10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2005

Commission file number 001-13641

PINNACLE ENTERTAINMENT, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	95-3667491
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

3800 Howard Hughes Parkway

Las Vegas, Nevada 89109

(Address of Principal Executive Offices) (Zip Code)

(702) 784-7777

(Registrant’s Telephone Number, Including Area Code)

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

PINNACLE ENTERTAINMENT, INC.

Common Stock, $.10 par value

New York Stock Exchange

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

Indicate by check mark whether registrant: is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:  YES  x    NO  ¨

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

Indicate by check mark whether 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, and (2) has been subject to such filing requirements for the past 90 days:  YES  x    NO  ¨

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (Check one):

Large accelerated filer  x Accelerated filer  ¨ Non-accelerated filer  ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):  YES  ¨    NO  x.

The aggregate market value of the common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter was $786,802,682 based on a closing price of $19.56 per share of common stock. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of outstanding shares of the registrant’s common stock, as of the close of business on March 10, 2006: 47,888,838.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive 2006 proxy statement, anticipated to be filed with the Securities and Exchange Commission within 120 days after the close of the Registrant’s fiscal year, are incorporated by reference into Part III of this Form 10-K.

PINNACLE ENTERTAINMENT, INC.

TABLE OF CONTENTS

PART I
Item 1.	Description of Business	1
	Company Overview	3
	Business Strategy and Competitive Strengths	4
	Current Operations	5
	Development Activities	7
	Expansion Opportunities	8
	Acquisitions	9
	Assets Held for Sale	9
	Competition	10
	Government Regulation and Gaming Issues	10
	Employees	11
	Other Information	11
	Available Information	11
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	20
Item 2.	Properties	21
Item 3.	Legal Proceedings	22
Item 4.	Submission of Matters to a Vote of Security Holders	24
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
Item 6.	Selected Financial Data	26
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
	Results of Operations	30
	Liquidity and Capital Resources	37
	Other Supplemental Data	41
	Contractual Obligations and Other Commitments	43
	Factors Affecting Future Operating Results	44
	Critical Accounting Policies	46
	Recently Issued and Adopted Accounting Standards	47
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 8.	Financial Statements	49
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	49
Item 9A.	Controls and Procedures	49
Item 9B.	Other Information	51
PART III
Item 10.	Directors and Executive Officers of the Registrant	52
Item 11.	Executive Compensation	52
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	52
Item 13.	Certain Relationships and Related Transactions	52
Item 14.	Principal Accountant Fees and Services	52
PART IV
Item 15.	Exhibits and Financial Statement Schedules	53
	Signatures	63

PART I

Item 1.    Description of Business

Pending Acquisition of Aztar Corporation

On March 13, 2006, we entered into a definitive merger agreement with Aztar Corporation to acquire all outstanding shares of Aztar at a purchase price of $38.00 in cash per share of Aztar common stock. The aggregate transaction value, including the payment to Aztar stockholders of approximately $1.45 billion in cash and refinancing of approximately $723 million of Aztar debt, is approximately $2.1 billion. Aztar operates the Tropicana Casino and Resort in Atlantic City, New Jersey, the Tropicana Resort and Casino on the “Strip” in Las Vegas, Nevada, as well as other casino facilities in Laughlin, Nevada, Caruthersville, Missouri, and Evansville, Indiana. Completion of the acquisition is contingent upon, among other things, the approval of the transaction by the stockholders of Aztar and receipt of certain required gaming and other regulatory approvals. The merger agreement provides for the payment by Aztar to us, in certain circumstances, of a termination fee of $42 million and up to $13 million for expense reimbursement. We expect the transaction to close by the end of 2006.

