bank credit facility contains certain financial and other covenants, including, without limitation, (i) establishing a minimum consolidated EBITDA (as defined in the Borgata bank credit facility) of $150 million over each trailing twelve-month period ending on the last day of each calendar quarter; (ii) establishing a minimum liquidity (as defined in the Borgata bank credit facility) of $30 million as of the end of each calendar quarter; (iii) imposing limitations on MDFC's ability to incur additional debt; and (iv) imposing restrictions on Borgata's ability to pay dividends and make other distributions, make certain restricted payments, create liens, enter into transactions with affiliates, merge or consolidate, and engage in unrelated business activities.

Compliance with Financial Covenants

We believe that MDFC was in compliance with the Borgata bank credit facility covenants, including minimum consolidated EBITDA and minimum liquidity, which, at June 30, 2011, were $160.2 million and $130.4 million, respectively.

Borgata Senior Secured Notes

9.5% Senior Secured Notes Due 2015

Significant Terms

In August 2010, MDFC issued, through a private placement, $400 million principal amount of 9.5% senior secured notes due October 2015, at an issue price of 98.943%, resulting in a discount at issuance of $4.1 million. The notes require semi-annual interest payments on April 15 and October 15, and commenced on April 15, 2011. The notes are guaranteed on a senior secured basis by MDDC and any future restricted subsidiaries of MDDC. The notes contain covenants that, among other things, limit MDFC's ability and the ability of MDDC to (i) incur additional indebtedness or liens; (ii) pay dividends or make distributions; (iii) make certain investments; (iv) sell or merge with other companies; and (v) enter into certain types of transactions. MDFC believes that it is in compliance with these covenants at June 30, 2011.

At any time prior to October 15, 2013, the notes may be redeemed at 100% of the principal amount thereof, plus a “make-whole premium” and accrued and unpaid interest. In addition, until October 15, 2013, MDFC may redeem up to 35% of the notes at a redemption price of 109.50% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from certain equity offerings. In addition, at any time prior to October 15, 2013, MDFC may redeem up to an aggregate of 10% of the notes in each twelve month period at a redemption price of 103% of the principal amount thereof plus accrued and unpaid interest, if any, to, but not including, the redemption date. On or after October 15, 2013, MDFC shall have the option to redeem the 2015 Notes, in whole or in part, at redemption prices (expressed as percentages of the principal amount) ranging from 104.75% beginning on October 15, 2013 to 102.375% beginning on October 15, 2014, plus accrued and unpaid interest to the applicable redemption date.

9.875% Senior Secured Notes Due 2018

Significant Terms

In August 2010, MDFC issued, through a private placement, $400 million principal amount of 9.875% senior secured notes due August 2018, at an issue price of 99.315%, resulting in an original issue discount of $2.7 million. The notes require semi-annual interest payments on February 15 and August 15, and commenced on February 15, 2011. The notes are guaranteed on a senior

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secured basis by MDDC and any future restricted subsidiaries of MDDC. The notes contain covenants that, among other things, limit MDFC's ability and the ability of MDDC to (i) incur additional indebtedness or liens; (ii) pay dividends or make distributions; (iii) make certain investments; (iv) sell or merge with other companies; and (v) enter into certain types of transactions. MDFC believes that it is in compliance with these covenants at June 30, 2011.

At any time prior to August 15, 2014, the notes may be redeemed at 100% of the principal amount thereof, plus a “make-whole premium” and accrued and unpaid interest. In addition, until August 15, 2013, MDFC may redeem up to 35% of the notes at a redemption price of 109.875% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from certain equity offerings. In addition, at any time prior to August 15, 2013, MDFC may redeem up to an aggregate of 10% of the notes in each twelve month period at a redemption price of 103% of the principal amount thereof plus accrued and unpaid interest, if any, to, but not including, the redemption date. On or after August 15, 2013, MDFC shall have the option to redeem the 2018 Notes, in whole or in part, at redemption prices (expressed as percentages of the principal amount) ranging from 104.938% beginning on August 15, 2014, to 102.469% beginning on August 15, 2015, to 100% beginning on August 15, 2016 and thereafter, plus accrued and unpaid interest, to the applicable redemption date.

The original issue discount has been recorded as an offset to the principal amount of these notes and is being accreted to interest expense over the term of the notes using the effective interest method. The effective interest rate on the 9.5% notes due 2015 notes is 10.2% and on the 9.875% notes due 2018 is 10.3%.

Registration Rights Agreement

Pursuant to the registration rights agreement entered into which the initial purchasers of these senior secured notes at the time of the private placement, on May 27, 2011, MDFC commenced an offer to exchange all of the outstanding $400.0 million aggregate principal amount of 9.5% Senior Secured Notes due 2015 and $400.0 million aggregate principal amount of 9.875% Senior Secured Notes due 2018 for new 9.5% Senior Secured Notes due 2015 and 9.875% Senior Secured Notes due 2018, respectively, that have been registered under the Securities Act of 1933. On June 28, 2011, the expiration date of the exchange offer, $396.4 million of the 9.5% Senior Secured Notes due 2015 and $400.0 of the 9.875% Senior Secured Notes due 2018 were validly tendered and accepted for exchange. This amount represents approximately 99.1% of the 9.5% Senior Secured Notes due 2015 and 100% of the 9.875% Senior Secured Notes due 2018, respectively.

Cash Flows Summary

	Six Months Ended
	June 30,
	2011			2010
	(In thousands)
Net cash provided by operating activities	$	97,568		$	149,757
Cash flows from investing activities:
Capital expenditures	(30,874		)	(47,481		)
Net cash effect upon change in controlling interest of Borgata	—			26,025
Decrease in restricted investments	168			—
Other investing activities	55			(164		)
Net cash used in investing activities	(30,651		)	(21,620		)
Cash flows from financing activities:
Payments on retirements of long-term debt	—			(28,861		)
Net borrowings under bank credit facility	—			(24,500		)
Net payments under Borgata bank credit facility	(40,900		)	(5,417		)
Debt financing costs, net	(828		)	—
Payments under note payable	—			(46,875		)
Proceeds from variable interest entity's issuance of debt	5,250			—
Payments on loans to variable interest entity's members	(181		)	—
Noncontrolling interest distributions by Borgata	—			(15,602		)
Other financing activities	(101		)	89
Net cash used in financing activities	(36,760		)	(121,166		)
Increase in cash and cash equivalents	$	30,157		$	6,971

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Cash Flows from Operating Activities

For the six months ended June 30, 2011, we generated operating cash flow of $97.6 million, compared to $149.8 million for the six months ended June 30, 2010, a decrease of $52.2 million. Generally, operating cash flows dropped due to a decrease in net income, an increase in interest paid and a reduction in our operating and non-operating income from Borgata under the equity method of accounting.

We did not receive distributions from Borgata during the six months ended June 30, 2011. Our distributions from Borgata were $17.5 million during the six months ended June 30, 2010. 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. As discussed above, Borgata's bank credit facility and senior secured notes contain certain covenants. Borgata's bank credit facility allows for certain limited distributions to be made to its partners. 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.

Cash Flows from Investing Activities

Cash paid for capital expenditures on major projects for the six months ended June 30, 2011 were $30.9 million and included the Echelon development project, which included spending of approximately $1.0 million, and maintenance capital expenditures of approximately $29.9 million.

Cash paid for capital expenditures on major projects for the six months ended June 30, 2010 were $47.5 million and included the Echelon development project, which included spending of approximately $26.6 million, and maintenance capital expenditures of approximately $19.0 million.

As a result of our consolidation of Borgata during the six months ended June 30, 2010, we included its cash balance of $26.0 million as an investing cash flow.

Cash Flows from Financing Activities

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

We did not repurchase any of our senior subordinated or senior notes during the six months ended June 30, 2011. During the three and six months ended June 30, 2010, we purchased and retired $17.5 million and $33.0 million, respectively, principal amount of our senior subordinated notes. The total purchase price of the notes was $15.5 million and $28.9 million, respectively, resulting in a gain of $1.9 million and $3.9 million, respectively, net of associated deferred financing fees, which is recorded on our condensed consolidated statement of operations for the respective period. The transactions were funded by availability under our former bank credit facility.

During the six months ended June 30, 2010, we made a final principal payment of $46.9 million related to the promissory note to the seller of Dania Jai-Alai.

During the six months ended June 30, 2010, Borgata made distributions of $35.0 million, of which we received $17.5 million.

Dividends

Dividends are declared at the discretion of our Board of Directors. We are subject to certain limitations regarding payment of dividends, such as restricted payment limitations related to our outstanding notes and our bank credit facility. In July 2008, our Board of Directors suspended the quarterly dividend for the current and future periods; therefore, we did not declare a dividend during the six months ended June 30, 2011 or 2010.

Share 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. 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. 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.

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

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repurchase program.

During the six months ended June 30, 2011 and 2010, we did not repurchase any shares of our common stock. 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 have in the past, and may in the future, 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.

Other Items Affecting Liquidity

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 for the next twelve months. Any additional financing that is needed may not be available to us or, if available, may not be on terms favorable to us. The outcome of the following specific matters, including our commitments and contingencies, may also affect our liquidity.

Agreement to Sell Dania

On April 29, 2011, we and Dania Entertainment Center, LLC (the “Buyer”) entered into an Asset Purchase Agreement (the “Agreement”) for the sale of certain assets and liabilities of the Dania Jai-Alai Business (as defined below).

Pursuant to the terms of the Agreement, we agreed to sell and transfer, and the Buyer agreed to purchase and assume, certain assets and liabilities (“Assets and Liabilities”) related to our Dania Jai Alai pari-mutuel facility, located in Dania Beach, Broward County, Florida at which jai alai and related gaming operations are conducted, including poker and inter-track wagering (the “Dania Jai-Alai Business”), for a purchase price of $80.0 million (the “Purchase Price”), subject to adjustment based on the amount of cash held by the Dania Jai-Alai Business as of the closing, including a non-refundable (except under certain limited circumstances) deposit of $5.0 million. We and the Buyer also agreed to indemnify each other against losses incurred or sustained due to actions arising out of the Agreement and the transactions contemplated thereby; however, our liability (and that of our respective affiliates) under the Agreement and the transaction documents is limited to a maximum amount.

The closing of the transactions contemplated by the Agreement is subject to certain conditions, including without limitation, (i) the receipt of all consents, approvals or authorizations required to permit us to transfer to the Buyer, and the Buyer to acquire from us, certain jai alai permits required to operate jai alai at the Dania facility; (ii) the absence of injunctions, judgments or other legal impediments seeking to prohibit the closing of the transaction; (iii) the expiration or termination of any required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; and (v) other customary closing conditions. In addition to other termination rights and events set forth in the Agreement, the Buyer has the right to terminate the Agreement at any time prior to the closing date based upon the Buyer's due diligence of the Assets and Liabilities. The closing must occur by September 26, 2011 (the “Outside Date”); provided that the Buyer may extend the Outside Date under certain limited circumstances until November 28, 2011 with payment of $2.0 million to us, $1.0 million of which shall be applied to the Purchase Price. We currently anticipate that the closing will occur in the third quarter of 2011.

Pending Acquisition of IP Casino Resort Spa

On June 15, 2011, we entered into an Agreement for Purchase and Sale (the "IP Agreement") with Imperial Palace of Mississippi, LLC and Key Largo Holdings, LLC (collectively, the “Seller”), pursuant to which the Seller agreed to sell and transfer, and we agreed to purchase and assume, certain assets and liabilities, respectively, related to the IP Casino Resort Spa (the "Property") in Biloxi, Mississippi, on an as-is basis (except as otherwise provided in the agreement), for a purchase price of $278 million in cash. Following the closing of the transaction, we will also make charitable contributions to the Engelstad Family Foundation equal to an aggregate of $10 million, which funds are intended to be distributed on behalf of, and in the name of, the Company, over five years to local and regional Biloxi charitable organizations to be designated by the Company. In addition, following the closing, we intend to perform certain capital improvement projects with respect to the IP Casino Resort Spa with costs estimated to be $44 million.

The closing of the transactions contemplated by the agreement is subject to the satisfaction or waiver of certain conditions, including, without limitation, (i) the receipt of certain consents, approvals or authorizations required to consummate the transactions contemplated by the IP Agreement and other licenses and permits required to operate the Property; (ii) the absence of injunctions, judgments or other legal impediments seeking to prohibit the closing; (iii) the expiration or termination of any required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; and (iv) other customary closing conditions.

The IP Agreement provides us a forty-five day due diligence period that commenced June 20, 2011, pursuant to which we, at our

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sole discretion, and without any cost or penalty, may terminate the agreement at any time prior to the expiration of such period. In the event that we do not terminate the agreement prior to the expiration of the due diligence period, we are required to make a non-refundable (except under certain circumstances) earnest money deposit of $10 million which will be credited against the purchase price upon the closing. If we fail to make the deposit at or prior to the expiration of the due diligence period, then the agreement will be automatically terminated. In addition to certain other termination rights, the IP Agreement may be terminated by either us or the Seller if the closing has not occurred by the date that is six months following the date of the agreement. We currently anticipate that the closing will occur before the end of the year.

Commitments

There have been no material changes to our commitments described under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on March 15, 2011.

Contingencies

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 14, 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 $17.5 million to $19.9 million, including interest. In late 2009, the Department audited and denied our refund claim and subsequently issued a $12.3 million sales tax deficiency assessment, plus interest of $7.5 million. We appealed both the denial of the refund claim as well as the deficiency assessment in a hearing before the Nevada Administrative Law Judge in September 2010. In April 2011, the judge issued a split decision, granting a refund on employee meals and applying a sales tax measure on complimentary meals; however, the ruling barred retroactive application of the sales tax measure to all years included in the refund claim period, effectively overturning the Department's 2009 deficiency assessment. Both we and the Department appealed the decision, with the exception of the portion related to the deficiency assessment, to the Nevada State Tax Commission (the "Commission"). Our Appeals hearing is scheduled for August 8, 2011. The Department did not appeal the Judge's decision overturning the 2009 deficiency assessment and therefore, the ruling on the deficiency assessment is final and non-appealable. Due to uncertainty surrounding the ultimate resolution of the Commission appeal, as well as subsequent appeals to higher levels of the state judicial system, we will not record any gain until both we and the Department have exhausted all appeal options and a final, non-appealable decision has been rendered. For periods subsequent to May 2008, we have not collected, remitted or accrued a liability for sales tax on complimentary and employee meals at our Nevada casino properties, as we do not believe it is 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 provisional bills received in 2007 through 2011, all of which were based on the 2006 valuation notice. In March 2011, we reached a settlement with the assessor, reducing the valuation by an additional $96.0 million and $74.0 million for the 2006 and 2007 tax years, respectively. As a result of the agreement reached on the 2006 and 2007 valuations, we have revised our accrual for years 2008 through 2011 to reflect the expected carryforward effect of the reductions received in the prior year settlements. Such reduction resulted in the reversal of previously accrued property tax expense of approximately $3.1 million and $2.8 million, net of fees, in the first and second quarter of 2011, respectively. We are currently in negotiations related to the 2008 and 2009 years but have not received valuation notices for years 2008 through 2011. We believe the assessment for the period from January 1, 2008 through June 30, 2011 could result in a property tax assessment ranging between $14.0 million and $18.0 million. We have accrued, net of the payments discussed above, approximately $18.0 million of property tax liability as of June 30, 2011, 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 assessment notices for the period January 1, 2008 through June 30, 2011, which have not been received as of June 30, 2011, could result in further adjustment

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to our estimated property tax liability at Blue Chip.

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 issued a ruling denying the exceptions on August 9, 2010. Copeland's counsel indicated a desire to move forward with the litigation and requested that the parties respond to outstanding discovery. Subsequently, on August 11, 2010, Robert J. Guidry, the co-defendant, filed a third party demand against the U.S. Attorney's Office seeking enforcement of Guidry's plea agreement which would limit Guidry's exposure in the case. On September 9, 2010, the U.S. Attorney's Office removed the suit to the U.S. District Court, Middle District of Louisiana. Pending before the District Court are a motion to dismiss for failing to state a cause of action filed by Guidry, asserting the same arguments he tried in state court, which the Company joined, and a motion to dismiss for lack of subject matter jurisdiction filed by the U.S. Attorney, which may result in the case being remanded to state court. The U.S. District Court heard the motions on March 16, 2011. A ruling has not yet been issued. On April 1, 2011, the U.S. Attorney's Office moved for summary judgment, maintaining its jurisdictional argument as well as seeking substantive relief. 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 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.

Other Opportunities

We regularly investigate and pursue additional expansion opportunities in markets where casino gaming is currently permitted. 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, which may include the following:

• 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 Amended 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.

Off Balance Sheet Arrangements

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There have been no material changes to our off balance sheet arrangements described under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on March 15, 2011.

Critical Accounting Policies

A description of our critical accounting policies can be found in our Annual Report on Form 10-K for the year ended December 31, 2010. The following summarizes the material changes to our critical accounting polices during the six months ended June 30, 2011, representing those of particular importance due to the retrospective recording of the measurement period adjustments reflected herein.

Application of Acquisition Method Accounting

Upon effectively obtaining control of Borgata, we were required to apply acquisition method accounting in accordance with the authoritative accounting guidance for business combinations. The application of the acquisition method accounting guidance had the following effects on our consolidated financial statements: (i) our previously held equity interest was measured at a provisional fair value at the date control was obtained; (ii) we recognized and measured the identifiable assets and liabilities in accordance with promulgated valuation recognition and measurement provisions; and (iii) we recorded the noncontrolling interest held in trust for the economic benefit of MGM as a separate component of our stockholders' equity.

The provisional fair value measurements and estimates of these items were subsequently refined during the one-year measurement period. We had provisionally recorded these fair values using an earnings valuation multiple model, because, at the time of the preliminary estimate, we had not completed our procedures with respect to the independent valuation of the business enterprise and Borgata's tangible and intangible assets. Our subsequent valuation procedures have necessitated a revision of the valuation of the provisional assets and liabilities. Thus, upon finalization of our valuation, certain measurement period adjustments were identified and retrospectively recorded in the condensed consolidated balance sheet as of December 31, 2010. These measurement period adjustments materially shifted the value of certain tangible and intangible assets. We have applied the measurement period adjustments retrospectively to the condensed consolidated balance sheet reported as of December 31, 2010; however, the impact on the condensed consolidated statements of operations for the three and six months ended June 30, 2011, as retrospectively adjusted to the statement as reported was not material, and was therefore not adjusted for any measurement period adjustments. The revisions to the provisional values of assets consists of reallocations of certain tangible assets and the recordation of other intangible assets; the accrual of certain liabilities including the recording of the deferred tax effect of the appreciated asset values; and the resulting effect on the fair value of the controlling and noncontrolling interests.

We determined the fair value of identifiable intangible assets such as customer relationships, a trademark and any other significant tangible assets or liabilities, such as long-lived property. The enterprise value allocation methodology requires management to make assumptions and apply judgment to estimate the fair value of acquired assets and liabilities. Management estimates the fair value of assets and liabilities primarily using discounted cash flows and replacement cost analysis. If estimates or assumptions used to complete the enterprise valuation and estimate the fair value of acquired assets and liabilities significantly differed from assumptions made, the resulting difference could materially affect the fair value of net assets. We will undertake impairment tests of the indefinite lived intangible assets in accordance with our existing policy, as discussed below. Additionally, given the eventual sale of the MGM interest, we will maintain a heightened awareness of any potential triggering events which would indicate a possible impairment of the intangible assets or long-lived assets.

The financial position of Borgata is consolidated in our condensed consolidated balance sheet as of June 30, 2011. We recorded a step up to the basis of Borgata's historical financial statements of $16.8 million, which is an appreciation over their historical book basis of 1% at the date of consolidation. In total, the assets of Borgata consolidated at June 30, 2011 represents 25.1% of our consolidated total assets at June 30, 2011.

Valuation of Indefinite-Lived Intangible Assets

Gaming License Rights

Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance with these certain jurisdictions. These assets, considered indefinite-lived intangible assets, are not subject to amortization, but instead are subject to an annual impairment test, performed in the second quarter of each year, and between annual test dates in certain circumstances. 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. License rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method. Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance therein. The value of gaming licenses is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only

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to future gaming revenue, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: gaming revenues; gaming operating expenses; general and administrative expenses; tax expense; terminal value; and discount rate. These projections are modeled for a five year period.

The results of our annual scheduled impairment test of these gaming license rights, performed during the second quarter of 2011, did not require us to record an impairment charge; however, if our estimates of projected cash flows related to these assets are not achieved, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next annual scheduled impairment test. Such test could result in a future a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

The carrying value of our gaming license rights was $371.4 million, or 6.6% of our consolidated total assets as of June 30, 2011, and all such rights are recorded within our Midwest and South reportable segment. The fair value of these rights exceeded their carrying value by an aggregate amount of $222.1 million, or by a multiple of 1.7.

Trademarks

Trademarks are based on the value of our brand, which reflects the level of service and quality we provide and from which we generate repeat business. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademarks, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the brand name. We used the following significant projections and assumptions to determine value under the relief from royalty method: revenue from gaming and hotel activities; royalty rate; general and administrative expenses; tax expense; terminal growth rate; discount rate; and the present value of tax benefit. The projections underlying this discounted cash flow model were forecasted for fifteen years. Applying the selected pretax royalty rates to the applicable revenue base in each period yielded pretax income for each property's trademarks and trade name. These pretax totals were tax effected utilizing the applicable tax rate to arrive at net, after-tax cash flows. The net, after-tax flows were then discounted to present value utilizing an appropriate discount rate. The present value of the after-tax cash flows were then added to the present value of the amortization tax benefit (considering the 15-year amortization of intangible assets pursuant to recent tax legislation) to arrive at the recommended fair values for the trademarks and trade names.

The carrying value of our trademarks within our Las Vegas Locals reportable segment was $50.7 million, or 0.9% of our consolidated total assets as of June 30, 2011 and the fair value of our reporting units exceeded their carrying value by $18.2 million, or 36%. Specific to the value of our Las Vegas Locals' trademarks, a respective annual decline in their gaming revenues of 6%, in hotel revenues of 2% or an aggregate decline in both streams of 2% would impact the fair value of the trademarks by $1 million, and result in a future impairment in such amount.

We also recorded a trademark related to the fair valuation of Borgata on March 24, 2010. The current carrying value of the Borgata trademark is $60 million, or 1.1% of our consolidated total assets as of June 30, 2011. During the six months ended June 30, 2011, we performed an interim impairment test of this trademark due to our consideration of certain facts and circumstances surrounding an adverse change in the business climate in Atlantic City. We believe our actual results have been adversely impacted by increased regional competition, and that in addition, our projected future results will be further impacted by cannibalization of our business upon the opening of a new property in Atlantic City, which was announced in February 2011. We also believe the refinancing of Borgata's debt and recapitalization of its member equity contributed to the results of this impairment test. As a result of the impairment test , which was in advance of our planned annual impairment test, and due to the adverse change in Borgata's business climate, we recorded a $5 million impairment charge. Specific to the value of Borgata's trademark, a respective annual decline in their gaming revenues of 3%, in hotel revenues of 5% or an aggregate decline in both streams of 2% would impact the fair value of the trademark by $1 million, and result in a future impairment in such amount.

Trademarks are considered indefinite lived intangible asset and will not be subject to future amortization, but rather subject to an annual impairment test in the second quarter of each year and between annual test dates in certain circumstances. We will continue to evaluate whether any triggering events or changes in circumstances have occurred subsequent to our annual impairment test that would indicate an impairment condition may exist. This evaluation required significant judgment, including consideration of whether there had been any significant adverse changes in legal factors or in our business climate, adverse action or assessment by a regulator, unanticipated competition, loss of key personnel or likely sale or disposal of all or a significant portion of a reporting unit. Should any further events as described above occur, or any significant assumption in our valuations methods is adversely impacted, the impact could result in a material impairment charge in the future.

Valuation of Goodwill

The authoritative guidance related to goodwill impairment requires goodwill to be tested for impairment at the reporting unit level at least annually using a two-step impairment test. Step One of the test is a screen used to identify whether or not goodwill

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impairment may exist. In Step One, an entity compares the fair value of a reporting unit with its carrying amount. If a reporting unit's carrying amount exceeds its fair value, goodwill impairment may exist. Step Two of the test must then be performed to measure the amount of impairment, if any. In Step Two, an entity compares the implied fair value of goodwill with its carrying amount. An impairment loss is measured by the excess of the carrying amount of goodwill over its implied fair value. The implied fair value of goodwill should be determined in the same manner that goodwill is measured in a business combination; that is, an entity must allocate the fair value of a reporting unit to the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination.

We solicit third party valuation expertise to assist in the performance of the Step One valuations of the goodwill of our reporting units. We perform the test in the second quarter of our fiscal calendar year, using a weighting of two different approaches to determine fair value: (i) the income approach and (ii) the market approach.

The income approach is based on a discounted cash flow method, which focuses on the expected cash flow of the subject company. In applying this approach, the cash flow available for distribution is calculated for a finite period of years. Cash flow available for distribution is defined, for purposes of this analysis, as the amount of cash that could be distributed as a dividend without impairing the future profitability or operations of the subject company. The cash flow available for distribution and the terminal value (the value of the subject company at the end of the estimation period) are then discounted to present value to derive an indication of value of the business enterprise.

In the valuation of an asset, the income approach focuses on the income-producing capability of the subject asset. The underlying premise of this approach is that the value of an asset can be measured by the present worth of the net economic benefit (cash receipts less cash outlays) to be received over the life of the subject asset. The steps followed in applying this approach include estimating the expected after-tax cash flows attributable to the asset over its life and converting these after-tax cash flows to present value through “discounting.” The discounting process uses a rate of return which accounts for both the time value of money and investment risk factors. Finally, the present value of the after-tax cash flows over the life of the asset is totaled to arrive at an indication of the fair value of the asset.

The market approach is comprised of the guideline company method, which focuses on comparing the subject company to selected reasonably similar, or “guideline”, publicly-traded companies. Under this method, valuation multiples are: (i) derived from the operating data of selected guideline companies; (ii) evaluated and adjusted based on the strengths and weaknesses of the subject company relative to the selected guideline companies; and (iii) applied to the operating data of the subject company to arrive at an indication of value. In the valuation of an asset, the market approach measures value based on what typical purchasers in the market have paid for assets which can be considered reasonably similar to those being valued. When the market approach is utilized, data are collected on the prices paid for reasonably comparable assets. Adjustments are made to the similar assets to compensate for differences between reasonably similar assets and the asset being valued. The application of the market approach results in an estimate of the price reasonably expected to be realized from the sale of the subject asset.

The two methodologies were weighted 80.0% toward the income approach and 20.0% toward the market approach, to arrive at an overall fair value.

The results of our annual scheduled impairment test of goodwill, performed during the second quarter of 2011, did not require us to record an impairment charge; however, if our estimates of projected cash flows related to these assets are not achieved, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next annual scheduled impairment test. Such test could result in a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

The carrying value of our goodwill was $213.6 million, or 3.8% of our consolidated total assets as of June 30, 2011. Although we satisfied Step One by fair margin ranging from $192.7 million to $324.9 million for each reporting unit tested, certain underlying assumptions and variables could greatly impact the results of future tests.

On a macro-economic level, we believe that over the next few years, several trends are expected to continue to adversely affect the gaming industry. The most significant trends include (i) delayed development of new construction; (ii) increased bankruptcy filings; and (iii) decreased consolidation. The impact of the weakening economy, credit crunch, and general outlook of the casino resort industry is illustrated through the recent trend of abandoned casino projects. Bankruptcy has served as a deterrent to deals because of the large decline in cash flow as well as significant increases in leverage. Debt to EBITDA ratios for public companies has nearly doubled overall in the past few years, indicating the inability to service debt. Analysts generally expect a sudden decrease in merger and acquisition activity after reports show that buyers are demanding a higher capitalization rate and lenders are significantly raising the equity portion required for deals. Deals are not only taking longer to fulfill, but as credit markets remain frozen, the slowdown is expected to continue into 2011. Although we cannot control or influence the impact of these factors from

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a fair valuation perspective, they could nonetheless have a material effect on the results of valuation, particularly the guideline company method under the market approach, in the future.

Additionally, several of the assumptions underlying the discounted cash flow method under the income approach could pose a high degree of sensitivity to the resulting fair value. These factors include, but are not limited to, the following: total revenue, depreciation expense, depreciation overhang, tax expense and effective rates, debt-free net working capital, capital additions, terminal year growth factor, discount rate and the capitalization rate. A change in any of these variables that cause our undiscounted cash flows or terminal value or both to adversely and materially would result in the failure of the Step One test, and a resulting impairment of our goodwill in an amount up to its book value of $213.6 million.

Recently Issued Accounting Pronouncements

A variety of 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.

Accounting Standards Update 2011-05 Presentation of Comprehensive Income ("Update 2011-05")

In June, 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-05 Presentation of Comprehensive Income, which is an amendment to Topic 220 of the Accounting Standards Codification.

The objective of Update 2011-05 is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. Update 2011-05 provides an entity with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income.

The amendments in Update 2011-05 do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income, nor does the amendment affect how earnings per share is calculated or presented. The amendments in this Update should be applied retrospectively. The amendment will effective for our fiscal year, and interim periods within the fiscal year beginning January 1, 2012. Update 2011-05 will not have a material impact on the computation of comprehensive income, but will require a revised presentation thereof.

Important Information Regarding Forward-Looking Statements

This Annual Report on Form 10-Q 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 business model, areas of focus and strategy for realizing improved results;

• 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;

• our commitment to having a significant presence on the Las Vegas Strip;

• indebtedness, including our ability to refinance or pay amounts outstanding under our bank credit facilities and

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notes when they become due and our compliance with related covenants, and our expectation that we and Borgata will need to refinance all or a portion of our respective indebtedness at maturity;

• our expectations with respect to Borgata, including our responsibility and control over day-to-day operations and the managerial resources we expect to devote to effectuate the sale of the MGM Interest;

• our expectation regarding the trends that will affect the gaming industry over the next few years and the impact of these trends on merger and acquisition activity in general;

• our belief that consumer confidence will strengthen as the job market recovers and expands;

• our expectations with respect to the valuation of Borgata's tangible and intangible assets;

• 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, the effect of this on consumer confidence 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;

• our ability to pay dividends or to pay any specific rate of dividends, and our expectations with respect to the receipt of dividends from Borgata;

• our commitment to finding opportunities to strengthen our balance sheet and to operate more efficiently;

• our intention to pursue acquisition opportunities and our ability to obtain financing for and successfully take advantage of such opportunities;

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

• our expectations regarding the closing of the sale of the Assets and Liabilities related to the Dania Jai-Alai Business in the third quarter of 2011;

• our expectations regarding the closing of the sale of the transactions contemplated by the IP Agreement before the end of the year;

• Adjusted EBITDA, Adjusted Earnings (Loss) and Adjusted Earnings Per Share and their usefulness as measures of operating performance or valuation;

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

• that our Amended Credit Facility and Borgata's credit facility and our respective cash flows from operating activities will be sufficient to meet our respective projected operating and maintenance capital expenditures for the next twelve months;

• our ability to fund any expansion projects using cash flows from operations and availability under the Amended Credit Facility;

• our market risk exposure and efforts to minimize risk;

• the timing of the 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, our expectations as to the costs associated with delays related to the project as well as the value of capitalized costs and recurring project costs we expect to incur in the future, and our belief that financing for a development project like Echelon continues to be unavailable;

• 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

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connection with such projects), timing and the ability to achieve market acceptance;

• our belief that, except for the Copeland matter discussed herein, all pending claims, if adversely decided, will not have a material adverse effect on our business, financial position, or results of operations;

• that margin improvements will remain a driver of profit growth for the Company going-forward;

• our belief that the risks to our business associated with USCG inspection should not change by reason of inspection by ABSC;

• development opportunities in existing or 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 asset impairment analyses and our intangible asset and goodwill impairment tests;

• the resolution of our pending litigation, including the litigation involving Treasure Chest casino;

• our relationship with LVE including, without limitation, our mutual agreement to not initiate litigation, the monthly periodic fee and our option to purchase LVE's assets;

• our intention to file a registration statement pursuant to the registration rights agreement entered into in connection with the private placement of our 9.125% senior notes due 2018;

• the likelihood of interruptions to our rights in the land we lease under long term leases for certain of our hotels and casinos;

• the outcome of various tax audits and assessments, including our appeals thereof, timing of resolution of such audits, our estimates as to the amount of taxes that will ultimately be owed and the impact of these audits on our consolidated financial statements;

• our overall outlook, including all statements under the heading Overall Outlook in Part I. Item 2. 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;

• 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 estimates as to the effect of any changes in our Consolidated EBITDA on our ability to remain in compliance with certain Amended Credit Facility covenants; 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 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

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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 USCG may not continue to allow in-place underwater inspections of our riverboats.

• 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 associated with challenges to legalized gaming in existing or current markets.

• 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.

• 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 or that regulatory authorities may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines and take other adverse actions against any of our casino operations.

• Our inability to select the new joint venture partner for Borgata and the possibility that a new operating agreement will be entered into with the new venture partner, which could result in changes to Borgata's ongoing operations.

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

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

• Risks associated with our ability to comply with the Total Leverage, Secured Leverage and Interest Coverage ratios in our Amended Credit Facility, and the risks associated with Borgata's ability to comply with the minimum consolidated EBITDA and minimum liquidity covenants.

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• The risk that we ultimately may not be successful in dismissing the action filed against Treasure Chest 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 Amended Credit Facility and Borgata's bank 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.

• The effect of the expansion of legalized gaming in the mid-Atlantic region.

• Borgata's expected liabilities under the multiemployer pensions in which it operates.

Additional factors that could cause actual results to differ are discussed in Part II. Item 1A. Risk Factors of this Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 and in other current and periodic reports filed from time to time with 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 3.     Quantitative and Qualitative Disclosures about Market Risk

As of June 30, 2011, there were no material changes to the information previously reported under Item 7A. in our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on March 15, 2011.

Item 4.     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 (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). 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. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. 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.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) 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.

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PART II. Other Information

Item 1.     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 issued a ruling denying the exceptions on August 9, 2010. Copeland's counsel indicated a desire to move forward with the litigation and requested that the parties respond to outstanding discovery. Subsequently, on August 11, 2010, Robert J. Guidry, the co-defendant, filed a third party demand against the U.S. Attorney's Office seeking enforcement of Guidry's plea agreement which would limit Guidry's exposure in the case. On September 9, 2010, the U.S. Attorney's Office removed the suit to the U.S. District Court, Middle District of Louisiana. Pending before the District Court are a motion to dismiss for failing to state a cause of action filed by Guidry, asserting the same arguments he tried in state court, which the Company joined, and a motion to dismiss for lack of subject matter Jurisdiction filed by the U.S. Attorney, which may result in the case being remanded to state court. The U.S. District Court heard the motions on March 16, 2011. A ruling has not yet been issued. On April 1, 2011, the U.S. Attorney's Office moved for summary judgment, maintaining its jurisdictional argument as well as seeking substantive relief. 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 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 1A.     Risk Factors

We have revised the risk factors that relate to our business as set forth below. These risks include any material changes to and supersede the risks previously disclosed in Part I. Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2010. We encourage investors to review the risks and uncertainties relating to our business disclosed in that Annual Report on Form 10-K, as well as those contained in Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Important Information Regarding Forward-Looking Statements, above.

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, senior notes and senior subordinated notes, could decline significantly, and investors could lose all or part of their investment.

Risks Related to our Business

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. 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, employment and credit crisis, the impact of high energy and food costs, the increased cost of travel, the potential for continued bank failures, decreased disposable

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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.

For example, the year ended December 31, 2009 was one of the toughest economic periods in Las Vegas Locals history. 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. Similarly, weak economic conditions have also adversely affected tourism and spending in Atlantic City, where Borgata is located. Since our business model relies on consumer expenditures on entertainment, luxury and other discretionary items, continuation or deepening of the economic downturn will further adversely affect our results of operations and financial condition.

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.

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 give 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.

Also, our business may be adversely impacted by the additional gaming and room capacity in states which may be competitive in the other markets where we operate or intend to operate. Several states are also considering enabling the development and operation of casinos or casino-like operations in their jurisdictions.

For example, the expansion of casino gaming in or near the mid-Atlantic region from which Borgata attracts and expects to attract most of its customers has had an adverse effect on its business, results of operations and financial condition. In January 2010, table game legislation was signed into Pennsylvania law which allows up to 250 table games at each of the twelve largest authorized casinos and up to 50 table games at each of the remaining two smaller authorized casinos. Table games became operational at the nine existing casinos in Philadelphia in mid-July 2010. In addition, other states near New Jersey, including New York and Delaware, either have or are currently contemplating gaming legislation. In January 2010, Delaware legalized table games, which became operational in June 2010 at all three Delaware casinos. Convenience may be a more important factor than amenities for some customers, especially mid-week and repeat customers. These customers may prefer the convenience of a closer drive to a nearby casino rather than dealing with a longer drive to enjoy the amenities that Borgata has to offer. Expansion of gaming facilities in Pennsylvania and other nearby states therefore has resulted in fewer customer visits to Borgata, which has adversely impacted Borgata's business, results of operations and financial condition.

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 and Sam's Town Shreveport 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

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operations of Blue Chip and Sam's Town Shreveport.

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 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. Therefore, we have no assurance that we will have further access to credit or capital markets at desirable times or at rates that we would consider acceptable, and the lack of such funding could have a material adverse effect on our business, results of operations and financial condition, including our ability to refinance our or Borgata's indebtedness, our flexibility to react to changing economic and business conditions and our ability or willingness to fund new development projects.

We are not able to predict the duration or severity of the economic downturn, and the resulting impact on the solvency of many of the financial institutions, that have been negatively impacted. 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 Amended Credit Facility to fund our current projects. There is no certainty that our lenders will continue to remain solvent or fund their respective obligations under our Amended Credit Facility. If we were otherwise required to renegotiate or replace our Amended Credit Facility, there is no assurance that we would be able to secure terms that are as favorable to us, if at all.

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

In accordance with the authoritative accounting guidance for goodwill and other intangible assets, 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. The results of our annual scheduled impairment test of goodwill and indefinite-lived intangible assets did not require us to record an impairment charge during the six months ended June 30, 2011; however, as discussed below, if our estimates of projected cash flows related to these assets are not achieved, we may be subject to a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

In addition, in accordance with the provisions of the authoritative accounting guidance for the impairment or disposal of long-lived assets, we test long-lived assets for impairment if a triggering event occurs. During the six months ended June 30, 2011, we performed an interim impairment test on the trademark we recorded in connection with the valuation of Borgata due to our consideration of a change in facts and circumstances surrounding an adverse change in the business climate in the Atlantic City region. As a result, we recorded a $5.0 million impairment to the trademark.

We are entirely dependent upon our properties for future cash flows and our continued success depends on our ability to draw customers to our properties. 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 were to recur, additional impairment charges may be required in future periods. If we are required to record additional impairment charges, this could have a material adverse impact 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. As we do not yet believe that a significant level of economic recovery has occurred along the Las Vegas Strip, we do not expect to resume construction for three to five years, as previously disclosed.

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. 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 exceeded the current carrying value of the assets of approximately $928 million at December 31, 2009, we can provide no assurances that future evaluations will not result in impairment charges. 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 during 2009. Considering the subsequent mutual termination of this joint venture, certain of our

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contributions, primarily related to the architectural and design plans, were ultimately not realizable and, 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, 2009.

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.

Our partner in the Holding Company, the limited liability company that owns and operates Borgata Hotel Casino and Spa in Atlantic City, New Jersey, has divested its 50% interest and we do not have the ability to select the new partner.

We own a 50% controlling interest in the limited liability company that operates Borgata. MGM currently beneficially owns the other 50% interest. As a result of the NJDGE's investigation of MGM's relationship with its joint venture partner in Macau, MGM entered into a settlement agreement with the NJDGE and the NJCCC under which MGM placed its 50% ownership interest in Borgata into a Divestiture Trust, which was established for the purpose of selling the MGM Interest to a third party.

We are the managing member of the limited liability company that operates Borgata, 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 the MGM Interest in Borgata. However, we believe we will expend managerial resources to effectuate the eventual sale of the MGM Interest from the Divestiture Trust to a new partner, regardless of whether we exercise our right of first refusal. Other than exercising our right of first refusal, we do not have the ability to affect the selection of the potential new partner at Borgata.

While we believe we will retain direct control of the operations of Borgata, based on our current and amended operating agreement, a new partner may want to negotiate greater rights or different terms. If we agree to consider changes to the operating agreement, 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 agree to negotiate agreements with a new partner that contain terms that differ from our existing operating agreement.

Borgata's bank credit facility matures in August 2014. At the time of maturity, if Borgata is unable to refinance its bank credit facility on favorable terms, additional credit support and/or capital contributions may be necessary to fund the ongoing operations of Borgata. This additional credit and/or equity may need to be contributed by us or a new partner, if any, 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 flow needs of Borgata, and our investment would be at risk. Moreover, if any new partner does not have the financial resources to meet its share of the obligations, or subsequently declares bankruptcy, we could be required to fund more than our 50% share.

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 2011, we announced the sale of Dania Jai Alai and the pending acquisition of the IP Casino Resort Spa. In February 2007, we completed the Barbary Coast exchange transaction. 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 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. With respect to the sale of Dania Jai-Alai and the pending acquisition of the IP Casino Resort Spa, there can be no assurance that the respective transactions will close as anticipated, or at all.

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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. As previously disclosed, we do not anticipate that Echelon will resume construction for three to five years. We also believe financing for a project like Echelon continues to be unavailable. 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.

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. As we do not yet believe that a significant level of economic recovery has occurred along the Las Vegas Strip, we do not expect to resume construction for three to five years, as previously disclosed.

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. 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,

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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.

LVE Energy Partners, LLC (“LVE”) is a joint venture between Marina Energy LLC and DCO ECH Energy, LLC. Through our wholly-owned subsidiary, Echelon Resorts LLC ("Echelon Resorts"), we have entered into an Energy Sales Agreement ("ESA") with LVE, to design, build, own (other than the underlying real property which is leased from Echelon Resorts) and operate a central energy center and related distribution system for our planned Echelon resort development. Pursuant to the ESA, LVE will provide chilled and hot water, electricity and emergency electricity generation to Echelon and potentially other joint venture entities associated with the Echelon development project or other third parties. However, since we are obligated to purchase substantially all of the output of the central energy center, we are the primary beneficiary under the terms of the ESA.

LVE has suspended construction of the central energy center while the Echelon project is delayed. On April 3, 2009, LVE notified us that, in its view, Echelon Resorts would be in breach of the ESA unless it recommences and proceeds with construction of the Echelon development project 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. On March 7, 2011, Echelon Resorts and LVE entered into both a purchase option agreement (the "Purchase Option Agreement") and a periodic fee agreement (the "Periodic Fee Agreement"). Under the Periodic Fee Agreement, Echelon Resorts and LVE have mutually agreed that neither LVE nor Echelon Resorts would give notice of, file or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and that any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is in effect. The prohibition on the initiation of litigation and the tolling of the statute of limitations provided for in the Periodic Fee Agreement should be applicable to any litigation with respect to LVE's April 3, 2009 claim of an alleged breach of the ESA. Under the Periodic Fee Agreement, Echelon Resorts has agreed to pay LVE, beginning March 4, 2011, the Periodic Fee and an operation and maintenance fee until either (i) Echelon notifies LVE that it has resumed construction of a portion of the Echelon development project that it will own in fee simple and Echelon and LVE have mutually agreed to changes to the dates in their respective construction milestones under the ESA: or (ii) Echelon exercises its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee is fixed at $11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee is estimated to be approximately $10.8 million annually. The operation and maintenance fee cannot exceed $0.6 million per annum without Echelon Resorts' prior approval. We have posted a letter of credit in the amount of $6.0 million to secure Echelon Resorts' obligation to pay the Periodic Fee and the operation and maintenance fee.

Under the Purchase Option Agreement, Echelon Resorts has the right, at its sole discretion, upon written notice to LVE, to purchase the assets of LVE including the central energy center and related distribution system for a price of $195.1 million, subject to certain possible adjustments. The ESA will be terminated concurrent with the purchase of LVE's assets.

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.

If we are unable to finance our expansion, development, investment and renovation projects, as well as other capital expenditures, through cash flow from operations, borrowings under our Amended 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 Amended 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

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debt, reducing the amount or suspending or discontinuing the distribution of dividends, obtaining additional equity financing or joint venture partners, or modifying our Amended 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 funding for any of our expansion projects would come from cash flows from operations and availability under our Amended Credit Facility (to the extent that availability exists under our Amended Credit Facility, as applicable, after we meet our working capital needs).

If availability under our Amended 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.

Risks Related to the Regulation of our Industry

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 our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on March 15, 2011. 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 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.

Regulation of smoking

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.

Additionally, on April 15, 2007, an ordinance in Atlantic City became effective which extended smoking restrictions under the New Jersey Smoke-Free Air Act. This ordinance mandated that casinos restrict smoking to designated areas of up to 25% of the casino floor. During April 2008, Atlantic City's City Council unanimously approved an amendment to the ordinance, banning smoking entirely on all casino gaming floors and casino simulcasting areas, but allowing smoking in separately exhausted, non-gaming, smoking lounges. The amendment to the ordinance became effective on October 15, 2008, however, on October 27, 2008, Atlantic City's City Council voted to postpone the full smoking ban for at least one year due to, among other things, the weakened economy and increased competition in adjoining states. The postponement of the full smoking ban became effective on November 16, 2008. In December 2009, Atlantic City's City Council announced that it would not consider a full smoking ban in casinos until at least the end of 2011.

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.

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

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

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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, 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.

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 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 provisional bills received in 2007 through 2010, all of which were based on the 2006 valuation notice. In March 2011, we reached a settlement with the assessor, reducing the valuation by an additional $96.0 million and $74.0 million for the 2006 and 2007 tax years, respectively. As a result of the agreement reached on the 2006 and 2007 valuations, we have revised our accrual for years 2008 through 2011 to reflect the expected carryforward effect of the reductions received in the prior year settlements. Such reduction resulted in an income statement benefit of approximately $3.1 million and $2.8 million, net of fees, in the first and second quarter of 2011, respectively. We are currently in negotiations related to the 2008 and 2009 years but have not received valuation notices for years 2008 through 2011. We believe the assessment for the period from January 1, 2008 through June 30, 2011 could result in a property tax assessment, net of payments, ranging between $14.0 million and $18.0 million. We have accrued, net of the payments discussed above, approximately $18.0 million of property tax liability as of June 30, 2011, 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 assessment notices for the period January 1, 2008 through June 30, 2011, which have not been received as of June 30, 2011, 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 14, 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 $17.5 million to $19.9 million, including interest. In late 2009, the Department audited and denied our refund claim and subsequently issued a $12.3 million sales tax deficiency assessment, plus interest of $7.5 million. We appealed both the denial of the refund claim as well as the deficiency assessment in a hearing before the Nevada Administrative Law Judge in September 2010. In April 2011, the judge issued a split decision, granting a refund on employee meals and applying a sales tax measure on complimentary meals; however, the ruling barred retroactive application of the sales tax measure to all years included in the refund claim period, effectively overturning the Department's 2009 deficiency assessment. Both we and the Department appealed the decision, with the exception of the portion related to the deficiency assessment, to the Nevada State Tax Commission (the "Commission"). Our Appeals hearing is scheduled for August 8, 2011. The Department did not appeal the Judge's decision overturning the 2009 deficiency assessment and therefore, the ruling on the deficiency assessment is final and non-appealable. Due to uncertainty surrounding the ultimate resolution of the Commission appeal, as well as subsequent appeals to higher levels of the state judicial system, we will not record any gain until both we and the Department have exhausted all appeal

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options and a final, non-appealable decision has been rendered. For periods subsequent to May 2008, we have not collected, remitted or accrued a liability for sales tax on complimentary and employee meals at our Nevada casino properties, as we do not believe it is probable, based on both procedural issues and the technical merits of the Department's arguments, that we will owe this tax.

Atlantic City casinos, including Borgata, currently pay a 9.25% effective tax rate on gross gaming revenues. We also pay property taxes, sales and use taxes, payroll taxes, franchise taxes, room taxes, parking fees, various license fees, investigative fees and our proportionate share of regulatory costs. Our profitability depends on generating enough revenues to pay gaming taxes and other largely variable expenses, such as payroll and marketing, as well as largely fixed expenses, such as property taxes and interest expense. Borgata is treated as a partnership for federal income tax purposes and therefore federal income taxes are the responsibility of its members. Casino partnerships in New Jersey, however, are subject to state income taxes under the Casino Control Act. Therefore, Borgata is required to record New Jersey state income taxes. We cannot assure you that the State of New Jersey will not enact legislation that increases gaming tax rates.

We own real property and are subject to extensive environmental regulation, which creates uncertainty regarding future environmental expenditures and liabilities.

We may incur costs to comply with environmental requirements, such as those relating to discharges into the air, water and land, the handling and disposal of solid and hazardous waste and the cleanup of our property affected by hazardous substances. Under these and other environmental requirements we may be required to investigate and clean up hazardous or toxic substances or chemical releases at our property. As an owner or operator, we could also be held responsible to a governmental entity or third parties for property damage, personal injury and investigation and cleanup costs incurred by them in connection with any contamination. These laws typically impose cleanup responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. The liability under those laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of the responsibility. The costs of investigation, remediation or removal of those substances may be substantial, and the presence of those substances, or the failure to remediate a property properly, may impair our ability to use our property.

Borgata is a participant in a multiemployer pension plan, and the plan has been certified in critical status by the fund's actuary.

In connection with Borgata's collective bargaining agreement with the culinary and hotel workers union, Local 54/UNITE HERE, it participates in the UNITE HERE National Retirement Fund pension plan (the “Fund”). On March 31, 2010, as a result of the extraordinary decline in the financial markets and downturn in the economy, the Fund was certified in critical status by the Fund's actuary under the federal multiemployer plan funding laws pursuant to the Pension Protection Act of 2006 (the “PPA”). In connection with the certification, the Fund's board of trustees has adopted a rehabilitation plan effective on April 1, 2010 (the “Rehabilitation Plan”) with the goal of enabling the Fund to emerge from critical status by January 1, 2023. The Rehabilitation Plan provides for certain increases in employer contributions and, in some cases, a reduction in participant benefits.

Borgata's current monthly pension contributions to the Fund range from $0.4 million to $0.5 million, and its unfunded vested liability to the Fund is $47.1 million for the plan year beginning on January 1, 2010. A renewed economic decline could have a significant adverse effect on the financial condition of the Fund, which may require Borgata to make contributions in addition to those already contemplated. Any such increases in required contributions could adversely affect Borgata's results of operations.

Under applicable federal law, any employer contributing to a multiemployer pension plan that completely ceases participating in the plan while it is underfunded is subject to payment of such employer's assessed share of the aggregate unfunded vested benefits of the plan. In certain circumstances, an employer can also be assessed withdrawal liability for a partial withdrawal from a multiemployer pension plan. Based on an estimate provided by the Fund in April 2010, Borgata has estimated that its pre-tax withdrawal, assuming a hypothetical immediate and complete withdrawal from the Fund, could be in excess of $47 million. However, the exact amount of potential exposure could be higher or lower than the estimate, depending on, among other things, the nature and timing of any triggering events and the funded status of the Fund at that time.

Risks Related to our Properties

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, due to flooding of the Mississippi River, the Mississippi Gaming Commission ordered the nine casinos located in Tunica, Mississippi to close indefinitely to ensure the safety of visitors and employees. Accordingly, effective May 1, 2011, we closed Sam's Town Hotel and Gambling Hall in Tunica. We were able to reopen on May 28, 2011; however, Sam's Town Hotel and Gambling Hall suffered minor damage, and we are still negotiating a settlement with our insurer.

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In addition, 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 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.

Moreover, Blue Chip, Par-A-Dice, Sam's Town Tunica, Sam's Town Shreveport, Treasure Chest and Borgata are each located in an area that has been identified by the director of the Federal Emergency Management Agency (“FEMA”) as a special flood hazard area, which, according to the FEMA statistics, has a 1% chance of a flood equal to or exceeding the base flood elevation (a 100-year flood) in any given year.

In addition to the risk of flooding and hurricanes, snowstorms and other adverse weather conditions may interrupt our operations, damage our properties and reduce the number of customers who visit our facilities in the affected area. For example, during January and February 2011, much of the country was impacted by some of the worst winter weather in decades, particularly in the Midwest. Although our properties at Blue Chip and Par-A-Dice were not closed as a result, these storms made it very difficult for our customers to visit, and we believe such winter weather had a material and adverse impact on the results of our operations during such time. Additionally, February 2010 was the snowiest month ever recorded in Atlantic City, which generally kept would-be gamblers from traveling to Borgata, contributing to a drop in Borgata's monthly revenues from January to February. The 2010 winter season was the worst on record, and travel throughout the entire Northeast was extremely difficult. The residual impact from these record winter storms resulted in day trip visitations to Atlantic City that were reduced or delayed as regional school calendars were extended in order to make up for prior school closures. Additionally, extreme heat and low precipitation levels in the latter half of the first six months of 2010, particularly in the month of June, had an adverse impact on visitation and spending at Borgata's property. If there is a prolonged disruption at Borgata or any of our other properties due to natural disasters, terrorist attacks or other catastrophic events, our results of operations and financial condition could be materially adversely affected.

While we maintain insurance coverage that may cover certain of the costs and loss of revenue 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.

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

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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 issued a ruling denying the exceptions on August 9, 2010. Copeland's counsel indicated a desire to move forward with the litigation and requested that the parties respond to outstanding discovery. Subsequently, on August 11, 2010, Robert J. Guidry, the co-defendant, filed a third party demand against the U.S. Attorney's Office seeking enforcement of Guidry's plea agreement which would limit Guidry's exposure in the case. On September 9, 2010, the U.S. Attorney's Office removed the suit to the U.S. District Court, Middle District of Louisiana. Pending before the District Court are a motion to dismiss for failing to state a cause of action filed by Guidry, asserting the same arguments he tried in state court, which the Company joined, and a motion to dismiss for lack of subject matter jurisdiction filed by the U.S. Attorney, which may result in the case being remanded to state court. The U.S. District Court heard the motions on March 16, 2011. A ruling has not yet been issued. On April 1, 2011, the U.S. Attorney's Office moved for summary judgment, maintaining its jurisdictional argument as well as seeking substantive relief. 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.

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.

Blue Chip, Par-A-Dice, Sam's Town Tunica, Sam's Town Shreveport, Treasure Chest and Borgata are each located in an area that has been identified by the director of the FEMA as a special flood hazard area. According to the FEMA statistics, a special flood hazard area has a 1% chance of a flood equal to or exceeding the base flood elevation (a 100-year flood) in any given year. Over a 30-year period, the risk of a 100-year flood in a special flood hazard area is 26%. At all times when we have a loan or credit facility from federally insured or regulated lender or lenders, we are required to maintain flood insurance at least equal to the lesser of (i) the outstanding principal balance of the loan; (ii) the maximum amount of coverage allowed for the type of property under the National Flood Insurance Program (“NFIP”) managed by FEMA; or (iii) the full replacement cost value of the collateral. The maximum amount of NFIP insurance currently available on a commercial building is currently $0.5 million. Our level of flood insurance coverage may not be adequate to cover all losses in the event of a major flood.

Due to flooding of the Mississippi River, Sam's Town Hotel and Gambling Hall was closed from May 1, 2011 until May 28, 2011. Sam's Town Hotel and Gambling Hall was damaged, and while we carry business interruption insurance and general liability insurance, we have not settled on our claims, and 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.

We draw a significant percentage of our customers from certain 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.

The California, Fremont and Main Street Station draw a substantial portion of their customers from the Hawaiian market. For the three months ended June 30, 2011, patrons from Hawaii comprised 66% of the room nights sold at the California, 54% at Fremont and 58% at Main Street Station, For the six months ended June 30, 2011, patrons from Hawaii comprised 67% of the room nights sold at the 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

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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.

Additionally, the expansion of casino gaming in or near the mid-Atlantic region from which Borgata attracts and expects to attract most of its customers could have a significant adverse effect on its business, results of operations and financial condition. In 2010, Pennsylvania passed legislation allowing table games at certain casinos in the state, and other states near New Jersey, including New York, Delaware, Connecticut, and Maryland have or are currently contemplating gaming legislation. The expansion of gaming facilities in nearby states will further increase competition and may adversely impact our business, financial condition and results of operations.

Borgata also competes with Native American tribes in the Northeast and Mid-Atlantic region. Expansion of Native American gaming could have an adverse effect on Borgata's business, results of operations and financial condition, as Native American gaming facilities typically have a significant operating advantage over Borgata due to lower gaming taxes, allowing those facilities to market more aggressively and to expand or update their facilities at an accelerated rate.

The strength and profitability of ourbusiness depends on consumer demand for hotel casino resorts in general and for the type of amenities our properties offer. Changes in consumer preferences or discretionary consumer spending could harm our business. The terrorist attacks of September 11, 2001, other terrorist activities in the United States and elsewhere, military conflicts in Iraq, Afghanistan and in the Middle East, outbreaks of infectious disease and pandemics, adverse weather conditions and natural disasters, among other things, have had negative impacts on travel and leisure expenditures. In addition, other factors affecting travel and discretionary consumer spending, including general economic conditions, disposable consumer income, fears of further economic decline and reduced consumer confidence in the economy, may negatively impact our business. We cannot predict the extent to which similar events and conditions may continue to affect us in the future. An extended period of reduced discretionary spending and/or disruptions or declines in tourism could significantly harm our operations.

Furthermore, our facilities are subject to the risk that operations could be halted for a temporary or extended period of time, as a result of casualty, flooding, forces of nature, adverse weather conditions, mechanical failure, or extended or extraordinary maintenance, among other causes. If there is a prolonged disruption at any of our properties due to natural disasters, terrorist attacks or other catastrophic events, our results of operations and financial condition could be materially adversely affected.

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 economic recession and continued economic downturn, 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.

Borgata has an executory contract with a wholly-owned subsidiary of a local utility company with terms that extend to June 2028, 20 years from the opening of The Water Club. The utility company provides Borgata 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 were estimated at approximately $11.4 million per annum as of June 30, 2011. Borgata is also obligated to purchase a certain portion of its electricity demand at essentially a

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fixed rate which is estimated at approximately $1.7 million per annum. Electricity demand in excess of the commitment is subject to market rates based on Borgata's tariff class.

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 two and three 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”). ABSC inspection for our riverboats at Blue Chip, Treasure Chest and Sam's Town Shreveport commenced during 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.

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, Treasure Chest, Sam's Town Shreveport and Borgata's hotel and gaming facility are located. In addition, we lease other parcels of land on which portions of the Cal and the Fremont are located. As a ground lessee, we have the right to use the leased land; however, we do not retain fee ownership in the underlying land. Accordingly, with respect to the leased land, we will have no interest in the land or improvements thereon at the expiration of the ground leases. Moreover, since we do not completely control the land underlying the property, a landowner could take certain actions to disrupt our rights in the land leased under the long term leases. While such interruption is unlikely, such events are beyond our control. If the entity owning any leased land chose to disrupt our use either permanently or for a significant period of time, then the value of our assets could be impaired and our business and operations could be adversely affected. 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.

Risks Related to our Indebtedness

We have a significant amount of indebtedness.

We had total consolidated long-term debt, net of current maturities, of approximately $2.82 billion at June 30, 2011. 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,

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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.

On December 3, 2010, we entered into an Amendment and Restatement Agreement among us, certain financial institutions (each a “Lender”), Bank of America, N.A., as administrative agent and letter of credit issuer, and Wells Fargo Bank, National Association, as swing line lender (the “Amendment and Restatement Agreement”). Pursuant to the terms of the Amendment and Restatement Agreement, our First Amended and Restated Credit Agreement, dated as of May 24, 2007, as amended by the First Amendment and Consent to First Amended Credit Agreement, dated as of December 21, 2009 (as amended, the “Amended Credit Facility”), was amended and restated to, among other things, (i) reduce the aggregate commitments under the Credit Facility and (ii) permit consenting Lenders to extend the maturity date of their commitments, new Lenders to issue revolving commitments and term loans and existing Lenders to increase their commitments (each, an “Extending Lender”) in each case with a maturity date five years from the restatement effective date.

Each of the Extending Lenders permanently reduced their commitments under the former credit facility by up to 50% of the amount thereof. As a result, the aggregate commitments under the Amended Credit Facility were reduced from $3 billion to approximately $1.5 billion (including $500 million of term loans, and excluding $331.0 million in non-extending amounts), which commitments may be increased from time to time by up to $500 million (instead of $1 billion commitment increases provided for under the former credit facility) through additional revolving credit or term loans under the Amended Credit Facility.

Our current debt service requirements on the extending amounts under the Amended Credit Facility primarily consist of interest payments on the outstanding borrowings. However, pursuant to the terms of the Amended Credit Facility, the term loans amortize in an annual amount equal to 5% of the original principal amount thereof, and commenced March 31, 2011, payable on a quarterly basis. The interest rate per annum applicable to revolving and term loans under the Amended Credit Facility is based upon, at our option, LIBOR or the “base rate,” plus an applicable margin in either case. Debt service requirements under our current outstanding senior subordinated and senior notes consist of semi-annual interest payments (based upon fixed annual interest rates ranging from 6.75% to 9.125%) and repayment of our senior subordinated and senior notes due April 15, 2014, February 1, 2016 and December 1, 2018 for each of our 6.75% and 7.125% senior subordinated notes and our 9.125% senior notes, respectively.

The Amended Credit Facility contains certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of a minimum consolidated interest coverage ratio, (ii) establishing a maximum permitted consolidated total leverage ratio, (iii) establishing a maximum permitted secured leverage ratio, (iv) imposing limitations on the incurrence of indebtedness, (v) imposing limitations on transfers, sales and other dispositions and (vi) imposing restrictions on investments, dividends and certain other payments. Subject to certain exceptions, we may be required to repay the amounts outstanding under the Amended Credit Facility in connection with certain asset sales and issuances of certain additional secured indebtedness.

In addition, our Amended Credit Facility requires us to maintain certain ratios, including a minimum Interest Coverage Ratio (as

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defined in the Amended Credit Facility) of 2.00 to 1.00, a Total Leverage Ratio and a Secured Leverage Ratio (both as defined in the Amended Credit Facility) that adjust over the life of our Amended Credit Facility. We believe that we were in compliance with the Amended Credit Facility covenants, including the minimum consolidated Interest Coverage Ratio, the maximum permitted consolidated Total Leverage Ratio and the maximum permitted Secured Leverage Ratio, which, at June 30, 2011, were 2.42 to 1.00, 6.95 to 1.00 and 4.14 to 1.00, respectively.

At June 30, 2011, assuming our current level of Consolidated Funded Indebtedness remains constant, we estimate that a 10.3% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to June 30, 2011, would cause us to exceed our maximum permitted consolidated Total Leverage Ratio covenant for that period. In addition, at June 30, 2011, assuming our current level of Secured Indebtedness remains constant, we estimate that a 8.0% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to June 30, 2011, would cause us to exceed our maximum permitted Secured Leverage Ratio covenant for that period. Additionally, at June 30, 2011, assuming our current level of interest expense remains constant, we estimate that a 17.2% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to June 30, 2011, would cause us to go below our minimum consolidated Interest Coverage Ratio covenant for that period.

However, in the event that we project our Consolidated EBITDA may decline by such levels or more, we could implement certain actions in an effort to minimize the possibility of a breach of the maximum permitted consolidated Total Leverage Ratio, the maximum permitted Secured Leverage Ratio and the minimum consolidated Interest Coverage Ratio covenants. 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.

In addition, Borgata has significant indebtedness which could affect its ability to pay dividends to us. While we received a one-time distribution from Borgata of approximately $135.4 million in August 2010 in connection with Borgata's financing, any future distribution from Borgata (other than distributions to satisfy tax liabilities relating to income of Borgata) will be subject to the limitations on dividends, distributions and certain other restricted payments under Borgata's bank credit agreement and the indenture governing Borgata's senior secured notes.

We did not receive distributions from Borgata during the six months ended June 30, 2011 and received $17.5 million from Borgata during the six months ended June 30, 2010. Other than the August 2010 distribution, the distributions from Borgata have generally declined as a result of the decline in Borgata's operating results. 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 bank credit facility contains customary affirmative and negative covenants, including covenants that limit Borgata's ability to:

•     incur additional debt;

•     pay dividends and make other distributions;

•     create liens;

•     enter into transactions with affiliates;

•     merge or consolidate; and

•     engage in unrelated business activities.

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 Amended Credit Facilityin amounts sufficient to enable us to pay our indebtedness, as such indebtedness matures and to fund our other liquidity needs. We believe that we will need to refinance all or a portion of our indebtedness, at maturity, and cannot provide assurances that we will be able to refinance any of our indebtedness, including our Amended 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

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may prevent us from obtaining necessary capital.

We and our subsidiaries may still be able to incur substantially more debt, which could further exacerbate the risks described above.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indentures governing our senior subordinated and senior notes and Borgata's senior secured notes do not fully prohibit us or our subsidiaries from doing so. Approximately $555.7 million of contractual availability was available for borrowing under our Amended Credit Facility as of June 30, 2011. If new debt is added to our, or our subsidiaries', current debt levels, the related risks that we or they now face could intensify.

Borgata may be unable to refinance its indebtedness.

In August 2010, Borgata entered into a $150 million bank credit facility that matures in August 2014 and issued $800 million in senior secured debt, $400 million of which matures in October 2015 and $400 million of which matures in August 2018. Borgata's ability to refinance its indebtedness will depend on its ability to generate future cash flow and Borgata is entirely dependent on its operations, including the Water Club, for all of its cash flow. Its ability to generate cash in the future, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control.

It is unlikely that Borgata's business will generate sufficient cash flows from operations in amounts sufficient to enable it to pay the principal on its indebtedness at maturity and to fund its other liquidity needs. We believe Borgata will need to refinance all or a portion of its indebtedness before maturity, and we cannot provide assurances that it will be able to repay or refinance its indebtedness on commercially reasonable terms, or at all. Borgata 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, New Jersey laws and regulations contain restrictions on the ability of companies engaged in the gaming business to undertake certain financing transactions. Such restrictions may prevent Borgata from obtaining necessary capital.

If we are unable to finance our expansion, development, investment and renovation projects, as well as other capital expenditures, through cash flow, borrowings under the 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 the Amended 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 the Amended 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 any expansion projects using cash flows from operations and availability under the Amended Credit Facility (to the extent that availability exists after we meet our working capital needs).

If availability under the Amended 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.

Risks Related to our Equity Ownership

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;

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• 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.

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 37.2% of the Company's outstanding shares of common stock as of June 30, 2011. 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.

Item 6.     Exhibits

Exhibits

10.2	Agreement for Purchase and Sale, dated June 15, 2011, among the Company, Imperial Palace of Mississippi, LLC and Key Largo Holdings, LLC.
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.
101	The following materials from Boyd Gaming Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010, (iii) Condensed Consolidated Statement of Changes in Stockholders' Equity for the six months ended June 30, 2011, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010, and (vi) Notes to Condensed Consolidated Financial Statements.*

* Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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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 August 5, 2011.

BOYD GAMING CORPORATION
By:	/S/    ELLIE J. BOWDISH
	Ellie J. Bowdish
	Vice President and Chief Accounting Officer (Principal Accounting Officer)

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EXHIBIT LIST

10.2	Agreement for Purchase and Sale, dated June 15, 2011, among the Company, Imperial Palace of Mississippi, LLC and Key Largo Holdings, LLC.
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.
101	The following materials from Boyd Gaming Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010, (iii) Condensed Consolidated Statement of Changes in Stockholders' Equity for the six months ended June 30, 2011, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010, and (vi) Notes to Condensed Consolidated Financial Statements.

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EX-10.2

AGREEMENT FOR PURCHASE AND SALE

dated as of June 15, 2011

by and among

IMPERIAL PALACE OF MISSISSIPPI, LLC AND

KEY LARGO HOLDINGS, LLC

(“Seller”)

and

BOYD GAMING CORPORATION

(“Buyer”)

AGREEMENT FOR PURCHASE AND SALE

THIS AGREEMENT FOR PURCHASE AND SALE, including all exhibits and schedules hereto (this “Agreement”), is made and entered into as of the 15th day of June, 2011 (the “Effective Date”), by and among IMPERIAL PALACE OF MISSISSIPPI, LLC, a Mississippi limited liability company, doing business as IP Casino Resort Spa at 850 Bayview Avenue, Biloxi, Mississippi 39530 (“IPM”) and KEY LARGO HOLDINGS, LLC, a Delaware limited liability company (“Key Largo” and together with IPM, collectively, “Seller”, and Seller shall, as the context requires, refer to IPM or Key Largo, or both of them), and BOYD GAMING CORPORATION, a Nevada corporation, its nominees and assignees (“Buyer”).

WITNESSETH:

WHEREAS, IPM is the owner of (a) that certain improved real property located generally at 850 Bayview Avenue, Biloxi, Mississippi 39530, commonly known as the Imperial Palace Casino Resort Spa (the “Hotel/Casino”), and designated as the Hotel/Casino Land (the “Hotel/Casino Land”) and more particularly described on Exhibit “A” attached hereto and hereby incorporated by reference herein (subject to modification of the legal description insofar as it may be inconsistent with the boundary established by the Agreed Final Judgment (defined below), and (b) that certain warehouse property in D'Iberville, Mississippi designated as the Warehouse Property (the “Warehouse Property”), and more particularly described on Exhibit “B” attached hereto and hereby incorporated by reference herein; and (c) that certain real property designated as the Undeveloped Land (the “Undeveloped Land”), and more particularly described on Exhibit “C” attached hereto and hereby incorporated by reference herein, and (d) all land and rights (collectively, the “Final Judgment Land and Rights”) vested in IPM pursuant to the terms of (i) that certain Agreed Final Judgment in Case No. C2402-98-389 in the Chancery Court of Harrison County, Mississippi, Second Judicial District, a copy of which Agreed Final Judgment (the “Agreed Final Judgment”) is attached hereto as Exhibit “D” and hereby incorporated by reference herein, and (ii) that certainBoundary Agreement dated December 10, 2009 by and between IPM and the Secretary of State of the State of Mississippi, including but not limited to the Taltavull Patent and certain littoral (riparian) rights, as described in said Boundary Agreement, a copy of which Boundary Agreement is attached to said Agreed Final Judgment as Exhibit “1” and hereby incorporated by reference herein; and

WHEREAS, IPM is the owner of that certain vessel (also sometimes generally referred to as a gaming vessel) (including without limitation, the barges and the superstructure erected thereon) used in connection with the operation of the Hotel/Casino (the “Gaming Vessel”); and

WHEREAS, Key Largo is the owner of that certain real property in Harrison County, Mississippi designated as the Key Largo Land (the “Key Largo Land”), and more particularly described on Exhibit “E” attached hereto and hereby incorporated by reference herein; and

WHEREAS, the parties hereto have reached an understanding with respect to the sale by Seller and the purchase by Buyer of the Hotel/Casino Land, the Warehouse Property, the Undeveloped Land, the Final Judgment Land and Rights, the Gaming Vessel, the Key Largo Land, and substantially all of the other assets, properties, goodwill and rights of Seller, including any and all rights of Seller in or to restrictive covenants or covenants not to compete, used in or necessary to the conduct of the hotel and casino business of IPM as currently conducted (the “Business”), excepting, however, certain assets that are hereinafter specifically excluded.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and upon and subject to the terms and conditions hereinafter set forth, Seller and Buyer agree as follows:

ARTICLE I.

SALE OF PROPERTY

1.Purchase and Sale.1.1Purchase and Sale Subject to the terms and conditions of this Agreement, at the Time of Possession (as set forth and more specifically defined in Section 11.2 below), Seller agrees to sell, transfer and convey to Buyer, free and clear of any and all liens, security interests, mortgages, pledges, claims, options, leases, easements, or other encumbrances or rights of third parties

(other than Permitted Encumbrances (defined below)), and Buyer agrees to purchase from Seller for the consideration hereinafter provided (other than the Excluded Property) the Property.

2.Property.1.2Definition of the Property Seller (on its own behalf and on behalf of Seller's affiliate, Imperial Palace, LLC (“Parent Licensor”), shall sell to Buyer and Buyer shall purchase from Seller hereunder:

(a)The Hotel/Casino Land, the Warehouse Property, the Undeveloped Land, the Final Judgment Land and Rights, and the Key Largo Land, together with all rights, hereditaments, privileges and easements appurtenant thereto, including but not limited to all development rights, air rights, water and water rights relating to and to which the Hotel/Casino Land, the Warehouse Property, the Undeveloped Land, the Final Judgment Land and Rights, and the Key Largo Land are entitled, and all of Seller's right, title and interest in and to any minerals, oil, gas and other hydrocarbon substances on or under the Hotel/Casino Land, the Warehouse Property, Undeveloped Land, the Final Judgment Land and Rights, and the Key Largo Land (collectively, the “Land”);

(b)All improvements located on the Land or on the Gaming Vessel, including, without limitation, the hotel, casino and all other buildings, structures, signs, apparatus, fixtures, equipment and appliances owned by Seller which are affixed to the Land or to the Gaming Vessel (all of which are collectively referred to as the “Improvements”);

(c)All of the interest of Seller in any intangible personal property owned by Seller now or at the Time of Possession which relates to and is reasonably required or desirable for the ownership or occupation of the of the Land and Improvements and is transferable (as opposed to nontransferable intangible personal property such as nontransferable gaming licenses and if applicable, nontransferable liquor and beer licenses, which are specifically excluded), including, without limitation, the Assumed Contracts (defined below), building plans and specifications, certain licenses and entitlements, soils reports, claims and causes of action related to the Land or Improvements, surveys, maps, any and all warranties, guaranties, utility contracts, permits, licenses, goodwill, prepaid advertising, telephone numbers, and other rights owned by Seller, relating to the ownership or occupation of all or any part of the Land or Improvements, and further including, without limitation, electronic copies of all customer lists, customer mailing lists, advance reservations and bookings, and originals of casino player credit information cards and credit files, and copies of such accounting records and reports relating to the Business which are necessary or desirable for the continued and uninterrupted operation of the Business from and after the Closing, all amounts owed to the Business by any person or entity that is not an Affiliate (defined below) of Seller, and all choses in action and claims that relate to Seller's ownership of the Property (defined below) or operation of the Business (“IntangibleProperty”);

(d)All of Seller's right, title and interest in and to the Gaming Vessel and all tangible personal property upon the Land or upon the Gaming Vessel or used in connection with the Improvements, including, without limitation, those certain motor vehicles described on Schedule 1.2(d) attached hereto, and other transportation equipment that may not be licensed by the Mississippi Department of Motor Vehicles, tools, signs and signage, displays, utensils, tableware, chinaware, glassware, silverware, all inventories of food and beverage stocks, gift shop and other retail shop inventory, hotel supplies, furniture, furnishings, equipment, supplies, decorations, marketing and promotional brochures and materials, and all other tangible personal property of Seller used in the operation of the Business (the “PersonalProperty”), but specifically excluding all personal property owned by hotel guests and IPM employees and the personal property described in Sections 1.3(g), 1.3(h) and 1.3(l) below;

(e)Upon final licensing approval by the Mississippi Gaming Commission (the “Mississippi Gaming Authorities”), all of Seller's right, title and interest to all “Gambling Devices” as defined in Mississippi Code Section 97-3-7, gaming tables, furniture and equipment and all other equipment and paraphernalia, including computer equipment and computer software (to the extent assignable) owned or licensed by Seller and used in connection with the Business, including, without limitation, associated equipment (the “GamingEquipment”);

(f)Deposits which IPM has made for goods or services yet to be received (the “IPM Deposits”);

(g)Cash, foreign chips (as used herein, “foreign” is defined as issued by an entity other than IPM, but readily redeemable in Harrison County, Mississippi) and foreign gaming tokens or similar cash

equivalents on the floor and in the cages, auxiliary banks, and booths at the Business, including any cash in bill validators, kiosks, and any other place in which cash, foreign chips or foreign gaming tokens of the Business, if any, are maintained, reduced however, by any portion thereof which constitutes part of the Patron Deposits (as defined in Section 3.1(f))(the “Bankroll”); provided, however, that Buyer shall have the option, by providing written notice to Seller no later than fifteen (15) calendar days prior to Closing, to require Seller to cash in all foreign chips and foreign gaming tokens on the day prior to Closing in which case, at the Time of Possession, Buyer may elect not to purchase such foreign chips and foreign gaming tokens that are received by Seller thereafter and such foreign chips and foreign gaming tokens received by Seller thereafter shall be the property of Buyer and shall not be deemed to be part of the Bankroll;

(h)All worldwide rights in and to (i) all intellectual property rights (including, without limitation, all registered and unregistered trademarks, service marks, trade names, corporate names, company names, fictitious business names, trade styles, trade dress, logos, and other source or business identifiers, patents, copyrights, web domain URLs, proprietary formulas, recipes, technology, software, computer source codes, know-how, trade secrets and other similar rights) used in or necessary to the conduct of the Business as currently conducted and necessary to perform all Assumed Liabilities, in each case whether owned, controlled, licensed or otherwise held by or for the benefit of Seller, (ii) all registrations and recordings thereof, all applications for registration pending therefor, all extensions and renewals thereof, and (iiii) all goodwill associated with the foregoing (including, without limitation, the names“Imperial Palace”, “Imperial Palace of Mississippi”, “Imperial Palace Casino Resort Spa”, “IP”, “IP Casino Resort Spa” and their internet domain names (other than www.imperialpalace.com), websites, logos, marks and designs and all goodwill associated therewith) owned by Seller and Parent Licensor, including but not limited to all rights and obligations under (x) that certain license agreement, dated August 22, 2005, entered into by and between Imperial Palace, LLC and Harrah's Imperial Palace Corp. (“Harrah's License Agreement”) and (y) that certain license agreement, dated January 1, 2006, entered into by and between Parent Licensor and Seller (“Seller's License Agreement”), each of which shall be deemed an Assumed Contract pursuant to Section 3.1(a)(i) (collectively, the “Intellectual Property”);

(i)Any insurance proceeds for casualty relating to the Property or the Real Property (the “Casualty Insurance Proceeds”) and an assignment (see Exhibit “G”) of each of the insurance policies listed on Schedule 1.2(i) attached hereto (the “Assumed Casualty Insurance Policies”), all of which shall be assumed by Buyer; provided that Seller shall remain the owner, named insured and/or beneficiary of such insurance policies for the period prior to the Time of Possession;

(j)Any insurance proceeds for liability relating to the Property or the Real Property (the “LiabilityInsurance Proceeds”) (the Casualty Insurance Proceeds and the Liability Insurance Proceeds shall collectively be referenced as the “Insurance Proceeds”) and an assignment (see Exhibit “H”) of each of the insurance policies listed on Schedule 1.2(j) attached hereto (the “Assumed Liability Insurance Policies”), all of which shall be assumed by Buyer; provided, that Seller shall remain the owner, named insured and/or beneficiary of such insurance policies for the period prior to the Time of Possession, and Seller shall for three (3) years after the Time of Possession be an additional named insured on such Assumed Liability Insurance Policies for incidents occurring after the Time of Possession;

(k)IPM's interest in that certain Amended and Restated Public Trust Tidelands Lease (the “Tidelands Lease”) dated December 10, 2009, by and between IPM as lessee and the State of Mississippi as lessor, subject to the State of Mississippi providing its permission, as applicable and to the extent required, for an assignment to Buyer of IPM's interest therein;

(l)The Seller's membership interests in IP Casino Vacations, LLC, a Nevada limited liability company;

(m)The Seller's uncollected accounts receivable (other than the Tray Ledger (defined below)) and notes receivable arising at or prior to the Time of Possession ; and

(n)Any other tangible or intangible property of the Seller (other than the Excluded Property) used in or necessary to the conduct of the Business as currentlyconducted.

The Land, the Improvements, the Intangible Property, the Personal Property, the Gaming Equipment, the Bankroll, IPM's interest in the Tidelands Lease, the IPM Deposits, the Intellectual Property, the Insurance Proceeds and all other assets set forth above are collectively referred to herein as the “Property”. The Land and the Improvements (except for the Improvements to the Gaming Vessel) are collectively referred

to herein as the “Real Property”.

3.Property Exceptions.1.3Property Exceptions Anything in Section 1.2 of this Agreement to the contrary notwithstanding, the Property does not include and Seller reserves and retains all right, title and interest in and to the following (collectively, the “Excluded Property”):

(a)Seller's certificate of formation, articles of organization, operating agreement, minute books, membership interest transfer records or other records related to the limited liability company organization of Seller, except as provided in Section 1.2(c) and Section 1.2(l);

(b)Marketable securities, if any, and certificates of deposit and other similar cash equivalents, whether or not such assets relate to Seller's ownership of the Property or operation of the Business, including but not limited to all certificates of deposit, surety bonds, and other similar cash equivalents, deposits with banks, utilities, Governmental Entities, Mississippi Gaming Authorities, and Mississippi Liquor Authorities (defined below), if any.

(c)The insurance policies and rights thereunder described in Schedule 1.3(c) attached hereto except as otherwise provided in this Agreement;

(d)Any personal property and equipment described in Schedule 1.3(d) attached hereto;

(e)Other assets used in or necessary to the conduct of the Business as currently conducted and described in Schedule 1.3(e) attached hereto;

(f)The 2011 Mercedes Benz S550 automobile bearing the vehicle identification number WDDNG7BB1AA288105;

(g)Miscellaneous items of personal property owned by W. Owen Nitz and Jeffrey M. Cooper located in the executive offices at the Hotel/Casino described on Schedule 1.3(g) attached hereto and hereby incorporated by reference herein;

(h)All computers, files, records, computer data, computer programs, hard drives, and all other items of personal property used by W. Owen Nitz or Jeffrey M. Cooper located in the executive offices at the Hotel/Casino described on Schedule 1.3(h) attached hereto which contain their work product or attorney/client or accountant/client privileged matters or which contain communications from their offices in Las Vegas, Nevada or from third parties which communications are unrelated to the operation of the Business (the “Privileged Property”); provided, however, Seller agrees to maintain a copy of the Privileged Property for a period of seven (7) years following the Time of Possession and, subject to Seller's right to seek a protective order, to provide Buyer with a copy of such materials which relate to IPM, or Buyer's counsel, to the extent necessary, in response to any demand, cause of action, requirement, or issue affecting the Business arising from or related to the time period before the Time of Possession (as reasonably determined by Buyer), including but not limited to: (i) any demand, audit, or inquiry of any entity having jurisdiction over the Business and (ii) any lawsuit or threat of lawsuit or other adverse action by a third party;

(i)All of Seller's shares of stock or interest in any corporations or limited liability companies, if any, except as described in Schedule 1.3(i) attached hereto;

(j)Seller's bank accounts as listed on Schedule 1.3(j) attached hereto;

(k)All IPM gaming chips, tokens or similar cash equivalents (the “IP Chips”) (such IP Chips, if retained by IPM, shall be destroyed by IPM in accordance with applicable laws) and all gaming chips (other than foreign chips, unless excluded from the Bankroll pursuant to Buyer's election in accordance with Section 1.2(g)), tokens (other than foreign tokens, unless excluded from the Bankroll pursuant to Buyer's election in accordance with Section 1.2(g)) or similar cash equivalents issued by casinos other than IPM which are not readily redeemable in Harrison County, Mississippi (the “Non-Redeemable Chips”); provided, however, that Buyer shall have the option, by providing written notice to IPM no later than fifteen (15) calendar days prior to the Closing, to keep the IP Chips, in which case Buyer shall receive a credit against the amount of the Purchase Price at Closing for IPM's estimated amount of IP Chips to be redeemed per Section 11.4(f) hereof. If, however, Buyer does not elect to exercise its option pursuant to this Section 1.3(k), Buyer agrees to redeem and deliver to IPM, subject to the Plan (defined below) all IP Chips presented to it at the Hotel/Casino, and IPM shall reimburse Buyer for all IP Chips so redeemed and delivered to IPM in the manner provided by Section 7.2(g);

(l)Miscellaneous items of personal property owned by Jon Lucas located at the Hotel/Casino described on Schedule 1.3(l) attached hereto and hereby incorporated by reference herein;

(m)All personal property owned by hotel guests and IPM employees;

(n)All unclaimed wages held by Seller;

(o)The trademarks and/or service marks registered to IPM which are listed on Schedule 1.3(o); and

(p)The domain name of www.imperialpalace.com.

ARTICLE II.

PURCHASE PRICE

1.Purchase Price. 2.1Purchase Price For and in full consideration of the sale of the Property, at the Time of Possession, Buyer shall assume the Assumed Liabilities and pay to Seller by wire transfer of immediately available funds to an account designated by Seller, a purchase price of Two Hundred Seventy Eight Million Dollars ($278,000,000.00) (the “Cash Consideration”), plus the amount of the Bankroll and Tray Ledger, subject to the adjustments, if any, pursuant to the Closing Statement in accordance with Section 11.4 (collectively, the “Purchase Price”). As used herein “Tray Ledger” means any accounts receivable of registered guests who have not checked out and who are occupying rooms at the Hotel/Casino at the Time of Possession.

2.Payment. 2.2Payment Notwithstanding the provisions of Section 2.1, the Purchase Price shall be payable as follows:

(a)An earnest money deposit of Ten Million Dollars ($10,000,000) (the “Deposit”) shall be deposited by Buyer in escrow (the “Deposit Escrow”) with Fidelity National Title Insurance Company (the “EscrowAgent”) on or before the expiration of the Due Diligence Period (as defined in Section 10.1(a)), which Deposit Escrow shall be subject to the terms and conditions of the Deposit Escrow Agreement attached hereto as Exhibit “I” (the “Deposit Escrow Agreement”). Upon the expiration of the Due Diligence Period, the Deposit shall immediately become non-refundable (except as provided in Articles IX and X hereof). In the event Buyer does not deliver the Deposit to Escrow Agent or before the expiration of the Due Diligence Period, then this Agreement shall, without further notice, automatically terminate at the end of the Due Diligence Period, and shall be of no further force and effect. At the Closing (hereafter defined), the Deposit (including any interest earned thereon) shall be credited against the Purchase Price. In the event this Agreement is terminated, then the Deposit and any interest earned thereon shall be delivered by Escrow Agent in accordance with the provisions of Article X hereof; and

(b)At the Closing, the Closing Date Payment shall be deposited by Buyer, by federal wire transfer or other good immediate federal funds, in escrow (the “Closing Escrow”) with Escrow Agent by twelve o'clock noon on the day prior to the Closing Date, which Closing Escrow shall be subject to the terms and conditions of the Closing Escrow Agreement attached hereto as Exhibit “J” (the “Closing Escrow Agreement”), as provided in Section 11.3 hereof. For purposes of this Agreement, the “Closing Date Payment” shall mean an amount equal to (1) the Cash Consideration, minus (2) the Deposit and accrued interest thereon.

ARTICLE III.

ASSUMPTION OF LIABILITIES AND CONTRACTS

1.Assumption of Liabilities and Assumed Contracts by Buyer. 3.1Assumption of Liabilities and Contracts by Buyer At the Time of Possession, Seller shall assign to Buyer and Buyer shall assume and pay, perform and discharge, and indemnify and hold Seller harmless (including without limitation reasonable attorneys' fees and costs) from and against, the following obligations and liabilities of Seller, in each case, subject to the adjustments, if any, pursuant to the Closing Statement in accordance with Section 11.4:

(a)Subject to any adjustments permitted by Section 11.4(j): (i) Liabilities and obligations of the Business which are due and payable after the Time of Possession under those contracts, agreements, licenses, commitments, notes, sales orders and purchase orders entered into by Seller prior to the Effective Date, and those set forth in Schedule 3.1(a) attached hereto (as may be updated to the extent permitted by this Agreement, which together with the Assumed Casualty Insurance Policies and the Assumed Liability Insurance Policies shall collectively be referenced as the “Assumed Contracts”) and (ii) subject to Sections 5.1(d), 8.1(c), 8.1(g) and 8.4(c) hereof, liabilities and obligations of the Business which are due and payable

after the Time of Possession under those contracts, agreements, licenses, commitments, notes, sales orders and purchase orders entered into by Seller in the Ordinary Course of Business after the Effective Date that are added to Schedule 3.1(a) as permitted by this Agreement. For purposes of this Agreement, “Ordinary Course of Business” shall mean any action taken by Seller if such action is consistent with Seller's past practices and is taken in the ordinary course of Seller's normal day to day operations; provided, however, that unless otherwise permitted by Section 8.1(c), without the consent of Buyer (which consent shall not be unreasonably withheld), no contract, agreement, license, commitment, note, sales order or purchase order entered into by Seller in the Ordinary Course of Business after the Effective Date shall be for an amount in excess of $100,000.00 for any individual contract or commitment, or for $1,000,000.00 in the aggregate when taken together with any previous contract or commitment entered into by Seller following the Effective Date, or for a time period greater than one (1) year. All other liabilities and obligations of the Business, whether due or payable before or after the Time of Possession under any contracts, agreements, licenses, commitments, notes, sales orders and purchase orders of Seller that are not set forth on Schedule 3.1(a), as it may be updated to the extent permitted by this Agreement, are part of the Excluded Liabilities referenced in Section 3.5;

(b)Any commitments or coupons for free or discounted accommodations, services, tickets, food or beverages, cash back points or kiosk redemptions issued or granted by IPM to customers or others in the Ordinary Course of Business and which remain outstanding after the Time of Possession;

(c)Any and all claims, liabilities, losses, costs, damages or expenses (including reasonable counsel fees and expenses) arising after the Time of Possession from Buyer's ownership of the Property or Buyer's conduct of the Business after the Time of Possession, including without limitation gift certificate obligations, Player's Club Points, IP Rewards Club and slot club obligations (including those redeemable in cash, or in complimentary food, beverage, room, merchandise or otherwise);

(d)All Progressive Liabilities (as defined in Section 11.4(e));

(e)The liabilities that are set forth on Schedule 3.1(e), and that relate to Seller's liability for payments of amounts and providing of benefits to or for the benefit of the Transferred Employees and their dependants earned and accrued or attributable to the time period prior to, at, or after the Time of Possession, whether paid or payable directly to said Transferred Employees, to insurance carriers or through the Imperial Palace of Mississippi, LLC Employee Benefit Plan, as amended (the “IP Health Plan”), the Seller's Associate Assistance Plan (the “Associate Assistance Plan”), and/or Seller's Section 125 Cafeteria Planand whether paid or payable from Seller's funds or through employee withheld contributions, for all employee benefits and plans provided by or through Seller, including but not limited to the following):

(i) paid time off (in accordance with Section 3.4),

(ii) contribution to benefit plans, including but not limited to Seller's 401(k) plan (“Seller's 401(k) Plan”) and Buyer's successor 401(k) Plan (in accordance with Section 3.6),

(iii) payroll taxes,

(iv) holiday premium payments, birthday premium payments, and other premium payments,

(v) life insurance, accidental death and dismemberment insurance, disability insurance, cancer coverage, critical illness coverage, life coverage, prepaid legal services, vision insurance and services, medical and health care and dental care,

(vii) (a) the “Senior Management Bonuses”, which are defined as all payments, bonuses or allocations which are or become due and payable to employees of IPM at or after the Time of Possession by virtue of the Restated and Amended IP Senior Management Incentive Compensation Plan effective January 1, 2009 (the “Compensation Plan”) but excluding the “Unit Sale Event Allocations” as defined on page 24 of the Compensation Plan and as provided in Article IV of the Compensation Plan, (b) the “Lucas Bonuses”, which are defined as all payments, bonuses or allocations which are or become due and payable to Jon Lucas at or after the Time of Possession by virtue of the Executive Employment Agreement dated December 29, 2006 by and between Jon Lucas and IPM (the “Lucas Agreement”) including without limitation, life insurance provided to Jon Lucas (the annual premium

for which was paid by Seller on February 17, 2011 and which is not due again for another year), but excluding the “Additional Sale Compensation” defined in and as provided in Section 3.2.2 of the Lucas Agreement, and (c) miscellaneous annual cash bonuses to the expanded management group (the “Annual Cash Bonuses”) which are or become due and payable at or after the Time of Possession; provided, however, that the payment of the obligations required by this subsection (vii) shall not result in a credit or debit for either Buyer of Seller to the Purchase Price or to the Preliminary Closing Net Working Capital (as defined below) or to the Final Closing Net Working Capital (as defined below);

(viii) all other benefits and plans including those provided through the Seller's Section 125 Cafeteria Plan, the IP Health Plan, the Associate Assistance Plan, and

(ix) workman's compensation claims and premiums (and similar claims and premiums related to the Longshoremen and Harbor Workers Compensation Act, if applicable);

provided, however, Buyer shall not assume and Seller agrees to pay and remain liable for: Seller's normal salary and wages earned by and accrued for Seller's employees which are due and payable up to the Time of Possession that are payable directly to Seller's employees, and Seller's payments of benefits listed in sub-paragraphs 3.2(e)(i) through (viii) above and Employee Benefits (as defined in Section 5.1(g). and workman's compensation claims and premiums (and similar claims and premiums related to the Longshoremen and Harbor Workers Compensation Act, if applicable) which are due and payable up to the Time of Possession; and provided further, however, that Buyer shall not assume and Seller agrees to pay and remain liable for the Unit Sale Event Allocations and for the Additional Sale Compensation;

(f)Hotel/Casino guest deposits (including front money, money for safekeeping, and deposits for rooms, conventions, banquets, catering and shows or other entertainment) for dates after the Closing Date and held by Seller for which an updated schedule (“Schedule 3.1(f)”) shall be provided to Buyer at Closing (the “PatronDeposits”);

(g)Unpaid or future premiums on the insurance policies set forth on Schedules 1.2(i) and 1.2(j) attributable to periods from and after the Time of Possession (the “Premiums”);

(h)Any obligations to make modifications to the Real Property required by any federal or state law or regulation (including without limitation the Americans with Disabilities Act (ADA)), and including without limitation any obligations imposed upon the Seller or the Real Property as a result of any complaint or action filed against IPM by the U.S. Department of Justice alleging ADA violations (the “ADA Claim”), or in any similar litigation as a result of any proceeding filed on or after the Time of Possession. In addition, Buyer shall be liable for all money damages or penalties, if any, in any ADA Claim filed (or any obligation under ADA arising) on or after the Time of Possession. Seller shall remain liable to make any modifications to the Real Property required by any ADA Claim filed (or any obligation under ADA arising) before the Time of Possession, and for all money damages or penalties, if any, in any ADA Claim filed (or any obligation under ADA arising) before the Time of Possession;

(i)All obligations and liabilities of IPM in the litigation listed on Schedule 3.1(i) attached hereto (the “Assumed Litigation”);

(j)All liability of IPM with respect to unclaimed jackpots, unredeemed slot tickets and customer front money;

(k)All debts, obligations, expenses or other liabilities involving environmental claims and remediation thereof arising out of the ownership or operation of the Property prior to or after the Time of Possession except to the extent such environmental claims and remediation costs result from matters caused by Seller;

(l)The Seller's accounts payable arising at or prior to the Time of Possession; and

(m)The obligation to defend (including reasonable counsel fees and expenses), and pay the self-insured retention with respect to, claims which are not filed until after the Time of Possession but which relate to claims, liabilities, losses, costs, damages or expenses resulting or arising out of ownership of the Property or conduct of the Business caused or arising prior to the Time of Possession.