In connection with the merger, we expect to refinance some or all of Aztar’s existing debt and some or all of our existing credit facility and senior subordinated debt. Certain banks have committed subject to terms and conditions contained in commitment letters we have received from those banks, to provide us up to approximately $3.4 billion in financing, which includes a $1.25 billion seven-year term loan facility, a $400 million six and one-half-year term loan facility, a $500 million five-year revolving credit facility and a $1.25 billion 365-day unsecured senior subordinated interim loan facility which, if not repaid at maturity, would be extended, subject to certain limited terms and conditions, to a 10-year term loan facility. We would also expect to use a total of approximately $150 million of cash on hand of ours and Aztar’s to fund the transaction. The new financing is also expected to provide the capacity necessary to finance our two St. Louis projects and our other announced plans to expand three of our existing facilities.

Our acquisition of Aztar is expected to permit us to expand our company significantly and would result in our having operations in the two largest U.S. gaming markets. We would have the opportunity to create a national casino network to increase customer loyalty across the system and attract additional customers to the combined company’s destination resort/hotel properties in Las Vegas and Atlantic City. We believe the combined company would have the financial resources to pursue its two development projects in St. Louis, its expansion projects at Belterra Casino Resort and L’Auberge du Lac and new hotels in New Orleans and at Aztar’s Evansville property, as well as other growth opportunities in the future.

After completion of the acquisition, we intend to develop a comprehensive plan for Aztar’s 34-acre Las Vegas “Strip” Tropicana site. We estimate that the design phase of this project will take at least two years from the close of the acquisition. When we are ready to proceed with the redevelopment, we would likely need substantial additional financing for the project, which we expect to be the largest development project we have undertaken to date.

Our Existing Business

Pinnacle Entertainment, Inc. is a rapidly growing, diversified, multi-jurisdictional owner and operator of gaming entertainment facilities. We own and operate five domestic casinos located in Nevada, Louisiana and Indiana and have plans to expand three of them. We also own a hotel in St. Louis, Missouri and have recently signed an agreement to purchase a riverboat casino near the site. We are also developing major casinos in downtown St. Louis, Missouri and in south St. Louis County, Missouri, and have filed a gaming license application in Philadelphia, Pennsylvania. We own a hotel casino site and have significant insurance claims related to a hotel casino previously operated in Biloxi, Mississippi. Outside of the United States, we operate casinos in Argentina; have begun construction of a small casino in the Bahamas; and have filed two applications for gaming licenses in Chile. Finally, we are in the process of selling our interests in the two southern California card clubs for which we receive lease income.

1

Pinnacle is the successor to the Hollywood Park Turf Club, organized in 1938. It was incorporated in 1981 under the name Hollywood Park Realty Enterprises, Inc. In 1992 we changed our name to Hollywood Park, Inc. In February 2000, we became Pinnacle Entertainment, Inc.

In May 2005, we opened L’Auberge du Lac, our casino resort in Lake Charles, Louisiana. It offers 743 guestrooms and suites, a casino with 1,601 slot machines and 60 table games, restaurants, a championship golf course and other resort amenities. In early 2006, we announced plans to add approximately 250 guestrooms, which when completed will bring the total to approximately 1,000 guestrooms. It is already the largest hotel in Louisiana outside of New Orleans.

In September 2005, we broke ground on our St. Louis City project, which will include a casino with approximately 2,000 slot machines, a 200-guestroom luxury hotel and other amenities. Also in September, we acquired the 297-suite Embassy Suites Hotel, which we intend to connect to our city project. In late 2005, we entered into a joint venture with a local partner for the development of a 10-story luxury condominium project on land near our site and overlooking the Mississippi River. Also in early 2006, we submitted a bid to acquire the President Casino—St. Louis, which dockside casino vessel is moored on the Mississippi River at the foot of our St. Louis City project site.

In November 2005, we began site development work on our St. Louis County project, named River City. River City is located on 56 acres of leased land approximately 10 miles south of downtown St. Louis and is planned to include approximately 3,000 slot machines, a 100-guestroom hotel, and substantial retail and entertainment space.