Items described in Sections 3.1(a) through (m) are hereinafter referred to as the “AssumedLiabilities”.

2.Additional Provisions Regarding the Assumed Liabilities. 3.2Additional

Provisions Regarding the Assumed Liabilities The assumption by Buyer of the Assumed Liabilities shall not enlarge any rights or remedies of any third party under any Assumed Contracts with Seller. Buyer agrees to indemnify, defend and hold Seller and its owners, members, managers, directors, officers, employees, agents, attorneys, accountants, successors and assigns harmless from and against any and all liability, loss, cost, damage and/or expense (including, without limitation, reasonable attorneys' fees and costs) pertaining to the Assumed Liabilities. Buyer shall not be prevented from contesting in good faith any of the Assumed Liabilities. Notwithstanding Section 3.1, the Assumed Liabilities shall not include, and Buyer shall not assume, any liabilities or obligations that are otherwise to deemed to be an Excluded Liability.

3.Provisions Relating to the Assignment of Assumed Contracts and Assumed Insurance Policies. 3.3Provisions Relating to the Assignment of Contracts and Assumed Insurance Policies To the extent that the assignment of any Assumed Contract (other than those insurance policies set forth in Exhibits G and H (each, an “Assumed Insurance Policy” and collectively, the “Assumed Insurance Policies”), for which the parties acknowledge that consent to assignment is unnecessary) is not permitted without the consent of the other party or parties to such Assumed Contract, this Agreement shall not be effective to assign such Assumed Contract if such consent is not given. Seller agrees that with respect to such Assumed Contracts, at the request of Buyer), Seller shall use all reasonable efforts to obtain such consent. If (i) any such consent is not obtained or (ii) if Buyer's assumption of such Assumed Contract is prohibited by law, Seller agrees, to the extent permitted by law, to undertake with Buyer to enter into a subcontract or other arrangement pursuant to which Buyer shall receive the benefits of such Assumed Contract upon Buyer's payment of any unpaid balance of the consideration provided in the Assumed Contract and assumption of the obligation to perform the same. If any Assumed Contract may only be assigned upon payment, directly or indirectly, of additional consideration, then Buyer shall pay any such additional consideration whereupon Seller shall assign such Assumed Contract to Buyer. In the event Buyer's assumption of any such Assumed Contract is prohibited by law, Buyer shall not be required to assume such Assumed Contract, which shall be and remain the sole responsibility of Seller, and Buyer shall have no rights under any such Assumed Contract. In such event, such Assumed Contract or may, upon thirty (30) calendar days' notice to Buyer, be cancelled by Seller and Seller shall indemnify Buyer from any liability arising from such cancellation, unless prior to cancellation Buyer instructs Seller not to cancel, in which event Buyer shall indemnify Seller from any liability of Seller under such Assumed Contract.

4.Paid Time Off. 3.4Paid Time Off With respect to paid time off, at the Time of Possession, Buyer shall send written notice to each and every one of the Transferred Employees listed on Schedule 3.4 attached hereto (which shall be updated at Closing) stating that Buyer will honor and has assumed sole responsibility for the payment of all accrued paid time off benefits to the extent listed in Schedule 3.4, and Buyer shall, subject to the adjustments, if any, pursuant to the Closing Statement in accordance with Section 11.4, pay such benefits as they become due in the Ordinary Course of Business.

5.No Other Liabilities Assumed. 3.5No Other Liabilities Assumed Notwithstanding anything to the contrary contained in this Agreement, except as specifically provided in Section 3.1 with respect to the Assumed Liabilities, Buyer expressly disclaims responsibility for and shall not assume or be obligated to pay, perform or discharge, and Seller shall pay, perform and discharge any debt, obligation, expense or liability of Seller, whether absolute or contingent, arising out of or in connection with the Property or the Business (collectively, “Excluded Liabilities”), including, without limitation, any of the following debts, obligations, expenses or liabilities of Seller or its Affiliates:

(a)any liability or obligation, whether absolute or contingent, for Taxes attributable to or imposed upon Seller or its Affiliates, or attributable to or imposed upon the Property for any taxable period ending on or before the close of business on the Closing Date or, in the case of any taxable period which includes, but does not end on, the Closing Date, the portion of such period up to and including the Closing Date;

(b)any liability or obligation, whether absolute or contingent, that relates to any Excluded Property;

(c)any liability or obligation, whether absolute or contingent, incurred in connection with the making or performance by Seller of this Agreement and the transactions contemplated hereby; and

(d)Any costs or expenses incurred in connection with shutting down, de-installing and

removing equipment not purchased by Buyer and any costs or expenses associated with any contract, agreement or undertaking of Seller other than the Assumed Contracts.

6.Buyer's 401(k) Plan. 3.6Buyer's 401(k) Plan Effective as of the Time of Possession, Buyer shall designate a defined contribution retirement plan which is qualified or eligible for qualification under Section 401(k) of the Code (“Buyer's 401(k) Plan”). Upon such designation, each Transferred Employee (defined below) who satisfies the eligibility requirements of Buyer's 401(k) Plan shall immediately thereafter become eligible to participate in Buyer's 401(k) Plan and shall be credited with eligibility service and vesting service for all periods of service with Seller or any other entity if so credited with such service under Seller's 401(k) Plan. As soon as practicable after such designation by Buyer, Seller shall cause the trustees of Seller's 401(k) Plan to transfer to the trustees or other funding agent of the Buyer's 401(k) Plan, the amounts representing the account balances of the Transferred Employees (including the appropriate net investment return thereon and any participant loans made to any Transferred Employees) who elect to participate in such transfer. Buyer shall cause the transfer of said amount to be established as account balances or accrued benefits of such participating Transferred Employees under Buyer's 401(k) Plan. Seller and Buyer shall each use their respective best efforts to assure that each such transfer shall comply with Section 414(l) of the Code and the requirements of ERISA and the regulations promulgated thereunder and the terms of the Seller's 401(k) Plan and the Buyer's 401(k) Plan. Prior to the Time of Possession, Buyer shall provide the Transferred Employees with reasonable notice of their right or obligation to (i) withdraw their funds from the Seller's 401(k) Plan, (ii) rollover their funds into the Buyer's 401(k) Plan, or (iii) rollover their funds into an IRA account.

7.Other Provisions Relating to IPM Employees. 3.7Other Provisions Relating to IPM Employees Buyer shall provide, at its expense, all required administration of all of the medical and health care plans and other plans paid through the IP Health Plan and the Associate Assistance Plan, for such period of time following the Time of Possession that such plans are in effect, and shall provide all federally required COBRAnotices and benefits to and for Seller's terminated employees. At the Time of Possession, all of Seller's employees shall be deemed terminated and Buyer shall, subject to Buyer's standard pre-employment screening process (including Buyer's review of employment files, employment interviews, background checks and drug testing), offer employment to those Seller's employees that are approved by Buyer pursuant to such process (such employees shall be referenced as the “Transferred Employees” which shall include those persons who are employees of IPM but who are paid by IPM Services, LLC in its capacity as payroll agent (however, the Transferred Employees do not include those persons paid by IPM Services, LLC who are employed by Imperial Palace, LLC, such as those persons who work at or from 851 S. Rampart, Las Vegas, Nevada 89145 or Imperial Construction, LLC)). Prior to the end of the Due Diligence Period, Buyer shall determine and disclose to Seller which employees of Seller will be Transferred Employees, and Buyer warrants that notwithstanding the screening process referenced in the preceding sentence, Buyer shall not, at the Time of Possession, refuse to hire more that forty-nine (49) of the Seller's employees. Buyer shall for such period after the Time of Possession as Buyer may in its sole discretion determine, pay such Transferred Employees salary and employee benefits comparable in the aggregate to those provided by Seller immediately prior to the Time of Possession. Transferred Employees' length of service will be honored by Buyer to the extent such length of service would be applicable to the benefits received as well as paid time off accrued pursuant to Seller's existing policies with respect to length of service. To the extent Seller's employee benefits and plans have been pre-funded or pre-paid by Seller prior to the Time of Possession and Buyer obtains the benefit of such pre-funding or pre-payment, Buyer shall reimburse Seller an amount equal to such benefit. In the event payments in excess of any insurance stop-loss amounts have been paid by Seller prior to the Time of Possession, Seller shall be entitled to any refunds from Seller's insurance carrier of such excess stop-loss payments. On behalf of Seller, at Buyer's expense, Buyer shall prepare and process Seller's final payroll and final payroll reporting (including preparation of all required federal, state and local governmental filings, forms and reports (whether monthly, quarterly or annually), such as W-2s, 940s, 941s, and comparable Mississippi forms and reports) as soon as practicable after the Time of Possession and distribute and pay the normal salary and wages earned prior to the Time of Possession, and Buyer shall start and be responsible for all payment and processing of payroll for Transferred Employees thereafter.

ARTICLE IV

TITLE AND SURVEY

1.Title Examination and Exceptions. 4.1Title Examination and Exceptions At any time prior to twenty-five (25) calendar days after Buyer's receipt of the Title Commitment (defined below) (the “Title Review Period”), Buyer shall be entitled to deliver to Seller a written statement of any objections to Seller's title, which objections, if any, shall be based on exceptions (the “Title Exceptions”) shown in a title opinion (the “Title Opinion”) to be obtained at Buyer's expense from such attorney or title agent as shall be selected by Buyer (the “Title Agent”) or on a commitment for the issuance of a standard form owner's policy (the “Title Commitment”) issued by a title insurance company selected by Buyer (the “Title Insurance Company”). Subject to Buyer's right to make title objections as herein provided, the Title Exceptions shown on the Title Opinion or the Title Commitment shall be deemed the “Permitted Exceptions” for all purposes of this Agreement. If Seller cures the objections, Buyer's objections shall be deemed satisfied. If any objections to title are not timely made or if Seller is not properly notified in accordance with the notice provisions of this Agreement, all such objections shall be deemed waived. Buyer agrees that except for encumbrances or liens arising from the acts of Seller and encumbering the Property which may be satisfied by payment of money at or before Closing, Seller shall have no obligation to satisfy any title objections, or to obtain affirmative title insurance. For purposes of this Agreement, a title objection shall be deemed cured if the Title Agent is induced to remove the item objected to from the Title Opinion or if the Title Insurance Company is induced to remove the item objected to from the Title Commitment such that it no longer appears as an exception thereon. The rights of the parties with respect to any uncured objections to title which are timely made and with respect to which Seller has been properly notified shall be as set forth below. Buyer agrees to take title to the Property at Closing subject to the Permitted Exceptions.

Any objections to title based upon a survey (the “Survey”) (assuming Buyer obtains the same) shall be in writing and shall be governed by this Section 4.1. Any such objections shall be due to Seller within twenty (20) calendar days of receipt by Buyer of said Survey and the failure to deliver any such objections shall constitute a waiver thereof. If any objections to title are timely made and Seller is properly notified, all as herein provided, and if such objections are not cured prior to the Date of Closing, Buyer may, as its sole remedies hereunder, by serving written notice to Seller and Escrow Agent in the manner provided herein, either (i) elect to terminate this Agreement and to declare it null and void and receive a refund of the Deposit and all interest earned thereon; or (ii) elect to waive any such title objections and to consummate the transaction contemplated by this Agreement in the same manner as if there had been no title objections without any reduction in the Purchase Price and without any further claim against Seller therefor. Following Closing, Buyer's sole source of recourse in the event of any claim or impediment to title to the Land shall be under and pursuant to the Title Policy (defined in Section 4.2 below) and not the Seller.

4.2.Title Policy. 4.2Title Policy On the Closing Date, Seller shall deliver to Buyer at Buyer's expense: (i) an ALTA Owner's Standard Coverage Policy of Title Insurance or, an ALTA Owner's Extended Coverage Policy, as Buyer may direct, together with all endorsements thereto reasonably requested by Buyer (the “Title Policy”) issued by the Title Insurance Company dated as of the Closing Date in the aggregate amount of the Purchase Price, less the amount of the Bankroll, and showing Buyer as owner of fee title to the Land subject only to the Permitted Exceptions. The Title Policy may be written on a re-insured basis by other title insurance companies to the extent required by the Title Insurance Company and Buyer.

2.Memorandum of Purchase Agreement. 4.3Memorandum of Purchase Agreement Concurrently with the execution and delivery of this Agreement, Seller shall deliver to Buyer an executed and notarized Memorandum of Purchase Agreement in the form attached hereto as Exhibit “K”. Buyer is hereby authorized to record said Memorandum of Purchase Agreement.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

1.Seller's Representations and Warranties. 5.1Seller's Representations and Warranties To the extent that any of Seller's representations and warranties set forth herein speak as of a date preceding December 22, 2005, such representation or warranty to the extent not already so qualified

shall be to the knowledge of Seller, Seller represents and warrants to Buyer on the Effective Date and on and as of the Closing Date as follows:

(a)Due Organization. (i) IPM is a limited liability company duly organized, validly existing, in good standing, and duly qualified or licensed to do business under the laws of the State of Mississippi, (ii) Key Largo is a limited liability company duly organized, validly existing, in good standing, and duly qualified to do business under the laws of the State of Delaware, and (iii)  Parent Licensor is a limited liability company duly organized, validly existing, in good standing, and duly qualified to do business under the laws of the State of Nevada, and (iv) each of IPM, Key Largo and Parent Licensor has all requisite power and authority to enter into, perform and carry out all of its duties and obligations in the transactions contemplated by this Agreement and has all requisite power and authority to own, operate and lease its properties and assets and to carry on its business as now being conducted.

(b)Binding Effect. The execution and delivery of this Agreement by each Seller and Parent Licensor, and the consummation by each Seller of the transactions to which it is a party that are contemplated by this Agreement have been duly authorized by all necessary action on the part of such Seller, and this Agreement and the other documents to be delivered on the part of such Seller (including any action required by such Seller's managing member or similar governing body, and all of such Seller's members, as required by and in accordance with such Seller's certificate of formation, articles of organization or operating agreement, in each case, as currently in effect), pursuant hereto are (or will be when executed and delivered pursuant hereto) legal, valid and binding obligations of such Seller, enforceable in accordance with their terms;

(c)Notices and Approvals; No Violation of Agreement. To the best of Seller's knowledge, except for (i) any required notice specified in Section 7.2(b) hereof relating to the WARN Act (defined below), (ii) the consents, if any, required under the Assumed Contracts set forth in Schedule 5.1(c), (iii) compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (iv) the ADA Claim, (v) any approvals of liquor or beer licenses or permits for Buyer (the “Buyer's Liquor Licensing Approval”) required by the Mississippi Alcoholic Beverage Control Division of the Department of Revenue or by the Mississippi State Tax Commission (collectively, the “Mississippi Liquor Authorities”), (vi) any approvals required by Mississippi Gaming Authorities, and (vii) any approvals or amendments related to the Tidelands Lease required by the Mississippi Secretary of State, no notice to, or approval or consent of, any court or other Governmental Entity or other Person is required in connection with the execution, delivery and performance of this Agreement by Seller and neither the execution and delivery of this Agreement, nor consummation of the transactions contemplated thereunder, nor compliance by Seller with any of the provisions hereof, will (1) conflict with any provision of Seller's certificate of formation, articles of organization or operating agreement, in each case, as currently in effect, (2) violate, conflict with, result in a breach of or constitute a default under or pursuant to any statute, agreement, judicial or administrative order, injunction, award, judgment or decree to which Seller is a party or by which Seller is bound, (3) except as a result of the Buyer's non-payment of the Assumed Liabilities, result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, contract or obligation to which Seller is a party or by which Seller or any of its Property may be bound or (4) except as a result of the Buyer's non-payment of the Assumed Liabilities, result in the imposition or creation of any mortgage, pledge, lien, security interest, conditional or installment sale agreement, charge or other claims of third parties of any kind (“Lien”) upon or with respect to any Property;

(d)Assumed Contracts. During the Due Diligence Period, Seller shall deliver to Buyer accurate, correct and complete copies of (i) all Assumed Contracts and (ii) all other contracts, agreements, licenses, commitments, notes, sales or purchase orders that are material to the Business. Whenever additional Assumed Contracts are entered into as provided by Sections 5.1(d), 8.1(c) and (g), and 8.4(c) of this Agreement or as otherwise permitted by this Agreement (the “Additional Assumed Contracts”, or if otherwise required by Section 8.4(c) below, such additional Assumed Contracts shall promptly be added by Seller to Schedule 3.1(a) and a copy of such additional Assumed Contracts shall be delivered to Buyer, and this Agreement shall be deemed amended to conform to such updated schedule. To the best of Seller's knowledge, except as provided in Schedule 3.1(a), all Assumed Contracts (including any Additional

Assumed Contracts) are in full force and effect, Seller has paid all amounts due thereunder and satisfied all other material obligations accrued thereunder and Seller has not received any written notice of default in any material respect thereunder and no event has occurred that with the passage of time or the giving of notice, or both, will constitute a breach, violation, default or give rise to a right of termination, modification, cancellation, foreclosure, imposition of a lien, prepayment or acceleration in any material respect thereunder (other than any default which may result from the failure or inability of Seller to obtain the consents of certain parties to the assignment to Buyer of certain of the Assumed Contracts set forth in Schedule 5.1(c)). Other than as disclosed by Seller to Buyer in writing prior to the Time of Possession, to the best of Seller's knowledge, no other party is in default in any material respect under any Assumed Contract (including any Additional Assumed Contracts);

(e)Taxes. Seller has timely filed (taking into account any extension of time to file) with the appropriate governmental or other taxing authority all material Tax returns, reports, statements, elections or other required filings relating to Taxes (“Tax Returns”). All such Tax Returns have been filed in accordance with applicable law and are correct and complete in all material respects. With respect to all Taxes required to be reported on any Tax Return, Seller has paid all Taxes due as shown on any such Tax Return. With respect to Taxes due which are not shown on any Tax Return, all such Taxes have been paid in all material respects. No claims, actions, audits or other proceedings against Seller with any governmental or other taxing authority are currently pending, in progress or, to Seller's knowledge, threatened in respect of any Taxes of Seller. There are no liens for Taxes (other than liens for Taxes not yet due and payable) on the Property. “Taxes” means any and all taxes, charges, fees, levies, tariffs, duties, liabilities, impositions or other assessments of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any governmental or other taxing authority, including, without limitation, income, gross receipts, profits, gaming, excise, real or personal property, environmental, sales, use, value-added, ad valorem, withholding, social security, retirement, employment, unemployment, workers' compensation, occupation, service, license, net worth, capital stock, payroll, franchise, gains, stamp, transfer and recording taxes.

(f)Litigation. Other than the matters set forth in Schedule 3.1(i), neither Seller, its officers, directors, agents or employees, nor any of Seller's properties, assets (including the Property), operations or businesses (including the Business), nor Seller's rights relating to any of the foregoing, is a party to or subject to any legal actions, or governmental actions, claims, suits, administrative or other proceedings or investigations before or by any governmental department, commission, board, regulatory authority, bureau or agency, whether foreign, federal, state or municipal, or any court, arbitrator or grand jury (a “Proceeding”) except as set forth on Schedule 5.1(f) attached hereto, and no such matter would prevent or materially interfere with the consummation of the transactions contemplated by this Agreement either individually or in the aggregate, if resolved against Seller would impair or interfere in any material respect with the ownership of the Property by Buyer or operation by Buyer of the Business. Except as to those matters as set forth in Schedule 3.1(i) and Schedule 5.1(f) attached hereto, to Seller's knowledge, no other Proceedings are threatened or contemplated by any Governmental Entity or any other Person and, to Seller's knowledge, no event has occurred, and no condition or circumstance exists, that might directly or indirectly give rise to or serve as a basis for the commencement of any such Proceedings;

(g)Employees, Officers and Managers; Employment and Similar Contracts; Benefits. Seller provides medical, dental and other employee benefit arrangements (e.g., Seller's 401(k) deferred compensation plan) for Seller's employees engaged at the Business as listed on Schedule 5.1(g) attached hereto (“EmployeeBenefits”). With the exception of Employee Benefits and contracts and covenants, if any, as are implied at law between an employer and employee under applicable laws or are terminable at the will of the employer, and except for (a) the Senior Management Bonuses, the Unit Sale Event Allocations, the Lucas Bonuses, the Additional Sale Compensation, the Annual Cash Bonuses and paid time off, to the best knowledge of Seller (subject to inquiry with regard thereto by W. Owen Nitz and Jeffrey M. Cooper with Jon Lucas, Lee Bond, Michael Bruffey, Pete Byrnes and Brad Rhines),Seller is neither a party to, nor has any express or implied obligations, with respect to any of the following instances which relate to employees who are employed at the Business and which will be in effect after the Time of Possession:

(i)Except for certain agreements for hosts, any agreement, contract or commitment with any employee, officer, manager, consultant, advisor, property manager or other person;

(ii)Agreement, contract or arrangement providing for the payment of any wages, incentive compensation, raise, bonus or commission or containing any deferred compensation or severance or termination pay liabilities or obligations; or

(iii)Pension, profit-sharing, retirement, group life insurance, hospitalization benefits, or other employee benefit or welfare plan, agreement or arrangement. However, as provided in Section 3.1(e), Seller has paid or made provision for the payment of all salaries, wages, and bonuses, including without limitation, the Unit Sale Event Allocations and the Additional Sale Compensation (but excluding the Senior Management Bonuses, the Lucas Bonuses, the Annual Cash Bonuses, and paid time off, which Buyer has agreed to pay) which are or become due and payable at or after the Time of Possession to or for the benefit of employees of Seller, and has complied in all material respects with all governmental regulations relating to the employment of labor, including, without limitation, those relating to wages, hours, and the payment and withholding of Taxes, and have withheld and paid to the appropriate Governmental Entity, or are holding for payment not yet due to such Governmental Entity, all amounts required by law or agreement to be withheld from the wages or salaries of such employees. Other than the matters set forth on Schedule 5.1(g),to the best knowledge of Seller,there are no material adversarial issues in the relationship of Seller with its employees nor any strike or labor disturbance by such employees or any other employees of the Seller performing services in connection with the Business, and the Seller is not aware of any indication that such a change, strike or labor disturbance is likely in the near future. Seller has no notice of and to the Seller's knowledge, none of the employees of Seller is represented by any union or other labor organization in their capacities as employees of Seller and there are no current union organizing activities among the employees of Seller, nor does any question concerning representation exist concerning such employees. Seller is not a party to or bound by any collective bargaining or similar agreement with any labor organization, or work rules or practices agreed to with any labor organization or employee association applicable to employees of Seller. There are no pending or, to the best of Seller's knowledge, threatened claims of breach of fiduciary duty or other violation of applicable law with respect to the Employee Benefits. Seller has not entered into any severance arrangement with any present or former employee which could result in any liability of Buyer. To the best of Seller's knowledge, Seller has, at all times, complied, and currently complies, in all material respects with all applicable statutes mandating health insurance continuation coverage for employees. As of the Effective Date, Seller has not made any written or oral representations to any employee or former employee of Seller concerning the employee benefits that may be offered to Seller's employees by Buyer. None of the Employee Benefits is a “multiemployer plan” within the meaning of ERISA (“Multiemployer Plan”), and there are no Multiemployer Plans to which the Seller has at any time had an obligation to contribute. Seller has not violated the WARN Act or any similar state or local law;

(h)Real Property; Eminent Domain or Other Proceedings.

(i)Neither the whole nor any portion of any Real Property owned, leased, occupied or used by Seller has been condemned, requisitioned or otherwise taken by any public authority, and no notice of any such condemnation, requisition or taking has been received. To the knowledge of Seller, no such condemnation, requisition or taking is threatened or contemplated. Seller has no knowledge of any public improvements which may result in special assessments against or otherwise affect the Real Property.

(ii)To the knowledge of Seller, no fact or condition exists which would result in the termination or impairment of access to the Real Property or discontinuation of sewer, water, electric, gas, telephone or other communications facilities, waste disposal or other utilities or services. To the knowledge of Seller, the facilities servicing the Real Property are in full compliance with all Legal Requirements.

(iii)Seller has delivered to Buyer accurate, correct and complete copies of all available existing title insurance policies, title reports, surveys, Environmental Reports, if any, with respect to each parcel of Real Property.

(iv)Seller has received no written or oral notice of, and has no knowledge of any, initiated or pending condemnation or eminent domain proceedings, or contemplated sales in lieu thereof, involving a partial or total taking of any of the Property, nor has Seller received written or oral notice or knowledge of any zoning or special assessment proceedings affecting the Real Property;

(i)The Property. Seller has title to (or in the case of any leased or licensed Property, has a valid leasehold interest in or valid rights to use), is the exclusive legal and equitable owner of (or in the case of any leased or licensed Property, is the valid licensee or valid lessee of) all of the Property, and other than the Real Property (as to which Buyer shall look solely to the Title Policy and not to this representation) and matters set forth in Article IV hereof (relating to Title and Survey), Seller's title shall be free and clear of any and all liens, security interests, mortgages, pledges, claims, options, leases, easements, or other encumbrances or rights of third parties except only for (1) liens for current Taxes which are not delinquent and other constitutional or statutory inchoate liens; (2) the Permitted Exceptions; (3) those leases for personal property described in Schedule 5.1(i) attached hereto (the “Personal Property Leases”) and for the Tidelands Lease; and (4) claims based upon or included in the Assumed Liabilities (such excepted items being herein collectively referred to as “Permitted Encumbrances”). Upon the Closing, Buyer will acquire exclusive, title or license to or a valid leasehold interest in (as the case may be) to the Property and title to the Real Property shall be conveyed pursuant to Special Warranty Deeds and with the Deed Warranties (defined in Section 11.2(a) below) as provided in Section 11.2(a). Except for any Governmental Approvals or other licenses required by any Governmental Entity, the Property constitutes all of the assets necessary to operate the Business in the manner presently operated by Seller and includes all of the operating assets of Seller (excepting only the Excluded Property). The Personal Property Leases are without default in any material respect by Seller, and there exists no event, occurrence or condition which (with notice or lapse of time or both) would constitute a default in any material respect by Seller under any such Personal Property Lease and, (except as otherwise disclosed to Buyer in writing) are without default in any material respect by any other party thereto. Seller shall provide Buyer with a true, correct and complete copy of each such Personal Property Lease, including all amendments and modifications thereto;

(j)Investigations or Reviews. Except with respect to matters set forth in notices received from the Mississippi Gaming Authorities as set forth in Schedule 5.1(j), prior to the Effective Date, Seller has not received a notice of any investigation or review by any court, administrative agency, regulatory body, commission, quasi-governmental authority, gaming authority or other governmental authority or instrumentality, including, without limitation, the Mississippi Gaming Authorities (collectively, the “Governmental Entities” and each a “Governmental Entity”) with respect to the Property that is pending, and no investigation or review is threatened, nor has any Governmental Entity indicated any intention to conduct the same;

(k)Insurance. Schedule 5.1(k) attached hereto is a correct and complete list of all policies of fire and liability coverage and other forms of insurance maintained by Seller relating to the Property or the Business (collectively, the “Insurance Policies”). During the Due Diligence Period, Seller shall deliver to Buyer accurate and complete copies of the Insurance Policies, if any, which have not yet been delivered. To the best of Seller's knowledge, each Insurance Policy is valid, binding, and in full force and effect. Seller is not in breach of any Insurance Policy, and no event has occurred which, with notice or the lapse of time, would constitute such a breach, or permit termination, modification, or acceleration, of any Insurance Policy. Seller has not received any notice of cancellation or non-renewal of any Insurance Policy. There is no claim under any Insurance Policy that has been improperly filed or as to which any insurer has questioned, disputed or denied liability. Seller has not received any notice of, nor does Seller have any knowledge of any facts that might result in, a material increase in the premium for any Insurance Policy;

(l)Condition. To the best of Seller's knowledge, there is no condition which would have a material adverse effect on the Property or the Business; the Business has been operated only in the Ordinary Course of Business; and none of the representations or warranties of Seller and none of the information provided by Seller to Buyer regarding the Business or the Property or contained herein or in any exhibit or schedule hereto is false or misleading in any material respect or omits to state a fact necessary to make the statements not misleading in any material respect;

(m)Hazardous Waste. Except for matters on Schedule 5.1(m), to the best of Seller's knowledge, there is no contamination, hazardous waste or toxic substance in existence on or below the surface of the Real Property, including, without limitation PCB's in any transformer or other equipment located in or on the Real Property, contamination of the soil, sub-soil or ground water or any use or storage of hazardous waste material on the Real Property, which constitutes a violation of any law, rule or regulation or standard of any Governmental Entity having jurisdiction thereof, and there are no underground storage

tanks on the Property. Buyer agrees that with respect to hazardous waste or toxic substances in existence on or below the surface of the Real Property, including, without limitation, asbestos in or on the Real Property, whether or not it constitutes a violation or potential violation of any law, rule or regulation or standard of any Governmental Entity having jurisdiction thereof, Buyer accepts all of the Property in its AS-IS, WHERE-IS CONDITION. Buyer agrees and acknowledges that Seller has no responsibility whatsoever for any remedial work or the remediation or removal of any hazardous waste or toxic substance regardless of whether a violation or potential violation of law exists, and that Buyer shall not be entitled to a reduction of the Purchase Price in the amount of any costs or expenses involved in the performance of any remedial work;

(n)Reports. Except as set forth in Schedule 5.1(n) attached hereto, to the best of the Seller's knowledge, there exists no written or tangible report, synopsis or summary of any investigation made with respect to any asbestos, toxic waste, hazardous substance or any soil, surface water or groundwater contamination present on all or any portion of the Property (whether or not prepared by experts and whether or not in the possession of Seller) (an “Environmental Report”);

(o)Zoning. To the best of the Seller's knowledge, the Real Property is currently zoned to permit all of its present uses;

(p)Financial Statements. The Seller has delivered to Buyer the audited balance sheets of the Business as of December 31, 2010 and 2009, and the related statements of operations, changes in members' equity, and cash flows of the Business for the fiscal years ended December 31, 2010, 2009 and 2008 (collectively, the “Financial Statements”), and has made available for inspection by Buyer the books and records for the periods contained in the Financial Statements and from the date of the Financial Statements until the Closing Date. To the best of Seller's knowledge, the Financial Statements (i) are complete and correct in all material respects, (ii) do not contain any information which is materially false or misleading, and (iii) accurately and fairly, in all material respects, present the financial condition the Business as of the respective dates thereof and the results of operations, changes in members' equity and cash flows of the Business for the periods covered thereby. To the best of Seller's knowledge, the books and records of the Business reviewed by Buyer prior to the execution of this Agreement were and are in all material respects true, accurate and complete, except for certain adjustments which have not been made to daily and monthly non-audited financial statements such as adjustments relating to executive compensation, related party interest and related party royalties;

(q)Brokers and Related Services. Other than any sums which may be paid by the Seller or which the Seller may be obligated to pay (the “Related Services Obligations”) to Persons who are individuals who provided value to the Seller in facilitating the transactions contemplated by this Agreement, Seller has not employed any broker, financial advisor or finder or incurred any liability for any brokerage fees, commissions or finder's fees in connection with this Agreement or the transactions contemplated by this Agreement. The Seller shall indemnify and hold harmless the Buyer from and against all Related Services Obligations;

(r)Absence of Undisclosed Liabilities. To the best of Seller's knowledge, Seller has no material undisclosed liabilities other than (i) those set forth in the audited balance sheet with respect to the Business as of December 31, 2010 and (ii) current liabilities incurred in the Ordinary Course of Business since December 31, 2010;

(s)Compliance with Laws. To the best of Seller's knowledge, no condition or circumstance exists, that might (with or without notice or lapse of time) constitute, or result directly or indirectly in, a default by Seller under, a breach or violation of, or a failure of Seller to comply with, any Legal Requirement. Seller has not received any notice from any third party regarding any actual, alleged or potential violation of any Legal Requirement. For purposes of this Agreement, “Legal Requirement” shall mean any federal, state, local, municipal, foreign or other law, statute, legislation, constitution, principle of common law, resolution, ordinance, code, order, edict, decree, proclamation, treaty, convention, rule, regulation, permit, ruling, directive, pronouncement, requirement (licensing or otherwise), specification, determination, decision, judgment, opinion or interpretation that is, has been or may in the future be issued, enacted, adopted, passed, approved, promulgated, made, implemented or otherwise put into effect by or under the authority of any Governmental Entity, including without limitation the Mississippi Gaming Authorities. To the knowledge of Seller, no Governmental Authority has proposed or is considering any Legal Requirement that may affect Seller, Seller's properties, assets (including the Property), operations or

businesses (including the Business), or Seller's rights thereto, except to the extent that any such Legal Requirement, if adopted or otherwise put into effect, individually or in the aggregate, will not have a material adverse effect on the Property or the Business.

(t)No Other Agreement. Other than for sales of assets in the Ordinary Course of Business, since December 22, 2005, neither Seller, nor any of its representatives, has entered into any contract, agreement or undertaking with respect to sell or other dispose of any assets of the Business (including the Property) or capital stock of Seller, except as set forth in this Agreement.

(u)Intellectual Property.

(i)Schedule 5.1(u) lists all (i) trademark and service mark registrations and applications, patents and patent applications, copyright registrations and web domain URLs that are included in the Intellectual Property (“Registered IP”) and (ii) all agreements granting any rights in any trademarks, service marks or trade name to or from Seller that are included in the Intellectual Property (“Trademark Licenses”);

(ii)Seller owns or possesses adequate, valid and enforceable rights to use the Intellectual Property as currently used in the Business without material restrictions or material conditions on use, and, to the knowledge of Seller, there is no conflict with the rights of others in such Intellectual Property which, individually or in the aggregate, would be reasonably likely to have a material adverse effect on the Property or the Business;

(iii)The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not result in a material loss or impairment of, or give rise to any right of any third Person to terminate a material right of Seller to own or use, the Intellectual Property. No party to any contract, agreement or undertaking related to the Intellectual Property (including any Trademark Licenses) is (or upon Closing will be) in breach or default, and to the knowledge of Seller, no event has occurred (or, upon Closing will occur) which with notice or lapse of time would constitute a breach or default or permit termination, modification or acceleration under such contract, agreement or undertaking;

(iv)No Registered IP or other Intellectual Property owned or purported to be owned by Seller is involved in any interference, reexamination, cancellation, or opposition proceeding, or any currently pending or, to Seller's knowledge, threatened suit, action, or proceeding arising out of a right or claimed right of any Person with respect to such Intellectual Property; and

(v)Seller (A) has no knowledge that it has infringed, misappropriated, diluted or otherwise violated any intellectual property rights of any Person, (B) has received no written communication that Seller is using or disclosing in an unauthorized manner, infringing, diluting, misappropriating or otherwise violating the right or claimed right of any Person with respect to any intellectual property right, (C) has no knowledge that any of the Intellectual Property is being used or disclosed in an unauthorized manner, infringed, diluted, misappropriated or otherwise violated by any person or entity, or (D) has not entered into any agreement to indemnify any Person against any charge of unauthorized use or disclosure, infringement, dilution, misappropriation or other violation of any intellectual property rights

2.Buyer's Representations and Warranties. 5.2Buyer's Representations and Warranties Buyer hereby represents and warrants to Seller on the Effective Date and on and as of the Closing Date as follows:

(a)Due Organization. Buyer is a corporation, duly organized, validly existing, in good standing and duly qualified to do business under the laws of the State of Nevada, and has all requisite corporate power and authority to enter into, perform and carry out all of its duties and obligations in the transactions contemplated by this Agreement;

(b)Binding Effect. This Agreement and the other documents to be delivered on the part of Buyer pursuant hereto are (or will be when executed and delivered pursuant hereto) legal, valid and binding obligations of Buyer enforceable in accordance with their terms;

(c)Notices and Approvals, No Violation of Agreements. Except for the matters specified in Section 7.2(a) (relating to Governmental Approvals) hereto: (i) no notice to, or approval or consent of, any Governmental Entity or other Person is required in connection with the execution, delivery and performance of this Agreement by Buyer; and (ii) neither the execution and delivery of this Agreement by Buyer, nor the consummation of the transactions contemplated hereunder, nor compliance by Buyer with any of the provisions hereof, will violate, conflict with, result in a breach of or constitute a default under or

pursuant to any statute, agreement, judicial or administrative order, injunction, award, judgment or decree to which Buyer is a party by which it is bound, which violation, conflict, breach or default would have a material adverse effect on the assets, business or financial condition of Buyer;

(d)Litigation. Buyer is not a party to any legal actions, or governmental action, claims, suits, administrative or other proceedings or investigations before or by any governmental department, commission, board, regulatory authority, bureau or agency, whether foreign, federal, state or municipal or any court, arbitrator or grand jury which would prevent or materially interfere with the consummation of the transactions contemplated by this Agreement. To the best of Buyer's knowledge, no such proceedings are threatened or contemplated by any governmental authority or any other person or entity;

(e)Closing Funds. Buyer has or will have funds available to close this transaction at the Closing in accordance with the terms of this Agreement; and

(f)Brokers. Buyer has not employed any broker, financial advisor or finder or incurred any liability for any brokerage fees, commissions or finder's fees in connection with this Agreement or the transactions contemplated by this Agreement.

3.No Other Representations and Warranties. 5.3No Other Representations and Warranties Buyer and Seller make no representations and warranties except as set forth in this Agreement.

ARTICLE VI

DISCLAIMER OF WARRANTIES; AS-IS CONVEYANCE; DUE DILIGENCE PERIOD AND INSPECTION; RIGHT OF ENTRY

1.EXCEPT AS SET FORTH IN ARTICLE 5.1 OF THIS AGREEMENT, BUYER ACKNOWLEDGES AND AGREES WITH SELLER THAT BUYER IS PURCHASING THE PROPERTY IN AN “AS-IS” CONDITION “WITH ALL FAULTS” AND SPECIFICALLY AND EXPRESSLY WITHOUT ANY OTHER WARRANTIES, REPRESENTATIONS OR GUARANTIES, EITHER EXPRESS OR IMPLIED, OF ANY KIND, NATURE, OR TYPE WHATSOEVER FROM OR ON BEHALF OF SELLER.

2.Buyer hereby acknowledges to and agrees with Seller that, except as set forth in Section 5.1 of this Agreement, it shall not be entitled to, and should not, rely on the Seller or its agents as to (i) the quality, nature, adequacy or physical condition of the Property including, but not limited to, the hull of the Gaming Vessel, the structural elements, foundation, roof, appurtenances, access, landscaping, parking facilities or the electrical, mechanical, HVAC, plumbing, sewage or utility systems, facilities or appliances at the Property, if any; (ii) the quality, nature, adequacy or physical condition of soils, sub-surface support or ground water at the Property; (iii) the existence, quality, nature, adequacy or physical condition of any utilities serving the Property, or access thereto; (iv) the development potential of the Property, its habitability, merchantability or fitness, or the suitability or adequacy of the Property for any particular purpose; (v) the zoning classification, use or other legal status of the Property; (vi) the Property's, or its operations' compliance with any applicable codes, laws, regulations, statutes, ordinances, covenants, setback requirements, conditions or restrictions of any Governmental Entity or of any other Person; or (vii) the quality of any labor or materials relating in any way to the Property or the nature, status and extent of any right of way, lease, right of redemption, possession, lien, encumbrance, license, reservations, covenant, condition, restriction or any other matter affecting title to the Property.

3.BUYER ACKNOWLEDGES TO AND AGREES WITH SELLER THAT, WITH RESPECT TO THE PROPERTY, SELLER, EXCEPT AS SET FORTH IN SECTION 5.1 OF THIS AGREEMENT, HAS NOT, DOES NOT AND WILL NOT MAKE ANY WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING BUT IN NO WAY LIMITED TO, ANY WARRANTY OF CONDITION, MERCHANTABILITY, HABITABILITY OR FITNESS FOR A PARTICULAR USE, OR WITH RESPECT TO THE VALUE, PROFITABILITY OR MARKETABILITY OF THE PROPERTY.

4.EXCEPT AS SET FORTH IN SECTIONS 5.1(m) AND 5.1(n) OF THIS AGREEMENT, BUYER ACKNOWLEDGES TO AND AGREES WITH SELLER THAT SELLER HAS NOT, DOES NOT AND WILL NOT MAKE ANY REPRESENTATION OR WARRANTY WITH REGARD TO COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS INCLUDING BUT NOT LIMITED TO, THOSE PERTAINING TO THE HANDLING, GENERATING, TREATING, STORING OR DISPOSING OF ANY HAZARDOUS WASTE,

MATERIAL OR SUBSTANCE. Without limiting the foregoing, except as set forth in Sections 5.1(m) and (n), Seller does not make and has not made and specifically disclaims any representation or warranty regarding the presence or absence of any “hazardous substances,” (as hereinafter defined), at, on, under or about the Property or the compliance or non-compliance of the Property with the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), the Superfund Amendment and Reauthorization Act, the Resource Conservation Recovery Act, the Federal Water Pollution Control Act, the Federal Environmental Pesticides Act, the Clean Water Act, the Clean Air Act, any Federal, State or local so-called “Superfund” or “Superlien Statute,” or any other statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning any hazardous substances (collectively the “Hazardous Substance Laws”). The disclaimer set forth herein shall not be affected or limited in any way by any investigation conducted by Seller or any contractor, agent or employee of Seller, or delivery by Seller to Buyer of copies of any environmental study or report prepared by any environmental testing firm on behalf of or at the direction of Seller, Buyer or any other party. Seller has not conducted any independent investigation or verification of the contents of any such study or report, the accuracy or completeness of the information contained therein. For purposes of this Agreement, “Hazardous Substance” shall mean and include those elements or compounds which are contained in the list of Hazardous Substances adopted by the United States Environmental Protection Agency and the list of toxic pollutants designated by Congress or the Environmental Protection Agency or under any Hazardous Substance Laws. Hazardous Substances shall also include petroleum products and radon gas. Except as provided in Sections 5.1(m) and (n) of this Agreement, Buyer further acknowledges that neither Seller, nor any broker(s), nor any agent(s) or representative(s) of Seller has provided any representation or warranty with respect to the existence of asbestos or other Hazardous Substance on the Property. Buyer shall have no recourse or claim against Seller, any broker or any agent or representative of Seller with respect to any loss or damage claimed or suffered by any third party arising from the physical condition of the Property, or arising from the existence of any Hazardous Substance on the Property.