In December 2005, we filed an application seeking one of two available gaming licenses in Philadelphia, Pennsylvania. We are one of five applicants. If selected, we intend to build a casino that would include approximately 3,000 slot machines, multiple bars and restaurants, and a multiplex movie theater.

In early 2006, we also announced plans to add 250 guestrooms to Belterra Casino Resort, our property in southern Indiana. When completed with more than 850 guestrooms, we believe Belterra will be the largest hotel in the Indiana, Ohio and Kentucky region. We also announced plans for a 200-guestroom hotel at our Boomtown New Orleans property, the first guestrooms at that facility.

In July 2005, we opened our replacement casino in Neuquen, Argentina approximately one mile from our former leased facility. The new facility includes a larger, more luxurious casino, a restaurant, several bars and an entertainment venue on 20 acres of land the we own. In early 2006, we began construction of our 5,000-square-foot casino adjacent to the Four Seasons Resort Great Exuma at Emerald Bay in the Bahamas. In August 2005, we submitted bids for two casino licenses in Chile.

2

Company Overview

The following is an overview of our various operations as of December 31, 2005 (a):

			Number of
Property	Type of Facility	Principal Markets	Slot Machines	Table Games	Hotel Rooms
Operating Properties:
Boomtown New Orleans, LA	Dockside	Local	1,532	47	—
Belterra Casino Resort, IN	Dockside	Cincinnati, Ohio and Louisville, Kentucky	1,625	56	608
L’Auberge du Lac, LA	Boat-in-moat (b)	Houston, Beaumont, Southwest Louisiana	1,601	60	743
Boomtown Bossier City, LA	Dockside	Dallas/Ft. Worth and Local	1,190	30	188
Boomtown Reno, NV	Land-based	Northern California, Local	1,101	31	318
Casino Magic Argentina(c):	Land-based	Local and Regional Tourists	863	50	—
Embassy Suites St. Louis-Downtown(d)	Hotel	Regional Travelers	—	—	297
Operating Property Total			7,912	274	2,154
Properties Under Construction:
City of St. Louis, MO(e)	Boat-in-moat (b)	Missouri and Illinois	2,000	40	200
St. Louis County, MO(e)	Boat-in-moat (b)	Missouri and Illinois	3,000	60	100
Great Exuma, Bahamas(f)	Land-based	In-house Tourists	65	8	—
Pending Applications:
Philadelphia, PA (g)	Land-based	Philadelphia	3,000	—	—
Chile (h)	Land-based	Local and Regional Tourists	800	—	106
Assets Held for Sale (i):
Hollywood Park-Casino and Crystal Park Casino, CA	Land-based	Local	—	120	238

(a) This table excludes Casino Magic Biloxi, a casino and hotel we operated in Biloxi, Mississippi. As a result of damage caused by Hurricane Katrina, the casino barge was destroyed and the hotel structure sustained substantial damage. The facility remains closed since late August 2005, and will not reopen unless we decide to build a replacement facility. Casino Magic Biloxi had 1,177 slot machines, 34 table games and 378 guestrooms.

(b) A “boat-in-moat” is a floating, single-level dockside casino in a controlled body of water.

(c) Data present the combined operations of the four casinos we operate in Argentina.

(d) In early September 2005, we completed the acquisition of the Embassy Suites St. Louis-Downtown, a 297-suite facility located adjacent to our St. Louis City project under construction.

(e) We have begun construction of our downtown St. Louis facility and site development activities at our St. Louis County River City project. Subject to final approval of the Missouri Gaming Commission, we expect the city project to open in the third quarter of 2007 and River City to open approximately one year later in 2008.

(f) We have begun construction of our 5,000-square-foot casino in Great Exuma, which we anticipate will open in mid-2006.

(g) In late December 2005, we filed an application for one of two available gaming licenses in Philadelphia, Pennsylvania. We are one of five applicants.

(h) In August 2005, we filed gaming applications for two of 17 casino licenses made available by the Chilean government—one for a casino in Antofagasta and one for a casino in Rancagua. There are several other applicants for each opportunity.

(i) We anticipate selling our interests in the two southern California card clubs in mid-2006. As of year-end, we leased the facilities to a third-party operator on a year-to-year basis. Such leases have since expired and the status of the leases are now month-to-month.

3

Business Strategy and Competitive Strengths

Our goals are to grow our company and its profitability. Our strategies include the strategic development of new gaming properties in attractive gaming markets; a disciplined capital expenditure program at our existing locations; and strategic acquisitions at reasonable valuations to add to our customer network and improve our competitiveness. The following represent our key competitive strengths:

• High-Quality Properties in Attractive Locations.    We own high-quality casino properties in attractive locations. We are committed to maintaining the quality of our properties by offering up-to-date slot machines, presenting fresh entertainment offerings and renovating and improving our facilities where necessary to remain competitive and enhance our customers’ gaming experience.

• Geographically Diversified Portfolio.    We own and operate five U.S. casino properties and are scheduled to open a sixth U.S. location in 2007 and a seventh U.S. location in 2008, each in a distinct market. We own a hotel casino site in Biloxi, Mississippi, for which we continue to evaluate our options for replacement. We also own facilities in Argentina and are scheduled to open a casino in the Bahamas in 2006.

• Expansion Activities.    In May 2005, we opened L’Auberge du Lac, our casino resort in Lake Charles, Louisiana. In July 2005, we opened our replacement casino in Neuquen, Argentina approximately one mile from our former leased facility. In early 2006, we announced plans for significant expansions at our three most profitable properties.

• Development Activities.    In September 2005, we broke ground on our $350 million St. Louis City project, located just north of the famed Gateway Arch. In late 2005, we entered into a joint venture to develop a $25 million, 10-story luxury condominium project on land near our city project site.

In November 2005, we began site development activities, including assembling the necessary land parcels for the road access from the local interstate highway, for our $375 million River City project in St. Louis County, which is located approximately 10 miles south of downtown St. Louis.

In early 2006, we began construction of our 5,000-square-foot casino adjacent to the Four Seasons Resort Great Exuma at Emerald Bay in the Bahamas.

• Acquisition Activities.    As discussed above, on March 13, 2006, we entered into a definitive merger agreement with Aztar Corporation to acquire all outstanding shares of Aztar for cash subject to the terms and conditions thereof. If our acquisition of Aztar is consummated, we would greatly expand our gaming business. Aztar operates the Tropicana Casino and Resort in Atlantic City, New Jersey, the Tropicana Resort and Casino on the “Strip” in Las Vegas, Nevada, as well as other casino facilities in Laughlin, Nevada, Caruthersville, Missouri, and Evansville, Indiana

In September 2005, we completed the purchase of the Embassy Suites St. Louis-Downtown, a 297-suite hotel that we intend to connect to our St. Louis City Project.

In early 2006, we entered into an agreement to purchase the President Casino—St. Louis, which dockside casino vessel is moored on the Mississippi River at the foot of our St. Louis city project.

• Non-Core Asset Opportunities.    Management is continually evaluating the company’s portfolio of assets to ensure such assets are essential to the core operating business of the company and meet our performance expectations.

In December 2005, we decided to pursue the sale of our two card clubs in southern California. We determined that the upside of continued ownership of the card clubs was limited and that we would prefer to focus our resources on core businesses that we can manage directly. California law makes it impractical for a public company to operate card clubs. Hence, we have historically leased our card clubs to third party operators. Accordingly, we are in the process of selling such assets and expect to complete the transactions in mid-2006.

4

We currently own approximately 500 undeveloped acres at our Boomtown Reno facility, including the approximately 30 acres we have agreed to sell to Cabela’s Retail, Inc. Cabela’s has announced its intention to build a retail store featuring outdoor sporting goods on the land.