5. Buyer acknowledges to and agrees with Seller that Buyer has had and/or has been given pursuant to this Agreement an adequate opportunity to make such legal, factual and other inquiries, inspections and investigations as Buyer deems necessary, desirable or appropriate with respect to the Property. Such inquiries, inspections and investigations of Buyer include, but are not limited to, Assumed Contracts, the physical components of all portions of the Property, the condition of the Property, the existence of any wood destroying organisms or mildew, mold or fungus organisms on the Property, such state of facts as an accurate survey and inspection would show, the present and future zoning ordinances, resolutions and regulations of the city, county and state where the Property is located and the value and marketability of the Property. Buyer acknowledges that Buyer's decision to purchase the Property is made in reliance solely upon the tests, analyses, inspections and investigations that Buyer has made, or had the right to make and opted not, or otherwise failed, to make, and, except as set forth in Article V of this Agreement, not in reliance upon any alleged representation made by or on behalf of Seller.

6.EXCEPT AS SET FORTH IN ARTICLE V AND SECTION 3.1(h) OF THIS AGREEMENT, Buyer acknowledges to and agrees with Seller that Seller does not make and has not made and specifically disclaims any representation or warranty regarding the compliance or non-compliance of the Property with the Americans With Disabilities Act, or any other statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning access and accommodation for disabled persons.

7.Except to the extent otherwise provided in Article XIV, Buyer specifically acknowledges and agrees that it hereby waives, releases and discharges any claim it has, might have had or may have against the Seller with respect to the physical condition of the Property, either patent or latent, its ability or inability to obtain or maintain building permits, either temporary or final certificates of occupancy or other licenses for the use or operation of the Property, and/or certificates of compliance for the Property, the actual or potential income or profits to be derived from the Property and the real estate taxes or assessments now or hereafter payable thereon (except as provided in Section 11.4(a) hereof), the compliance with any environmental protection, pollution or land use laws, rules, regulations or requirements, and Buyer agrees that it will hold Seller harmless from future environmental and Hazardous Substance remediation costs except to the extent such remediation costs result from matters caused by Seller.

8.Buyer shall and does hereby indemnify and hold Seller harmless from and against any and all costs, expenses, losses, claims, attorney's fees, or liabilities (including, but not limited to, claims or mechanic's liens) incurred or sustained by Seller, asserted against Seller, or imposed upon or occurring on the Property as a result of Buyer's entry or acts upon the Property prior to Closing excluding any condition existing before Buyer's entry on the Property. Buyer shall and does hereby further indemnify and hold Seller harmless from and against any and all costs, expenses, losses and attorney's fees incurred or sustained by Seller as a result of personal injury or death, property damage or claims of any nature arising from, in connection with or as a result of Buyer's entry onto or activities upon the Property prior to Closing and will provide to Seller a Certificate of Insurance insuring Seller upon a general liability policy acceptable to Seller which protects Seller from the type of claims referenced above; provided, however, that Buyer shall not be responsible for any such damages resulting from Seller's willful misconduct or from a preexisting condition, except that if Buyer exacerbates or aggravates any such preexisting condition, Buyer shall be liable for a portion of such damages only to the extent such damages directly result from such exacerbation or aggravation.

ARTICLE VII

CONDITIONS PRECEDENT TO CLOSING AND COVENANTS

1.Conditions to Closing. 7.1Conditions to Closing

(a)Conditions to the Parties' Obligation to Effect the Closing. The respective obligations of each party to this Agreement to effect the Closing shall be subject to the satisfaction or waiver (as it relates to those conditions that are legally permissible to waive) by each party prior to the Time of Possession of the following conditions:

(i)No Injunctions. No Governmental Entity shall have enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or injunction or statute, rule or regulation which is in effect (whether temporary, preliminary or permanent) and which prevents or prohibits the consummation of the transactions contemplated by this Agreement.

(ii)HSR Act. Any applicable waiting periods, together with any extensions thereof, under the HSR Act and the antitrust or competition laws of any other applicable jurisdiction shall have expired or been terminated.

(iii)Governmental Consents. Buyer shall have obtained all material consents, approvals, findings of suitability, licenses, permits, orders or authorizations of and registrations, declarations or filings with any Governmental Entity with jurisdiction in respect of any federal, state or local statute, ordinance, rule, regulation, permit, consent, registration, finding of suitability, license, judgment, order, decree, injunction or other authorization, including any condition or limitation placed thereon, governing or relating to the current or contemplated casino and gaming activities and operations on any of the Property by Seller, Buyer or any of their respective Affiliates including without limitation any approvals of the Mississippi Gaming Authorities (collectively, the “Gaming Laws”) and the Mississippi laws relating to liquor and beer required or necessary in connection with the transactions contemplated by this Agreement and necessary for ownership and operation of the Property (including, without limitation, approval, licensing or registration of Buyer and its (i) officers, executive directors, key employees or Persons performing management functions similar to officers, (ii) partners or members and (iii) limited partners or members, each, as required by any Governmental Entity) shall have been obtained and made and shall be in full force and effect. As used herein, an “Affiliate” is any entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with a party to this Agreement.

(b)Buyer's Conditions. The obligations of Buyer to purchase the Property and to make the Closing Date Payment on the Closing Date are subject to the satisfaction or waiver (as it relates to those conditions that are legally permissible to waive) on or prior to the Time of Possession of each of the following conditions:

(i)(A) All terms, covenants, agreements and conditions of this Agreement to be complied with and performed by Seller on or prior to the Time of Possession, including without limitation Sections 4.2 (Title Policy), 7.2(a) (Governmental Approvals), 7.2(b) (Workers Adjustment and Retraining Notification Act), 7.2(c) (Cooperation), and 11.2 (Seller's Delivery) of this Agreement, shall have been

complied with and performed in all material respects, (B) except as otherwise provided in Section 8.4(b), all of the representations and warranties of Seller (without regard to any update pursuant to Section 8.4(a)) contained in this Agreement shall be true and correct in all material respects at and as of the date of this Agreement and at and as of the Time of Possession as if made at and as of such time (except, in each case, to the extent the representation or warranty is expressly made as of an earlier date, in which case it shall be true and correct in all material respects as of such earlier date) and (C) all of the representations and warranties of Seller that are qualified by materiality or similar qualifiers (without regard to any update pursuant to Section 8.4(a)) contained in this Agreement) shall be true and correct in all respects at and as of the date of this Agreement and at and as of the Time of Possession as if made at and as of such time (except, in each case, to the extent the representation or warranty is expressly made as of an earlier date, in which case it shall be true and correct in all respects as of such earlier date). Seller shall have delivered to Buyer a certificate, executed by an officer of Seller and dated as of the Time of Possession, to the foregoing effect.

(ii)Seller shall have delivered to Escrow Agent the instruments, documents, certificates, and other matters described in Section 11.2;

(iii)Since the execution of this Agreement, there shall have been no damage or loss (other than incidental damage or loss) to the Real Property;

(iv)Seller shall not have received any written or oral notice of, and there shall not be any, initiated or pending condemnation or eminent domain proceedings, or contemplated sales in lieu thereof, involving a partial or total taking of any of the Property;

(v)Buyer shall have obtained the Buyer's Liquor Licensing Approval (as defined in Section 5.1(c));

(vi)Seller shall have delivered to Buyer, at Buyer's sole cost and expense, (i) if requested by Buyer, an ALTA survey for all Land and for the Tidelands Lease (such survey, form of survey certification and date of such survey to be reasonably satisfactory to Buyer) and (ii) a title policy for all Land and for Buyer's interest in the Tidelands Lease (such policies to be ALTA Standard Coverage owner's or leasehold (as applicable) policies (or ALTA Extended Coverage owner's or leasehold (as applicable) policies, if requested by Buyer), together with copies of the underlying documents referenced in each such title policy. The issuer, reinsurers, form of policy, endorsements, and scheduled exceptions for each such title policy shall all be reasonably satisfactory to Buyer. In the case where Seller possesses a valid Title Policy, the requirement set forth herein may be satisfied, at the sole discretion and expense of Buyer, by the obtaining of an endorsement to such Title Policy dating down the coverage thereunder to the date of the Closing; and

(vii)There shall not have occurred any event, change or effect that, when taken individually or together with any other event, change or effect, constitutes a Material Adverse Change in the physical condition of the Property or in the operation of the Business. As used herein, “Material Adverse Change” means (a) physical damage or environmental damage to the Property which results in a decline in the total fair market value of the Property of at least five percent (5%); or (b) a decline in the operating results of the Business such that the EBITDA on an annualized basis shall have been reduced by at least five percent (5%) from where it was last year for the same time period. In the event of a Material Adverse Change, Buyer may terminate this Agreement, in which case Buyer shall be entitled to receive and retain the Deposit and all interest earned thereon.

(viii)Seller shall have prepared and delivered to Buyer the financial statements of the Business for the periods reasonably requested by Buyer, together with all consents, management representation letters, engagement letters and similar documentation reasonably requested by Buyer or Buyer's auditors in connection with Buyer's review of such financial statements.

(ix)Seller shall have applied for, obtained and assigned to Buyer, all building, construction, environmental and related regulatory and governmental permits mutually agreed upon by Buyer and Seller to be necessary for the construction of the Capital Projects (as defined below in Section 12.7) (the “Capital Projects Permits”).

(c)Seller's Conditions. The obligation of Seller to deliver the Property to Buyer at the Time of Possession is subject to the satisfaction or waiver (as it relates to those conditions that are legally permissible to waive) on or prior to the Time of Possession of each of the following conditions:

(i)(A) All the terms, covenants, agreements and conditions of this Agreement to

be complied with and performed by Buyer on or prior to the Time of Possession shall have been complied with and performed in all material respects, (B) except as otherwise provided in Section 8.4(b), all of the representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects at and as of the date of this Agreement and at and as of the Time of Possession as if made at and as of such time (except, in each case, to the extent the representation or warranty is expressly made as of an earlier date, in which case it shall be true and correct in all material respects as of such earlier date) and (C) all of the representations and warranties of Buyer that are qualified by materiality or similar qualifiers shall be true and correct in all respects at and as of the date of this Agreement and at and as of the Time of Possession as if made at and as of such time (except, in each case, to the extent the representation or warranty is expressly made as of an earlier date, in which case it shall be true and correct in all respects as of such earlier date). Buyer shall have delivered to Seller a certificate, executed by an officer of Buyer and dated as of the Time of Possession, to the foregoing effect;

(ii)Buyer shall have deposited the Deposit and the Closing Date Payment into Escrow with Escrow Agent as set forth in Article II and in Section 11.3(a) hereof; and

(iii)Buyer shall have delivered to Escrow Agent the instruments, documents, certificates, and other matters described in Section 11.3.

2.Covenants. 7.2Covenants

(a)Governmental Approvals.

(i)Buyer and Seller shall use their respective reasonable best efforts to as promptly as practicable, take, or cause to be taken, all appropriate action, and do or cause to be done, all things necessary, under applicable law or otherwise to consummate and make effective the transactions governed by this Agreement.

(ii)Buyer shall use its reasonable best efforts to (y) obtain from any Governmental Entities any consents, licenses, permits, orders, waivers, variances, exemptions, approvals, licenses, authorizations or orders (including, without limitation, any licenses from and/or findings of suitability, as applicable, by any Governmental Entities, and including the Buyer's Liquor Licensing Approval) required (A) to be obtained or made by Buyer or any of their Affiliates or any of their respective representatives and (B) to avoid any action or proceeding by any Governmental Entity (including, without limitation, those in connection with the HSR Act and antitrust and competition laws of any other applicable jurisdiction), in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions governed herein, and (z) make all necessary filings, and thereafter make any other required submissions with respect to this Agreement, as required under (A) the HSR Act and antitrust and competition laws of any other applicable jurisdiction, (B) the Gaming Laws and Mississippi laws relating to liquor and beer, and (C) any other applicable law (collectively, the “Governmental Approvals”), and to comply with the terms and conditions of all such Governmental Approvals. Buyer shall pay all filing fees or other costs associated with the HSR Act filing (including the cost of any filing required of Seller) and the other Governmental Approvals, provided that Seller shall bear its own costs of copying or providing information to be used in making the HSR Act filing and/or otherwise obtaining the Governmental Approvals.

(iii)Seller shall use its reasonable best efforts to as promptly as possible, upon the request and direction of Buyer, assist Buyer and cooperate with Buyer in Buyer's efforts to obtain the Governmental Approvals as set forth in the preceding subparagraph (ii) including, at Buyer's request, providing information to Buyer to be used in seeking the Governmental Approvals in a manner consistent with this Agreement including the provisions of subparagraph (iv) immediately below.

(iv)The Buyer and its respective representatives and Affiliates shall file within twenty (20) calendar days after the end of the Due Diligence Period (defined below), all required initial applications and documents in connection with obtaining the Governmental Approvals (including without limitation under applicable Gaming Laws, Mississippi laws relating to liquor and beer and the HSR Act) and shall act diligently and promptly to pursue the Governmental Approvals. Seller shall cooperate with the Buyer in connection with the making of all filings referenced in the preceding sentence, including providing copies of all such documents to the Buyer and its advisors prior to filing (provided, that each party may, as it deems reasonably advisable and necessary, redact any competitively sensitive information provided to any party under this Section 7.2(a)(iv) or any information that is not pertinent to the subject matter of the filing or submission, including personal information of individual applicants), and consider and include in

good faith all additions, deletions or changes suggested in connection therewith.

(v)Buyer shall use reasonable best efforts to schedule and attend any hearings or meetings with Governmental Entities to obtain the Governmental Approvals as promptly as possible. Seller shall attend all such hearings or meetings as the Buyer shall request of Seller. Seller or its advisors shall have the right to attend all such hearings or meetings regardless of whether Buyer has requested Seller's attendance. Buyer shall have the right to review in advance (for a period not to exceed three (3) business days) and, to the extent practicable, each will consult the other on, in each case, subject to applicable laws relating to the exchange of information (including, without limitation, antitrust laws and Gaming Laws), all the information relating to Buyer or Seller, as the case may be, and any of their respective Affiliates or representatives which appear in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions governed by this Agreement. Without limiting the foregoing, each of Buyer and Seller will notify the other promptly of the receipt of comments or requests from Governmental Entities relating to Governmental Approvals, and will supply the other with copies of all correspondence between the notifying party or any of its representatives and Governmental Entities with respect to Governmental Approvals. Anything in this Agreement to the contrary notwithstanding, Buyer shall have no obligation to provide to Seller copies of any of Buyer's gaming applications.

(vi)Without limiting the provisions of Section 7.2(a)(i) through (v) Buyer and Seller shall:

(A)each use its reasonable best efforts to avoid the entry of, or to have vacated or terminated, any decree, order or judgment that would restrain, prevent or delay the Closing, on or before six (6) months following the Effective Date (the “Outside Time Limit”), including defending through litigation on the merits any claim asserted in any court by any individual, corporation, limited liability company, partnership, association, trust, unincorporated organization, joint venture, estate, other entity or “group” (as defined in Rule 13d-5(b)(1) under the Securities Exchange Act of 1934, as amended) (“Person”); and

(B)each use its reasonable best efforts to avoid or eliminate any impediment under any antitrust, competition or trade regulation law that may be asserted by any Governmental Entity with respect to the Closing so as to enable the Closing to occur as soon as reasonably possible (and in any event no later than the Outside Time Limit), including implementing, contesting or resisting any litigation before any court or quasi-judicial administrative tribunal seeking to restrain or enjoin the Closing; provided, however, that nothing in this Agreement shall require Buyer or any of its Affiliates to commit to any divestitures, licenses or hold separate or similar arrangements with respect to its, or their respective assets or conduct of business arrangements, whether as a condition to obtaining any approval from a Governmental Entity or any other Person or for any other reason.

(vii)Buyer and Seller shall promptly advise each other upon receiving any communication from any Governmental Entity whose consent or approval is required for consummation of the transactions governed by this Agreement which causes such party to reasonably believe that there is a reasonable likelihood that such consent or approval from such Governmental Entity will not be obtained or that the receipt of any such approval will be materially delayed. Buyer and Seller each shall use its reasonable best efforts to take, or cause to be taken, all actions reasonably necessary to defend any lawsuits or other legal proceedings challenging this Agreement or the consummation of the transactions contemplated by this Agreement, including seeking to prevent the entry by any Governmental Entity of any decree, injunction or other order challenging this Agreement or the consummation of the transactions contemplated by this Agreement, appealing as promptly as possible any such decree, injunction or other order and having any such decree, injunction or other order vacated or reversed.

(viii)From the date of this Agreement until the Closing, each party shall promptly notify the other party in writing of any pending or, to the knowledge of Buyer or Seller, as appropriate, threatened action, suit, arbitration or other proceeding or investigation by any Governmental Entity or any other Person (i) challenging or seeking damages in connection with the Closing or any other transaction contemplated by this Agreement or (ii) seeking to restrain or prohibit the consummation of the Closing.

(ix)From the date of this Agreement until the Closing, Seller shall at its own cost and expense, diligently and expeditiously pursue obtaining the Capital Projects Permits with the assistance of Buyer and its engineering staff and consultants (the “Capital Projects Permits Costs”), which costs Buyer shall reimburse to Seller at the time that all of the Capital Projects Permits are obtained or upon the

earlier termination, by Buyer or Seller, of any agreement for the obtaining of the Capital Projects Permits. In addition, Buyer agrees to pay at such time, the unpaid balance of any Capital Projects Permits Costs which Seller is able to defer, directly to the consultants performing the work, to the extent such costs are approved in advance by Buyer

(b)Workers Adjustment and Retraining Notification Act. Due to the provisions of Section 3.7, the parties acknowledge and agree that no notification is required by Seller under the Worker Adjustment and Retraining Notification Act (29 U.S.C. §2102 et seq.) or any similar state law, rule or regulation (collectively, “WARN Act”), if applicable, relating to any termination of any of the employees from employment with Seller occurring at or prior to the Time of Possession, whether or not in connection with the transactions contemplated hereby. Buyer shall be solely responsible for providing notice, if necessary, of any “plant closing” or “masslayoff” (as defined in the WARN Act) occurring after the Time of Possession.

(c)Cooperation. Each party shall make or file all other required notifications and use all reasonable effort to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Entities which must be obtained by such party in order to consummate the transactions contemplated hereby. Each party shall render the other its full and complete cooperation in giving such notices or obtaining such consents, approvals and authorizations; provided, however, that neither party shall be required to incur any cost or expense in giving notice or obtaining any consent, approval or authorization which the other party is required to give or obtain pursuant to the terms hereof. Each party covenants and agrees promptly to furnish to the other all information and data in the furnishing party's possession requested in writing by the requesting party which is reasonable and necessary in order to assist the requesting party to give the necessary notices or secure any permits, licenses and approvals required in connection with the Business.

(d)State Unemployment Tax Experience Rating. At the option of Buyer, the Seller, if permitted by Mississippi law, shall transfer to Buyer on or after the Time of Possession the Mississippi unemployment tax experience rating of the Business (if any) and any unemployment tax reserve balance with the State of Mississippi (if any). In the event Buyer elects to have such experience rating so transferred, Seller shall cooperate and assist Buyer in accomplishing such transfer.

(e)Access to Information. Seller shall, during the period from the date hereof to the Closing, furnish promptly to Buyer (i) copies of monthly financial reports and development reports, (ii) the Financial Statements and (iii) all other information concerning the Business, as Buyer may reasonably request. Buyer will hold any such information furnished to it by Seller, which is nonpublic, in confidence in accordance with the Confidentiality Agreement dated February 1, 2010 between Buyer and Seller (the “Confidentiality Agreement”). No information or knowledge obtained in any investigation pursuant to this Section 7.2(e) shall affect or be deemed to modify or limit any of the representations, warranties, covenants or agreements contained in this Agreement or the conditions to the obligations of the parties to consummate the transactions contemplated herein.

Following the Time of Possession, upon reasonable notice, Buyer shall provide Seller with reasonable access and duplicating rights, subject to the terms of the Confidentiality Agreement, during normal business hours, to all of Buyer's personnel, Property, Assumed Contracts, books and records related to Seller (other than the Excluded Property) and shall cooperate with Seller, subject to the terms of Article XIV, as reasonably necessary for Seller to pursue or defend, as required or permitted by this Agreement, any third party suit, claim, action, proceeding or investigation relating to the claims in connection with this Agreement and the transactions contemplated hereby, including, without limitation, any suit, claim, action, proceeding or investigation related to the Excluded Property. Notwithstanding the foregoing, Buyer shall not be required to provide any information which (i) it reasonably believes it may not provide to Seller and its representatives by reason of applicable law or by a confidentiality agreement with a third party, or (ii) constitutes information protected by the attorney/client and/or attorney work product privilege. If any material is withheld by Buyer pursuant to the immediately preceding sentence, Buyer shall inform Sellers as to the general nature of the material which is being withheld.

(f)Publicity. Buyer shall be solely responsible for all press releases, public disclosures and public statements with respect to any of the transactions contemplated hereby; provided, however, that Buyer shall consult with Seller before issuing same and all such press releases, disclosures and statements shall be jointly approved by Buyer and Seller with both Seller's

and Buyer's approval not to be unreasonably withheld, conditioned or delayed; provided further, however, that Seller shall not object to any information in a press release, disclosure or statement which Buyer is required under the law to disclose to the public (including without limitation the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and any Gaming Laws) or any listing agreement with the New York Stock Exchange.

Notwithstanding anything to the contrary herein, Buyer and any of its Affiliates may make any public statement in response to specific questions by the press, analysts, investors or those attending industry conferences or financial analyst conference calls, so long as any such statements are not inconsistent with previous press releases, public disclosures or public statements made by Buyer and do not reveal non-public information regarding Buyer or Seller.

(g)IP Chip Redemption. Subject to Buyer's option to retain the IP Chips pursuant to Section 1.3(k), within fifteen (15) calendar days prior to the Closing, Seller shall file a plan (the “Plan”) for the redemption and disposal by IPM of the IP Chips. Such Plan shall provide for the retention by IPM at Closing of all IP Chips, and shall include the form of publication notice and the terms of publication, shall be approved by Buyer and shall comply with the provisions of Section 1.3(k) hereof. Buyer and Seller shall implement the Plan as approved. If Buyer does not elect to exercise its option pursuant to Section 1.3(k), Buyer agrees to redeem and deliver to IPM, subject to the Plan all IP Chips presented to it at the Hotel/Casino, and IPM shall reimburse Buyer for all IP Chips so redeemed and delivered to IPM. Thirty (30) calendar days, sixty (60) calendar days, ninety (90) calendar days and one hundred twenty (120) calendar days following the Closing, Buyer shall provide IPM with an accounting showing the dollar amount of IP Chips that Buyer has redeemed. Within ten (10) calendar days following receipt by IPM of each such accounting, IPM shall pay Buyer the amount shown to be due in such accounting. If Buyer does not elect to retain the IP Chips, nothing in this Section 1.3(k) shall be deemed to constitute Buyer's assumption of any liability associated with the IP Chips, and IPM expressly acknowledges that all such liabilities are its sole and absolute responsibility.

ARTICLE VIII

CONDUCT OF BUSINESS

1.Conduct of Business. 8.1Conduct of Business Seller covenants and agrees that, after the Effective Date and prior to Closing (unless Buyer consents in writing otherwise):

(a)Seller will conduct its Business in the regular and Ordinary Course of Business, pay its debts and Taxes when due, pay or perform its other obligations when due and will use all reasonable efforts to preserve its relationships with suppliers, customers and others having relationships with Seller pertaining to the Business;

(b)Seller will not incur any material liabilities, except in the Ordinary Course of Business;

(c)Seller will make such repairs and replacements and perform such maintenance operations as are necessary to maintain and keep the Property in substantially the same repair, working order and condition as such Property is in on the date hereof (reasonable wear and tear and damage from fire or other casualty excepted). Without Buyer's consent, except as set forth in Schedule 8.1(c), Seller will not commit to make any capital expenditure for any capital improvement relating to the Property which would be required to be paid or assumed by Buyer at or after the Time of Possession, which has not been scheduled and as to which Buyer has not consented in writing, except that no consent of Buyer shall be required for expenditures related to new slot machines, slot machine manufacturer participation agreements, player tracking programs, room remodeling and renovations, room corridor renovations, elevator lobby remodeling and renovations, room closet door installations, barge hull remediation (including re-plating), dredging, welding, the repair or replacement of EIFS, and air conditioning upgrades and renovations (the portion of the cost of which has become due as of the Time of Possession, shall be paid by Seller). In the event that Buyer makes a written request to Seller to change an ongoing or proposed capital improvement in a manner that would increase the cost, or in the event Buyer's consent to a capital improvement is conditioned in writing by Buyer upon a change which would increase the cost, then Seller may elect to incorporate the Buyer's suggested change, and Buyer shall within ten (10) calendar days following a demand

by Seller, pay to Seller in immediately available funds the increase in cost due to the change (the “Cost Increase”), which shall be non-refundable and which shall increase the Purchase Price by the amount of the Cost Increase and shall be credited against the Purchase Price at Closing;

(d)Seller will not voluntarily sell or otherwise dispose of (i) any Real Property; or (ii) any other of the Property, except in the Ordinary Course of Business as previously conducted. To the extent Seller sells or disposes of any Property other than Real Property, Seller shall replace same with a similar item or a suitable alternative therefor;

(e)Seller will maintain in full force and effect its existing insurance covering the improvements on the Property and the contents thereof. Seller shall request any consents necessary to transfer the insurance policies listed in Schedules 1.2(i) and 1.2(j) to Buyer. At the request of Buyer and at Buyer's sole cost and expense (which shall be paid or secured in advance to the reasonable satisfaction of Seller), the amount of insurance against fire and other casualties which, at the date of this Agreement, Seller carries on the Real Property, shall be increased (at Buyer's expense) by such amount or amounts as Buyer shall reasonably specify to Seller in writing;

(f)Seller will not breach, amend, terminate (other than for cause or in the Ordinary Course of Business) or waive any rights under any Assumed Contract to be assigned to and assumed by Buyer hereunder;

(g)Unless otherwise permitted by Section 8.1(c), without Buyer's consent, which shall not be unreasonably withheld, Seller will not, after the end of the Due Diligence Period, enter into any contract, or series of related contracts that would be Assumed Contracts hereunder, except in the Ordinary Course of Business and all such contracts shall expressly permit assignment by Seller to Buyer at the Time of Possession or condition such assignment on the payment, directly or indirectly, of additional consideration;

(h)Unless diligently contested in good faith (and then such contest shall only be pursued so as to not delay the Closing), Seller shall promptly comply with any and all notices of violation of laws, federal, state, municipal or county ordinances, regulations, orders or requirements of departments of housing, building, fire, or other federal, state, municipal or county departments or other governmental authorities having jurisdiction over the Property or the use of operation thereof;

(i)Seller shall promptly disclose in writing to Buyer any change in any facts or circumstances which would make any of the representations or warranties of Seller inaccurate, incomplete or misleading to the detriment of Buyer;

(j)From the date hereof through and including the Closing, except as expressly provided herein or with Buyer's written consent, Seller shall not (i) mortgage, pledge, or subject to lien, encumbrance or charge any of the Property; (ii) sell or transfer any of the Property; (iii) permit any damage, destruction or loss (whether or not covered by insurance) which would materially and adversely affect the Property; or (iv) waive any material rights with respect to the Property;

(k)All Tax Returns of Seller required by law to be filed will be duly filed on a timely basis (subject to timely and properly filed extensions), and all Taxes of Seller which are due and payable will be paid on a timely basis;

(l)Other than (i) for customary review and wage increases for Seller's employees consistent with historical practices of Seller, and (ii) for commitments which arise by Seller's hiring of employees in the Ordinary Course of Business, Seller shall not adopt or amend any new bonus, profit sharing, compensation, stock option, pension, retirement, deferred compensation, employment or other employee benefit plan, agreement, trust plan fund or other arrangement for the benefit or welfare of any employee or increase in any manner the compensation or fringe benefits of any employee or pay any benefit not required by any existing plan, current practice or arrangement;

(m)Seller shall not make any representation to any employee of Seller that is inconsistent with or contrary to the provisions of this Agreement;

(n)Seller shall not close, shut down, or otherwise eliminate any part of the Business, except for such closures, shutdowns or eliminations which are (i) required by action, order, writ, injunction, judgment or decree or otherwise required by applicable law, (ii) due to acts of God or other force majeure events, or (iii) temporary closures in the Ordinary Course of Business by reason of lack of business;

(o)Seller shall not make any material changes to advertising or marketing plans of the Business;

(p)Seller shall not terminate any employees (other than in the Ordinary Course of Business);

(q)Seller shall not violate any material Legal Requirement applicable to Seller or the Business;

(r)Seller shall not, without disclosing to and first obtaining the consent of Buyer, take any action that would make any of its representations and warranties contained in this Agreement untrue or incorrect in any material respect or prevent it from performing or cause it not to perform its covenants hereunder; and

(s)Seller shall not enter into any contract, agreement or undertaking to take any of the actions described in Section 8.1(b), (d), (f), (g), (j), (l), (m), (n), (o), (p), (q) and (r) above.

2.Payment of Liabilities. 8.2Payment of Liabilities Except for the Assumed Liabilities, all non-contingent outstanding liabilities of the Business which are known to Seller and which are due and payable at or prior to the Time of Possession, including without limitation any delinquent Taxes, shall be paid in full by Seller on or before the Time of Possession.

3.No Solicitation of Competing Transaction. 8.3No Solicitation of Competing Transaction Seller shall immediately cease, and shall cause it representatives to immediately cease, any and all existing activities, discussions or negotiations with any persons conducted heretofore with respect to any Competing Transaction (as hereinafter defined). At all times during the period commencing with the Effective Date and continuing until the earlier of (a) the Closing, or (b) the termination of this Agreement pursuant to its terms, Seller shall not, and Seller shall cause its representatives not to, directly or indirectly, (i) initiate, solicit or encourage (including by way of furnishing information regarding the Business or the Property or the Assumed Liabilities) any inquiries, or make any statements to third parties which may reasonably be expected to lead to any proposal concerning the sale of Seller, the Business or the Property or the Assumed Liabilities (whether by way of merger, purchase of equity, purchase of assets or otherwise) (a “Competing Transaction”); or (ii) hold any discussions or enter into any agreements with, or provide any information or respond to, any third party concerning a proposed Competing Transaction or cooperate in any way with, agree to, assist or participate in, solicit, consider, entertain, facilitate or encourage any effort or attempt by any third party to do or seek any of the foregoing. If at any time prior to the earlier of (x) the Closing or (y) the termination of this Agreement pursuant to its terms, Seller is approached in any manner by a third party concerning a Competing Transaction (a “Competing Party”), Seller shall promptly inform Buyer regarding such contact and furnish Buyer with a copy of any inquiry or proposal, or, if not in writing, a description thereof, including the name of such Competing Party, and Seller shall keep Buyer informed of the status and details of any future notices, requests, correspondence or communications related thereto.

4.Updates by Seller. 8.4Updates by Seller

(a)From the Effective Date to the Closing, Seller shall give prompt notice in writing to Buyer of:

(i)the discovery by Seller of any event, condition, fact or circumstance that occurred or existed on or prior to the Effective Date and that caused or constitutes or that is reasonably likely to cause or constitute information contrary to any representation or warranty made by Seller in this Agreement; and

(ii)any event, condition, fact or circumstance that first occurs, arises or exists after the Effective Date and that would cause or constitute information contrary to any representation or warranty made by Seller in this Agreement (as to which Seller had no knowledge or notice as of the Effective Date) if (A) such representation or warranty had been made as of the time of the occurrence, existence or discovery of such event, condition, fact or circumstance, or (B) such event, condition, fact or circumstance had occurred, arisen or existed on or prior to the Effective Date;

(b)Prior to the end of the Due Diligence Period (i) the parties shall have the right to examine the books and records of the Company in the various departments of the Company for the purpose of establishing the accuracy of the schedules and exhibits and (ii) the Seller shall prepare a set of schedules and exhibits (the “Jointly-Approved Schedules and Exhibits”) which is accurate as of that time and which shall be approved in writing by both the Buyer and Seller. This Agreement shall be deemed amended to conform to such Jointly-Approved Schedules and Exhibits. In the event that the parties do not agree to such Jointly-Approved Schedules and Exhibits during the Due Diligence Period, Buyer or Seller shall have

the right to terminate this Agreement, in which event the Deposit and all interest earned thereon shall be returned to Buyer. In addition, within twenty-four (24) hours prior to the Time of Possession, the parties shall jointly approve updates to the following schedules and exhibits (the “Updated Schedules and Exhibits”): Schedules 3.1(a), 3.1(f), 3.1(i), 3.4, 5.1(c), 5.1(f), 8.1(c), 11.4(e)(iii), and 11.4(e)(iv). This Agreement shall be deemed amended to conform to such Updated Scheduled and Exhibits.

(c)If any event, condition, fact or circumstance that is required to be disclosed pursuant to Section 8.4(a) requires any material change in the schedules and exhibits to this Agreement, or if any such event, condition, fact or circumstance would require such a change assuming such schedules and exhibits were dated as of the date of the occurrence, existence or discovery of such event, condition, fact or circumstance, then Seller shall promptly deliver to Buyer, for Buyer's approval, a proposed update to such schedules and exhibits specifying such change, and approval of such schedules and exhibits by Buyer shall not be unreasonably withheld. This Agreement shall be deemed amended to conform to such updated schedules and exhibits as are approved by Buyer and Seller.

(d)The Jointly-Approved Schedules and Exhibits and the Updated Scheduled and Exhibits, as well as any update specifying an item to be disclosed solely pursuant to Section 8.4(a) shall be deemed to supplement and amend such schedules and exhibits for the purpose of determining the accuracy of any representations and warranties made by Seller for the purpose of Section 14.1.

(e)The accuracy and content of (1) the Jointly-Approved Schedules and Exhibits shall be deemed conclusive at the end of the Due Diligence Period, (2) any update specifying an item to be disclosed solely pursuant to Section 8.4(a) shall be deemed conclusive at the time of such update, and (3) the Updated Schedules and Exhibits shall be deemed conclusive at the Time of Possession.

ARTICLE IX

DAMAGE, DESTRUCTION AND CONDEMNATION

1.In the event that all or any substantial portion of the Real Property shall be taken in condemnation or under the right of eminent domain before the Time of Possession, Buyer may, at its option, either (i) terminate this Agreement by delivering written notice thereof to Seller and receive an immediate refund of the Deposit and all interest earned thereon, or (ii) proceed to close the transaction contemplated herein pursuant to the terms hereof, in which event Seller shall deliver to Buyer at the Closing, or as soon thereafter as received, any proceeds actually received by Seller that are attributable to the Real Property taken by such condemnation or eminent domain proceeding, shall assign to Buyer any right it may have to receive proceeds that are attributable to the Real Property taken by such condemnation or eminent domain proceeding, and there shall be no reduction in the Purchase Price. For the purposes of this provision, a “substantial portion” of the Real Property shall be deemed to include any taking equal to or greater than 5% of the gross number of square feet of the Real Property.

2.In the event that all or any substantial portion of the Real Property shall be damaged or destroyed by fire or other casualty (a “Material Loss to the Real Property”) after the Effective Date and before the Time of Possession, Buyer may, at its option, either (i) terminate this Agreement by written notice thereof to Seller and receive an immediate refund of the Deposit and all interest earned thereon, or (ii) proceed to close the transaction contemplated herein pursuant to the terms hereof, in which event Seller shall deliver to Buyer at the Closing, or as soon thereafter as received, any insurance proceeds actually received by Seller that are attributable to the Real Property damaged by such casualty, shall assign to Buyer any right it may have to receive insurance proceeds that are attributable to the Real Property damaged by such casualty, and there shall be no reduction in the Purchase Price. For the purposes of this provision, a “substantial portion” of the Real Property shall be deemed to include any casualty loss affecting a portion of the Real Property equal to or greater than 5% of the gross number of the square feet contained in the buildings and other improvements that are situated on the Real Property.

3.In the event that less than a substantial portion of the Real Property shall be damaged or destroyed by a casualty or taken in condemnation or under the right of eminent domain before the Time of Possession, or in the event the circumstances specified in Sections 9.1 or 9.2 above are applicable, and Buyer fails to give Seller proper notice of termination, then the parties shall proceed to close this transaction and any proceeds actually received by Seller attributable to the Real Property from such casualty,

condemnation or eminent domain shall be delivered or assigned to Buyer at Closing or as soon thereafter as available, and there shall be no reduction in the Purchase Price.

ARTICLE X

TERMINATION; REMEDIES

1.Termination. 10.1Termination This Agreement may be terminated by:

(a)Buyer in its sole discretion, at any time prior to the day that is forty-five (45) calendar days following the first Monday after the Effective Date (the “Due Diligence Period”), in which case Buyer shall not be obligated to make the Deposit;

(b)The mutual written consent of Seller and Buyer at any time prior to the Closing, in which case, unless the parties agree otherwise, Buyer shall be entitled to receive and retain the Deposit and all interest earned thereon;

(c)Seller, at any time prior to the Closing, if (i) Buyer has breached any representation, warranty, covenant or agreement on the part of Buyer set forth in this Agreement which (1) would result in a failure of a condition set forth in Section 7.1(c) hereof and (2) has not been cured in all material respects within thirty (30) calendar days after receipt of written notice thereof from Seller; provided, however, that Seller's right to terminate this Agreement under this Section 10.1(c) shall not be available if, at the time of such intended termination, Buyer has the right to terminate this Agreement under Section 10.1(h) hereof; or (ii) Buyer fails to timely deliver the balance of the Closing Date Payment and other funds referenced in Section 11.3(a) on or before twelve o'clock noon (Las Vegas time) on the Closing Date, as provided in Section 11.3. If termination occurs pursuant to this Section 10.1(c), Seller shall be entitled to and Seller's sole remedy shall be to receive and retain the Deposit and all interest earned thereon, plus the costs of the Survey and Phase I (defined below), if not previously paid by Buyer, as liquidated damages per Section 10.3(b);

(d)Seller or Buyer, at any time prior to the Closing, if the transactions contemplated hereby shall not have been consummated on or prior to the Outside Time Limit, in which case Seller shall be entitled to receive and retain the Deposit and all interest earned thereon unless the failure to consummate the transactions contemplated hereby prior to the Outside Time Limit is due to an uncured Seller's default, in which event each of Buyer and Seller shall be entitled to receive and retain fifty percent (50%) of the Deposit and all interest earned thereon; provided, however, that the right to terminate this Agreement under this Section 10.1(d) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the primary cause of such action;

(e)Seller, at any time prior to the Closing, if any Governmental Approvals expressly require Seller to perform acts or do or refrain from doing anything that Seller would be unable to do without causing a change that is reasonably likely to be materially adverse to the properties, assets (including the Property), liabilities (including the Assumed Liabilities) of Seller or the Business taken as a whole, in which case each of Buyer and Seller shall be entitled to receive and retain fifty percent (50%) of the Deposit and all interest earned thereon; provided, however, that the right to terminate this Agreement under this Section 10.1(e) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the primary cause of such action;

(f)Seller or Buyer at any time prior to the Closing, if any Governmental Entity has made a final non-appealable written determination that such Governmental Entity will not issue to Buyer any required Governmental Approvals, in which case each of Buyer and Seller shall be entitled to receive and retain fifty percent (50%) of the Deposit and all interest earned thereon; provided, however, that the right to terminate this Agreement under this Section 10.1(f) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the primary cause of such action;

(g)Seller or Buyer, at any time prior to the Closing, if a court of competent jurisdiction or other Governmental Entity shall have issued a non-appealable final order, decree or ruling or taken any other non-appealable final action, in each case, having the effect of permanently restraining, enjoining or otherwise prohibiting the Closing and one or more of the transactions contemplated hereby, in which case each of Buyer and Seller shall be entitled to receive and retain fifty percent (50%) of the Deposit and all interest earned thereon; provided, however, that the right to terminate this Agreement under this Section 10.1

(g) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the primary cause of such action;

(h)Buyer, at any time prior to the Closing, if Seller has breached any representation, warranty, covenant or agreement on the part of Seller set forth in this Agreement which (i) would result in a failure of a condition set forth in Section 7.1(b) hereof and (ii) is not cured in all material respects within thirty (30) calendar days after receipt of written notice thereof from Buyer, in which case Buyer shall be entitled to receive and retain the Deposit and all interest earned thereon; provided, however, that Buyer's right to terminate this Agreement under this Section 10.1(h) shall not be available if, at the time of such intended termination, Seller has the right to terminate this Agreement under Sections 10.1(c) hereof;

(i)Buyer, at any time prior to the Closing, in the event that a substantial portion of the Real Property is taken in condemnation or under the right of eminent domain prior to the Time of Possession, or a Material Loss to the Real Property occurs prior to the Time of Possession, in which case Buyer shall be entitled to receive and retain the Deposit and all interest earned thereon; provided, however, that the termination right set forth in this Section 10.1(i) is subject to the terms and conditions set forth in Article IX hereof;

(j)Buyer or Seller, in accordance with the provisions of Section 8.4(b) hereof, in which case Buyer shall be entitled to receive and retain the Deposit and all interest earned thereon;

(k)Buyer, at any time prior to the Closing, if any event, condition, fact or circumstance is required to be disclosed by Seller pursuant to Section 8.4(a), in which case Buyer shall be entitled to receive and retain the Deposit and all interest earned thereon;

(l)Buyer, at any time prior to the Closing, in accordance with the provisions of Section 4.1 hereof, in which case Buyer shall be entitled to receive and retain the Deposit and all interest earned thereon; provided, however, that the termination right set forth in this Section 10.1(l) is subject to the terms and conditions set forth in Section 4.1 hereof; or

(m)Buyer, at any time prior to the Closing, in the event a Material Adverse Change occurs, in which case Buyer shall be entitled to receive and retain the Deposit and all interest earned thereon.

(n)Buyer, if as of the Outside Time Limit or earlier termination of this Agreement, Seller has failed to obtain the Capital Projects Permits as set forth in Sections 7.1(b)(ix) and 7.2(a)(ix), in which case Buyer shall be entitled to receive and retain the Deposit and all interest earned thereon.

2.Effect of Termination. 10.2Effect of Termination

(a)Liability. In the event of termination of this Agreement, this Agreement shall become void and have no effect, without any liability on the part of any party or its members, directors, officers or stockholders, other than (i) the obligations set forth in this Article X and Sections 16.8 and 16.10, (ii) any obligation to require the disbursement of the Deposit and all interest earned thereon as provided in Section 10.1 above, and (iii) the Indemnity Cap provided in Section 14.1(c).

(b)Fees and Expenses. Except as otherwise expressly provided in this Agreement, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, whether or not the Closing is consummated; provided, however, that the cost of the Survey and of any environmental Phase I report (the “Phase I”) shall be paid by Buyer in any event, or reimbursed by Buyer to Seller, if applicable.

3.Breach; Liquidated Damages. 10.3Breach; Liquidated Damages

(a)If Seller terminates this Agreement pursuant to Section 10.1(a)-(g) and (j), then (i) the Deposit Escrow created hereby shall, without further notice to Escrow Agent, be at an end and shall terminate; (ii) Seller shall be entitled to retain copies of all survey, inspection, evaluation and other reports on the Property prepared by or for Buyer; (iii) subject to Section 10.1 hereof, Seller shall receive and retain the portion of the Deposit provided in Section 10.1 (a)-(g) and (j), as applicable, together with all interest earned thereon, plus the costs of the Survey and Phase I, if not previously paid by Buyer, as and for Seller's liquidated damages and sole remedy for breach and not as a penalty or forfeiture, actual damages being difficult or impossible to measure as set forth in Section 10.3(b) hereof; and (iv) no party shall have any further claim against the other and each party shall be fully released and discharged from any obligation to the other by reason of having heretofore entered into this Agreement and the Deposit Escrow created hereby.

(b)Buyer is fully aware that if the Buyer does not perform its obligations or otherwise breaches this Agreement, Seller will sustain substantial damages. Buyer hereby agrees that the Deposit

shall be security for the faithful performance of this Agreement and in the event of Seller's termination of this Agreement pursuant to Section 10.1(a)-(g) and (j), the portion of the Deposit and the interest earned thereon provided in Section 10.1(a)-(g) and (j), as applicable, plus the costs of the Survey and Phase I, if not previously paid by Buyer, shall be deemed to be liquidated damages and shall be paid to and retained by Seller because of the difficulty in ascertaining the exact amount of damages sustained by Seller by reason of such default. It is expressly understood and agreed that Seller's actual damages would be substantial, continuing and extremely difficult to ascertain, and that the payment of the applicable portion of the Deposit and interest earned thereon, plus the costs of the Survey and Phase I, if not previously paid by Buyer, is intended to be a good faith estimate of the Seller's actual damages and not a penalty or forfeiture.

(c)If, at any time, Seller shall have materially defaulted in any of its obligations hereunder, Buyer may, as its sole remedy hereunder (except for any claim that Buyer may have to the Indemnity Cap as defined in Section 14.1(c)), by serving notice in writing upon Seller and Escrow Agent in the manner provided herein: (i) elect to terminate this Agreement and declare it null and void and, subject to Section 10.1 hereof, receive and retain the Deposit and all interest earned thereon; (ii) elect to waive any such conditions, title objections or defaults and to consummate the transaction contemplated by this Agreement, subject to, and in accordance with the rights of Buyer pursuant to Section 8.4; and/or (iii) seek specific performance of Seller's obligations hereunder. The parties agree that the remedy of specific performance will not be applicable in situations where there are outstanding title objections (except liens or encumbrances created by or arising as a result of the acts of Seller that may be satisfied by the payment of money) unless all said title objections are waived by Buyer. The parties further agree that in the event the Buyer seeks the remedy of specific performance, Buyer shall, within three (3) business days after the entry of any order or judgment for specific performance, deposit the entire balance of the Purchase Price into the Closing Escrow, or with the court. Seller hereby acknowledges and agrees that the failure of Seller to perform its agreements and covenants hereunder could cause irreparable injury to Buyer, for which damages, even if available, may not be an adequate remedy. Accordingly, except where Seller terminates as authorized by Article X, Seller hereby consents to the issuance of injunctive relief by any court of competent jurisdiction to compel performance of Seller's obligations and to the granting by any court of the remedy of specific performance of its obligations hereunder.