Current Operations

Boomtown New Orleans is a locals-oriented dockside riverboat casino. The riverboat features a casino containing 1,532 slot machines and 47 table games and an approximately 88,000-square-foot adjoining building with two restaurants, a delicatessen, a 350-seat nightclub, 21,000 square feet of meeting space, an amusement center and 1,729 parking spaces. The property opened in 1994 and is located on 54 acres in Harvey, Louisiana, approximately 10 miles from downtown New Orleans and across the Mississippi River in the “West Bank” suburban area.

On September 30, 2005, Boomtown New Orleans reopened after having sustained storm damage and having been closed for approximately five weeks as a result of Hurricane Katrina. Of the two competing dockside riverboat casinos in the area, one facility reopened in early October, while the other remains closed. Owners of the closed facility have announced their desire to relocate the license to Morgan City, Louisiana. In mid-February 2006, the large land-based casino in downtown New Orleans reopened. That casino expects to open a new 450-guestroom hotel in fall 2006. Except for three casinos that opened in Biloxi, Mississippi, much of the competing casino capacity along the Mississippi Gulf Coast remains closed due to hurricane damage.

Boomtown New Orleans is located, and most of its customers reside, on the “West Bank” of the Mississippi River. This area generally did not flood during the 2005 hurricanes. Much of the recovery effort of the downtown New Orleans area is being staged from the West Bank, which is located across the river from downtown New Orleans. The facility’s revenues since reopening have been substantially greater than those experienced prior to the hurricane. Such increased operating levels are expected to moderate as competing casino capacity in the New Orleans and Mississippi Gulf Coast reopen, including the land-based casino in downtown New Orleans that recently opened.

Belterra Casino Resort is a regional resort adjoining a dockside riverboat casino. It opened in October 2000 and is located on 315 acres of land along the Ohio River in southern Indiana, approximately 50 miles southwest of downtown Cincinnati, Ohio, and 65 miles northeast of Louisville, Kentucky. The total population within 300 miles of Belterra is approximately 53 million people. By comparison, some 27 million people live within 300 miles of Las Vegas.

The resort features a riverboat casino with 40,500 square feet of casino space, 1,625 slot machines and 56 table games. It also features a 15-story, 608-guestroom hotel with 51 suites (which includes the 300-guestroom expansion completed in May 2004), six restaurants, 33,000 square feet of meeting and conference space, a retail shopping pavilion, a 1,750-seat entertainment showroom, a year-round swimming pool, a spa and an 18-hole championship golf course designed by Tom Fazio. The resort provides 2,161 parking spaces, most of which are in a multi-level parking structure.

Belterra competes with four other dockside riverboats. Current Indiana law does not permit any additional casinos to be built along the Ohio River, although there are no legal limitations as to the size of the riverboats operated by each licensee. A competitor in the Cincinnati area has announced plans to replace its dockside riverboat with a larger single-story facility in 2007 or 2008. In addition, a casino operation is scheduled to open in December 2006 in the town of French Lick, Indiana, approximately 100 miles west of Belterra.

L’Auberge du Lac in Lake Charles, Louisiana opened in May 2005. Lake Charles is approximately a two hour drive east from Houston, Texas, and is the closest significant gaming market to not only Houston, but also the Austin and San Antonio metropolitan areas.

Located on 242 acres of land, L’Auberge du Lac offers 743 guestrooms and suites, several restaurants, approximately 28,000 square feet of meeting space, a championship golf course designed by Tom Fazio, retail shops and a full-service spa. Unlike other riverboat casinos in Louisiana, most of the public areas at L’Auberge du

5

Lac, and in particular the casino, are situated entirely on one level. The casino is surrounded on three sides by the hotel facility and other guest amenities, providing convenient access to the 1,601 slot machines and 60 table games.