ARTICLE XI

CLOSING

1.Closing. 11.1Closing The “Recording” shall be the recording of the Deeds (as defined in Section 11.2(a)) in the Office of the Chancery Clerk in Harrison County, the Second Judicial District, Biloxi, Mississippi (the “Recorder”) and the “Closing Date” shall be the date that the Recording occurs.As used herein, the “Closing” is defined as the performance by the Title Agent of the matters set forth in Sections 8 and 9 of the Closing Escrow Agreement, and the Closing shall be deemed to be effective as of the Time of Possession, at which time Buyer shall be deemed to have received delivery of the Deeds and of the other documents referenced in Section 11.2(a) through (p), and Seller shall be deemed to have received delivery of the documents referenced in Section 11.3(b) through (j), even though the actual physical delivery of such documents shall not be made until after the Recording. Unless this Agreement shall earlier terminate as permitted or required by this Agreement, the Closing shall take place at the offices of the Title Agent and the Escrow Agent, and unless extended by written agreement of the parties, time being made expressly of the essence thereof, the Closing Date shall be on the third business day following satisfaction or waiver of all the conditions set forth in Article VII hereof (other than those conditions to be satisfied or waived at the Closing).

On the Closing Date, Title Agent shall cause the Recording of the Deeds to occur, Escrow Agent is hereby irrevocably instructed by both Seller and Buyer that immediately following the Recording, Escrow Agent shall, by federal wire transfer, cause the Purchase Price which it shall be holding pursuant to Section 11.3(a) hereof to be transferred to Seller's bank account in accordance with the terms of the Closing Escrow Agreement, following which Title Agent and Escrow Agent shall deliver to Buyer the items set forth in Sections 11.2(a) through (p) and Title Agent or Escrow Agent, as applicable, shall deliver to Seller the other items set forth in Sections 11.3(b) through (j).

2.Seller's Delivery. 11.2Seller's Delivery On the day prior to the Closing Date, Seller shall deliver to Title Agent or Escrow Agent, as applicable, the following (executed and notarized as applicable by Seller):

(a)To Title Agent, Special Warranty Deeds (“Deeds”) conveying the Real Property to Buyer subject only to the Permitted Exceptions and other matters permitted under Section 4.1 in the form attached hereto as Exhibits L(1) and L(2). The Deeds shall be in recordable form (to be subsequently attached as Schedule 11.2(a) prior to Closing), conveying title to such property to Buyer subject to the Permitted Exceptions, in such form as shall be reasonably approved by Buyer's counsel and Seller's counsel that contains the following express covenants and warranties, and none other, on the part of the grantor, for itself and its successors, to the grantee, its successors and assigns that previous to the time of the execution of the conveyance, the grantor has not conveyed the same property or any right, title or interest therein to any person other than the grantee; and that the real property is, at the time of the execution of the conveyance, free from encumbrances done, made or suffered by the grantor or any person claiming under him (the “Deed Warranties”);

(b)To Escrow Agent, four (4) executed originals of the bill of sale conveying the Personal Property and Gaming Equipment to Buyer, subject to no liens or encumbrances other than Permitted Encumbrances in the form of Bill of Sale-Personal Property and Gaming Equipment attached hereto as Exhibit M;

(c)To Escrow Agent, four (4) executed originals of an assignment to Buyer of all of Seller's right, title and interest in and to the Intangible Property in the form of Assignment and Assumption Agreement-Intangible Property attached hereto as Exhibit N;

(d)To Escrow Agent, four (4) executed originals of an assignment to Buyer of all of Seller's right, title and interest in and to the Assumed Contracts and Assumed Liabilities, to be effective at the Time of Possession, in the form of Assignment and Assumption Agreement- Assumed Contracts and Assumed Liabilities attached hereto as Exhibit O;

(e)To Escrow Agent, four (4) executed originals of an assignment to Buyer of all of Seller's right, title and interest in and to the Tidelands Lease to be effective at the Time of Possession in the form of the Assignment and Assumption Agreement-Tidelands Lease attached hereto as Exhibit P;

(f)To Escrow Agent, the Assumed Contracts, except to the extent previously or separately delivered to Buyer or located at the Real Property;

(g)To Escrow Agent, all consents obtained by Seller with respect to assignment of any of the Assumed Contracts except to the extent previously or separately delivered to Buyer;

(h)To Title Agent, four (4) executed originals of a Certificate of Non-Foreign Status properly executed by officers of Seller containing such information as shall be required by Section 1445(b)(2) of the Internal Revenue Code of 1986, as amended (“Code”) and the applicable regulations issued thereunder in the form attached hereto as Exhibit Q;

(i)To Escrow Agent, four (4) executed originals of a Confirmation of Transfer of Guest Baggage and Patron Deposits in the form attached hereto as Exhibit R;

(j)To Escrow Agent, certificates of titles, endorsed for transfer to Buyer, for all vehicles and four (4) executed originals of a Bill of Sale-Passenger/Delivery Vehicles in the form attached hereto as Exhibit S;

(k)To Escrow Agent, four (4) executed originals of an assignment to Buyer of all of Parent Licensor's right, title and interest in and to the License Agreement dated effective as of December 22, 2005 by and between Parent Licensor and Harrah's Imperial Palace Corp., to be effective at the Time of Possession, in the form of Assignment and Assumption Agreement- Harrah's License Agreement attached hereto as Exhibit T;

(l)To Escrow Agent, four (4) executed originals of a Servicemark and Trademark Assignment Agreement to be effective at the Time of Possession, in the form attached hereto as Exhibit U;

(m)To Escrow Agent, four (4) executed originals of a Servicemark and Trademark Assignment Agreement to be effective at the Time of Possession, in the form attached hereto as Exhibit V;

(n)To Escrow Agent, four (4) executed originals of a Servicemark, Trademark, Domain

Name and Website Assignment Agreement to be effective at the Time of Possession, in the form attached hereto as Exhibit W;

(o)To Escrow Agent, four (4) executed originals of an Assignment of the Right to Use the Name Studio B to be effective at the Time of Possession, in the form attached hereto as Exhibit X;

(p)To Escrow Agent, five (5) executed originals of a Deposit Escrow Agreement in the form attached hereto as Exhibit I;

(q)To Escrow Agent, five (5) executed originals of a Closing Escrow Agreement in the form attached hereto as Exhibit J (with a copy to Title Agent and Title Insurance Company);

(r)To Escrow Agent, four (4) executed originals of (i) an Assignment of Casualty Insurance Policies in the form attached hereto as Exhibit G for each of Seller's insurance policies listed on Schedule 1.2(i), and (ii) an Assignment of Liability Insurance Policies in the form attached hereto as Exhibit H for each of Seller's insurance policies listed on Schedule 1.2(j);

(s)To Escrow Agent, four (4) executed originals of the certificate required by Section 7.1(b)(i) hereof;

(t)To Escrow Agent and Title Agent, a copy of a written consent from the managers or members of Seller, authorizing Seller to execute and perform this Agreement and any other agreements contemplated hereby by Seller; and

(u)To Escrow Agent, such other agreements, notices, certificates or other instruments as are required to be delivered by Seller hereunder.

Possession shall be delivered to Buyer as of midnight (Mississippi time) on the Closing Date (i.e. one minute after 11:59 p.m. on the day prior to the Recording which shall be referenced as the “Time of Possession”), and to the extent applicable, the transfer of possession shall be pursuant to a closing memorandum approved by any Governmental Entity.

At or prior to the Time of Possession, authorized representatives of Buyer and Seller shall take inventory of (i) all baggage, suitcases, luggage, valises and trunks of hotel guests checked or left in the care of Seller, (ii) all luggage or other property of guests retained by Seller as security for unpaid accounts receivable, and (iii) the contents of the storage room; provided, however, that no such baggage, suitcases, luggage, valises or trunks shall be removed from the Hotel/Casino by Seller after inventory and prior to the Time of Possession, and all such baggage and other items shall be sealed in a manner to be agreed upon by the parties and listed in an inventory prepared and signed jointly by representatives of Buyer and Seller at or prior to the Time of Possession. Buyer shall be responsible from the Time of Possession and thereafter for all baggage and other items listed in such inventory and, where the seals have been broken, for the contents thereof. Seller shall be responsible for said contents if the seals have not been broken and for all luggage or other property of guests not listed on such inventory or retained by Seller as security for unpaid accounts receivable. By conveying the Property to Buyer at the Time of Possession, Seller shall be deemed, without further action, to have assigned any storage, warehouse or innkeepers liens it may have under applicable law.

Safe deposit boxes in use by customers at the Time of Possession will be sealed prior to the Time of Possession in a reasonable manner mutually agreeable to Buyer and Seller. Representatives of both Buyer and Seller shall be given notice and an opportunity to be present when a seal is broken. Seller will have no further responsibility for seals broken without the presence of Seller's representative unless such representative fails to be present after being provided notice pursuant to this Article. Buyer will have no responsibility for loss or theft from a safe deposit box whose seal was broken in the presence of Seller's representative without the presence of Buyer's representative, but after having given such representative notice as provided below. Seller will make a representative available within one (1) hour after Buyer notifies the person whom Seller will from time to time designate. Prior to the Time of Possession, Seller shall designate in writing its initial safe deposit representative. All safe deposit keys, combinations and records shall be delivered to Buyer at the Time of Possession.

Prior to the Time of Possession, Seller and Buyer shall perform the following functions for all motor vehicles that were checked and placed in the care of Seller: (i) mark all motor vehicles with a sticker or tape; and (ii) prepare an inventory of such items (“Inventoried Vehicles”) indicating the valet check stub number applicable thereto and any damage thereto. Thereafter, Buyer shall be responsible for the Inventoried Vehicles except for any damage indicated in the inventory.

Subject to Buyer's option to retain the IP Chips pursuant to Section 1.3(k), at the Time of Possession, Seller shall remove and retain the IP Chips and any Non-Redeemable Chips, and Buyer shall then use its own chips and tokens for the operation of the casino.

Pursuant to and in order to comply with any statutes relating to the payment of taxes (e.g., unemployment taxes), such amounts as Buyer and Seller reasonably estimate are necessary to comply with the provisions of such statutes will be withheld by Escrow Agent out of the Closing Escrow, and will be payable to Seller after Closing at such time as Seller furnishes Buyer or Buyer's assignee and Escrow Agent receipts or certificates provided for in such statutes, or if not so provided for, such evidence as Buyer or Buyer's assignees may reasonably require to assure Buyer or Buyer's assignee that the applicable obligations have been paid. If Seller does not produce such receipts or certificates within the time period provided for in such statutes, or if any lien or claim therefore is asserted against Buyer or Buyer's assignee or the Property, Escrow Agent shall pay such withheld sums to the appropriate governmental or other taxing authority. Any payments made pursuant to this Section 11.2 shall be paid in accordance with the terms and conditions of the Closing Escrow Agreement.

3.Buyer's Delivery. 11.3Buyer's Delivery On or before twelve o'clock noon (Las Vegas Time) on the day prior to the Closing Date, Buyer shall deliver or cause to be delivered to Escrow Agent the following:

(a)By federal wire transfer, the Closing Date Payment pursuant to Section 2.2(b) hereof, plus sufficient funds to pay for its Closing obligations, including any Real Property transfer taxes, if any, Title Policy premiums, Escrow fees and any other payments to be made on or before twelve o'clock noon on the day prior to the Closing Date by Buyer as provided in this Agreement.

(b)Four (4) executed originals of the certificate required by Section 7.1(c)(i) hereof;

(c)Such other agreements, notices, certificates and other instruments as are required to be delivered by Buyer hereunder;

(d)Four (4) executed originals of the bill of sale conveying the Personal Property and Gaming Equipment to Buyer in the form of Bill of Sale-Personal Property and Gaming Equipment attached hereto as “Exhibit M”;

(e)Four (4) executed originals of an Assignment and Assumption Agreement-Intangible Property in the form attached hereto as Exhibit N;

(f)Four (4) executed originals of an instrument evidencing assumption by Buyer of the Assumed Liabilities effective as of the Time of Possession in the form of the Assignment and Assumption Agreement-Assumed Contracts and Assumed Liabilities attached hereto as Exhibit O;

(g)Four (4) executed originals of an executed Assignment and Assumption Agreement-Tidelands Lease in the form attached hereto as Exhibit P;

(h)four (4) executed originals of the Confirmation and Transfer of Guest Baggage and Patron Deposits in the form attached hereto as Exhibit R;

(i)four (4) executed originals of the bill of sale conveying the motor vehicles listed on Schedule 1.2(d) to the Purchase Agreement in the form of Bill of Sale-Passenger/Delivery Vehicles attached hereto as Exhibit S;

(j)To Escrow Agent, four (4) executed originals of an assignment to Buyer of all of Parent Licensor's right, title and interest in and to the License Agreement dated effective as of December 22, 2005 by and between Parent Licensor and Harrah's Imperial Palace Corp., to be effective at the Time of Possession, in the form of Assignment and Assumption Agreement- Harrah's License Agreement attached hereto as Exhibit T;

(k)To Escrow Agent, four (4) executed originals of a Servicemark and Trademark Assignment Agreement to be effective at the Time of Possession, in the form attached hereto as Exhibit U;

(l)To Escrow Agent, four (4) executed originals of a Servicemark and Trademark Assignment Agreement to be effective at the Time of Possession, in the form attached hereto as Exhibit V;

(m)To Escrow Agent, four (4) executed originals of a Servicemark, Trademark, Domain Name and Website Assignment Agreement to be effective at the Time of Possession, in the form attached hereto as Exhibit W;

(n)To Escrow Agent, four (4) executed originals of an Assignment of the Right to Use the Name Studio B to be effective at the Time of Possession, in the form attached hereto as Exhibit X; and

(o)Five (5) executed originals of a Closing Escrow Agreement in the form attached hereto as Exhibit J (with a copy to Title Agent and Title Insurance Company), which includes an irrevocable escrow instruction, directing the Escrow Agent to deposit the Purchase Price and all other funds deposited by Buyer with Escrow Agent into an interest bearing account, and on the Closing Date, immediately following the Recording, to cause, by Federal wire transfer, the Purchase Price and any other deposits made by Buyer on or before the Closing, to which Seller is entitled to receive hereunder, together with any interest thereon, to be transferred to Seller's bank account.

4.Closing Statement. 11.4Closing Statement The items listed in sub-clauses (a) through (j) of this Section 11.4 shall be prorated, allocated and/or adjusted between Buyer and Seller as set forth below, and as also set forth in a written closing statement (the “Closing Statement”) to be prepared by Buyer and Seller and executed by Buyer and Seller prior to the Time of Possession, subject to amendment only as determined by the Operations Settlement defined in Section 11.5 below. Any additional amounts owed by Buyer or credits due to Buyer shall be reflected in such Closing Statement and the Purchase Price shall be adjusted accordingly:

(a)Property Taxes. At the Time of Possession, all real and personal property, ad valorem or similar Taxes of Seller (collectively, “Property Taxes”) for the current property tax year that includes the Closing Date shall be prorated as of the Time of Possession using the latest available rates and assessments, and Seller's proportionate share of Property Taxes (which shall be determined on a per diem basis from the beginning of the current property tax year through the day prior to Closing) shall be credited to the appropriate party in the Closing Statement. This proration of Property Taxes shall be subject to adjustment after the Time of Possession when the final tax bill for the year of the Closing becomes available. Seller or Buyer, as applicable, shall pay promptly to the other party any amounts due as a result of such adjustments. Any Property Tax refunds or rebates relating to any tax period ending on or before the Time of Possession shall be the property of Seller, and Buyer shall pay promptly to Seller any such amounts (or portions thereof) that it receives. Any Property Tax refunds or rebates relating to any tax period ending after the Time of Possession shall be the property of Buyer, and Seller shall pay promptly to Buyer any such amounts (or portions thereof) that it receives.

(b)Utilities. Utility meters will be read, to the extent that the utility company will do so, during the daylight hours on the day prior to the Closing Date, with charges to that time paid by Seller and charges thereafter paid by Buyer. Prepaid utility charges shall be adjusted on the Closing Statement. Charges for utilities which are un-metered, or for meters which have not been read on the day prior to the Closing Date, will be prorated between Buyer and Seller as of the Time of Possession on the Closing Statement based upon utility billings received after the Closing. Seller or Buyer, as appropriate, shall, upon receipt, submit a copy of the utility billings for any such charges to the other party and such party shall pay the party's pro-rata share of such charges to the party requesting payment within seven (7) days from the date of any such request. Buyer shall make, and Sellers shall cooperate with Buyer in making, appropriate arrangements for transfer of all necessary utility and other services in its own name to be effective as of the Time of Possession (or as soon as practicable thereafter).

(c)Insurance. Prepaid insurance premiums on the Assumed Insurance Policies shall be prorated on a daily basis as of the Time of Possession.

(d)Assumed Contracts. All income and expenses pursuant to the Assumed Contracts will be prorated between Buyer and Sellers as of the Time of Possession. Seller shall receive a credit on the Closing Statement for the amount of any prepaid items related to periods after the Time of Possession, security deposits, or other deposits previously paid by Seller under the Assumed Contracts, less any such amounts paid to and collected by Seller under the Assumed Contracts. Buyer shall receive a credit on the Closing Statement for the amount of any unpaid obligations of Seller under the Assumed Contracts which are due and payable as of the Time of Possession. Any amounts received by Buyer under the Assumed Contracts from and after the Time of Possession shall be retained by Buyer. Any amounts received by Seller under the Assumed Contracts from and after the Time of Possession shall be promptly paid to Buyer. Any amounts due relating to the Excluded Property or Excluded Liabilities will be promptly paid by Seller.

(e)Progressive Liabilities. The Purchase Price shall be reduced by the estimated

amounts outstanding as of the Time of Possession on the liabilities set forth below in (i)-(iv) (collectively, the “Progressive Liabilities”), which amounts shall be reflected on the Closing Statement: (i) amounts shown on the Seller's internal progressive slot machine meters, or meters for other games or gaming devices as of the Time of Possession in the cumulative amount of approximately Six Hundred Thousand Dollars ($600,000.00); (ii) table games with an in-house progressive jackpot feature as of the Time of Possession; (iii) progressive pool programs in which Seller participates with other gaming entities as set forth on Schedule 11.4(e)(iii) attached hereto; and (iv) all progressive games which shall be listed on Schedule 11.4(e)(iv) attached hereto. On the Closing Date, Seller shall deliver a final accounting of the Progressive Liabilities outstanding as of the Time of Possession, to be reviewed by Buyer within two (2) business days following receipt. Any additional amounts owed by Buyer or credits due to Buyer as a result of such final accounting shall be paid for by Buyer or Seller, as applicable, or by wiring of federal funds to the account designated by Buyer or Seller, as applicable, no later than 5:00 p.m. (Las Vegas Time) on the fourth day immediately following the Closing Date.

(f)Outstanding IP Chips. If Buyer elects to exercise its option to retain the IP Chips pursuant to Section 1.3(k), the Purchase Price shall be reduced by the Seller's and Buyer's jointly estimated amount of IP Chips likely to be redeemed pursuant to the Eldorado formula used by the Internal Revenue Service and the gaming industry.

(g)Any fees or taxes (including gaming taxes and license fees) which are permitted by law to be prorated shall be prorated;

(h)Rents or periodic payments on the Tidelands Lease which have been prepaid by Seller shall be prorated as of the Closing in accordance with a schedule prepared jointly and approved by Seller and Buyer;

(i)Premiums which have been prepaid by Seller on any Assumed Insurance Policies shall be prorated as of the Time of Possession. Other than any Assumed Insurance Policies which the applicable insurance company consents that Buyer may assume, Seller shall cancel its insurance as of the Closing, and Seller shall be entitled to any refund of premiums prepaid thereon;

(j)Other Adjustments.

(i)The Closing Statement shall provide for a calculation of the Closing Net Working Capital of the Business as of the Time of Possession (the “Preliminary Closing Net Working Capital”), provided, however, that the payment of the obligations required by Section 3.1(e)(vii) shall not result in a credit or debit for either Buyer of Seller to the calculation of the Preliminary Closing Net Working Capital. Seller shall receive a credit on the Closing Statement for the amount by which the Preliminary Closing Net Working Capital as of the Time of Possession, as reflected on the Closing Statement, is more than zero. Buyer shall receive credit on the Closing Statement for the amount by which the Preliminary Closing Net Working Capital as of the Time of Possession, as reflected on the Closing Statement, is less than zero.

(ii)For purposes of this Agreement, “Closing Net Working Capital” shall mean (A) the current assets (excluding the Bankroll and the current assets to the extent specifically listed in sub-clauses (a) through (i) above of this Section 11.4 and fully accounted for in the Closing Statement) of the Business as of the Time of Possession, determined in accordance with GAAP (defined below) as applied by Seller on a consistent basis, minus (B) the current liabilities (but excluding the current liabilities to the extent specifically listed in sub-clauses (a) through (i) above of this Section 11.4 and fully accounted for in the Closing Statement) of the Business as of the Time of Possession, determined in accordance with GAAP as applied by Seller on a consistent basis. For purposes of this Agreement, “GAAP” means U.S. generally accepted accounting principles in effect on the date on which they are to be applied pursuant to this Agreement.

(iii)Within one hundred and twenty (120) calendar days following the Closing Date, Buyer and Seller shall jointly cause to be prepared and approved a written statement setting forth a calculation of the Closing Net Working Capital of the Business as of the Time of Possession (the “Final Closing Net Working Capital” and such statement, the “Final Closing Net Working Capital Statement”); provided, however, that the payment of the obligations required by Section 3.1(e)(vii) shall not result in a credit or debit for either Buyer of Seller to the calculation of the Final Closing Net Working Capital. During such one hundred and twenty (120) day period, Buyer shall permit Seller to have reasonable access during

regular business hours to the books, records and work papers for purposes of the joint preparation of the Final Closing Net Working Capital Statement, subject to the Confidentiality Agreement. When jointly approved by Buyer and Seller, the Final Closing Net Working Capital Statement shall be final, binding and conclusive on the parties upon the earlier of the following to occur (the “Final Resolution Date”): (A) the date that Buyer and Seller jointly approve the Final Closing Net Working Capital Statement, or (B) the date of the resolution of all disputes related to the Final Closing Net Working Capital Statement pursuant to Section 11.4(j)(iv), by the Independent Accounting Firm (as defined below).

(iv)In the event that Buyer and Seller do not jointly approve a Final Closing Net Working Capital Statement within such one hundred and twenty (120) day period, within five (5) days thereafter, Buyer and Seller shall submit their respective determinations and calculations and the items remaining in dispute for resolution to an independent accounting firm that is mutually acceptable to Buyer and Seller (the “Independent Accounting Firm”), which shall be selected from the following list of accounting firms in Las Vegas, Nevada: (1) Conway Stuart & Woodbury, (2) Kafoury Armstrong & Co., (3) McGladrey & Pullen LLP and (4) Piercy Bowler Taylor & Kern. In the event the parties cannot agree on the selection of the Independent Accounting Firm, then Seller shall place the names of each of the aforementioned firms into a container and the Buyer shall draw from the container the name of the firm which shall be selected. The parties shall cause the Independent Accounting Firm to submit a report to Buyer and Seller with a determination regarding the remaining disputed items, within thirty (30) calendar days after submission of the matter, and such report shall be final, binding and conclusive on Buyer and Seller. The fees, costs and expenses of the Independent Accounting Firm shall be paid one-half by Buyer and one-half by Seller.

(v)The Purchase Price shall be increased, dollar for dollar, by the amount by which the Final Closing Net Working Capital is greater than the Preliminary Closing Net Working Capital and shall be decreased, dollar for dollar, by the amount by which the Final Closing Net Working Capital is less than the Preliminary Closing Net Working Capital. If the Purchase Price has increased pursuant to this Section 11.4(j)(v), Buyer shall pay such additional amount due to Seller by wire transfer of immediately available funds to an account designated by Seller within five (5) business days of the Final Resolution Date. If the Purchase Price has decreased pursuant to this Section 11.4(j)(v), Seller shall pay such amount due to Buyer by wire transfer of immediately available funds to an account designated by Buyer within five (5) business days of the Final Resolution Date.

(k)Cooperation. In the event Seller and Buyer agree that additional items should be prorated, allocated and/or adjusted between Buyer and Seller, any such items shall be prorated, allocated and/or adjusted consistent with the provisions of this Section 11.4.

5.Operations Settlement. 11.5Operations Settlement The items listed in sub-clauses (a) and (b) of this Section 11.5 shall be determined by a final accounting, as of the Time of Possession, prepared by Buyer's accountants and reviewed by Seller's accountants in the period between 11:59 p.m. on the day prior to the Closing Date and twelve o'clock noon on the Closing Date, the results of which shall be incorporated into a written operations settlement statement which shall be executed by Buyer and Seller (the “Operations Settlement”). Any amounts determined to be due and owing to Buyer or Seller pursuant to the Operations Settlement shall be paid for by Buyer or Seller, as applicable, or by wiring of federal funds to the account designated by Buyer or Seller, no later than 5:00 p.m. (Las Vegas Time) on the Closing Date. Each party shall bear its own costs of participation in the preparation of the Operations Settlement.

(a)Room Revenues. All revenues from the rental of guest rooms at the Hotel/Casino, together with any sales or other Taxes thereon (collectively, the “Room Revenues”) for the night preceding the Closing Date shall be divided equally between Buyer and Seller pursuant to the Operations Settlement. Revenues, other than Room Revenues, of the Business for the night preceding the Closing Date shall belong solely to and be retained by Seller. All other revenues, including other Room Revenues, accruing prior to the Time of Possession shall belong solely to and be retained by the Seller.

(b)Tray Ledger. Buyer shall purchase the Tray Ledger as of the Time of Possession from Seller pursuant to the Closing Statement. The Tray Ledger is not included in the Purchase Price and the purchase price for the Tray Ledger shall be in addition to the Purchase Price.

(c)Bankroll. Prior to the Time of Possession, there shall be conducted a complete countdown of the Bankroll (the “Countdown”), pursuant to mutually agreed upon procedures, to determine the value of the Bankroll. A representative of Buyer and of Seller shall be present at the Countdown. The

IP Chips (if Buyer does not elect to exercise its option to retain the IP Chips pursuant to Section 1.3(k)), and the Non-Redeemable Chips shall be retained by Seller and are excluded from the transaction contemplated herein. The value of the Bankroll as determined at the Countdown shall be included in the Purchase Price to be paid to Seller on the Closing Date.

6.Costs. 11.6Costs Costs and expenses relating to the transactions contemplated by this Agreement shall be borne and paid as follows:

(a)All motor vehicle transfer taxes, vehicle registration fees, sales, use and excise Taxes and documentary stamp or real estate transfer taxes, if any, relating to the purchase and sale of the Property shall be borne and paid by Buyer;

(b)All fees for recording the Deeds and any assignments of the Property to be conveyed and assigned pursuant hereto and all real property transfer taxes, if any, shall be borne and paid by Buyer;

(c)Any fees and expenses of the Escrow Agent, the Title Agent or the Title Insurance Company including, without limitation, all Title Policy premiums, shall be paid by Buyer;

(d)Except as otherwise specifically provided in this Agreement, Seller and Buyer shall bear their own costs and expenses arising out of the negotiation, execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated herein, including without limitation, legal and accounting fees and expenses.

7.Gaming Taxes. 11.7Gaming Taxes Seller shall be and remain liable for any gaming fees or taxes due pursuant to Mississippi law which accrue prior to the Time of Possession. Within 30 days following Closing, any fees or taxes which have been prepaid or advanced by Seller, for which Buyer receives the benefit therefor, shall be reimbursed to Seller by Buyer.

8.Approval of Closing Documents. 11.8Approval of Closing Documents All certificates, instruments, documents and agreements to be executed and delivered at Closing shall be in form and substance reasonably acceptable to and approved by the parties and their counsel.

9.Merger and Survival. 11.9Merger and Survival The following covenants and agreements contained herein shall survive the Closing and Recording: (a) the covenants and agreements which by their terms are to be performed after the Time of Possession as set forth in Sections 3.6, 7.2(b), 7.2(c), 12.1-12.5, 12.7, 14.1-14.5, Article XV and 16.1-16.15 and all definitions related thereto; (b) the Assumed Liabilities as set forth in Article III; and (c) the post-Closing obligations, adjustments and payments required pursuant to Articles XI and XIV. All other covenants and agreements of Buyer and Seller, as the case may be, contained in this Agreement shall merge with any deed or conveyance, and such covenants and agreements shall not survive the Closing and the Recording.

ARTICLE XII

POST-CLOSING COVENANTS

1.Further Assurances. 12.1Further Assurances Each party shall, at the request of the other, at any time and from time to time following the Time of Possession, execute and deliver to the requesting party all such further instruments as may be reasonably necessary or appropriate in order more effectively to (a) assign, transfer and convey to Buyer, or to perfect or record Buyer's title to or interest in the Property, (b) evidence and confirm the assumption by Buyer of the liabilities of Seller to be assumed by Buyer pursuant to this Agreement, or (c) confirm or carry out the provisions of this Agreement.

After the Time of Possession, Seller shall refer to Buyer all inquiries relating to the Property and as soon as reasonably practicable deliver to Buyer (i) any mail, packages and other communications addressed to Seller relating to the Property and (ii) any cash or other property that Seller receives and that properly belongs to Buyer pursuant to the terms hereof, including any insurance proceeds, payments and interest payable thereon.

2.Cooperation in Legal Proceedings and Retention of Records. 12.2Cooperation in Legal Proceedings and Retention of Records Each party acknowledges that the other may be a party to legal proceedings involving third parties (including but not limited to mediation, arbitration, settlement hearings or conferences, and court proceedings, including proceedings on appeal) following the Time of Possession which relate to the Business or the Property, and covenants to maintain and make available to the other upon reasonable request and at the expense of the

requesting party for purposes of investigating, testing, accessing, photographing, videoing, or such other activities necessary for the purpose of prosecuting or defending such legal proceedings: (a) any and all files and business records in its custody or control relating to the Business or the Property; (b) any and all individuals employed by the other party hereto whose testimony or knowledge, is necessary or useful with respect to the issues involved in such legal proceedings or preparation therefor or the investigation thereof; and (c) relevant portions of the Property to conduct activities necessary for prosecuting or defending such legal proceedings. Buyer shall keep and maintain all files, records and other information which Seller shall deliver to Buyer at Closing or leave on the Real Property, either at Buyer's offices on the Real Property or at storage locations in Las Vegas, Nevada for a period of at least five (5) years after the Closing. Before destroying any such files, records or information, Buyer shall notify Seller and Seller may, at its expense, obtain and retain the same. Seller shall be entitled at all reasonable times following notice to inspect and make copies at Seller's expense of such files, records and information. In fulfilling its obligations under this Section 12.2, Buyer will make available Mike Bruffey and Julia Jones as a resource to assist Seller so long as Buyer continues to employ Mike Bruffey and Julia Jones.

3.Reports and Accounting Personnel. 12.3Accounting Personnel For a period of up through April 30, 2012 and such additional time as described below, commencing immediately after the Closing, Buyer will make available to Seller, upon Seller's reasonable request, such information and such services of certain of its accounting personnel as may be reasonably necessary to assist Seller in closing its books and records, and in preparing, processing and filing any required federal, state and local governmental forms and reports (whether monthly, quarterly or annually and including 1099s and gaming reports but excluding the 2011 federal and Mississippi income tax returns), and financial statements, with respect to the Business and for such additional time as may be necessary in order to have such employees available to assist Seller to respond to any audits or similar proceedings (relating to Seller's operations, reports, or filings) by any Governmental Entity or third party authorized to make such audit or bring such proceeding; provided, however, that Seller's use of such personnel shall be during normal business hours and at such times so as not to interfere with Buyer's normal business activities and such personnel shall at all times serve at the direction and control of Buyer. Upon the request of Seller, Buyer shall, at Buyer's expense, prepare any such required governmental forms or reports on behalf of Seller.

4.Labor Arbitration and Grievances of Seller. 12.4Labor Arbitration and Grievances of Seller In the event there are any labor or employment claims concerning or arising from periods prior to the Time of Possession which are unasserted as of the Time of Possession or there are pending and unresolved as of the Time of Possession any employee complaints, charges or grievances before any court or Governmental Entity or arbitrator between Seller and any applicant or employee, or discrimination complaints in any state or federal agency or court filed by or on behalf of any applicants, employees or former employees of Seller arising in connection with the Business, Buyer shall be solely responsible for the handling and/or the resolution of said matters subject to the following conditions:

(a)In the event the resolution of any such matter requires that any terminated employee be reinstated, Buyer agrees to reinstate said employee in its operation.

(b)Any duty to pay wages or benefits to or on behalf of a terminated employee from the date of termination to the date of reinstatement shall be the obligation of Buyer.

5.Buyer's Covenant Relating to Certain Transferee Liability. 12.5Buyer's Covenant Relating to Certain Transferee LiabilityBuyer covenants and agrees that it shall at no time and under no circumstances, assert or bring any claim of any nature whatsoever against IP Holdings, Inc., a Nevada corporation (“IP Holdings”) or the Engelstad Family Foundation (the “Foundation”) on the basis of transferee liability or any other legal theory for any Buyer Damages (defined below). Buyer has made such covenant with knowledge that Seller has informed Buyer that, in general, the proceeds representing the Purchase Price are to be transferred to the legal owners of IPM which are IP Holdings and the Foundation; provided, however, that Seller acknowledges that Buyer, except as otherwise provided in this Agreement: (a) has not given any approval to the actions of Seller with respect to the proceeds representing the Purchase Price and (b) has no rights to approve or disapprove the actions of Seller with respect to the proceeds representing the Purchase Price.

6.Enforcement of Post-Closing Covenants. 12.6Enforcement of Post-Closing

Covenants Both Buyer and Seller shall cooperate with each other regarding the post-Closing covenants contained in Article XII and shall be entitled to injunctive relief in order enforce such post-Closing covenants.

7.Certain Capital Projects. Both Buyer and Seller agree that, following the Closing, Buyer intends to perform and will pay for certain capital projects with respect to the barge and air conditioning system at the Property, as determined by Buyer (the “Capital Projects”). Buyer and Seller have estimated the cost of the Capital Projects to be Forty Four Million Dollars ($44,000,000) (the “Cap”). To the extent the aggregate costs of the Capital Projects exceed the Cap, Buyer shall be solely responsible for such additional costs. To the extent the aggregate costs of the Capital Projects are less than the Cap, Buyer shall remit to Seller one-half of the difference between the actual costs of the Capital Projects and the Cap, within five (5) business days after completion of the Capital Projects. Buyer shall provide Seller with documentation related to the final cost of the Capital Projects, which shall include the Capital Projects Permits Costs amount (the “Final Capital Projects Costs”) within ten (10) business days after completion thereof.

In the event that Seller does not agree with Buyer's determination of the Final Capital Projects Costs, then Seller shall provide Buyer with written notice of such disagreement within thirty (30) days of Seller's receipt of said Final Capital Projects Costs. If Buyer and Seller are unable to reach an agreement as to the Final Capital Projects Costs within five (5) days of Seller's notice of such disagreement, then Buyer and Seller shall submit their respective determinations and calculations and the items remaining in dispute for resolution to an independent accounting firm that is mutually acceptable to Buyer and Seller, which shall be selected from the following list of accounting firms in Las Vegas, Nevada: (1) Conway Stuart & Woodbury, (2) Kafoury Armstrong & Co., (3) McGladrey & Pullen LLP and (4) Piercy Bowler Taylor & Kern. In the event the parties cannot agree on the selection of the independent accounting firm, then Seller shall place the names of each of the aforementioned firms into a container and the Buyer shall draw from the container the name of the firm which shall be selected. The parties shall cause such selected independent accounting firm to submit a report to Buyer and Seller with a determination regarding the remaining disputed items within thirty (30) calendar days after submission of the matter, and such report shall be final, binding and conclusive on Buyer and Seller. The fees, costs and expenses of the firm shall be paid one-half by Buyer and one-half by Seller.

ARTICLE XIII

BROKERAGE FEES

Each of the parties hereto agree to indemnify and hold and save the other or others harmless from any brokerage or finder's fees, commissions, compensation or expenses (including reasonable attorneys' fees and other expenses incurred in connection with any such claim) which may be due or asserted by reason of any such agreement or purported agreement by the indemnifying party regarding the transaction contemplated herein.

ARTICLE XIV

SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

1.Seller's Indemnity. 14.1Seller's Indemnity

(a)Subject to Section 14.1(c) below, Seller covenants and agrees to indemnify and save and hold Buyer and each of its Affiliates and their respective officers, directors, members, managers, trustees, employees, advisors, agents, attorneys, accountants or other representatives (collectively, “Buyer Indemnified Parties”) harmless at all times after the Time of Possession with respect to any and all claims, liabilities, loss, cost, damage and expense, including reasonable attorneys' fees and expenses and statutory or other interest with respect to any such claims, liabilities, loss, costs, damage and expenses arising from, by reason of, or in connection with (i) all claims and liabilities on account of any Excluded Property or Excluded Liabilities, (ii) any reimbursement obligations of Seller pursuant to Section 1.3(k), (iii) any breach by Seller of any covenant made by Seller in this Agreement and (vi) any breach by Seller of any representation or warranty made by Seller in this Agreement (collectively, the “Buyer Damages”).

(b)Subject to Section 14.1(c) below, All representations and warranties of Seller set forth

in this Agreement shall survive the Closing until the two (2) year anniversary of the Closing Date; and

(c)Anything in this Agreement to the contrary notwithstanding, the maximum amount of Buyer Damages in the aggregate for which Seller shall be obligated to the Buyer Indemnified Parties under all of the provisions of this Agreement shall not exceed Two Million Dollars ($2,000,000.00) (the “Indemnity Cap”). At the Closing, the Title Insurance Company shall withhold the Indemnity Cap from the Seller's proceeds and the Title Insurance Company shall hold such Indemnity Cap for a period of two (2) years from the Closing Date, and such portion thereof thereafter that is sufficient to cover (up to the amount of the Indemnity Cap) as security for the payment of any claim for Buyer Damages that has been asserted during such two (2) year period, until such claim(s) are resolved or paid.

2.Buyer's Indemnity. 14.2Buyer's Indemnity

(a)Buyer covenants and agrees to indemnify and save and hold Seller and each of its Affiliates and their respective officers, directors, members, managers, trustees, employees, advisors, agents, attorneys, accountants or other representatives (collectively, “Seller Indemnified Parties”) harmless at all times after the Time of Possession in respect of any and all claims, liabilities, loss, cost, damage and expense, including reasonable attorneys' fees and expenses, arising from, by reason of or in connection with (i) any act or omission by Buyer relating to the conduct of the Business after the Time of Possession (including but not limited to any breach by Buyer after the Time of Possession of the provisions of the Harrah's License Agreement, (ii) Buyer's ownership, use, operation or maintenance of the Property arising from events occurring after the Time of Possession, (iii) all claims and liabilities on account of any Assumed Liabilities, (iv) any breach by Buyer of any covenant made by Buyer in this Agreement and (v) any breach by Buyer of any representation or warranty made by Buyer in this Agreement (collectively, the “Seller Damages”).

(b)All representations and warranties of Buyer set forth in this Agreement shall survive the Closing until the two (2) year anniversary of the Closing Date.

3.Notice of Claim. 14.3Notice of Claim Each indemnified party hereunder agrees that promptly upon its discovery of any event, occurrence, fact, circumstances or other matter which, in its reasonable judgment, gives rise to a claim for indemnity under the provisions of this Agreement, including receipt by it of notice of any demand, assertion, claim, action or proceeding, judicial or otherwise, by any third party (any such third party action being collectively referred to herein as a “Claim”) with respect to any matter as to which it is entitled to indemnity under the provisions of this Agreement, it will give prompt notice thereof in writing to the indemnifying party together with a statement of such information respecting such Claim as it shall then have and that such Claim is one as to which such party is entitled to indemnification under this Agreement. The omission of any indemnified party so to notify an indemnifying party of any such Claim shall not relieve the indemnifying party from any liability in respect of such Claim which it may have otherwise had to such indemnified party on account of any damages which are the subject of such Claim except and only to the extent that the indemnifying party is prejudiced thereby, and in no event shall the indemnifying party be relieved of any other liability which it may have to such indemnified party pursuant to this Agreement. Upon receiving such notice, the indemnifying party, at its election, shall have the right to defend against and settle such Claim (any such settlement shall occur only with the written consent of the indemnified party, which consent shall not be unreasonably withheld), by counsel of its own choosing (provided that such attorneys are reasonably acceptable to the indemnified party), at the indemnifying party's expense. The indemnified party shall cooperate fully in all respects with the indemnifying party in any such defense, including, without limitation, by making available to the indemnifying party all pertinent information under the control of or available to the indemnified party (including consultation with, and testimony, advice and assistance of officers, employees and agents of the indemnified party having knowledge of the matters in dispute). If the named parties to such action or proceeding include both the indemnified party and the indemnifying party, and the indemnified party has been advised in writing by counsel that there may be one or more legal defenses available to such indemnified party that are different from or additional to those available to the indemnifying party, then the indemnified party shall be entitled, at the indemnifying party's reasonable cost, risk and expense, to separate counsel (provided that such counsel is reasonably acceptable to the indemnifying party). If the indemnifying party does not notify the indemnified party, within ten (10) days of the indemnified party's notice to the indemnifying party of the indemnifying party's election to defend such Claim, or if the indemnifying party fails to file any answer or other pleading before the same is due, the indemnified party may defend or settle such Claim (any such settlement shall occur only with the written

consent of the indemnifying party, which consent shall not be unreasonably withheld) in such manner as the indemnified party deems appropriate, in its reasonable discretion, at the indemnifying party's reasonable cost, risk and expense. The indemnifying party may defend, but not settle, a Claim without waiving its rights to assert that such Claim is not subject to the indemnity provisions of this Article XIV. If the indemnifying party elects to defend a Claim, the indemnified party may, at the indemnified party's expense, participate in such matter with counsel of the indemnified party's own choosing, provided such participation does not unreasonably interfere with the defense of such Claim.

4.Payment of Damages. 14.4Payment of Damages The indemnified party shall be paid in cash by the indemnifying party the amount to which the indemnified party may become entitled by reason of the provisions of this Article XIV, within fifteen (15) days after such amount is determined either by mutual agreement of the parties or on the date on which both such amount and an indemnified party's obligation to pay such amount have been determined by a final judgment (i.e., a judgment which is not subject to further appeal) of a court or administrative body having jurisdiction over such proceeding.

5.Treatment of Indemnification Payments. 14.5Treatment of Indemnification Payments All indemnification payments made pursuant to this Article XIV shall be treated by the parties for income tax purposes as adjustments to the Purchase Price, unless otherwise required by applicable law.

6.No Double Recovery. 14.6No Double Recovery Notwithstanding the fact that any person may have the right to assert claims for indemnification under more than one provision of this Agreement in respect to any fact, event, condition or circumstance, no person will be entitled to recover any amount in respect of such fact, event, condition or circumstance more than once under this Agreement.

7.Remedies Cumulative. 14.7Remedies Cumulative Subject to Section 14.1(c), the remedies provided in this Agreement shall be cumulative and shall not preclude any party from asserting any other right, or seeking any other remedies, against the other party.

ARTICLE XV

NOTICES

Any and all notices or demands permitted or required to be given hereunder shall be in writing and shall be validly given or made when personally delivered or when actually received as prepaid, certified or registered mail, return receipt requested, or upon delivery by any commercial courier service, or on the date of sender's confirmation of transmission if sent via facsimile, addressed as follows:

If to Seller, to: Imperial Palace of Mississippi, LLC

c/o Betty Engelstad, President

851 S. Rampart Blvd. Suite 150

Las Vegas, NV 89145

Facsimile: (702) 731-2123

Key Largo Holdings, LLC

c/o Betty Engelstad

851 S. Rampart Blvd. Suite 150

Las Vegas, NV 89145

Facsimile: (702) 731-2123

With copies to:W. Owen Nitz, Esq.

Nitz, Walton & Heaton, Ltd.

601 South Tenth Street, #201

Las Vegas, Nevada 89101

Facsimile: (702) 384-3011 and also to

(702) 387-7897

and to:Jeffrey M. Cooper

Bradshaw, Smith & Co., LLP

5851 West Charleston

Las Vegas, Nevada 89146

Facsimile: (702) 878-9167

If to Buyer, to:Keith E. Smith

President

Boyd Gaming Corporation

3883 Howard Hughes Parkway, Ninth Floor

Las Vegas, Nevada 89169

Facsimile: (702) 792-7335

With a copy to:Brian A. Larson, Esq.

Executive Vice President, Secretary

and General Counsel

Boyd Gaming Corporation

3883 Howard Hughes Parkway, Ninth Floor

Las Vegas, Nevada 89169

Facsimile: (702) 792-7335

Any party hereto may change its address for the purpose of receiving notices or demands by written notice to the other party hereto given as herein provided.

ARTICLE XVI

MISCELLANEOUS

1.Mississippi Law. 16.1Mississippi Law The laws of the State of Mississippi applicable to contracts made and wholly performed therein shall govern the validity, construction, performance and effect of this Agreement.

2.Assignment; Binding Effect. 16.2Assignment; Binding Effect Buyer may not assign, transfer or convey any of its rights herein or hereunder to any Person whatsoever without the prior written consent of Seller, except that Buyer may at Closing assign its rights and obligations with respect to the acquisition of the Property; provided, however, that Buyer is not relieved of any of its obligations by virtue of such assignment. Notwithstanding the prior sentence, Buyer may assign, in its sole discretion, any of or all of its rights, interests and obligations under this Agreement to any controlled Affiliate of Buyer (so long as such Affiliate remains at all times thereafter an Affiliate of Buyer); provided, however, that such assignment shall not be valid under this Agreement unless (a) such Affiliate assumes all of Buyer's agreements and obligations hereunder, (b) no such assignment shall relieve Buyer from any of its agreements and obligations hereunder, and (c) no such assignment in any way (i) shall adversely affect the ability to receive, or delay the receipt of, the Governmental Approvals or antitrust approvals contemplated by this Agreement or (ii) shall adversely affect or delay the Closing of the transactions contemplated by this Agreement. Any assignment in violation of this Section 16.2 shall be void. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their respective successors and permitted assigns.

3.Time of Essence. 16.3Time of Essence Time is of the essence of this Agreement and all of the terms, provisions, covenants and conditions hereof.

4.Captions. 16.4Captions The captions appearing at the commencement of the Articles hereof are descriptive only and for convenience in reference to this Agreement and in no way whatsoever define, limit or describe the scope or intent of this Agreement.

5.Pronouns. 16.5Pronouns Masculine or feminine pronouns shall be substituted for the neuter form and vice versa in anyplace or places herein in which the context required such substitution or substitutions.

6.Knowledge of Seller. 16.6Knowledge of Seller Any matter which is stated to be known to Seller, and any representation or warranty herein contained made by or on behalf of Seller to the knowledge

of Seller, to the best knowledge of Seller, or words of similar import, shall be deemed to mean and be limited to the actual knowledge of W. Owen Nitz, Jeffrey M. Cooper, Jon Lucas or Lee Bond of the matter in question and shall not include constructive knowledge imputed or implied from notices to or knowledge by other persons including employees, or any agent(s) of Seller.

7.Entire Agreement; Amendment; Waiver. 16.7Entire Agreement; Amendment; Waiver This Agreement, together with the Confidentiality Agreement and the License Agreement, and the agreements referenced as Exhibits hereto, constitute the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior agreements, negotiations, proposals, brochures, informational memoranda, representations and/or understandings of the parties. No amendment or modification of this Agreement shall be binding unless executed in writing by the parties. Except as may be otherwise provided in this Agreement, no waiver of any of the provisions, whether or not similar, shall constitute a continuing waiver, and no waiver shall be binding unless evidenced by an instrument in writing executed by the party against whom the waiver is sought to be enforced.

8.No Third Party Beneficiary. 16.8No Third Party Beneficiary This Agreement is for the benefit of, and may be enforced only by, Seller and Buyer and their respective successors and permitted assigns, and is not for the benefit of, nor intended to be for the benefit of, and may not be enforced by, any third party for any purposes whatsoever.

9.Counterparts. 16.9Counterparts This Agreement may be executed in any number of counterparts, with each counterpart being deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. The exchange or delivery of copies Agreement and of signature pages by facsimile or email transmission shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes; provided, however, each of the parties agrees to exchange original signatures upon the request of the other and to the extent original signatures or copies are otherwise required by this Agreement.

10.Attorneys' Fees. 16.10Attorney's Fees If any action is brought by any party hereto concerning a breach of any of the provisions of this Agreement, the prevailing party shall be entitled to recover from the other party the reasonable attorneys' fees and expenses of the prevailing party incurred in connection therewith as determined by the court.

11.Jurisdiction. 16.11Jurisdiction Seller and Buyer agree that the Second Judicial District Court sitting in Harrison County, Mississippi, or the U.S. District Court for the Southern District of Mississippi, shall have sole and exclusive jurisdiction and venue over any action brought to enforce or interpret the terms of this Agreement.

12.No Party Deemed Drafter. 16.12No Party Deemed Drafter The parties agree that neither party shall be deemed to be the drafter of this Agreement and that in the event this Agreement is ever construed by a court of law or equity, such court shall not construe this Agreement or any provision hereof against either party as the drafter of the Agreement, Seller and Buyer acknowledging that each has contributed substantially and materially to the preparation of this Agreement.

13.Confidentiality. 16.13Confidentiality Subject to the provisions of Section 7.2(f) relating to publicity, Buyer and Seller agree that prior to the termination of the Agreement or the Closing, as applicable, this Agreement and each and all of the terms, covenants and conditions hereof (the “Confidential Information”) will be kept strictly confidential, and in no event shall Buyer, subject to the terms of the Confidentiality Agreement: (i) disclose such Confidential Information to any third party unless, in the opinion of Buyer's counsel, such disclosure is required by any statute or law or any judgment, decree, order, regulation or rule of any court or other Governmental Entity, in which case Buyer shall advise and consult with Seller and its counsel prior to any disclosure Buyer proposes to make concerning the reasons for, and the nature of Buyer's proposed disclosure or (ii) use such Confidential Information to the detriment of Seller. Buyer agrees to provide such Confidential Information only to responsible officers, employees or agents of or persons who are authorized by Buyer for the exclusive purpose of evaluating the terms of this Agreement or consummating this transaction, all of whom shall be informed by Buyer of this confidentiality requirement, and shall agree to be bound by the terms thereof. Buyer further agrees that without Seller's prior written consent, Buyer will not disclose to any person, other than as provided herein, that Buyer has received Confidential Information about Seller, or that this Agreement has been signed, or the status of this transaction. Each party shall be entitled to injunctive relief to enforce these confidentiality requirements.

14.Allocation of Purchase Price. 16.14Allocation of Purchase Price The parties shall use their reasonable best efforts to agree in writing prior to Closing upon the manner in which to allocate the Purchase Price to the assets purchased, which shall be as set forth in Schedule 16.14 and which may be updated during the Due Diligence Period; provided, however, that in the event that, as of the Closing Date, the parties have not agreed in writing upon the manner in which to allocate the Purchase Price to the assets purchased, then each of the parties shall make their own allocation for Internal Revenue Code purposes.

15.Performance of Acts. 16.15Performance of Acts As used herein, the term “business days” shall mean Monday through Friday, unless any of such days is a Mississippi state holiday or a U.S. federal holiday. Unless specifically stated to the contrary, all references to days herein shall be deemed to refer to calendar days. In the event that the final date for payment of any amount or performance of any act hereunder falls on a Saturday, Sunday, or holiday, such payment may be made or act performed on the next succeeding business day.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement for Purchase and Sale as of the date first written above.

“SELLER”

IMPERIAL PALACE OF MISSISSIPPI, LLC, a Nevada limited liability company

By:/s/ Betty Engelstad

Betty Engelstad

Its: President

By:/s/ Kris Ann Engelstad McGarry

Kris Ann Engelstad McGarry

Its: Vice President

By:/s/ W. Owen Nitz

W. Owen Nitz

Its: Vice President and Secretary

By:/s/ Jeffrey M. Cooper

Jeffrey M. Cooper

Its: Treasurer

KEY LARGO HOLDINGS, LLC, a Delaware limited liability company

By: :/s/ Betty Engelstad

Betty Engelstad

Its: President

By:/s/ W. Owen Nitz

W. Owen Nitz

Its: Vice President and Secretary

By: /s/ Jeffrey M. Cooper

Jeffrey M. Cooper

Its: Treasurer

“BUYER”

BOYD GAMING CORPORATION, a Nevada corporation

By:/s/ Keith E. Smith

Keith E. Smith

Its: President

As to Sections 1.2(h), 5.1(a), 5.1(b), 11.2(k) and 11.3(j) only:

“PARENT LICENSOR”

IMPERIAL PALACE, LLC, a Nevada limited liability company

By:/s/ Betty Engelstad

Betty Engelstad

Its: President

By:/s/ W. Owen Nitz

W. Owen Nitz

Its: Vice President and Secretary

By:/s/Jeffrey M. Cooper

Jeffrey M. Cooper

Its: Treasurer

Certain Definitions. As used in this Agreement, the following terms shall have the respective meanings ascribed thereto in the respective sections of this Agreement set forth opposite each such term below:

Term	Section
ADA Claim	Section 3.1(h)
Additional Assumed Contracts	Section 5.1(d)
Additional Sale Compensation	Section 3.1(e)(vii)
Affiliates	Section 7.1(a)(iii)
Agreed Final Judgment	Recitals
Agreement	Preamble
Annual Cash Bonuses	Section 3.1(e)(vii)
Associate Assistance Plan	Section 3.1(e)
Assumed Casualty Insurance Policies	Section 1.2(i)
Assumed Contract	Section 3.1(a)
Assumed Insurance Policy	Section 3.3
Assumed Liability Insurance Policies	Section 1.2(j)
Assumed Liabilities	Section 3.1
Assumed Litigation	Section 3.1(i)
Bankroll	Section 1.2(g)
Business	Recitals
Buyer	Preamble

Buyer Damages	Section 14.1(a)
Buyer Indemnified Parties	Section 14.1(a)
Buyer's 401(k) Plan	Section 3.6
Buyer's Liquor Licensing Approval	Section 5.1(c)
Capital Projects	Section 12.7
Capital Projects Permits	Section 7.1(b)(ix)
Capital Projects Permits Costs	Section 7.2(a)(ix)
Cash Consideration	Section 2.1
Casualty Insurance Proceeds	Section 1.2(i)
CERCLA	Section 6.4
Claim	Section 14.3
Closing	Section 11.1
Closing Date	Section 11.1
Closing Date Payment	Section 2.2(b)
Closing Escrow	Section 2.2(b)
Closing Escrow Agreement	Section 2.2(b)
Closing Net Working Capital	Section 11.4(j)(ii)
Closing Statement	Section 11.4 Preamble
Code	Section 11.2(h)
Compensation Plan	Section 3.1(e)(vii)
Competing Party	Section 8.3
Competing Transaction	Section 8.3
Confidential Information	Section 16.13
Confidentiality Agreement	Section 7.2(e)
Cost Increase	Section 8.1(c)
Countdown	Section 11.5(c)
Deed Warranties	Section 11.2(a)
Deeds	Section 11.2(a)
Deposit	Section 2.2(a)
Deposit Escrow	Section 2.2(a)
Deposit Escrow Agreement	Section 2.2(a)
Due Diligence Period	Section 10.1(a)
Effective Date	Preamble
Employee Benefits	Section 5.1(g)
Environmental Report	Section 5.1(n)
Escrow Agent	Section 2.2(a)
Excluded Liabilities	Section 3.5
Excluded Property	Section 1.3 Preamble
Final Capital Projects Costs	Section 12.7
Final Closing Net Working Capital	Section 11.4(j)(iii)
Final Closing Net Working Capital Statement	Section 11.4(j)(iii)
Final Judgment Land and Rights	Recitals
Final Resolution Date	Section 11.4(j)(iii)
Financial Statements	Section 5.1(p)
Foundation	Section 12.5
GAAP	Section 11.4(j)(ii)
Gambling Devices	Section 1.2(e)

Gaming Equipment	Section 1.2(e)
Gaming Laws	Section 7.1(a)(iii)
Gaming Vessel	Recitals
Governmental Approvals	Section 7.2(a)(ii)
Governmental Entity	Section 5.1(j)
Harrah's License Agreement	Section 1.2(h)
Hazardous Substance	Section 6.4
Hazardous Substance Laws	Section 6.4
Hotel/Casino	Recitals
Hotel/Casino Land	Recitals
HSR Act	Section 5.1(c)
Improvements	Section 1.2(b)
Indemnity Cap	Section 14.1(c)
Independent Accounting Firm	Section 11.4(j)(iv)
Insurance Policies	Section 5.1(k)
Insurance Proceeds	Section 1.2(j)
Intangible Property	Section 1.2(c)
Intellectual Property	Section 1.2(h)
Inventoried Vehicles	Section 11.2
IP Chips	Section 1.3(k)
IP Health Plan	Section 3.1(e)
IP Holdings	Section 12.5
IPM	Preamble
IPM Deposits	Section 1.2(f)
Jointly-Approved Schedules and Exhibits	Section 8.4(b)
Key Largo	Preamble
Key Largo Land	Recitals
Land	Section 1.2(a)
Legal Requirement	Section 5.1(s)
Liability Insurance Proceeds	Section 1.2(j)
Lien	Section 5.1(c)
Lucas Agreement	Section 3.1(e)(vii)
Lucas Bonuses	Section 3.1(e)(vii)
Material Adverse Change	Section 7.1(b)(vii)
Material Loss to the Real Property	Section 9.2
Mississippi Gaming Authorities	Section 1.2(e)
Mississippi Liquor Authorities	Section 5.1(c)
Multiemployer Plan	Section 5.1(g)(iii)
Non-Redeemable Chips	Section 1.3(k)
Operations Settlement	Section 11.5 Preamble
Ordinary Course of Business	Section 3.1(a)
Outside Time Limit	Section 7.2(a)(vi)(A)
Parent Licensor	Section 1.2 Preamble
Patron Deposits	Section 3.1(f)
Permitted Encumbrances	Section 5.1(i)
Permitted Exceptions	Section 4.1
Person	Section 7.2(a)(vi)(A)

Personal Property	Section 1.2(d)
Personal Property Leases	Section 5.1(i)
Phase I	Section 10.2(b)
Plan	Section 7.2(g)
Preliminary Closing Net Working Capital	Section 11.4(j)(i)
Premiums	Section 3.1(g)
Privileged Property	Section 1.3(h)
Proceeding	Section 5.1(f)
Progressive Liabilities	Section 11.4(e)
Property	Following Section 1.2(n)
Property Taxes	Section 11.4(a)
Purchase Price	Section 2.1
Real Property	Following Section 1.2(n)
Recorder	Section 11.1
Recording	Section 11.1
Registered IP	Section 5.1(u)(i)
Related Services Obligations	Section 5.1(q)
Room Revenues	Section 11.5(a)
Seller	Preamble
Seller Damages	Section 14.2(a)
Seller Indemnified Parties	Section 14.2(a)
Seller's 401(k) Plan	Section 3.1(e)(ii)
Seller's License Agreement	Section 1.2(h)
Senior Management Bonuses	Section 3.1(e)(vii)
Survey	Section 4.1
Tax Returns	Section 5.1(e)
Taxes	Section 5.1(e)
Tidelands Lease	Section 1.2(k)
Time of Possession	Following Section 11.2(u)
Title Agent	Section 4.1
Title Commitment	Section 4.1
Title Insurance Company	Section 4.1
Title Exceptions	Section 4.1
Title Opinion	Section 4.1
Title Policy	Section 4.2
Title Review Period	Section 4.1
Trademark Licenses	Section 5.1(u)(i)
Transferred Employees	Section 3.7
Tray Ledger	Section 2.1
Undeveloped Land	Recitals
Unit Sale Event Allocations	Section 3.1(e)(vii)
Updated Schedules and Exhibits	Section 8.4(b)
Warehouse Property	Recitals
WARN Act	Section 7.2(b)

Exhibits

Exhibit AHotel/Casino Land Legal Description

Exhibit BWarehouse Property Legal Description

Exhibit CUndeveloped Land Legal Description

Exhibit DAgreed Final Judgment

Exhibit EKey Largo Land Legal Description

Exhibit F[Omitted]

Exhibit GAssignment of Casualty Insurance Policies

Exhibit HAssignment of Liability Insurance Policies

Exhibit IDeposit Escrow Agreement

Exhibit JClosing Escrow Agreement

Exhibit KMemorandum of Purchase Agreement

Exhibits L(1) and L(2)Deeds

Exhibit MBill of Sale-Personal Property and Gaming Equipment

Exhibit NAssignment and Assumption Agreement-Intangible Personal Property

Exhibit OAssignment and Assumption Agreement-Assumed Contracts and Assumed Liabilities

Exhibit PAssignment and Assumption Agreement-Tidelands Lease

Exhibit QCertificate of Non-Foreign Status

Exhibit RBill of Sale-Guest Baggage and Patron Deposits

Exhibit SBill of Sale-Passenger/Delivery Vehicles

Exhibit TAssignment and Assumption Agreement-Harrah's License Agreement

Exhibit UServicemark and Trademark Assignment Agreement (re IP)

Exhibit VServicemark and Trademark Assignment Agreement (re IPM)

Exhibit WServicemark, Trademark, Domain Name and Website Assignment Agreement

Exhibit XAssignment of the Right to Use the Name Studio B

Schedules

Schedule 1.2(d) Motor Vehicles

Schedule 1.2(i)Assumed Casualty Insurance Policies

Schedule 1.2(j)Assumed Liability Insurance Policies

Schedule 1.3(c)Excluded Insurance Policies and Rights

Schedule 1.3(d) Excluded Tangible Personal Property and Equipment

Schedule 1.3(e) Excluded Assets

Schedule 1.3(g) Excluded Miscellaneous Personal Property Owned by W. Owen Nitz and Jeffrey M. Cooper

Schedule 1.3(h) Excluded Computer Data and Files

Schedule 1.3(i) Excluded Stock Interests

Schedule 1.3(j) Excluded Seller's Bank Accounts

Schedule 1.3(l) Excluded Miscellaneous Personal Property Owned by Jon Lucas

Schedule 1.3(o)Excluded Trademarks and/or Servicemarks Registered to IPM

Schedule 3.1(a) Assumed Contracts

Schedule 3.1(e)Employee Benefit Liabilities

Schedule 3.1(f) Patron Deposits

Schedule 3.1(i)Assumed Litigation

Schedule 3.4 Seller's Employees and Seller's Employees' Accrued Paid Time Off Benefits to be Assumed by Buyer

Schedule 5.1(c) Consents Required under the Assumed Contracts

Schedule 5.1(f) Litigation

Schedule 5.1(g) Employee Benefits

Schedule 5.1(i) Personal Property Leases

Schedule 5.1(j)Notices from Mississippi Gaming Authorities

Schedule 5.1(k) Insurance Policies

Schedule 5.1(m) Hazardous Materials

Schedule 5.1(n) Environmental Reports

Schedule 5.1(u) Intellectual Property

Schedule 8.1(c)Capital Improvements

Schedule 11.2(a)Deeds

Schedule 11.4(e)(iii) Progressive Pool Programs

Schedule 11.4(e)(iv) Progressive Games

Schedule 16.14Allocation of Purchase Price

EX-31.1

Exhibit 31.1

BOYD GAMING CORPORATION

CERTIFICATION

I, Keith E. Smith, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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:	August 5, 2011	/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 quarterly report on Form 10-Q 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:	August 5, 2011	/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-Q for the period ended June 30, 2011 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:	August 5, 2011	/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-Q for the period ended June 30, 2011 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:	August 5, 2011	/s/ Josh Hirsberg
		Josh Hirsberg
		Senior Vice President, Chief Financial Officer and Treasurer

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Condensed Consolidated Balance Sheets (Parentheticals) (USD $)	Jun. 30, 2011	Dec. 31, 2010
Stockholders' Equity:
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	86,284,984	86,244,978
Common stock, shares outstanding	86,284,984	86,244,978
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000

XML



Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Operating revenues:
Gaming	$ 486,557	$ 490,132	$ 968,492	$ 840,537
Food and beverage	94,585	94,020	186,662	154,002
Room	60,459	58,671	117,050	90,105
Other	33,276	33,813	66,307	57,635
Gross revenues	674,877	676,636	1,338,511	1,142,279
Less promotional allowances	100,474	98,190	199,162	148,698
Net revenues	574,403	578,446	1,139,349	993,581
Operating costs and expenses:
Gaming	223,173	229,755	449,782	397,860
Food and beverage	50,080	49,149	97,648	81,791
Room	13,514	13,056	26,335	23,106
Other	27,335	27,006	53,574	46,244
Selling, general and administrative	96,783	99,666	192,571	169,944
Maintenance and utilities	36,773	37,970	74,188	62,109
Depreciation and amortization	48,488	55,408	99,072	95,454
Corporate expense	12,264	13,526	25,544	25,615
Preopening expenses	1,741	1,243	3,572	2,306
Write-downs and other items, net	2,262	1,991	6,969	3,592
Total operating costs and expenses	512,413	528,770	1,029,255	908,021
Operating income from Borgata	0	0	0	8,146
Operating income	61,990	49,676	110,094	93,706
Other expense (income):
Interest income	(20)	0	(25)	(4)
Interest expense	66,694	34,650	123,985	63,657
Fair value adjustment of derivative instruments	48	0	265	0
Loss (gain) on early retirements of debt	0	(1,912)	20	(3,949)
Other non-operating expenses from Borgata, net	0	0	0	3,133
Total other expense, net	66,722	32,738	124,245	62,837
Income (loss) before income taxes	(4,732)	16,938	(14,151)	30,869
Income taxes	(911)	(4,912)	2,197	(9,161)
Net income (loss)	(5,643)	12,026	(11,954)	21,708
Net (income) loss attributable to noncontrolling interest	2,692	(8,644)	5,482	(9,891)
Net income (loss) attributable to Boyd Gaming Corporation	$ (2,951)	$ 3,382	$ (6,472)	$ 11,817
Basic net income (loss) per common share:	$ (0.03)	$ 0.04	$ (0.07)	$ 0.14
Weighted average basic shares outstanding	87,204	86,511	87,181	86,471
Diluted net income (loss) per common share:	$ (0.03)	$ 0.04	$ (0.07)	$ 0.14
Weighted average diluted shares outstanding	87,204	86,942	87,181	86,743

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Segment Information

6 Months Ended

Jun. 30, 2011

Segment Information [Abstract]

Segment Reporting Disclosure

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) Atlantic City. The table below lists the classification of each of our properties.

Las Vegas Locals
Gold Coast Hotel and Casino	Las Vegas, Nevada
The Orleans Hotel and Casino	Las Vegas, Nevada
Sam's Town Hotel and Gambling Hall	Las Vegas, Nevada
Suncoast Hotel and Casino	Las Vegas, Nevada
Eldorado Casino	Henderson, Nevada
Jokers Wild Casino	Henderson, Nevada
Downtown Las Vegas
California Hotel and Casino	Las Vegas, Nevada
Fremont Hotel and Casino	Las Vegas, Nevada
Main Street Station Casino, Brewery and Hotel	Las Vegas, Nevada
Midwest and South
Sam's Town Hotel and Gambling Hall	Tunica, Mississippi
Par-A-Dice Hotel Casino	East Peoria, Illinois
Blue Chip Casino, Hotel & Spa	Michigan City, Indiana
Treasure Chest Casino	Kenner, Louisiana
Delta Downs Racetrack Casino & Hotel	Vinton, Louisiana
Sam's Town Hotel and Casino	Shreveport, Louisiana
Atlantic City
Borgata Hotel Casino & Spa	Atlantic City, New Jersey

Results of Operations - Adjusted EBITDA

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 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.

Results for Downtown Las Vegas include the results of our travel agency and captive insurance company. 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.

We reclassify 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. 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. Other operating costs and expenses include Property EBITDA from Dania Jai-Alai, deferred rent, and share-based compensation expense charged to our Reportable Segments. Interest expense is net of interest income and amounts capitalized.

The following table sets forth, for the periods indicated, certain operating data for our Reportable Segments, and reconciles Adjusted EBITDA to operating income (loss), as reported in our accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010.

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In thousands)
Gross Revenues
Las Vegas Locals	$	167,346	$	169,658	$	338,792	$	343,555
Downtown Las Vegas	62,911		61,007		124,538		120,720
Midwest and South	203,526		205,466		410,616		413,522
Atlantic City	239,609		238,924		461,525		260,927
Reportable Segment Gross Revenues	673,392		675,055		1,335,471		1,138,724
Other	1,485		1,581		3,040		3,555
Gross revenues	$	674,877	$	676,636	$	1,338,511	$	1,142,279
Reportable Segment Adjusted EBITDA
Las Vegas Locals	$	38,570	$	36,810	$	78,213	$	77,223
Downtown Las Vegas	9,366		9,310		18,370		17,682
Midwest and South	42,276		35,590		83,487		74,869
Atlantic City	38,657		42,960		70,339		56,043
Reportable Segment Adjusted EBITDA	$	128,869	$	124,670	$	250,409	$	225,817
Other operating costs and expenses
Depreciation and amortization	$	48,488	$	55,408	$	99,072	$	95,454
Corporate expense	12,264		13,526		25,544		25,615
Preopening expenses	1,741		1,243		3,572		2,306
Our share of Borgata's other items and write-downs, net	—		—		—		34
Write-downs and other items, net	2,262		1,991		6,969		3,592
Other	2,124		2,826		5,158		5,110
Total other operating costs and expenses	66,879		74,994		140,315		132,111
Operating income	$	61,990	$	49,676	$	110,094	$	93,706

Operating Income from Borgata

The following table reconciles our operating income from Borgata, as reported in our condensed consolidated statements of operations, to the Atlantic City Reportable Segment Adjusted EBITDA, as reported above:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	In thousands
Operating income from Borgata	$	—	$	—	$	—	$	8,146
Our share of Borgata's write-downs and other items, net	—		—		—		34
Our share of Borgata's operating income before net amortization, preopening and other items	—		—		—		8,180
Borgata EBITDA(1)	38,657		42,960		70,339		47,863
Adjusted EBITDA, Atlantic City	$	38,657	$	42,960	$	70,339	$	56,043

(1) As discussed above, Borgata's results of operations for the three and six months ended June 30, 2011 and for the period from March 24 through June 30, 2010 are included in our condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010, respectively.

Total Assets

The Company's total assets, by Reportable Segment, consisted of the following amounts at June 30, 2011 and December 31, 2010:

	June 30, 2011		December 31, 2010
	(In thousands)
Assets
Las Vegas Locals	$	1,253,016	$	1,284,160
Downtown Las Vegas	133,977		136,868
Midwest and South	1,090,603		1,117,959
Atlantic City	1,413,434		1,433,265
Total Reportable Segment assets	3,891,030		3,972,252
Corporate	1,457,118		1,428,763
Other	288,387		288,274
Total assets	$	5,636,535	$	5,689,289

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Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Jul. 29, 2011
Document Information
Entity Registrant Name	BOYD GAMING CORP
Entity Central Index Key	0000906553
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		86,288,485
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes

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Intangible Assets

6 Months Ended

Jun. 30, 2011

Intangible Assets [Abstract]

Intangible Assets Disclosure

INTANGIBLE ASSETS

Intangible assets consist of the following:

				June 30, 2011
	Weighted Average Original Life	Gross Carrying Value		Cumulative Amortization			Cumulative Impairment Losses			Intangible Assets, Net
	(In thousands)
Amortizing intangibles:
Customer relationships	3.9 years	$	14,400	$	(7,271	)	$	—		$	7,129
Favorable lease rates	43.8 years	45,370		(7,303		)	—			38,067
		59,770		(14,574		)	—			45,196
Indefinite lived intangible assets:
Trademarks	Indefinite	115,700		—			(5,000		)	110,700
Gaming license rights	Indefinite	567,886		(33,960		)	(162,500		)	371,426
		683,586		(33,960		)	(167,500		)	482,126
		$	743,356	$	(48,534	)	$	(167,500	)	$	527,322
	December 31, 2010
	Weighted Average Original Life	Gross Carrying Value		Cumulative Amortization			Cumulative Impairment Losses			Intangible Assets, Net
		(In thousands)
Amortizing intangibles:
Customer relationships	5 years	$	14,400	$	(400	)	$	—		14,000
Favorable lease rates	43.8 years	45,370		(6,782		)	—			38,588
		59,770		(7,182		)	—			52,588
Indefinite lived intangible assets:
Trademarks	Indefinite	115,700		—			—			115,700
Gaming license rights	Indefinite	567,886		(33,960		)	(162,500		)	371,426
		683,586		(33,960		)	(162,500		)	487,126
December 31, 2010		$	743,356	$	(41,142	)	$	(162,500	)	$	539,714

Customer Relationships

Customer relationships represent the value of repeat business associated with our customer loyalty programs. The value of customer relationships is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to these customers, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: revenue of our rated customers, based on expected level of play; promotional allowances provided to these existing customers; attrition rate related to these customers; operating expenses; general and administrative expenses; trademark expense; discount rate; and the present value of tax benefit.

Favorable Lease Rates

Favorable lease rates represent the rental rates for assumed land leases that are favorable to comparable market rates. The fair value is determined on a technique whereby the difference between the lease rate and the then current market rate for the remaining contractual term is discounted to present value. The assumptions underlying this computation include the actual lease rates, the expected remaining lease term, including renewal options, based on the existing lease; current rates of rent for leases on comparable properties with similar terms obtained from market data and analysis; and an assumed discount rate. The estimates underlying the result covered a term of 41 to 52 years.

Trademarks

Trademarks are based on the value of our brand, which reflects the level of service and quality we provide and from which we generate repeat business. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademark, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the Borgata name. We used the following significant projections and assumptions to determine value under the relief from royalty method: revenue from gaming and hotel activities; royalty rate; general and administrative expenses; tax expense; terminal growth rate; discount rate; and the present value of tax benefit. The projections underlying this discounted cash flow model were forecasted for fifteen years.

Gaming License Rights

Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance therein. The value of gaming licenses is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to future gaming revenue, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: gaming revenues; gaming operating expenses; general and administrative expenses; tax expense; terminal value; and discount rate. These projections are modeled for a five year period.

Activity For the Six Months Ended June 30, 2011 and 2010

The following table sets forth the changes in these intangible assets during the six months ended June 30, 2011 and 2010:

	Customer Relationships				Favorable Lease Rates			Trademarks			Gaming License Rights		Intangible Assets, Net
	(In thousands)
Six Months Ended June 30, 2011
Balance December 31, 2010	$	14,000			$	38,588		$	115,700		$	371,426	$	539,714
Additions	—				—			—			—		—
Impairments	—				—			(5,000		)	—		(5,000		)
Amortization	(6,871		)		(521		)	—			—		(7,392		)
Balance June 30, 2011	$	7,129			$	38,067		$	110,700		$	371,426	$	527,322
Six Months Ended June 30, 2010
Balance December 31, 2009	$	—			$	39,632		$	50,700		$	371,426	$	461,758
Additions	14,000				—			65,000			—		79,000
Amortization	—			—	(524		)	—			—		(524		)
Balance June 30, 2010	$	14,000			$	39,108		$	115,700		$	371,426	$	540,234

Future Amortization

Customer relationships are being amortized on an accelerated basis over an approximate four-year period. Favorable lease rates are being amortized on a straight-line basis over a weighted-average useful life of 43.8 years. Future amortization is as follows:

For the Year Ending December 31,	Customer Relationships		Favorable Lease Rates		Total
	(In thousands)
2011 (remainder)	$	2,391	$	523	$	2,914
2012	3,174		1,043		4,217
2013	1,564		1,043		2,607
2014	—		1,043		1,043
2015	—		1,043		1,043
Thereafter	—		33,372		33,372
	$	7,129	$	38,067	$	45,196

Trademarks and gaming license rights are not subject to amortization, as we have determined that they have an indefinite useful life, however these assets are subject to an annual impairment test.

Impairment Testing

Intangible assets include gaming license rights, trademarks and customer lists. 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.

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. If our estimates of projected cash flows related to these assets are not achieved, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next annual scheduled impairment test. As a result of such test, we may be subject to a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

The results of our annual scheduled impairment test of indefinite-lived intangible assets, performed during the second quarter of 2011, did not require us to record an impairment charge; however, if our estimates of projected cash flows related to these assets are not achieved, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next annual scheduled impairment test. Such test could result in a future a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

During the first quarter of 2011, we performed an interim impairment test over the trademark we recorded in connection with the valuation of Borgata due to our consideration of certain facts and circumstances surrounding an adverse change in the business climate in Atlantic City. We believe our actual results have been adversely impacted by increased regional competition, and that in addition, our projected future results will be further impacted by cannibalization of our business upon the opening of a new property in Atlantic City, which was announced in February 2011. We also believe the refinancing of Borgata's debt and recapitalization of its member equity contributed to the results of this impairment test.

Our analysis consisted of a valuation of the trademark, using the relief from royalty method, as discussed above. The only significant change in our assumptions from the initial fair valuation were revised revenue and profitability projections, reflecting the impact of the changed present and forecasted circumstances. The impairment test shall consist of a comparison of the fair value of trademark with its carrying amount. As a result, we recorded a $5.0 million impairment to the trademark, representing the amount by which the carrying amount exceeded its fair value.

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Subsequent Events

6 Months Ended

Jun. 30, 2011

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

We have evaluated all events or transactions that occurred after June 30, 2011. During this period, the following material subsequent events occurred.

Pending Acquisition of IP Casino Resort Spa

On August 4, 2011, as required by the Agreement for Purchase and Sale with Imperial Palace of Mississippi, LLC and Key Largo Holdings, LLC (collectively, the “Seller”), we made a non-refundable (except under certain circumstances) earnest money deposit of $10 million. Pursuant to the agreement, the Seller agreed to sell and transfer, and we agreed to purchase and assume, certain assets and liabilities, respectively, related to the IP Casino Resort Spa in Biloxi, Mississippi, on an as-is basis (except as otherwise provided in the agreement), for a purchase price of $278 million in cash. The $10 million earnest money deposit will be credited against the purchase price upon the closing. Following the closing of the transaction, we will also make charitable contributions to the Engelstad Family Foundation equal to an aggregate of $10 million, which funds are intended to be distributed on behalf of, and in the name of, the Company, over five years to local and regional Biloxi charitable organizations to be designated by the Company. In addition, following the closing, we intend to perform certain capital improvement projects with respect to the IP Casino Resort Spa with costs estimated to be $44 million.

The closing of the transactions contemplated by the agreement is subject to the satisfaction or waiver of certain conditions, including, without limitation, (i) the receipt of certain consents, approvals or authorizations required to consummate the transactions contemplated by the Agreement and other licenses and permits required to operate the Property; (ii) the absence of injunctions, judgments or other legal impediments seeking to prohibit the Closing; (iii) the expiration or termination of any required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; and (iv) other customary closing conditions.

In addition to certain other termination rights, the agreement may be terminated by either us or the Seller if the closing has not occurred by the date that is six months following the date of the agreement. We currently anticipate that the closing will occur before the end of the year.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2011

Commitments and Contingencies [Abstract]

Commitments and Contingencies Disclosure

COMMITMENTS AND CONTINGENCIES

Commitments

There have been no material changes to our commitments described under Note 12, Commitments and Contingencies, in our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on March 15, 2011.

Contingencies

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 14, 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 $17.5 million to $19.9 million, including interest. In late 2009, the Department audited and denied our refund claim and subsequently issued a $12.3 million sales tax deficiency assessment, plus interest of $7.5 million. We appealed both the denial of the refund claim as well as the deficiency assessment in a hearing before the Nevada Administrative Law Judge in September 2010. In April 2011, the judge issued a split decision, granting a refund on employee meals and applying a sales tax measure on complimentary meals; however, the ruling barred retroactive application of the sales tax measure to all years included in the refund claim period, effectively overturning the Department's 2009 deficiency assessment. Both we and the Department appealed the decision, with the exception of the portion related to the deficiency assessment, to the Nevada State Tax Commission (the "Commission"). Our Appeals hearing is scheduled for August 8, 2011. The Department did not appeal the Judge's decision overturning the 2009 deficiency assessment and therefore, the ruling on the deficiency assessment is final and non-appealable. Due to uncertainty surrounding the ultimate resolution of the Commission appeal, as well as subsequent appeals to higher levels of the state judicial system, we will not record any gain until both we and the Department have exhausted all appeal options and a final, non-appealable decision has been rendered. For periods subsequent to May 2008, we have not collected, remitted or accrued a liability for sales tax on complimentary and employee meals at our Nevada casino properties, as we do not believe it is 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 provisional bills received in 2007 through 2011, all of which were based on the 2006 valuation notice. In March 2011, we reached a settlement with the assessor, reducing the valuation by an additional $96.0 million and $74.0 million for the 2006 and 2007 tax years, respectively. As a result of the agreement reached on the 2006 and 2007 valuations, we have revised our accrual for years 2008 through 2011 to reflect the expected carryforward effect of the reductions received in the prior year settlements. Such reduction resulted in the reversal of previously accrued property tax expense of approximately $3.1 million and $2.8 million, net of fees, in the first and second quarter of 2011, respectively. We are currently in negotiations related to the 2008 and 2009 years but have not received valuation notices for years 2008 through 2011. We believe the assessment for the period from January 1, 2008 through June 30, 2011 could result in a property tax assessment ranging between $14.0 million and $18.0 million. We have accrued, net of the payments discussed above, approximately $18.0 million of property tax liability as of June 30, 2011, 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 assessment notices for the period January 1, 2008 through June 30, 2011, which have not been received as of June 30, 2011, could result in further adjustment to our estimated property tax liability at Blue Chip.

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 issued a ruling denying the exceptions on August 9, 2010. Copeland's counsel indicated a desire to move forward with the litigation and requested that the parties respond to outstanding discovery. Subsequently, on August 11, 2010, Robert J. Guidry, the co-defendant, filed a third party demand against the U.S. Attorney's Office seeking enforcement of Guidry's plea agreement which would limit Guidry's exposure in the case. On September 9, 2010, the U.S. Attorney's Office removed the suit to the U.S. District Court, Middle District of Louisiana. Pending before the District Court are a motion to dismiss for failing to state a cause of action filed by Guidry, asserting the same arguments he tried in state court, which the Company joined, and a motion to dismiss for lack of subject matter jurisdiction filed by the U.S. Attorney, which may result in the case being remanded to state court. The U.S. District Court heard the motions on March 16, 2011. A ruling has not yet been issued. On April 1, 2011, the U.S. Attorney's Office moved for summary judgment, maintaining its jurisdictional argument as well as seeking substantive relief. 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 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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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Summary of Signficant Accounting Policies [Abstract]

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies

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 in 1988 and has been operating since 1973. 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 controlling interest in a limited liability company. 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) Atlantic City.

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. On April 29, 2011, we and Dania Entertainment Center, LLC (the “Buyer”) entered into an Asset Purchase Agreement (the “Agreement”) for the sale of certain assets and liabilities of the Dania Jai-Alai Business (as defined below).

Pursuant to the terms of the Agreement, we agreed to sell and transfer, and the Buyer agreed to purchase and assume, certain assets and liabilities (“Assets and Liabilities”) related to our Dania Jai Alai pari-mutuel facility, located in Dania Beach, Broward County, Florida at which jai alai and related gaming operations are conducted, including poker and inter-track wagering (the “Dania Jai-Alai Business”), for a purchase price of $80.0 million (the “Purchase Price”), subject to adjustment based on the amount of cash held by the Business as of the closing, including a non-refundable (except under certain limited circumstances) deposit of $5.0 million.

The closing of the transactions contemplated by the Agreement is subject to certain conditions, including without limitation, (i) the receipt of all consents, approvals or authorizations required to permit us to transfer to the Buyer, and the Buyer to acquire from us, certain jai alai permits required to operate jai alai at the Dania facility; (ii) the absence of injunctions, judgments or other legal impediments seeking to prohibit the closing of the transaction; (iii) the expiration or termination of any required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; and (v) other customary closing conditions. In addition to other termination rights and events set forth in the Agreement, the Buyer has the right to terminate the Agreement at any time prior to the closing date based upon the Buyer's due diligence of the Assets and Liabilities. The closing must occur by September 26, 2011 (the “Outside Date”); provided that the Buyer may extend the Outside Date under certain limited circumstances until November 28, 2011 with payment of $2.0 million to us, $1.0 million of which shall be applied to the Purchase Price. We currently anticipate that the closing will occur in the third quarter of 2011; however, there can be no assurance that this transaction will close as scheduled, or at all.

We also own and operate a travel agency in Hawaii, and a captive insurance company, also in Hawaii, that underwrites travel-related insurance.

Additionally, we own 85 acres of land on the Las Vegas Strip, where our multibillion dollar Echelon development project (“Echelon”) 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 Echelon. At such time, however, we did not anticipate the severity or 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. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, we do not expect to resume construction of Echelon for three to five years, as previously disclosed. We also do not believe that financing for a development project like Echelon is currently available.

Basis of Presentation

Interim Condensed Consolidated Financial Statements

As permitted by the rules and regulations of the SEC, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, although we believe that the disclosures made are adequate to make the information reliable. These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010.

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly our financial position as of June 30, 2011 and December 31, 2010, and the results of our operations and cash flows for the three and six months ended June 30, 2011 and 2010. Our operating results and cash flows for the three and six months ended June 30, 2011 and 2010 are not necessarily indicative of the results that would be achieved for the full year or future periods.

Effective Control of Borgata

On March 24, 2010, as a result of the amendment to our operating agreement with MGM Resorts International (“MGM”) (our original 50% partner in Borgata), which provided, among other things, for the termination of MGM's participating rights in the operations of Borgata, we effectively obtained control of Borgata. The amendment to the operating agreement was related to MGM's divestiture of its interest pursuant to a regulatory settlement, as discussed further in Note 2, Consolidation of Certain Interests. This resulting change in control required acquisition method accounting in accordance with the authoritative accounting guidance for business combinations. As a result, we measured our previously held equity interest at a provisional fair value as of March 24, 2010, the date we effectively obtained control.

The financial position of Borgata is presented in our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010; its results of operations for the three months ended June 30, 2011 and 2010 are included in our condensed consolidated statement of operations for the three months ended June 30, 2011 and 2010; its results of operations for the six months ended June 30, 2011 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2011; and its results of operations for the period from March 24 through June 30, 2010 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2010.

Consolidation of Variable Interest Entity

LVE Energy Partners, LLC (“LVE”) is a joint venture between Marina Energy LLC and DCO ECH Energy, LLC. Through our wholly-owned subsidiary, Echelon Resorts LLC ("Echelon Resorts"), we have entered into an Energy Sales Agreement ("ESA") with LVE to design, build, own (other than the underlying real property which is leased from Echelon Resorts) and operate a central energy center and related distribution system for our planned Echelon resort development. In April 2007, we entered into an ESA with LVE to provide chilled and hot water, electricity and emergency electricity generation to Echelon and potentially other joint venture entities associated with the Echelon development project or other third parties.

LVE began construction of the facility in 2007 and expected to provide full energy services to Echelon in 2010, when we originally expected to open. However, LVE suspended construction in January 2009, after our announcement of the delay of Echelon. On April 3, 2009, LVE notified us that, in its view, Echelon Resorts would be in breach of the ESA unless it recommences and proceeds with construction of the Echelon development project 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.

On March 7, 2011, Echelon Resorts and LVE entered into both a purchase option agreement (the "Purchase Option Agreement") and a periodic fee agreement (the "Periodic Fee Agreement"). LVE has agreed not to initiate any litigation with respect to its April 3, 2009 claim of an alleged breach of the ESA and both Echelon Resorts and LVE have mutually agreed that neither LVE nor Echelon Resorts would give notice of, file or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and that any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is in effect. Under the Periodic Fee Agreement, Echelon Resorts has agreed to pay LVE, beginning March 4, 2011, a monthly periodic fee (the “Periodic Fee”) and an operation and maintenance fee until Echelon Resorts either (i) resumes construction of the project or (ii) exercises its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee is fixed at $11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee is estimated to be approximately $10.8 million annually. The operation and maintenance fee cannot exceed $0.6 million per annum without Echelon Resorts' prior approval.

Under the Purchase Option Agreement, Echelon Resorts has the right, at its sole discretion, upon written notice to LVE, to purchase the assets of LVE including the central energy center and the related distribution system for a price of $195.1 million, subject to certain possible adjustments. The ESA will be terminated concurrent with the purchase of the LVE assets.

New consolidation guidance regarding the variable interest model became effective on January 1, 2010. Under this new qualitative model, the primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the variable interest entity that most significantly impacts the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. Upon adoption, this guidance required us to consolidate LVE for financial statement purposes, as we determined that we are presently the primary beneficiary of the executory contract, the ESA, giving rise to the variable interest.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Boyd Gaming Corporation and its subsidiaries.

In addition, as discussed above, the financial position of Borgata is consolidated in our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010; its results of operations for the three months ended June 30, 2011 are included in our condensed consolidated statement of operations for the three months ended June 30, 2011; its results of operations for the six months ended June 30, 2011 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2011; its results of operations for the period from April 1 through June 30, 2010 are included in our condensed consolidated statement of operations for the three months ended June 30, 2010; and its results of operations for the period from March 24 through June 30, 2010 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2010. At June 30, 2011 and December 31, 2010, approximately $1.41 billion and $1.45 billion, respectively, of our consolidated total assets related to Borgata.

Additionally, the financial position of LVE is consolidated in our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010, and its results of operations for the three and six months ended June 30, 2011 are included in our condensed consolidated statements of operations and cash flows during such periods. At June 30, 2011, approximately $249.6 million of our consolidated total assets related to LVE, however, certain of these assets, approximating $195.9 million, are pledged as security on LVE's outstanding construction loan advances, and an additional $48.0 million of such assets are held in restricted escrow funds in accordance with the underlying terms of LVE's tax-exempt bond financing. At December 31, 2010, approximately $249.7 million of our consolidated total assets related to LVE, however, certain of these assets, approximating $196.4 million, were pledged as security on LVE's outstanding construction loan advances, and an additional $48.2 million of such assets were held in restricted escrow funds in accordance with the underlying terms of LVE's tax-exempt bond financing.

All material intercompany accounts and transactions have been eliminated in consolidation.

Investments in unconsolidated affiliates, which are less than 50% owned and do not meet the consolidation criteria of the authoritative accounting guidance for voting interest, controlling interest or variable interest entities, are accounted for under the equity method. See Note 2, Consolidation of Certain Interests.

Property and Equipment, Net

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.

The estimated useful lives of our major components of property and equipment are:

Building and improvements	10 through 40 years
Riverboats and barges	10 through 40 years
Furniture and equipment	3 through 10 years

Gains or losses on disposals of assets are recognized as incurred, using the specific identification method. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred.

Assets Held for Development

The costs incurred relative to projects under development are carried at cost. Development costs clearly associated with the acquisition, development, and construction of a project are capitalized as a cost of that project, during the periods in which activities necessary to get the property ready for its intended use are in progress. Certain pre-acquisition costs, not qualifying for capitalization, are charged to preopening or other operating expense as incurred.

Debt Financing Costs

Debt financing costs, which include legal, and other direct costs related to the issuance of our outstanding debt, are deferred and amortized to interest expense over the contractual term of the underlying long-term debt using the effective interest method. In the event that our debt is modified, repurchased or otherwise reduced prior to its original maturity date, we ratably reduce the unamortized debt financing costs.

Restricted Investments

In accordance with the terms of the tax-exempt loan agreements, which are the obligations of LVE, unused proceeds are required to be held in escrow pending approval of construction expenditures. These investments are held in an interest-bearing account.

Intangible Assets

Intangible assets include customer relationships, favorable lease rates, gaming license rights and trademarks.

Amortizing intangible assets: Customer relationships represent the value of repeat business associated with our customer loyalty programs. These intangible assets are being amortized on an accelerated method over their approximate useful life. Favorable lease rates represent the amount by which acquired lease rental rates are favorable to market terms. These favorable lease values are amortized over the remaining lease term, primarily on leasehold land interests, ranging in remaining duration from 41 to 52 years.