On October 8, L’Auberge du Lac reopened after having been closed for 16 days as a result of Hurricane Rita, which passed directly over the Lake Charles area. By the end of October, all amenities, including the championship golf course, were reopened. Of the five competing casinos in the Lake Charles area, four have reopened since the hurricane. The owner of the fifth has not announced when, or if, its facility will reopen.

Boomtown Bossier City is a regional hotel property adjacent to a dockside riverboat casino. The property opened in October 1996 on a site directly adjacent to, and highly visible from, Interstate 20. The Bossier City/Shreveport region offers among the closest casinos to the Dallas/Fort Worth metropolitan area, which is a three-hour drive to the west along Interstate 20. Boomtown Bossier City has 1,190 slot machines and 30 table games. The property also includes a 188-guestroom hotel, with four master suites and 88 junior suites, four restaurants and 1,867 parking spaces, most of which are in a multi-level parking structure.

The market consists of five dockside riverboat casino hotels, including Boomtown, and a racetrack slot operation located approximately eight miles east of Boomtown Bossier City. Current state regulations do not permit table games at the racetrack. In mid-2003, Native American casinos opened in southern Oklahoma, approximately one hour north of Dallas, providing competition for the Bossier City/Shreveport casinos. In the 2005 first quarter, such tribal casinos began offering table games. Racetracks in Oklahoma also installed slot machines in 2003.

Boomtown Reno is a land-based casino hotel that has been operating for nearly 40 years and is located on a portion of our 569 acres approximately 11 miles west of downtown Reno, Nevada. The location is near the California border and adjacent to Interstate 80, the primary east-west interstate highway into northern California from northern Nevada.

The casino hotel features 318 guestrooms and a 45,000-square-foot casino containing 999 slot machines and 31 table games. The property also features four restaurants, an 80-seat lounge and a 30,000-square-foot amusement center. In addition to the main casino/hotel, the property also includes a full-service truck stop with a satellite casino containing 102 slot machines, a gas station and mini-mart, a 203-space recreational vehicle park and 1,548 parking spaces.

Reno’s gaming market has historically been primarily a drive to market that attracts visitors from northern California. Since mid-2003, new and expanded Native American casino developments that compete with Reno gaming properties opened in California. These casino developments are significantly closer to several primary feeder markets than is the Boomtown Reno property and had an adverse impact on Boomtown Reno’s performance. We believe the effect of the growth in Native American gaming in northern California has been substantially absorbed by the Reno gaming market, including our Boomtown Reno property, although the market will continue to be very competitive.

Embassy Suites St. Louis—Downtown:    In September 2005, we purchased this 297-suite hotel located in Laclede’s Landing, adjacent to our St. Louis City project and across from the Edward Jones Domed Stadium and America Center Convention Center in downtown St. Louis, for approximately $38 million. We anticipate investing approximately $7 million to refurbish the facility in 2006. The hotel, built in 1985, competes with approximately 20 other hotels in the downtown St. Louis area.

Casino Magic Argentina consists of four land-based casinos in the Patagonia region of Argentina. The principal Casino Magic Argentina property, in Neuquen province, opened in July 2005 as a $15 million replacement facility approximately one mile from the former leased facility we had operated since 1995. The new facility includes a larger and more lavish casino with 703 slot machines and 37 table games, a large restaurant, several bars and an entertainment venue on 20 acres. The second-largest facility, located in San Martín de los Andes, has 113 slot machines and 13 table games, and has been operated by us since 1995. In November 2003, we began operating the third facility located in Junín de los Andes, which has 47 slot machines.

6

And in February 2006, we began operating the smallest of the four facilities, which is located in Copahue and has approximately 20 slot machines.

We have certain exclusive rights to operate casinos in major cities of the Province of Neuquen through 2016. In the Province of Rio Negro, immediately adjacent to the Province of Neuquen, there is a casino approximately 10 miles from our Neuquen operations.