Indefinite lived intangible assets: Trademarks are based on the value of our brand, which reflects the level of service and quality we provide and from which we generate repeat business. Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance with these certain jurisdictions. These assets, considered indefinite-lived intangible assets, are not subject to amortization, but instead are subject to an annual impairment test, performed in the second quarter of each year, and between annual test dates in certain circumstances. 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. License rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method.

Long-Term Debt, Net

Long-term debt is reported at amortized cost. The discount on the senior secured notes and the transaction costs paid to the initial purchasers upon issuance of the senior and senior secured notes are recorded as an adjustment to the face amount of our outstanding debt. This resulting difference between the net proceeds upon issuance of the senior and senior secured notes and the face amount of the senior and senior secured notes is accreted to interest expense using the effective interest method.

Noncontrolling Interest

Noncontrolling interest is the portion of the ownership in Borgata not directly attributable to Boyd, as well as the ownership of LVE, none of which is attributable to Boyd, and is reported as a separate component of our stockholders' equity in our condensed consolidated financial statements. Our consolidated net income is reported at amounts that include the amounts attributable to both us and the noncontrolling interest. At June 30, 2011 and December 31, 2010, there was a noncontrolling interest of $214.7 million and $219.3 million, respectively, associated with the portion of ownership in Borgata that is not attributable to the stockholders of Boyd Gaming Corporation. As discussed above, we effectively obtained control of Borgata on March 24, 2010 and began consolidating its financial statements at that date. At June 30, 2011 and December 31, 2010, there was a noncontrolling interest loss of $15.5 million and $13.7 million, respectively, associated with the ownership in LVE that is not attributable to the stockholders of Boyd Gaming Corporation.

Revenue Recognition

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.

Promotional Allowances

The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenues and then deducted as promotional allowances. 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 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

The amounts included in promotional allowances for the three and six months ended June 30, 2011 and 2010 are as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In thousands)
Rooms	$	30,718	$	31,973	$	60,822	$	46,612
Food and beverage	41,070		42,801		83,564		72,714
Other	28,686		23,416		54,776		29,372
Total promotional allowances	$	100,474	$	98,190	$	199,162	$	148,698

The estimated costs of providing such promotional allowances for the three and six months ended June 30, 2011 and 2010 are as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In thousands)
Rooms	$	13,044	$	18,236	$	26,117	$	26,196
Food and beverage	37,752		48,456		76,237		78,063
Other	4,189		6,417		7,986		7,985
Total cost of promotional allowances	$	54,985	$	73,109	$	110,340	$	112,244

Gaming Taxes

We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are an assessment of our gaming revenues and are recorded as a gaming expense on the condensed consolidated statements of operations. These taxes totaled approximately $63.5 million and $64.6 million for the three months ended June 30, 2011 and 2010, respectively, and totaled approximately $127.3 million and $118.4 million for the six months ended June 30, 2011 and 2010, respectively.

Earnings per Share

Basic earnings per share is computed by dividing net income applicable to Boyd Gaming Corporation stockholders, excluding net income attributable to noncontrolling interests, by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the additional dilution for all potentially-dilutive securities, such as stock options.

The weighted average number of common and common share equivalent shares used in the calculations of basic and diluted earnings per share for the three and six months ended June 30, 2011 and 2010, consisted of the following amounts:

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2011	2010	2011	2010
	(In thousands)
Earnings per share:
Basic weighted average shares outstanding	87,204	86,511	87,181	86,471
Potential dilutive effect	—	431	—	272
Diluted weighted average shares outstanding	87,204	86,942	87,181	86,743

Due to the net loss for the three and six months ended June 30, 2011, the effect of all potential common shares was anti-dilutive, and therefore were not included in the computation of diluted earnings per share. Anti-dilutive options totaling 7.8 million and 6.7 million have been excluded from the computation of diluted earnings per share for the three months ended June 30, 2011, and 2010, respectively. Anti-dilutive options totaling 7.8 million and 8.1 million have been excluded from the computation of diluted earnings per share for the six months ended June 30, 2011 and 2010, respectively.

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 condensed consolidated financial statements include the estimated allowance for doubtful accounts receivable, the estimated useful lives for depreciable and amortizable assets, recoverability of assets held for development, measurement of the fair value of our controlling interest and the noncontrolling interest in Borgata, fair values of acquired assets and liabilities, estimated cash flows in assessing the recoverability of long-lived assets and assumptions relative to the valuation and impairment of goodwill and intangible assets, estimated valuation allowances for deferred tax assets, slot bonus point programs, certain tax liabilities and uncertain tax positions, self-insured liability reserves, share-based payment valuation assumptions, fair values of assets and liabilities measured at fair value, fair values of assets and liabilities disclosed at fair value, fair values of derivative instruments, contingencies and litigation, claims and assessments. Actual results could differ from these estimates.

Recently Issued Accounting Pronouncements

A variety of 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.

Accounting Standards Update 2011-05 Presentation of Comprehensive Income ("Update 2011-05")

In June, 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-05 Presentation of Comprehensive Income, which is an amendment to Topic 220 of the Accounting Standards Codification.

The objective of Update 2011-05 is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. Update 2011-05 provides an entity with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income.

The amendments in Update 2011-05 do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income, nor does the amendment affect how earnings per share is calculated or presented. The amendments in this Update should be applied retrospectively. The amendment will effective for our fiscal year, and interim periods within the fiscal year beginning January 1, 2012. Update 2011-05 will not have a material impact on the computation of comprehensive income, but will require a revised presentation thereof.

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Accrued Liabilities

6 Months Ended

Jun. 30, 2011

Accrued Liabilities [Abstract]

Other Liabilities Disclosure

ACCRUED LIABILITIES

Accrued liabilities consist of the following:

	June 30, 2011		December 31, 2010
	(In thousands)
Payroll and related expenses	$	82,703	$	73,054
Interest	38,926		51,347
Gaming liabilities	62,244		70,908
Accrued expenses and other liabilities	100,407		83,160
Total accrued liabilities	$	284,280	$	278,469

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Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2011

Accumulated Other Comprehensive Loss [Abstract]

Comprehensive Income (Loss) Note

ACCUMULATED OTHER COMPREHENSIVE LOSS

Comprehensive income includes net income and all other non-stockholder changes in equity, or other comprehensive income. Components of the Company's comprehensive income are reported in the accompanying condensed consolidated statements of stockholders' equity. The cumulative balance of other comprehensive income consists solely of fair value adjustments related to hedged derivative instruments.

A portion of the net derivative instruments market adjustment included in accumulated other comprehensive loss, net, at June 30, 2011 relates to certain derivative instruments that we de-designated as cash flow hedges.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	(In thousands)
Fair value adjustment of derivative instruments	$	6,063		$	4,869		$	11,824		$	6,818
Tax effect	(2,177		)	(1,724		)	(4,230		)	(2,408		)
Fair value adjustment of derivative instruments, net of tax	$	3,886		$	3,145		$	7,594		$	4,410

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Long-Term Debt

6 Months Ended

Jun. 30, 2011

Long Term Debt Net of Current Maturities [Abstract]

Long-term Debt

LONG-TERM DEBT

Long-term debt, net of current maturities consists of the following:

	June 30, 2011
	Outstanding Principal		Unamortized Discount			Unamortized Origination Fees			Long-Term Debt, Net
	(In thousands)
Boyd Gaming Long-Term Debt:
Bank credit facility	$	1,425,000	$	—		$	—		$	1,425,000
9.125% senior notes due 2018	500,000		—			(9,175		)	490,825
6.75% senior subordinated notes due 2014	215,668		—			—			215,668
7.125% senior subordinated notes due 2016	240,750		—			—			240,750
Other	11,421		—			—			11,421
	$	2,392,839	$	—		$	(9,175	)	$	2,383,664
Borgata Debt:
Bank credit facility	20,000		—			—			20,000
9.50% senior secured notes due 2015	400,000		(3,644		)	(8,558		)	387,798
9.875% senior secured notes due 2018	400,000		(2,531		)	(9,171		)	388,298
	$	820,000	$	(6,175	)	$	(17,729	)	$	796,096
Less current maturities	356,711		—			—			356,711
Long-term debt, net	$	2,856,128	$	(6,175	)	$	(26,904	)	$	2,823,049

	December 31, 2010
	Outstanding Principal		Unamortized Discount			Unamortized Origination Fees			Long-Term Debt, Net
	(In thousands)
Boyd Gaming Long-Term Debt:
Bank credit facility	$	1,425,000	$	—		$	—		$	1,425,000
9.125% senior notes due 2018	500,000		—			(9,794		)	490,206
6.75% senior subordinated notes due 2014	215,668		—			—			215,668
7.125% senior subordinated notes due 2016	240,750		—			—			240,750
Other	11,761		—			—			11,761
	$	2,393,179	$	—		$	(9,794	)	$	2,383,385
Borgata Debt:
Bank credit facility	60,900		—			—			60,900
9.50% senior secured notes due 2015	400,000		(3,969		)	(9,319		)	386,712
9.875% senior secured notes due 2018	400,000		(2,648		)	(9,594		)	387,758
	$	860,900	$	(6,617	)	$	(18,913	)	$	835,370
Less current maturities	25,690		—			—			25,690
Long-term debt, net	$	3,228,389	$	(6,617	)	$	(28,707	)	$	3,193,065

Bank Credit Facility

Significant Terms

On December 3, 2010, we entered into an Amendment and Restatement Agreement among certain financial institutions (each a “Lender”), Bank of America, N.A., as administrative agent and letter of credit issuer and Wells Fargo Bank, National Association, as swing line lender (the “Amendment and Restatement Agreement”). Pursuant to the terms of the Amendment and Restatement Agreement, our First Amended and Restated Credit Agreement, dated as of May 24, 2007, as amended by the First Amendment and Consent to First Amended Credit Agreement, dated as of December 21, 2009 (as amended, the “Amended Credit Facility”), was amended and restated to, among other things, (i) reduce the aggregate commitments under the former credit facility and (ii) permit consenting Lenders to extend the maturity date of their commitments, new Lenders to issue revolving commitments and term loans and existing Lenders to increase their commitments (each, an “Extending Lender”) in each case with a maturity date five years from the restatement effective date.

Each of the Extending Lenders permanently reduced their commitments under the former credit facility by up to 50% of the amount thereof. As a result, the aggregate commitments under the Amended Credit Facility were reduced from $3 billion to approximately $1.5 billion (including $500 million of term loans, and excluding $548.8 million in non-extending amounts), which commitments may be increased from time to time by up to $500 million (instead of $1 billion commitment increases provided for under the former credit facility) through additional revolving credit or term loans under the Amended Credit Facility.

Pursuant to the terms of the Amended Credit Facility, the term loans amortize in an annual amount equal to 5% of the original principal amount thereof, which commenced on March 31, 2011, payable on a quarterly basis. The interest rate per annum applicable to revolving and term loans under the Amended Credit Facility are based upon, at the option of the Company, LIBOR or the “base rate,” plus an applicable margin in either case. The applicable margin under the Amended Credit Facility is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio. The applicable margin on the outstanding balance on the Extended Revolving Facility (as defined in our Amended Credit Facility) ranges from 2.50% to 3.50% (if using LIBOR), and from 1.50% to 2.50% (if using the base rate). The applicable margin on the outstanding balance of the loans and commitments of the non-extending lenders continues to range from 0.625% to 1.625% (if using LIBOR), and from 0.0% to 0.375% (if using the base rate). A fee of a percentage per annum (which ranges from 0.250% to 0.500%) determined by the level of the total leverage ratio is payable on the unused portions of the Amended Credit Facility.

The “base rate” under the Amended Credit Facility is the highest of (x) Bank of America's publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) the Eurodollar rate for a one month period plus 1.00%.

The letter of credit fees under the Amended Credit Facility remain the same as those under the Credit Facility; however, the margins payable to Extending Lenders are based on the margins applicable to the Extended Revolving Facility.

Subject to certain conditions, amounts outstanding under the Amended Credit Facility may be prepaid without premium or penalty, and the unutilized portion of any of the commitments may be terminated without penalty.

The blended interest rates for outstanding borrowings under our Amended Credit Facility were 3.2% and 3.3% at June 30, 2011 and December 31, 2010, respectively. At June 30, 2011, approximately $1.43 billion was outstanding under our Amended Credit Facility, with $15.6 million allocated to support various letters of credit, leaving remaining contractual availability of approximately $555.7 million.

Guarantees

The Company's obligations under the Amended Credit Facility, subject to certain exceptions, are guaranteed by certain of the Company's subsidiaries and are secured by the capital stock of certain subsidiaries. In addition, subject to certain exceptions, the Company and each of the guarantors granted the administrative agent first priority liens and security interests on substantially all of their real and personal property (other than gaming licenses and subject to certain other exceptions) as additional security for the performance of the secured obligations under the Amended Credit Facility.

Financial and Other Covenants

The Amended Credit Facility contains certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of a minimum consolidated interest coverage ratio of 2.00 to 1.00, (ii) establishing a maximum permitted consolidated total leverage ratio (discussed below), (iii) establishing a maximum permitted secured leverage ratio (discussed below), (iv) imposing limitations on the incurrence of indebtedness, (v) imposing limitations on transfers, sales and other dispositions and (vi) imposing restrictions on investments, dividends and certain other payments. Subject to certain exceptions, the Company may be required to repay the amounts outstanding under the Amended Credit Facility in connection with certain asset sales and issuances of certain additional secured indebtedness.

The minimum consolidated Interest Coverage Ratio (as defined in our Amended Credit Facility) is calculated as (a) twelve-month trailing Consolidated EBITDA (as defined in our Amended Credit Facility) to (b) consolidated interest expense (as also defined in our Amended Credit Facility).

The maximum permitted consolidated Total Leverage Ratio (as defined in our Amended Credit Facility) is calculated as Consolidated Funded Indebtedness to twelve-month trailing Consolidated EBITDA (all capitalized terms are defined in the Amended Credit Facility). Presently, and through December 31, 2011, our maximum Total Leverage Ratio is set at 7.75 to 1.00. Thereafter, on a scheduled basis in 0.25 basis point increments, the maximum ratio decreases to a low 5.50 to 1.00 at March 15, 2015 through the duration of the term.

The maximum permitted Secured Leverage Ratio (as defined in our Amended Credit Facility) is calculated as Secured Indebtedness to twelve-month trailing Consolidated EBITDA (all capitalized terms are defined in the Amended Credit Facility). Presently, and through March 31, 2012, our maximum Secured Leverage Ratio is set at 4.50 to 1.00. Thereafter, on a scheduled basis in 0.25 basis point increments, the maximum ratio decreases to a low 3.25 to 1.00 at June 30, 2014 through the duration of the term.

Compliance with Financial Covenants

We believe that, at June 30, 2011, we were in compliance with the Amended Credit Facility covenants, including the minimum consolidated Interest Coverage Ratio, the maximum permitted consolidated Total Leverage Ratio and the maximum permitted Secured Leverage Ratio, which, as of that date, were 2.42 to 1.00, 6.95 to 1.00 and 4.14 to 1.00, respectively.

Debt Financing Costs

In conjunction with the Amendment and Restatement Agreement, we incurred approximately $20.6 million in incremental debt financing costs, which have been deferred and are being amortized over the remaining term of the Amended Credit Facility.

Senior Notes

9.125% Senior Notes due December 2018.

Significant Terms

On November 10, 2010, we issued, through a private placement, $500 million aggregate principal amount of 9.125% senior notes due December 2018. The notes require semi-annual interest payments on December 1 and June 1 of each year, which commenced on June 1, 2011. The notes will mature on December 1, 2018 and are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. The notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the indenture governing the notes) to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. We believe that we are in compliance with these covenants at June 30, 2011. In addition, upon the occurrence of a change of control (as defined in the indenture governing the notes), we will be required, unless certain conditions are met, to offer to repurchase the notes at a price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest, if any, to, but not including, the date of purchase. If we sell assets or experience an event of loss, we will be required under certain circumstances to offer to purchase the notes. At any time prior to December 1, 2013, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109.125% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, with the net cash proceeds that we raise in one or more equity offerings. In addition, prior to December 1, 2014, we may redeem the notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. Subsequent to December 1, 2014, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 104.563% in 2014 to 100% in 2016 and thereafter, plus accrued and unpaid interest.

Registration Rights Agreement

In connection with the private placement of the notes, we entered into a registration rights agreement with the initial purchasers in which we agreed to file a registration statement with the SEC to permit the holders to exchange or resell the notes. We must use commercially reasonable efforts to file a registration statement and to consummate an exchange offer within 365 days after the issuance of the notes, subject to certain suspension and other rights set forth in the registration rights agreement. Under certain circumstances, including our determination that we cannot complete an exchange offer, we are required to file a shelf registration statement for the resale of the notes and to cause such shelf registration statement to be declared effective as soon as reasonably practicable (but in no event later than the 365th day following the issuance of the notes) after the occurrence of such circumstances. Subject to certain suspension and other rights, in the event that the registration statement is not filed or declared effective within the time periods specified in the registration rights agreement, the exchange offer is not consummated within 365 days after the issuance of the notes, or the registration statement is filed and declared effective but thereafter ceases to be effective or is unusable for its intended purpose for a period in excess of 30 days without being succeeded immediately by a post-effective amendment that cures such failure, the agreement provides that additional interest will accrue on the principal amount of the notes at a rate of 0.25% per annum during the 90-day period immediately following any of these events and will increase by 0.25% per annum at the end of each subsequent 90-day period, but in no event will the penalty rate exceed 1.00% per annum, until the default is cured. There are no other alternative settlement methods and, other than the 1.00% per annum maximum penalty rate, the agreement contains no limit on the maximum potential amount of consideration that could be transferred in the event we do not meet the registration statement filing requirements. We currently intend to file a registration statement, have it declared effective and consummate any exchange offer within these time periods. Accordingly, we do not believe that payment of additional interest under the registration payment arrangement is probable and, therefore, no related liability has been recorded in the condensed consolidated financial statements.

Senior Subordinated Notes

6.75% Senior Subordinated Notes due April 2014.

Significant Terms

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 SEC. 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 June 30, 2011. Effective 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.

Senior Subordinated Notes

7.125% Senior Subordinated Notes due February 2016.

Significant Terms

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 June 30, 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.

Repurchases of Senior Subordinated Notes

We did not repurchase any of our senior subordinated or senior notes during the six months ended June 30, 2011. During the three and six months ended June 30, 2010, we purchased and retired $17.5 million and $33.0 million, respectively, principal amount of our senior subordinated notes. The total purchase price of the notes was $15.5 million and $28.9 million, respectively, resulting in a gain of $1.9 million and $3.9 million, respectively, net of associated deferred financing fees, which is recorded on our condensed consolidated statement of operations for the respective period. The transactions were funded by availability under our former bank credit facility.

Indentures

The indentures governing the senior and senior subordinated notes each include permitted investment clauses, the most restrictive of which limits the amount of permitted investments to a basket of $150 million, increased by a calculated amount including 50% of net income, as defined in the indentures, and net of previous permitted investments. Also, the indentures allow for the incurrence of additional indebtedness, if after giving effect to such incurrence, our coverage ratio (as defined in the indentures, essentially a ratio of consolidated EBITDA to fixed charges, including interest) for a trailing four quarter period on a pro forma basis would be at least 2.0 to 1.0. Such pro forma coverage ratio was above 2.0 to 1.0 at the dates in which these respective tranches of senior and senior subordinated notes were issued; and, at June 30, 2011, after giving effect to the repayment of certain indebtedness, as defined in the indentures, our coverage ratio was above 2.0 to 1.0.

Borgata Bank Credit Facility

Significant Terms

In August 2010, Marina District Finance Company, Inc. (“MDFC”) closed a $950 million debt financing, consisting of the establishment of a $150.0 million new payment priority secured revolving credit facility (the "Borgata bank credit facility") and the issuance of $800 million of aggregate principal amount of notes. MDFC is a wholly-owned subsidiary of MDDC, which develops and owns Borgata, and which is the guarantor of both the Borgata bank credit facility and the notes. The proceeds from the financing were used to (i) pay fees and expenses related to the financing; (ii) repay the former credit facility; and (iii) make a one-time distribution to Borgata's joint venture owners.

The Borgata bank credit facility provides for a $150.0 million payment priority secured revolving credit facility and matures in August 2014. The Borgata bank credit facility is guaranteed on a senior secured basis by MDDC and any future subsidiaries of MDDC and is secured by a first priority lien on substantially all of the assets of the Company, MDDC and any future subsidiaries of MDDC, subject to certain exceptions. The obligations under the Borgata bank credit facility will have priority in payment to payment of the notes.

Neither Boyd Gaming nor any of its wholly-owned subsidiaries is a guarantor of Borgata's new bank credit facility.

Outstanding borrowings under the Borgata bank credit facility accrue interest at a selected rate based upon either: (i) the highest of (a) the agent bank's quoted prime rate, (b) the one-month Eurodollar rate plus 1.00%, and (c) the daily federal funds rate plus 1.50%, and in any event not less than 1.50% (such highest rate, the “base rate”), or (ii) the Eurodollar rate, plus with respect to each of clause (i) and (ii) an applicable margin as provided in the Borgata bank credit facility. In addition, a commitment fee is incurred on the unused portion of the Borgata bank credit facility ranging from 0.50% per annum to 1.00% per annum.

At June 30, 2011, the outstanding balance under the Borgata bank credit facility was $20.0 million, leaving contractual availability of $130.0 million. The interest rate on the outstanding borrowings at June 30, 2011 was 4.4%.

Financial and Other Covenants

The Borgata bank credit facility contains certain financial and other covenants, including, without limitation, (i) establishing a minimum consolidated EBITDA (as defined in the Borgata bank credit facility) of $150 million over each trailing twelve-month period ending on the last day of each calendar quarter; (ii) establishing a minimum liquidity (as defined in the Borgata bank credit facility) of $30 million as of the end of each calendar quarter; (iii) imposing limitations on MDFC's ability to incur additional debt; and (iv) imposing restrictions on Borgata's ability to pay dividends and make other distributions, make certain restricted payments, create liens, enter into transactions with affiliates, merge or consolidate, and engage in unrelated business activities.

Compliance with Financial Covenants

We believe that MDFC was in compliance with the Borgata bank credit facility covenants, including minimum consolidated EBITDA and minimum liquidity, which, at June 30, 2011, were $160.2 million and $130.4 million, respectively.

Borgata Senior Secured Notes

9.5% Senior Secured Notes Due 2015.

Significant Terms

In August 2010, MDFC issued, through a private placement, $400 million principal amount of 9.5% senior secured notes due October 2015, at an issue price of 98.943%, resulting in a discount at issuance of $4.1 million. The notes require semi-annual interest payments on April 15 and October 15, which commenced on April 15, 2011. The notes are guaranteed on a senior secured basis by MDDC and any future restricted subsidiaries of MDDC. The notes contain covenants that, among other things, limit MDFC's ability and the ability of MDDC to (i) incur additional indebtedness or liens; (ii) pay dividends or make distributions; (iii) make certain investments; (iv) sell or merge with other companies; and (v) enter into certain types of transactions. MDFC believes that it is in compliance with these covenants at June 30, 2011.

At any time prior to October 15, 2013, the notes may be redeemed at 100% of the principal amount thereof, plus a “make-whole premium” and accrued and unpaid interest. In addition, until October 15, 2013, MDFC may redeem up to 35% of the notes at a redemption price of 109.50% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from certain equity offerings. In addition, at any time prior to October 15, 2013, MDFC may redeem up to an aggregate of 10% of the notes in each twelve month period at a redemption price of 103% of the principal amount thereof plus accrued and unpaid interest, if any, to, but not including, the redemption date. On or after October 15, 2013, MDFC shall have the option to redeem the 2015 Notes, in whole or in part, at redemption prices (expressed as percentages of the principal amount) ranging from 104.75% beginning on October 15, 2013 to 102.375% beginning on October 15, 2014, plus accrued and unpaid interest to the applicable redemption date.

9.875% Senior Secured Notes Due 2018.

Significant Terms

In August 2010, MDFC issued, through a private placement, $400 million principal amount of 9.875% senior secured notes due August 2018, at an issue price of 99.315%, resulting in an original issue discount of $2.7 million. The notes require semi-annual interest payments on February 15 and August 15, which commenced on February 15, 2011. The notes are guaranteed on a senior secured basis by MDDC and any future restricted subsidiaries of MDDC. The notes contain covenants that, among other things, limit MDFC's ability and the ability of MDDC to (i) incur additional indebtedness or liens; (ii) pay dividends or make distributions; (iii) make certain investments; (iv) sell or merge with other companies; and (v) enter into certain types of transactions. MDFC believes that it is in compliance with these covenants at June 30, 2011.

At any time prior to August 15, 2014, the notes may be redeemed at 100% of the principal amount thereof, plus a “make-whole premium” and accrued and unpaid interest. In addition, until August 15, 2013, MDFC may redeem up to 35% of the notes at a redemption price of 109.875% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from certain equity offerings. In addition, at any time prior to August 15, 2013, MDFC may redeem up to an aggregate of 10% of the notes in each twelve month period at a redemption price of 103% of the principal amount thereof plus accrued and unpaid interest, if any, to, but not including, the redemption date. On or after August 15, 2013, MDFC shall have the option to redeem the 2018 Notes, in whole or in part, at redemption prices (expressed as percentages of the principal amount) ranging from 104.938% beginning on August 15, 2014, to 102.469% beginning on August 15, 2015, to 100% beginning on August 15, 2016 and thereafter, plus accrued and unpaid interest, to the applicable redemption date.

The original issue discount has been recorded as an offset to the principal amount of these notes and is being accreted to interest expense over the term of the notes using the effective interest method. The effective interest rate on the 9.50% notes due 2015 notes is 10.2% and on the 9.875% notes due 2018 is 10.3%.

Registration Rights Agreement

Pursuant to the registration rights agreement entered into which the initial purchasers of these senior secured notes at the time of the private placement, on May 27, 2011, MDFC commenced an offer to exchange all of the outstanding $400.0 million aggregate principal amount of 9.5% Senior Secured Notes due 2015 and $400.0 million aggregate principal amount of 9.875% Senior Secured Notes due 2018 for new 9.5% Senior Secured Notes due 2015 and 9.875% Senior Secured Notes due 2018, respectively, that have been registered under the Securities Act of 1933. On June 28, 2011, the expiration date of the exchange offer, $396.4 million of the 9.5% Senior Secured Notes due 2015 and $400.0 of the 9.875% Senior Secured Notes due 2018 were validly tendered and accepted for exchange. This amount represents approximately 99.1% of the 9.5% Senior Secured Notes due 2015 and 100% of the 9.875% Senior Secured Notes due 2018, respectively.

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Non-recourse Obligations of Variable Interest Entity

6 Months Ended

Jun. 30, 2011

Non Recourse Obligations of Variable Interest Entity [Abstract]

Non-Recourse Obligations of Variable Interest Entity

NON-RECOURSE OBLIGATIONS OF VARIABLE INTEREST ENTITY

The non-recourse obligations of variable interest entity represent the outstanding debt of LVE, all of which is classified as current, and is comprised of the following:

	June 30, 2011		December 31, 2010
	(In thousands)
Construction and term loan facility	$	120,392	$	120,572
Tax-exempt variable rate bonds	100,000		100,000
Notes payable to members of variable interest entity	27,736		22,487
	$	248,128	$	243,059

Assets serving as collateral for these debt obligations had a carrying value of $243.9 million and $244.5 million at June 30, 2011 and December 31, 2010, respectively, and primarily consist of certain assets held for development and restricted investments. The condensed consolidated statements of operations for the three and six months ended June 30, 2011 includes $2.6 million and $1.0 million of loss, respectively, and the condensed consolidated statement of cash flows for the six months ended June 30, 2011 includes $6.1 million of net operating cash outflows related to this consolidated variable interest entity; however, none of the offsetting consolidated income or operating cash inflows are available to service this debt, which is non-recourse and non-guaranteed by Boyd.

Construction and Term Loan Facility

In December 2007, LVE entered into a construction and term loan facility with two commercial banks with a committed amount of up to $143.5 million, of which $120.4 million was outstanding at June 30, 2011. Proceeds from the construction loan were used to finance the construction of the central energy center and district energy system. The loan is secured by the assets of LVE and does not contain financial covenants. Although LVE's loan is presently in default, and classified as current, the original loan maturities are as follows: $4.2 million in 2011; $83.1 million in 2012 and the remainder in 2013.

The construction loan bears interest at a variable rate based on the London InterBank Offered Rate ("LIBOR"). LVE entered into an interest rate swap with scheduled increases in the notional amount designed to fix the LIBOR portion of the interest rate on this debt until its maturity in November 2013, which was hedged against the outstanding debt. However, due to the construction delays, the outstanding amount of debt did not increase as fast as the contractual increases in notional amount of the swap, which rendered a portion of the swap ineffective. The effective rate on the outstanding construction loan, including the impact of the effective portion of the swap, was approximately 2.4% at June 30, 2011.

Tax-exempt Variable Rate Bonds

In December 2007, LVE issued $100.0 million of tax-exempt variable rate bonds through the State of Nevada Department of Business and Industry, which mature in October 2035. Unused proceeds from the tax-exempt, variable rate bonds are required to be escrowed pending approved construction expenditures. Such unused funds are reported as restricted investments on our consolidated balance sheet.

The tax-exempt variable rate bonds bear interest at rates that are determined by a remarketing agent on a weekly basis. LVE entered into an interest rate swap with a total notional amount of $100.0 million that effectively fixes the underlying interest rate index on these bonds until November 2013. Investors in these bonds receive liquidity and credit support provided by a letter of credit from a commercial bank. This letter of credit expires in November 2013, but can be accelerated by the bank in the event of a default under the construction and term loan facility. The effective interest rate on these bonds, including the impact of the swap and cost of the related letter of credit, was approximately 6.0% at June 30, 2011.

Events of Default

The central energy center and district energy system are being financed by LVE with debt that is non-recourse to us. The outstanding balance of LVE's bank debt is approximately $220.4 million as of June 30, 2011, consisting of borrowing under the construction and term loan facility of $120.4 million and outstanding tax-exempt bonds of $100.0 million. In September 2009, LVE reached an agreement with the banks that are financing the energy facilities to address defaults under the financing agreements. These LVE defaults were caused by construction delay and the termination of an energy services agreement by a hotel operator associated with the project. As a result of these defaults, the banks had previously stopped funding the project. The terms of the September 2009 agreement required the LVE joint venture partners to guarantee the payment of future interest costs by LVE through December 2010. In addition, the LVE joint venture partners had each committed to provide approximately $8.9 million of additional capital as of September 2009 to cover costs related to the termination of the energy services agreement by a hotel operator and interest costs incurred since August 2008 when construction of Echelon was suspended. In turn, the banks waived all existing defaults under the financing agreements and were relieved of their commitment to provide additional funding.

As a result of the ongoing construction delay, the central energy center and district energy system was not completed by the end of 2010 as originally expected. Consequently, the full amount of LVE's debt became due and payable in December 2010. LVE intends to seek additional financing to complete the facility once construction of the resort resumes; however, as of June 30, 2011, LVE was in default under the financing agreements with the banks, and all its debt has been presented as currently due.  

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Condensed Consolidated Statement of Changes in Stockholders' Equity (Parentheticals) (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Derivative instruments fair value adjustment, tax	$ 4,230	$ 2,408

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Consolidation of Certain Interests

6 Months Ended

Jun. 30, 2011

Consolidation of Certain Interests [Abstract]

Business Combination and Consolidation of Variable Interest Entity

CONSOLIDATION OF CERTAIN INTERESTS

Controlling Interest

Borgata Hotel Casino and Spa

Overview

We and MGM each originally held 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.

In February 2010, we entered into an agreement with MGM to amend the operating agreement to, among other things, facilitate the transfer of MGM's interest in the Holding Company ("MGM Interest") to a divestiture trust (“Divestiture Trust”) established for the purpose of selling the MGM Interest to a third party. The proposed sale of the MGM Interest through the Divestiture Trust was a part of a then-proposed settlement agreement between MGM and the New Jersey Department of Gaming Enforcement (the “NJDGE”). Pursuant to the terms of the amended operating agreement, in connection with the refinancing of the Borgata bank credit facility on August 6, 2010, the Holding Company made a $135.4 million one-time distribution to us, of which $30.8 million was a priority distribution equal to the excess prior capital contributions made by us.

On March 17, 2010, MGM announced that its settlement agreement with the NJDGE had been approved by the New Jersey Casino Control Commission ("NJCCC"). Under the terms of the settlement agreement, MGM agreed to transfer the MGM Interest into the Divestiture Trust and further agreed to sell such interest within a 30-month period. During the first 18 months of such period, MGM has the power to direct the trustee to sell the MGM Interest, subject to the approval of the NJCCC. If the sale has not occurred by such time, the trustee will be solely responsible for the sale of the MGM Interest. The MGM Interest was transferred to the Divestiture Trust on March 24, 2010.

MGM has subsequently announced that it has entered into an amendment with respect to its settlement agreement with the NJDGE, subject to approval by the NJCCC. The amendment provides that the mandated sale of the MGM Interest be increased by an additional 18 months to a total of 48 months.  During the first 36 months (or until March 24, 2013), MGM has the right to direct the Divestiture Trust to sell the MGM Interest. If a sale is not concluded by that time, the Divestiture Trust will be responsible for selling MGM''s Interest during the following 12-month period.  The NJCCC is expected to hold a hearing on the amendment to the settlement on August 8, 2011.

Effective Change in Control

In connection with the amendments to the operating agreements MGM relinquished all of its specific participating rights under the operating agreement, and we retained all authority to manage the day-to-day operations of Borgata. MGM's relinquishment of its participating rights effectively provided us with direct control of Borgata. This resulting change in control required acquisition method accounting in accordance with the authoritative accounting guidance for business combinations.

Acquisition Method Accounting

The application of the acquisition method accounting guidance had the following effects on our condensed consolidated financial statements: (i) our previously held equity interest was measured at a provisional fair value at the date control was obtained; (ii) we recognized and measured the identifiable assets and liabilities in accordance with promulgated valuation recognition and measurement provisions; and (iii) we recorded the noncontrolling interest held in trust for the economic benefit of MGM as a separate component of our stockholders' equity. The provisional fair value measurements and estimates of these items were estimated as of the date we effectively obtained control.

The provisional fair value measurements and estimates of these items have been subsequently refined. We had provisionally recorded these fair values using an earnings valuation multiple model, because, at the time of the preliminary estimate, the Company had not completed its procedures with respect to the independent valuation of the business enterprise and Borgata's tangible and intangible assets. The Company's subsequent valuation procedures have necessitated a revision of the valuation of the provisional assets and liabilities. Thus, upon finalization of our valuation, certain measurement adjustments were identified and retrospectively recorded in the condensed consolidated balance sheet as of December 31, 2010, and certain disclosures were updated to reflect the measurement period adjustments, as reflected herein.

Retrospective Adjustment to Condensed Consolidated Balance Sheet

We have retrospectively adjusted the provisional values to reflect the fair valuation, and therefore, the condensed consolidated balance sheet as of December 31, 2010 presented herein reflects the adjustments above.

December 31, 2010

	As Originally Reported			Acquisition Method Accounting Adjustments			As Retrospectively Adjusted
	(In thousands)
ASSETS
Current assets
Cash and cash equivalents	$	145,623		$	—		$	145,623
Restricted cash	19,494			—			19,494
Accounts receivable, net	47,942			—			47,942
Inventories	16,029			—			16,029
Prepaid expenses and other current assets	37,390			(237		)	37,153
Income taxes receivable	5,249			—			5,249
Deferred income taxes	8,149			—			8,149
Total current assets	279,876			(237		)	279,639
Property and equipment, net	3,471,933			(88,562		)	3,383,371
Assets held for development	1,119,403			—			1,119,403
Debt financing costs, net	38,451			(3,458		)	34,993
Restricted investments	48,168			—			48,168
Other assets, net	70,425			—			70,425
Intangible assets, net	460,714			79,000			539,714
Goodwill, net	213,576			—			213,576
Total assets	$	5,702,546		$	(13,257	)	$	5,689,289
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt	$	25,690		$	—		$	25,690
Non-recourse obligations of variable interest entity	243,059			—			243,059
Accounts payable	57,183			—			57,183
Income taxes payable	6,504			—			6,504
Accrued liabilities	279,779			(1,310		)	278,469
Total current liabilities	612,215			(1,310		)	610,905
Long-term debt, net of current maturities	3,193,065			—			3,193,065
Deferred income taxes	360,342			1,832			362,174
Other long-term tax liabilities	44,813			—			44,813
Other liabilities	85,859			(2,270		)	83,589
Stockholders' equity
Preferred stock	—			—			—
Common stock	862			—			862
Additional paid-in-capital	635,028			—			635,028
Retained earnings	560,909			—			560,909
Accumulated other comprehensive loss, net	(7,594		)	—			(7,594		)
Total Boyd Gaming Corporation stockholders' equity	1,189,205			—			1,189,205
Noncontrolling interest	217,047			(11,509		)	205,538
Total stockholders' equity	1,406,252			(11,509		)	1,394,743
Total liabilities and stockholders' equity	$	5,702,546		$	(13,257	)	$	5,689,289

Bargain Purchase Gain

The fair valuation resulted in the recording of a bargain purchase gain, due to the excess fair value of Borgata over the historical basis of our equity interest in Borgata. Recorded in write-downs and other items, net on the condensed consolidated statement of operations, this gain was recorded as a cumulative adjustment during the six months ended June 30, 2011.

The gain was computed as follows:

	Bargain Purchase Gain
	(In thousands)
Fair value of controlling equity interest	$	397,931
Carrying value of equity investment in Borgata	397,622
Bargain purchase gain	$	309

The fair value of our controlling interest included a $72.4 million control premium, which is reflected in the fair value of the enterprise, and included in the calculation of the bargain purchase gain. A control premium of 10% was applied to the enterprise value members' equity, excluding interest bearing debt, to calculate an indicated value of equity on a controlling basis. While the value of control is somewhat below prevailing market rates, we believe the control premium reflects the value of our influence, mitigated by only a 50% interest and return.

Results of Operations of Borgata

(for the period from March 24, 2010 through June 30, 2010)

reflecting amounts included on a consolidated basis

The results of Borgata, as included in the accompanying condensed consolidated statements of operations from the date we effectively obtained control, March 24, 2010, (specifically, for the period from March 24 through June 30, 2010 for the six months ended June 30, 2010) are presented below. These results of operations do not reflect the retrospective impact from the measurement period adjustments discussed above, as such amounts were not material to either the three and six months ended June 30, 2010.

	Six Months Ended June 30, 2010
	(In thousands)
REVENUES
Operating revenues:
Gaming	$	180,475
Food and beverage	39,140
Room	29,952
Other	11,360
Gross revenues	260,927
Less promotional allowances	57,259
Net revenues	203,668
COSTS AND EXPENSES
Operating costs and expenses:
Gaming	71,073
Food and beverage	19,893
Room	4,224
Other	9,193
Selling, general and administrative	33,300
Maintenance and utilities	18,122
Depreciation and amortization	19,861
Write-downs and other items, net	12
Total operating costs and expenses	175,678
Operating income	27,990
Other expense
Interest expense	6,072
Total other expense, net	6,072
Income before income taxes	21,918
Income taxes	(2,137		)
Net income	$	19,781

Supplemental Pro Forma Information

Pro Forma Condensed Consolidated Statement of Operations

for the six months ended June 30, 2010

The following supplemental pro forma information presents the financial results as if the effective control of Borgata had occurred as of the beginning of the earliest period presented herein, or on January 1, 2010. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what the actual results for the six months ended June 30, 2010 would have been had the consolidation of Borgata been completed as of the earlier date, nor are they indicative of any future results.

	Six Months Ended June 30, 2010
	Boyd Gaming Corp			Borgata						Boyd Gaming Corp
	As Reported			Stub Period			Adjustments			Pro Forma
	(In thousands)
Revenues
Gaming	$	840,537		$	137,831		$	—		$	978,368
Food and beverage	154,002			31,217			—			185,219
Room	90,105			24,154			—			114,259
Other	57,635			9,179			—			66,814
Gross revenues	1,142,279			202,381			—			1,344,660
Less promotional allowances	148,698			44,091			—			192,789
Net revenues	993,581			158,290			—			1,151,871
Costs and expenses
Gaming	397,860			59,861			—			457,721
Food and beverage	81,791			13,500			—			95,291
Room	23,106			2,185			—			25,291
Other	46,244			7,127			—			53,371
Selling, general and administrative	169,944			28,981			—			198,925
Maintenance and utilities	62,109			13,522			—			75,631
Depreciation and amortization	95,454			16,754			—			112,208
Corporate expense	25,615			—			—			25,615
Preopening expenses	2,306			—			—			2,306
Write-downs and other charges	3,592			68			—			3,660
Total costs and expenses	908,021			141,998			—			1,050,019
Operating income from Borgata	8,146			—			(8,146		)	—
Operating income	93,706			16,292			(8,146		)	101,852
Other expense (income)
Interest income	(4		)	—			—			(4		)
Interest expense, net of amounts capitalized	63,657			5,060			—			68,717
Fair value adjustment of derivative instruments	—			—						—
Gain on early retirements of debt	(3,949		)	—			—			(3,949		)
Other non-operating expenses from Borgata, net	3,133			—			(3,133		)	—
Total other expense, net	62,837			5,060			(3,133		)	64,764
Income before income taxes	30,869			11,232			(5,013		)	37,088
Income taxes	(9,161		)	(1,207		)	—			(10,368		)
Net income	21,708			10,025			(5,013		)	26,720
Noncontrolling interest	(9,891		)	—			(5,012		)	(14,903		)
Net income attributable to Boyd Gaming Corporation	$	11,817		$	10,025		$	(10,025	)	$	11,817

The pro forma adjustments reflect the differences resulting from the conversion of the equity method of accounting to a fully consolidated presentation. There were no significant intercompany transactions affecting the statement of operations between the Boyd wholly-owned entities and Borgata which would require elimination during the six months ended June 30, 2010.

Variable Interest

LVE Energy Partners, LLC

The effects of the consolidation of LVE on our financial position as of June 30, 2011 and December 31, 2010, and its impact on our results of operations for the three and six months ended June 30, 2011 are reconciled by respective line items to amounts as reported in our condensed consolidated balance sheets and condensed consolidated statements of operations are presented below.

The primary impact on our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010 was as follows:

	June 30, 2011
	Boyd Gaming Corporation (as historically presented)		LVE, LLC			Eliminations			Boyd Gaming Corporation (as consolidated)
	(In thousands)
ASSETS
Cash and cash equivalents	$	175,765	$	15		$	—		$	175,780
Restricted cash	18,486		374			—			18,860
Accounts receivable, net	46,018		2,412			(2,394		)	46,036
Prepaid expenses and other current assets	39,352		845			—			40,197
Other current assets	24,262		—			—			24,262
Property and equipment, net	3,315,592		—			—			3,315,592
Assets held for development	923,997		195,941			—			1,119,938
Debt financing costs, net	31,927		—			—			31,927
Restricted investments	—		47,999			—			47,999
Other assets	70,657		4,389			—			75,046
Intangible assets, net	527,322		—			—			527,322
Goodwill, net	213,576		—			—			213,576
Total Assets	$	5,386,954	$	251,975		$	(2,394	)	$	5,636,535
LIABILITIES
Current maturities of long-term debt	$	356,711	$	—		$	—		$	356,711
Non-recourse obligations of variable interest entity	—		248,128			—			248,128
Accounts payable	44,901		54			—			44,955
Accrued liabilities	283,253		1,027			—			284,280
Long-term debt, net of current maturities	2,823,049		—			—			2,823,049
Deferred income taxes	362,899		—			—			362,899
Other liabilities	105,452		18,246			(2,394		)	121,304
Total Liabilities	$	3,976,265	$	267,455		$	(2,394	)	$	4,241,326
STOCKHOLDERS' EQUITY
Common stock	$	863	$	—		$	—		$	863
Additional paid-in capital	640,661		—			—			640,661
Retained earnings	554,437		—			—			554,437
Noncontrolling interest	214,728		(15,480		)	—			199,248
Total Liabilities and Stockholders' Equity	$	5,386,954	$	251,975		$	(2,394	)	$	5,636,535

	December 31, 2010
	Boyd Gaming Corporation (as historically presented)			LVE, LLC			Eliminations		Boyd Gaming Corporation (as consolidated)
	(In thousands)
ASSETS
Cash and cash equivalents	$	145,291		$	332		$	—	$	145,623
Restricted cash	19,494			—			—		19,494
Accounts receivable, net	47,537			405			—		47,942
Other current assets	66,580			—			—		66,580
Property and equipment, net	3,383,371			—			—		3,383,371
Assets held for development	923,038			196,365			—		1,119,403
Debt financing costs, net	34,993			—			—		34,993
Restricted investments	—			48,168			—		48,168
Other assets	65,963			4,462			—		70,425
Intangible assets, net	539,714			—			—		539,714
Goodwill, net	213,576			—			—		213,576
Total Assets	$	5,439,557		$	249,732		$	—	$	5,689,289
LIABILITIES
Current maturities of long-term debt	$	25,690		$	—		$	—	$	25,690
Non-recourse obligations of variable interest entity	—			243,059			—		243,059
Accounts payable	56,790			393			—		57,183
Accrued liabilities	277,429			1,040			—		278,469
Long-term debt, net of current maturities	3,193,065			—			—		3,193,065
Deferred income taxes	362,174			—			—		362,174
Other liabilities	115,948			18,958			—		134,906
Total Liabilities	$	4,031,096		$	263,450		$	—	$	4,294,546
STOCKHOLDERS' EQUITY
Common stock	$	862		$	—		$	—	$	862
Additional paid-in capital	635,028			—			—		635,028
Retained earnings	560,909			—			—		560,909
Accumulated other comprehensive loss, net	(7,594		)	—			—		(7,594		)
Noncontrolling interest	219,256			(13,718		)	—		205,538
Total Liabilities and Stockholders' Equity	$	5,439,557		$	249,732		$	—	$	5,689,289

The reduction in accounts receivable, net and other liabilities reflects the elimination of the Periodic Fee booked as a receivable by LVE, which mirrors the payable recorded on Boyd's general ledger. Both the receivable and payable are eliminated in consolidation completely, thereby having no impact on our consolidated balance sheet.

The impact on our condensed consolidated statement of operations for the three months ended June 30, 2011 was as follows:

	Three Months Ended June 30, 2011
	Boyd Gaming Corporation (as historically presented)			LVE, LLC			Eliminations			Boyd Gaming Corporation (as consolidated)
	(In thousands)
REVENUES
Other revenue	$	33,276		$	2,769		$	(2,769	)	$	33,276
COSTS AND EXPENSES
Maintenance and utilities	$	36,739		$	34		$	—		$	36,773
Preopening expenses	4,510			—			(2,769		)	1,741
Operating income	$	59,255		$	2,735		$	—		$	61,990
Other expense
Interest expense	$	61,387		$	5,307		$	—		$	66,694
Loss before income taxes	$	(2,160	)	$	(2,572	)	$	—		$	(4,732	)
Income taxes	(911		)	—			—			(911		)
Net loss	(3,071		)	(2,572		)	—			(5,643		)
Net income attributable to noncontrolling interest	120			2,572			—			2,692
Net loss attributable to Boyd Gaming Corporation	$	(2,951	)	$	—		$	—		$	(2,951	)

The impact on our condensed consolidated statement of operations for the six months ended June 30, 2011 was as follows:

	Six Months Ended June 30, 2011
	Boyd Gaming Corporation (as historically presented)			LVE, LLC			Eliminations			Boyd Gaming Corporation (as consolidated)
	(In thousands)
REVENUES
Other revenue	$	66,307		$	5,410		$	(5,410	)	$	66,307
COSTS AND EXPENSES
Maintenance and utilities	$	73,257		$	931		$	—		$	74,188
Preopening expenses	8,982			—			(5,410		)	3,572
Operating income	$	105,615		$	4,479		$	—		$	110,094
Other expense
Interest expense	$	118,551		$	5,434		$	—		$	123,985
Loss before income taxes	$	(13,196	)	$	(955	)	$	—		$	(14,151	)
Income taxes	2,197			—			—			2,197
Net loss	(10,999		)	(955		)	—			(11,954		)
Net income attributable to noncontrolling interest	4,527			955			—			5,482
Net loss attributable to Boyd Gaming Corporation	$	(6,472	)	$	—		$	—		$	(6,472	)

The reduction in other revenue and preopening expenses reflects the elimination of the Periodic Fee paid by Boyd Gaming to LVE. Such fee is recognized as revenue by LVE, but eliminated in consolidation completely, thereby having no impact on our consolidated other revenues. Although this Periodic Fee is eliminated in this consolidation, it is actually paid to LVE directly on a monthly basis.

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Property and Equipment, Net

6 Months Ended

Jun. 30, 2011

Property and Equipment, Net [Abstract]

Property, Plant and Equipment Disclosure

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following.

	June 30, 2011		December 31, 2010
	(In thousands)
Land	$	576,947	$	576,947
Buildings and improvements	3,308,851		3,309,506
Furniture and equipment	1,143,312		1,131,837
Riverboats and barges	167,505		167,420
Other	25,793		25,423
Total property and equipment	5,222,408		5,211,133
Less accumulated depreciation	1,906,816		1,827,762
Property and equipment, net	$	3,315,592	$	3,383,371

Depreciation expense for the three months ended June 30, 2011 and 2010 was $46.4 million and $55.4 million, respectively. Depreciation expense for the six months ended June 30, 2011 and 2010 was $92.2 million and $95.5 million, respectively. The amounts recorded during the six months ended June 30, 2011 include the effect of certain measurement period adjustments.

Other property and equipment presented in the table above primarily relates to costs capitalized in conjunction with major improvements and that have not yet been placed into service, and accordingly, such costs are not currently being depreciated.

We test certain of these property and equipment assets for recoverability if a recent operating or cash flow loss, combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses, is associated with the use of a long-lived asset. Impairment is the condition that exists when the carrying amount of a long-lived asset exceeds its fair value. An impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. That assessment shall be based on the carrying amount of the asset at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

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Stockholders' Equity and Stock Incentive Plans

6 Months Ended

Jun. 30, 2011

Stockholders' Equity and Stock Incentive Plans [Abstract]

Shareholders' Equity and Share-based Payments [Text Block]

STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS

Share Repurchase Program

We have in the past, and may in the future, 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. 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 six months ended June 30, 2011 or 2010, we did not repurchase any shares of our common stock. We are currently authorized to repurchase up to an additional $92.1 million in shares of our common stock under the share repurchase program.

Dividends

Dividends are declared at our Board of Director's discretion. We are subject to certain limitations regarding payment of dividends, such as restricted payment limitations related to our outstanding notes and our bank credit facility. In July 2008, our Board of Directors suspended the quarterly dividend for the current and future periods; therefore, we did not declare a dividend during the six months ended June 30, 2011 or 2010.

Share-Based Compensation

We account for share-based awards exchanged for employee services in accordance with the authoritative accounting guidance for share-based payments. Under the guidance, share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, over the employee's requisite service period.

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In thousands)
Gaming	$	52	$	74	$	104	$	148
Food and beverage	10		14		20		28
Room	4		7		9		13
Selling, general and administrative	266		422		531		845
Corporate expense	1,808		2,355		5,289		4,694
Total shared-based compensation expense	$	2,140	$	2,872	$	5,953	$	5,728

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Assets Held for Development

6 Months Ended

Jun. 30, 2011

Assets Held for Development [Abstract]

Assets Held For Development

ASSETS HELD FOR DEVELOPMENT

Assets held for development, which is comprised of assets associated with our Echelon development project, consists of the following:

	June 30, 2011		December 31, 2010
	(In thousands)
Echelon Project Infrastructure
Land	$	213,649	$	213,649
Construction and development costs	501,091		500,132
Project management and other costs	115,712		115,712
Professional and design fees	93,545		93,545
Central Energy Facility
Construction and development costs	195,941		196,365
Total assets held for development	$	1,119,938	$	1,119,403

Echelon Project Infrastructure

At June 30, 2011 and December 31, 2010, the capitalized costs related to the Echelon project included land and construction in progress. The construction and development costs consist primarily of site preparation work, underground utility installation and infrastructure and common area development. Professional and design fees include architectural design, development and permitting fees, inspections, consulting and legal fees. We expect to additionally incur approximately $0.3 million to $3.0 million of capitalized costs annually, principally related to such items as transportation of stored offsite steel as well as offsite improvements.

In addition, we expect annual recurring project costs, consisting primarily of monthly charges related to construction of the central energy center, site security, property taxes, rent and insurance, of approximately $15.0 million to $17.0 million 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 commitments, including commitments and contingencies with respect to the ESA entered into between Echelon Resorts and LVE.

We evaluate our investment in assets held for development in accordance with the authoritative accounting guidance on impairment or disposal of long lived assets. For a long-lived asset to be held and used, such as these assets under development, 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. For these assets under development, future cash flows include remaining construction costs.

The suspension of development on the Echelon project implied that the carrying amounts of the assets related to the development may not be recoverable; therefore, at the time of the suspension, we performed an impairment test of these assets, which occurred during the three months ended 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.

One such scenario includes the outright sale of the project as is, which is primarily based upon land value. We considered the land value by analyzing recent sales transactions of sites with similar characteristics such as location, zoning, access, and visibility, to establish a general understanding of the potential comparable sales. The recoverability under this option represented any excess sales price, net of estimated selling costs, from the land over the carrying value of the assets, including land, held for development.

Another scenario is the full development of the project, as designed, at a later date. The cash inflows related to this option represent the revenue projections for the individual components associated with each planned construction element (casino, hotel, food and beverage, retail, convention and other), based upon the estimated respective dates of completion and particular graduated supply absorption rates. These projections are offset by outflows for incurred and estimated costs to complete the development. For costs already incurred, and to compensate for potential losses due to the delay, we adjusted for (i) physical deterioration; (ii) functional obsolescence; and (iii) economic obsolescence. Physical deterioration is impairment to the condition of the asset brought about by “wear and tear,” disintegration, and/or the action of the elements. Functional obsolescence is the impairment in the efficiency of the asset brought about by such factors as inadequacy or change in technology that affect the asset. Economic obsolescence is the impairment in the desirability of the asset arising from external economic forces, building code enhancements or changes in supply and demand relationships. For estimated costs to complete, we applied selected construction expense growth rates to our present cost analysis. In addition to these hard and soft construction costs, we estimated outflows for preservation costs that are intended and required to maintain the development site and the existing structures as well as development materials for future use. These net outflows were incrementally added to our estimated operating and ongoing maintenance costs, to establish the undiscounted net cash flow of the project.

Our final scenario is a scaled-down version of the full project, whereby only certain components would be developed. This cash flow projection considered the inflows and outflows discussed above, with relevant curtailment for revenue from, and costs related to, the amenities not completed.

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 the determination that there was no impairment of the assets held for development, as the estimated weighted net undiscounted cash flows from the project exceed the current carrying value of the assets held for development. As we further explore the viability of alternatives for the project, we will continue to monitor these assets for recoverability.

Central Energy Facility

The capitalized construction costs of the central energy facility include labor, materials, construction overhead and capitalized interest, all of which has been directly incurred by LVE. Depreciation is generally recorded on a straight line basis over useful lives of property ranging from 5 to 50 years, but has not commenced on the components of the facility, as it has not been placed in service. The costs of repairs and maintenance, including planned major maintenance activities and minor replacements of property are charged to maintenance expense as incurred.

These assets are tested for recoverability whenever events or changes in circumstances indicate that such amounts may not be recoverable. Impairment is the condition that exists when the carrying amount of a long-lived asset exceeds its fair value. An impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. That assessment shall be based on the carrying amount of the asset at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

The assets of the central energy facility are pledged as collateral to the outstanding debt obligations of LVE, as further discussed in Note 6, Non-recourse Obligations of Variable Interest Entity below.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value [Abstract]

Fair Value Disclosures

FAIR VALUE MEASUREMENTS

We have adopted the authoritative accounting guidance for fair value measurements, which 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.

As required by the guidance for fair value measurements, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.

Balances Measured at Fair Value

The following tables show the fair values of certain of our financial instruments.

	June 30, 2011
	Balance		Level 1		Level 2		Level 3
			(In thousands)
Assets
Cash and cash equivalents	$	175,780	$	175,780	$	—	$	—

	December 31, 2010
	Balance		Level 1		Level 2		Level 3
			(In thousands)
Assets
Cash and cash equivalents	$	145,623	$	145,623	$	—	$	—
Liabilities
Derivative instruments	$	11,871	$	—	$	11,871	$	—

The fair value of our cash and cash equivalents, classified in the fair value hierarchy as Level 1, is based on statements received from our banks at June 30, 2011 and December 31, 2010.

Our derivative instruments are classified in the fair value hierarchy as Level 2 as the LIBOR swap rate is observable at commonly quoted intervals for the full term of the interest rate swaps. See Note 9, Derivative Instruments for further discussion regarding the fair valuation of our interest rate swaps.

Balances Disclosed at Fair Value

The following table provides the fair value measurement information about our long-term debt at June 30, 2011 and December 31, 2010.

	June 30, 2011
	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
	(In thousands)
Bank credit facility	$	1,425,000	$	1,425,000	$	1,332,663	Level 2
9.125% Senior Notes due 2018	500,000		490,825		513,750		Level 1
6.75% Senior Subordinated Notes due 2014	215,668		215,668		214,320		Level 1
7.125% Senior Subordinated Notes due 2016	240,750		240,750		225,660		Level 1
Borgata bank credit facility	20,000		20,000		20,000		Level 2
Borgata 9.50% Senior Secured Notes due 2015	400,000		387,798		416,000		Level 1
Borgata 9.875% Senior Secured Notes due 2018	400,000		388,298		411,000		Level 1
Other	11,421		11,421		10,850		Level 3
Total long-term debt, including current maturities	$	3,212,839	$	3,179,760	$	3,144,243

	December 31, 2010
	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
	(In thousands)
Bank credit facility	$	1,425,000	$	1,425,000	$	1,346,625	Level 2
9.125% Senior Notes due 2018	500,000		490,206		487,755		Level 1
6.75% Senior Subordinated Notes due 2014	215,668		215,668		212,163		Level 1
7.125% Senior Subordinated Notes due 2016	240,750		240,750		217,879		Level 1
Borgata bank credit facility	60,900		60,900		60,900		Level 2
Borgata 9.50% Senior Secured Notes due 2015	400,000		386,712		375,111		Level 1
Borgata 9.875% Senior Secured Notes due 2018	400,000		387,758		379,518		Level 1
Other	11,761		11,761		11,173		Level 3
Total long-term debt, including current maturities	$	3,254,079	$	3,218,755	$	3,091,124

The estimated fair value of the Amended Credit Facility is based on a relative value analysis performed on or about June 30, 2011 and December 31, 2010, respectively. The estimated fair value of Borgata's bank credit facility at June 30, 2011 and December 31, 2010 approximates its carrying value due to the short-term nature and variable repricing of the underlying Eurodollar loans comprising the Borgata bank credit facility. The estimated fair values of our senior subordinated and senior notes and Borgata's senior secured notes are based on quoted market prices as of June 30, 2011 and December 31, 2010, respectively. 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.

There were no transfers between Level 1 and Level 2 measurements during the six months ended June 30, 2011 or the year ended December 31, 2010.

Fair Value of Non-Recourse Obligations of Variable Interest Entity

At June 30, 2011 and December 31, 2010, the carrying value of LVE's long-term debt approximates its fair value due to the prevailing interest rates on the debt, which are comparable to market.

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Condensed Consolidated Statement of Changes in Stockholders' Equity (USD $) In Thousands, except Share data	Total	Comprehensive Income	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interest
Balance at Dec. 31, 2009	$ 1,156,369		$ 861	$ 623,035	$ 550,599	$ (18,126)	$ 0
Balance, shares at Dec. 31, 2009			86,130,454
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	11,817	11,817	0	0	11,817	0	0
Derivative instruments fair value adjustment, net of taxes	4,410	4,410	0	0	0	4,410	0
Comprehensive income attributable to Boyd Gaming Corporation		16,227
Stock options exercised, shares			96,187
Stock options exercised, value	606		1	605	0	0	0
Tax effect from share-based compensation arrangements	(21)		0	(21)	0	0	0
Share-based compensation costs	5,728		0	5,728	0	0	0
Change in noncontrolling interest in Borgata and LVE for the six months ending June 30, 2011, and in Borgata for the six months ending June 30, 2010	331,379		0	0	0	0	331,379
Balance at Jun. 30, 2010	1,510,288		862	629,347	562,416	(13,716)	331,379
Balance, shares at Jun. 30, 2010			86,226,641
Balance at Dec. 31, 2010	1,394,743		862	635,028	560,909	(7,594)	205,538
Balance, shares at Dec. 31, 2010	86,244,978		86,244,978
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(6,472)	(6,472)	0	0		0	0
Derivative instruments fair value adjustment, net of taxes	7,594	7,594	0	0	0	7,594	0
Comprehensive income		1,122
Comprehensive loss attributable to noncontrolling interest	(808)	(808)	0	0	0	0	(808)
Comprehensive income attributable to Boyd Gaming Corporation		314
Stock options exercised, shares			40,006
Stock options exercised, value	239		1	238	0	0	0
Tax effect from share-based compensation arrangements	(558)		0	(558)	0	0	0
Share-based compensation costs	5,953		0	5,953	0	0	0
Change in noncontrolling interest in Borgata and LVE for the six months ending June 30, 2011, and in Borgata for the six months ending June 30, 2010	(5,482)		0	0	0	0	(5,482)
Balance at Jun. 30, 2011	$ 1,395,209		$ 863	$ 640,661	$ 554,437	$ 0	$ 199,248
Balance, shares at Jun. 30, 2011	86,284,984		86,284,984

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Write-downs and Other Items, Net

6 Months Ended

Jun. 30, 2011

Write Downs and Other Items Net [Abstract]

Asset Impairment and Other Charges Net [Text Block]

WRITE-DOWNS AND OTHER ITEMS, NET

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

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011			2010		2011			2010
	In thousands
Impairment of trademark	$	—		$	—	$	5,000		$	—
Measurement period adjustments	(103		)	—		(473		)	—
Asset write-downs	852			12		929			12
Acquisition related expenses	370			1,979		370			3,580
Tunica flood expenses, net of recoveries	1,143			—		1,143			—
Total write-downs and other items, net	$	2,262		$	1,991	$	6,969		$	3,592

Impairment of Trademark

As discussed in Note 5, Intangible Assets, during the six months ended June 30, 2011,we recorded a $5.0 million impairment to the trademark, based upon the performance of an interim impairment test in connection with the valuation of Borgata.

Measurement Period Adjustments

In connection with the valuation procedures we performed on Borgata, we recorded measurement adjustments of $0.1 million and $0.5 million during the three and six months ended June 30, 2011, which were primarily comprised of a $0.3 million bargain purchase gain.

Asset Write-Downs

During the three months ended June 30, 2011 and 2010, we recognized a loss of $0.9 million and $0.0 million in connection with the disposal of certain property and equipment in the ordinary course of business.

During the six months ended June 30, 2011, we recognized a loss of $0.9 million and $0.0 million in connection with the disposal of certain property and equipment in the ordinary course of business.

Acquisition Related Expenses

During the three months ended June 30, 2011 and 2010, we recorded $0.4 million and $2.0 million of expenses related to evaluating various acquisition possibilities and other business development activities.

During the six months ended June 30, 2011 and 2010, we recorded $0.4 million and $3.6 million of expenses related to evaluating various acquisition possibilities and other business development activities.

Tunica Flood Expenses, Net of Recoveries

Due to flooding of the Mississippi River and temporary closure of the property in May 2011, during the three and six months ended June 30, 2011, we recorded $1.1 million of Tunica flood expenses, net of recoveries.

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Condensed Consolidating Financial Information

6 Months Ended

Jun. 30, 2011

Condensed Consolidating Financial Information [Abstract]

Condensed Consolidating Financial Information for Subsidiary Guarantors and Nonguarantors [Text Block]

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In contemplation of the registration of our 9.125% Senior Notes due 2018 under the Securities Act of 1933, separate condensed consolidating financial information for our subsidiary guarantors and non-guarantors of this debt is presented below. The non-guarantors primarily represent special purpose entities, tax holding companies, our less significant operating subsidiaries and our less than wholly-owned subsidiaries.

The tables below present the condensed consolidating balance sheets as of June 30, 2011 and December 31, 2010 and the condensed consolidating statements of operations for the three and six month periods ended June 30, 2011 and 2010 and the condensed consolidating statements of cash flows for the six months ended June 30, 2011 and 2010.

Condensed Consolidating Balance Sheets

	June 30, 2011
	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
					(In thousands)
Assets
Cash and cash equivalents	$	76,513	$	74,481	$	3,926		$	20,860		$	—		$	175,780
Other current assets	42,220		22,711		18,673			45,751			—			129,355
Property and equipment, net	107,365		1,895,308		76,698			1,236,221			—			3,315,592
Assets held for development	—		923,997					195,941			—			1,119,938
Investments in subsidiaries	3,715,764		334,221		32			4,570			(4,054,587		)	—
Intercompany receivable	—		2,063,821		66,146						(2,129,967		)	—
Other assets, net	37,161		19,908		2,966			94,937			—			154,972
Intangible assets, net	—		460,193		—			67,129			—			527,322
Goodwill, net	—		212,794		782			—			—			213,576
Total assets	$	3,979,023	$	6,007,434	$	169,223		$	1,665,409		$	(6,184,554	)	$	5,636,535
Liabilities and Stockholders' Equity
Current liabilities	$	41,040	$	164,305	$	17,526		$	106,704		$	—		$	329,575
Intercompany payable	349,820		1,386,606		255,615			—			(1,992,041		)	—
Current maturities of long-term debt	356,002		709		—			—			—			356,711
Non-recourse obligations	—		—		—			248,128			—			248,128
Long-term debt, net of current maturities	2,016,241		10,712		—			796,096			—			2,823,049
Other long-term liabilities	19,959		403,406		1,538			58,960			—			483,863
														0
Preferred stock	—		—		—			—			—			—
Common stock	863		31,128		32			—			(31,160		)	863
Additional paid-in capital	640,661		2,972,069		41,724			476,733			(3,490,526		)	640,661
Retained earnings	554,437		1,038,499		(147,212		)	(21,212		)	(870,075		)	554,437
Total Boyd Gaming Corporation stockholders' equity	1,195,961		4,041,696		(105,456		)	455,521			(4,391,761		)	1,195,961
Noncontrolling interest	—		—		—			—			199,248			199,248
Total stockholders' equity	1,195,961		4,041,696		(105,456		)	455,521			(4,192,513		)	1,395,209
Total liabilities and stockholders' equity	$	3,979,023	$	6,007,434	$	169,223		$	1,665,409		$	(6,184,554	)	$	5,636,535

Condensed Consolidating Balance Sheets, continued

	December 31, 2010
	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)		Eliminations			Consolidated
						(In thousands)
Assets
Cash and cash equivalents	$	11,231		$	88,282	$	3,679		$	42,431	$	—		$	145,623
Other current assets	10,395			61,829		15,246			46,546		—			134,016
Property and equipment, net	111,921			1,939,834		77,949			1,253,667		—			3,383,371
Assets held for development	—			923,038		—			196,365		—			1,119,403
Investments in subsidiaries	3,373,486			424,707		—			5,185		(3,803,378		)	—
Intercompany receivable	50,824			—		69,931					(120,755		)	—
Other assets, net	73,420			46,885		2,979			89,836		(59,534		)	153,586
Intangible assets, net	—			460,714		—			79,000		—			539,714
Goodwill, net	—			212,794		782			—		—			213,576
Total assets	$	3,631,277		$	4,158,083	$	170,566		$	1,713,030	$	(3,983,667	)	$	5,689,289
Liabilities and Stockholders' Equity
Current liabilities	$	39,663		$	175,870	$	17,462		$	109,161	$	—		$	342,156
Intercompany payable	—			472,795		246,144					(718,939		)	—
Current maturities of long-term debt	25,000			690		—			—		—			25,690
Non-recourse obligations	—			—		—			243,059		—			243,059
Long-term debt, net of current maturities	2,346,623			11,072		—			835,370		—			3,193,065
Other long-term liabilities	30,786			399,148		1,538			59,104		—			490,576
Preferred stock	—			—		—			—		—			—
Common stock	862			30,298		32			—		(30,330		)	862
Additional paid-in capital	635,028			2,320,477		41,724			421,472		(2,783,673		)	635,028
Retained earnings	560,909			747,734		(136,334		)	44,864		(656,264		)	560,909
Accumulated other comprehensive loss	(7,594		)	—		—			—		—			(7,594		)
Total Boyd Gaming Corporation stockholders' equity	1,189,205			3,098,509		(94,578		)	466,336		(3,470,267		)	1,189,205
Noncontrolling interest	—			—		—			—		205,538			205,538
Total stockholders' equity	1,189,205			3,098,509		(94,578		)	466,336		(3,264,729		)	1,394,743
Total liabilities and stockholders' equity	$	3,631,277		$	4,158,084	$	170,566		$	1,713,030	$	(3,983,668	)	$	5,689,289

Condensed Consolidating Statements of Operations

	Three months ended June 30, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Net revenues	$	38,350		$	377,443		$	14,204		$	185,525		$	(41,119	)	$	574,403
Costs and expenses
Operating	—			203,551			14,537			96,014			—			314,102
Selling, general and administrative	—			62,073			2011			32,699			—			96,783
Maintenance and utilities	—			20,316			1,038			15,419			—			36,773
Depreciation and amortization	2,004			29,204			732			16,548			—			48,488
Corporate expense	22,511			11,611			653			—			(22,511		)	12,264
Preopening expenses	240			(3,007		)	4,416			92			—			1,741
Write-downs and other items, net	397			1,116			—			749			—			2,262
Total costs and expenses	25,152			324,864			23,387			161,521			(22,511		)	512,413
Equity in earnings of subsidiaries	15,397			(2,842		)	—			—			(12,555		)	—
Operating income	28,595			49,737			(9,183		)	24,004			(31,163		)	61,990
Other expense (income)
Interest expense, net	39,847			198			(6		)	26,635			—			66,674
Fair value adjustment of derivative instruments	48			—			—			—			—			48
Total other expense, net	39,895			198			(6		)	26,635			—			66,722
Income (loss) before income taxes	(11,300		)	49,539			(9,177		)	(2,631		)	(31,163		)	(4,732		)
Income taxes	8,349			(10,691		)	1,611			(180		)				(911		)
Net income (loss)	(2,951		)	38,848			(7,566		)	(2,811		)	(31,163		)	(5,643		)
Net loss attributabl to controlling interest	—			—			—			—			2,692			2,692
Net income (loss) attributable to Boyd Gaming Corporation	$	(2,951	)	$	38,848		$	(7,566	)	$	(2,811	)	$	(28,471	)	$	(2,951	)

Condensed Consolidating Statements of Operations, continued

	Three months ended June 30, 2010
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Net revenues	$	34,310		$	375,466		$	16,088		$	186,892		$	(34,310	)	$	578,446
Costs and expenses
Operating	—			208,469			14,052			96,445			—			318,966
Selling, general and administrative	—			65,693			2,132			31,841			—			99,666
Maintenance and utilities	—			21,257			1,067			15,646			—			37,970
Depreciation and amortization	3,134			32,927			1,111			18,236			—			55,408
Corporate expense	24,368			(14,055		)	3,213			—			—			13,526
Preopening expenses	76			(98		)	1,265			—			—			1,243
Write-downs and other items, net	1,979			—			—			12			—			1,991
Total costs and expenses	29,557			314,193			22,840			162,180			—			528,770
Equity in earnings of subsidiaries	18,106			8,299			—			—			(26,405		)	—
Operating income	22,859			69,572			(6,752		)	24,712			(60,715		)	49,676
Other expense (income)
Interest expense, net	28,879			183			—			5,588			—			34,650
Gain on early retirements of debt	(1,912		)	—			—			—			—			(1,912		)
Total other expense, net	26,967			183			—			5,588			—			32,738
Income (loss) before income taxes	(4,108		)	69,389			(6,752		)	19,124			(60,715		)	16,938
Income taxes	7,490			(11,581		)	1,016			(1,837		)	—			(4,912		)
Net income (loss)	3,382			57,808			(5,736		)	17,287			(60,715		)	12,026
Net loss attributable to noncontrolling interest	—			—			—			—			(8,644		)	(8,644		)
Net income (loss) attributable to Boyd Gaming Corporation	$	3,382		$	57,808		$	(5,736	)	$	17,287		$	(69,359	)	$	3,382

Condensed Consolidating Statements of Operations, continued

	Six months ended June 30, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Net revenues	$	76,700		$	758,920		$	28,583		$	357,256		$	(82,110	)	$	1,139,349
Costs and expenses
Operating	—			411,161			29,053			187,125			—			627,339
Selling, general and administrative	—			124,750			4,275			63,546			—			192,571
Maintenance and utilities	—			40,484			1,937			31,767			—			74,188
Depreciation and amortization	4,028			58,101			1,529			35,414			—			99,072
Corporate expense	48,685			—			1,333			—			(24,474		)	25,544
Preopening expenses	495			(699		)	9,094			92			(5,410		)	3,572
Write-downs and other items, net	369			835			—			5,765			—			6,969
Total costs and expenses	53,577			634,632			47,221			323,709			(29,884		)	1,029,255
Equity in earnings of subsidiaries	30,180			(5,265		)	—			—			(24,915		)	—
Operating income	53,303			119,023			(18,638		)	33,547			(77,141		)	110,094
Other expense (income)
Interest expense, net	79,570			344			—			44,046			—			123,960
Fair value adjustment of derivative instruments	265			—			—			—			—			265
Loss on early retirements of debt	20			—			—			—			—			20
Total other expense, net	79,855			344			—			44,046			—			124,245
Income (loss) before income taxes	(26,552		)	118,679			(18,638		)	(10,499		)	(77,141		)	(14,151		)
Income taxes	20,080			(21,595		)	3,221			491						2,197
Net income (loss)	(6,472		)	97,084			(15,417		)	(10,008		)	(77,141		)	(11,954		)
Net loss attributable to noncontrolling interest	—			—			—			—			5,482			5,482
Net income (loss) attributable to Boyd Gaming Corporation	$	(6,472	)	$	97,084		$	(15,417	)	$	(10,008	)	$	(71,659	)	$	(6,472	)

Condensed Consolidating Statements of Operations, continued

	Six months ended June 30, 2010
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Net revenues	$	69,826		$	755,808		$	34,105		$	203,668		$	(69,826	)	$	993,581
Costs and expenses
Operating	—			416,540			28,078			104,383			—			549,001
Selling, general and administrative	—			132,150			4,494			33,300			—			169,944
Maintenance and utilities	—			41,901			2,086			18,122			—			62,109
Depreciation and amortization	6,416			66,811			2,366			19,861			—			95,454
Corporate expense	47,268			—			6,785			—			(28,438		)	25,615
Preopening expenses	156			(74		)	2,224			—			—			2,306
Write-downs and other items, net	3,580			—			—			12			—			3,592
Total costs and expenses	57,420			657,328			46,033			175,678			(28,438		)	908,021
Equity in earnings of subsidiaries	40,830			14,165			—			—			(46,849		)	8,146
Operating income	53,236			112,645			(11,928		)	27,990			(88,237		)	93,706
Other expense (income)
Interest expense, net	57,213			368			—			6,072			—			63,653
Gain on early retirements of debt	(3,949		)	—			—			—			—			(3,949		)
Other non-operating expenses, net	3,133			—			—			—			—			3,133
Total other expense, net	56,397			368			—			6,072			—			62,837
Income (loss) before income taxes	(3,161		)	112,277			(11,928		)	21,918			(88,237		)	30,869
Income taxes	14,978			(24,016		)	2,014			(2,137		)	—			(9,161		)
Net income (loss)	11,817			88,261			(9,914		)	19,781			(88,237		)	21,708
Noncontrolling interest	—			—			—			—			(9,891		)	(9,891		)
Net income (loss) attributable to Boyd Gaming Corporation	$	11,817		$	88,261		$	(9,914	)	$	19,781		$	(98,128	)	$	11,817

Condensed Consolidating Statements of Cash Flows

	Six months ended June 30, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations		Consolidated
							(In thousands)
Cash flows from operating activities
Net cash from operating activities	$	64,350		$	7,102		$	464		$	25,652		$	—	$	97,568
Cash flows from investing activities
Capital expenditures	—			(20,563		)	(217		)	(10,094		)	—		(30,874		)
Investments in subsidiaries, net	787			—			—			(787		)	—		—
Other investing activities	55			—			—			168			—		223
Net cash from investing activities	842			(20,563		)	(217		)	(10,713		)	—		(30,651		)
Cash flows from financing activities
Borrowings under bank credit facility	35,920			—			—			365,700			—		401,620
Payments under bank credit facility	(35,920		)	—			—			(406,600		)	—		(442,520		)
Payments on long-term debt	—			(340		)	—			—			—		(340		)
Proceeds from issuance of non-recourse obligations	—			—			—			5,250			—		5,250
Debt financing cosst, net	(149		)	—			—			(679		)	—		(828		)
Other financing activities	239			—			—			(181		)	—		58
Net cash from financing activities	90			(340		)	—			(36,510		)	—		(36,760		)
Net change in cash and cash equivalents	65,282			(13,801		)	247			(21,571		)	—		30,157
Cash and cash equivalents, beginning of period	11,231			88,282			3,679			42,431			—		145,623
Cash and cash equivalents, end of period	$	76,513		$	74,481		$	3,926		$	20,860		$	—	$	175,780

Condensed Consolidating Statements of Cash Flows

	Six months ended June 30, 2010
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Cash flows from operating activities
Net cash from operating activities	$	107,356		$	(5,277	)	$	(1,216	)	$	38,471		$	10,423		$	149,757
Cash flows from investing activities
Capital expenditures	(8,021		)	(34,002		)	(342		)	(5,116		)	—			(47,481		)
Investments in subsidiaries, net	—			223			—			(525		)	—			(302		)
Net cash upon change in control of Borgata				26,025						26,025			(26,025		)	26,025
Other investing activities	138			—			—			—			—			138
Net cash from investing activities	(7,883		)	(7,754		)	(342		)	20,384			(26,025		)	(21,620		)
Cash flows from financing activities
Borrowings under bank credit facility	374,800			—			—			190,983			—			565,783
Payments under bank credit facility	(399,300		)	—			—			(196,400		)	—			(595,700		)
Payments under note payable	(46,875		)	—			—			—			—			(46,875		)
Distributions to noncontrolling interest	—			—			—			(31,204		)	15,602			(15,602		)
Proceeds from stock options exercised	606			—			—			—			—			606
Payments on long-term debt	(28,861		)	(321		)	—			—			—			(29,182		)
Other financing activities	99			—			—			(295		)	—			(196		)
Net cash from financing activities	(99,531		)	(321		)	—			(36,916		)	15,602			(121,166		)
Net change in cash and cash equivalents	(58		)	(13,352		)	(1,558		)	21,939			—			6,971
Cash and cash equivalents, beginning of period	363			88,071			4,768			—			—			93,202
Cash and cash equivalents, end of period	$	305		$	74,719		$	3,210		$	21,939		$	—		$	100,173

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash Flows from Operating Activities
Net income (loss)	$ (11,954)	$ 21,708
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	99,072	95,454
Amortization of debt financing costs	4,304	2,917
Amortization of discounts on senior secured notes	1,626	0
Share-based compensation expense	5,953	5,728
Deferred income taxes	(4,991)	4,503
Operating and non-operating income from Borgata	0	(5,013)
Distributions of earnings received from Borgata	0	1,910
Noncash asset write-downs	6,444	0
Loss (gain) on early retirements of debt	20	(3,949)
Other operating activities	1,556	1,135
Changes in operating assets and liabilities:
Restricted cash	634	554
Accounts receivable, net	(48)	2,628
Inventories	1,402	(598)
Prepaid expenses and other current assets	(2,920)	(2,004)
Income taxes receivable	(1,023)	12,102
Other long-term tax assets	647	0
Other assets, net	(1,754)	870
Accounts payable and accrued liabilities	(2,263)	9,622
Income taxes payable	123	0
Other long-term tax liabilities	2,382	1,159
Other liabilities	(1,642)	1,031
Net cash provided by operating activities	97,568	149,757
Cash Flows from Investing Activities
Capital expenditures	(30,874)	(47,481)
Net cash effect upon change in controlling interest of Borgata	0	26,025
Decrease in restricted investments	168	0
Other investing activities	55	(164)
Net cash used in investing activities	(30,651)	(21,620)
Cash Flows from Financing Activities
Payments on retirements of long-term debt	0	(28,861)
Borrowings under bank credit facility	35,920	374,800
Payments under bank credit facility	(35,920)	(399,300)
Borrowings under Borgata bank credit facility	365,700	190,983
Payments under Borgata bank credit facility	(406,600)	(196,400)
Debt financing costs, net	(828)	0
Payments under note payable	0	(46,875)
Proceeds from variable interest entity's issuance of debt	5,250	0
Payments on loans to variable interest entity's members	(181)	0
Noncontrolling interest distributions by Borgata	0	(15,602)
Other financing activities	(101)	89
Net cash used in financing activities	(36,760)	(121,166)
Increase in cash and cash equivalents	30,157	6,971
Cash and cash equivalents, beginning of period	145,623	93,202
Cash and cash equivalents, end of period	175,780	100,173
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	128,400	69,109
Cash paid (received) for income taxes, net	1,221	(9,761)
Supplemental Schedule of Noncash Investing and Financing Activities
Payables incurred for capital expenditures	4,087	6,965
Fair value adjustment on derivative instruments	11,931	7,884
Assets and Liabilities Recorded at Fair Value (net of Cash Received) Due to Change in Controlling Interest of Borgata
Accounts receivable, net	0	29,099
Inventories	0	4,118
Prepaid expenses and other current assets	0	9,201
Deferred income taxes	0	1,290
Property and equipment, net	0	1,293,792
Intangibles	0	14,000
Indefinite lived intangibles	0	65,000
Other assets, net	0	36,641
Fair value of assets	0	1,453,141
Current maturities of long-term debt	0	632,289
Accounts payable	0	8,729
Income taxes payable	0	7,579
Accrued liabilities	0	66,854
Other long-term liabilities	0	40,204
Fair value of liabilities	$ 0	$ 755,655

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Derivative Instruments

6 Months Ended

Jun. 30, 2011

Derivatives [Abstract]

Derivative Instruments and Hedging Activities Disclosure

DERIVATIVE INSTRUMENTS

We utilize derivative instruments to manage interest rate risk.

Derivatives that are not designated as hedges for accounting purposes must be adjusted to fair value through income. We designated current interest rate swaps as cash flow hedges through September 30, 2010, and measured 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.

Interest Rate Swap Agreements

The Company has entered into floating-to-fixed interest rate swap arrangements in order to manage interest rate risk relating to its Amended Credit Facility. We were a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500 million, whereby we received payments based upon the three-month LIBOR and made payments based upon a stipulated fixed rate. These interest rate swap agreements modified the Company's exposure to interest rate risk by synthetically converting a portion of the Company's floating-rate debt to a fixed rate. The interest rate swap agreements terminated on June 30, 2011, however, the following presents the activity related to our accounting for the interest rate swaps during the periods in which they were outstanding.

The following table presents the historical fair value of the interest rate swaps recorded in the accompanying condensed consolidated balance sheets as of December 31, 2010, the balance of which are included in other long-term liabilities.

	Notional				December 31,
Effective Date	Amount		Fixed Rate		2010		Maturity Date
September 28, 2007	$	100,000	5.13	%	$	2,374	June 30, 2011
September 28, 2007	200,000		5.14	%	4,751		June 30, 2011
June 30, 2008	200,000		5.13	%	4,746		June 30, 2011
Totals	$	500,000			$	11,871

Hedge Accounting

These derivative instruments were accounted for as cash flow hedges through September 30, 2010. Accounting for cash flow hedging requires determining a division of hedge results deemed effective and deemed ineffective. However, most of the Company's hedges were designed in such a way so as to perfectly offset specifically-defined interest payments, such that no ineffectiveness has occurred, nor would any ineffectiveness occur, as long as the forecasted cash flows of the designated hedged items and the associated swap contracts remain unchanged.

However, on October 1, 2010, in anticipation of the refinancing of our former bank credit facility, we de-designated all of our interest rate swap agreements as cash flow hedges. Concurrent with the de-designation of the hedging relationship, hedge accounting was suspended and the amount remaining in accumulated other comprehensive loss associated with this cash flow hedging relationship was frozen. This amount is being amortized into interest expense over the respective remaining term of the associated debt. Prospectively, all changes in the fair value of these interest rate swaps will be recognized immediately in earnings.

Fair Value

Fair value approximates the amount we would pay if these contracts were settled at the respective valuation dates. Fair value is estimated based upon current, and predictions of future, interest rate levels along a yield curve, the remaining duration of the instruments and other market conditions, and therefore, is subject to significant estimation and a high degree of variability and fluctuation between periods. The fair value is adjusted, to reflect the impact of credit ratings of the counterparties or the Company, as applicable. These adjustments resulted in a reduction in the fair values as compared to their settlement values.

Credit risk relating to derivative counterparties is mitigated by using multiple, highly rated counterparties, and the credit quality of each is monitored on an ongoing basis.

The fair values of our derivative instruments at December 31, 2010 included approximately $0.2 million 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.

Classification of Changes in Fair Value

The effect of derivative instruments on the condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010 was as follows (in thousands):

Derivatives in a Cash Flow Hedging Relationship - Interest Rate Swap Contracts	Gain  Recognized in  OCI on Derivative  (Effective Portion)		Location of Gain  (Loss) Reclassified  from AOCI  into Income  (Ineffective Portion)	Gain (Loss)  Reclassified  from AOCI  into Income  (Ineffective Portion)
Three Months Ended
June 30, 2011	$	—	Interest expense	$	(6,063	)
June 30, 2010	4,869		Interest expense	554
Six Months Ended
June 30, 2011	—		Interest expense	(11,824		)
June 30, 2010	6,818		Interest expense	1,066

Derivatives Not Designated as Hedging Instruments - Interest Rate Swap Contracts	Location of Loss Recognized  in Income on Derivative  (Ineffective Portion)	Loss Recognized in Income on Derivative  (Ineffective Portion)
Three Months Ended June 30, 2011	Fair value adjustment of derivative instruments	$	48
Six Months Ended June 30, 2011	Fair value adjustment of derivative instruments	$	265

The net effect of our floating-to-fixed interest rate swaps resulted in an increase in interest expense of $6.1 million and $5.6 million for the three months ended June 30, 2011 and 2010, respectively, and an increase in interest expense of $11.8 million and $11.2 million for the six months ended June 30, 2011 and 2010, respectively, as compared to the contractual rate of the underlying hedged debt, for these periods.

During the three and six months ended June 30, 2011, due to the de-designation of our interest rate swap agreements as hedges during 2010, we recognized $0.0 million and $0.3 million, respectively, as a loss on the change in the fair value of these swaps. In addition, the Company amortized $6.1 million and accreted $0.6 million during the three months ended June 30, 2011 and 2010, respectively, and amortized $11.8 million and accreted $1.1 million during the six months ended June 30, 2011 and 2010, respectively, in OCI related to these, and other derivatives that were previously de-designated as hedging instruments.

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Noncontrolling Interest

6 Months Ended

Jun. 30, 2011

Noncontrolling Interest [Abstract]

Noncontrolling Interest Disclosure

NONCONTROLLING INTEREST

Noncontrolling interest represents: (i) the 50% interest in Borgata, held by the Divestiture Trust for the economic benefit of MGM, which was initially recorded at fair value at the date of the effective change in control, on March 24, 2010; and (ii) all 100% of the members' equity interest in LVE, the variable interest entity which was consolidated in our financial statements effective January 1, 2010, but in which we hold no equity interest. Pursuant to the authoritative accounting guidance for noncontrolling interests, a noncontrolling interest continues to be attributed its share of losses even if that attribution results in a deficit noncontrolling interest balance, as is the case with LVE, as presented below.

Changes in the noncontrolling interest during the six months ended June 30, 2011 are as follows:

	Borgata			LVE			Total
	(In thousands)
Six Months Ended June 30, 2011
Beginning balance, January 1, 2011	$	219,256		$	(13,718	)	$	205,538
Attributable net loss	(4,527		)	(955		)	(5,482		)
Comprehensive loss	—			(808		)	(808		)
Ending Balance, June 30, 2011	$	214,729		$	(15,481	)	$	199,248

LVE

Comprehensive Income

LVE has entered into interest rate derivative contracts in order to hedge exposure to increasing interest rates, and the impact of those rates on the cash flows of its variable-rate debt. LVE's active interest rate swaps are as follows (notional amount in thousands):

Effective Date	Notional Amount		Fixed Rate		Maturity Date
Derivatives Designated as Hedging Instruments:
December 21, 2007	$	131,986	4.59	%	November 1, 2013
Derivatives Not Designated as Hedging Instruments:
December 21, 2007	100,000		3.42	%	November 1, 2013
Totals	$	231,986

The fair value of these derivatives was $18.2 million at June 30, 2011, which represents the amount LVE would have to pay the counterparty to terminate these contracts as of such date.

At inception, these interest rate derivatives were designated as cash flow hedges and determined to be highly effective. The differential to be paid or received as a result of these swaps is accrued as interest rates change and is recognized as an adjustment to interest expense. The change in fair value of the effective portion of these derivative has been recorded in accumulated other comprehensive loss. During the three and six months ended June 30, 2011, LVE recognized $2.1 million and $0.8 million, respectively, in comprehensive loss related to the changes in the fair value of the effective portion of these hedges.

Prior to January 1, 2010, the date LVE is first reflected in our financial condition and results of operations, hedge accounting was discontinued on the interest rate swap related to the taxable debt because it was no longer expected to be highly effective in hedging the exposure to increased interest rates and the impact of those rates on cash flows. The ineffective portion of the swap caused the variable-rate debt to increase at a slower pace than the contractual increases in notional amount of the swap.

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Condensed Consolidated Balance Sheets (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Current assets
Cash and cash equivalents	$ 175,780	$ 145,623
Restricted cash	18,860	19,494
Accounts receivable, net	46,036	47,942
Inventories	14,628	16,029
Prepaid expenses and other current assets	40,197	37,153
Income taxes receivable	0	5,249
Deferred income taxes	9,634	8,149
Total current assets	305,135	279,639
Property and equipment, net	3,315,592	3,383,371
Assets held for development	1,119,938	1,119,403
Debt financing costs, net	31,927	34,993
Restricted investments	47,999	48,168
Other assets, net	75,046	70,425
Intangible assets, net	527,322	539,714
Goodwill, net	213,576	213,576
Total assets	5,636,535	5,689,289
Current liabilities
Current maturities of long-term debt	356,711	25,690
Non-recourse obligations of variable interest entity	248,128	243,059
Accounts payable	44,955	57,183
Income taxes payable	340	6,504
Accrued liabilities	284,280	278,469
Total current liabilities	934,414	610,905
Long-term debt, net of current maturities	2,823,049	3,193,065
Deferred income taxes	362,899	362,174
Other long-term tax liabilities	47,194	44,813
Other liabilities	73,770	83,589
Commitments and contingencies (Note 10)
Stockholders’ equity
Preferred stock, $0.01 par value, 5,000,000 shares authorized	0	0
Common stock, $0.01 par value, 200,000,000 shares authorized; 86,284,984 and 86,244,978 shares outstanding	863	862
Additional paid-in capital	640,661	635,028
Retained earnings	554,437	560,909
Accumulated other comprehensive loss, net	0	(7,594)
Total Boyd Gaming Corporation stockholders’ equity	1,195,961	1,189,205
Noncontrolling interest	199,248	205,538
Total stockholders’ equity	1,395,209	1,394,743
Total liabilities and stockholders’ equity	$ 5,636,535	$ 5,689,289