Casino Magic Biloxi was a regional property originally built in 1993 and located on approximately 11 acres in Biloxi, Mississippi on the Mississippi Gulf Coast. It featured a dockside riverboat casino, a 378-guestroom hotel tower containing four restaurants, 6,600 square feet of convention space and a health club. As a result of Hurricane Katrina, the casino barge was destroyed, and the hotel facility sustained substantial damage. We are evaluating whether to build a replacement Biloxi facility. We will base our decision on management’s forecasted profitability of a new facility, taking into consideration the competitive, regulatory and infrastructure conditions, among other factors. Some competing operators in Biloxi incurred less damage from the storms and have reopened.

Segment and geographic information is incorporated by reference from Note 14 to the Consolidated Financial Statements included herewith.

Development Activities

St. Louis Projects:    In September 2005, we broke ground on our $350 million St. Louis City Project, located in the Laclede’s Landing historic district just north of the famed Gateway Arch and adjacent to our Embassy Suites Hotel. We believe our development project will serve as a catalyst for additional neighborhood redevelopment, including the condominium project noted below. As of mid-March, we have completed site excavation and substantial foundation work and the building has begun to emerge from the ground. The facility is planned to include a casino with approximately 2,000 slot machines, a 200-guestroom luxury hotel, spa, several restaurants and 12,000 square feet of meeting and convention space. We anticipate opening the facility in the third quarter of 2007.

In late 2005, we entered into an agreement with a joint venture partner to develop a $25 million, 10-story luxury condominium project. The site overlooks the Mississippi River, the famed Gateway Arch and downtown St. Louis and is expected to contribute to the revitalization and redevelopment of the historic Laclede’s Landing district.

In November 2005, we commenced site development work for our $375 million River City project in south St. Louis County. Our River City project is located just south of the confluence of the Mississippi River and the River des Peres in the community of Lemay in St. Louis County, one of the most densely populated areas in the St. Louis region. River City is planned to include a casino with approximately 3,000 slot machines, a 100-guestroom hotel, full-service spa, restaurants, a boutique bowling alley, a multiplex movie theater and an entertainment venue. It will be located on 56 acres of land leased from St. Louis County pursuant to a lease and development agreement executed in August 2004. We anticipate opening the facility in 2008, approximately one year after the opening of the city project.

Pursuant to the St. Louis City Project redevelopment agreement and St. Louis County Project lease and development agreement, our development commitments are a minimum of $208 million and $300 million for the city and county projects, respectively. In August 2005, our board of directors approved investments of $350 million and $375 million, respectively, in the two projects. Such budgets include pre-opening costs, land acquisition, capitalized interest and standard contingencies.

In September 2004, we were selected by the Missouri Gaming Commission (“MGC”) for both St. Louis Projects for “priority investigation,” a term used by the MGC as an indication that it has accepted our application for licensure of the project and that it will investigate the application on a priority basis in order to reach a final determination on licensure. Neither facility may be opened until we have MGC approval.

Guestroom Development Projects:    In early 2006, we announced capital projects at three of our existing facilities. We expect to begin construction of all three projects in 2006, with completion planned for 2007.

7

As noted above, much of the recovery effort for the greater New Orleans metropolitan area is being staged from the West Bank. Responding to demand and growth of our community, we plan to build a 200-guestroom hotel on a portion of the 54 acres we own at our Boomtown New Orleans property. The estimated cost of this project is approximately $30 million.

In 2005, Belterra Casino Resort achieved its fifth consecutive year of revenue and earnings growth. A combination of the $37 million hotel tower expansion completed in May 2004, superior amenities to other hotel casinos in the Ohio River Valley market and the on-going maturation of the regional resort have expanded popularity of the facility. We plan to add a 250-guestroom hotel tower to Belterra Casino Resort for approximately $45 million. With more than 850 guestrooms, we believe the expanded Belterra Casino Resort will be the largest hotel in the Indiana, Ohio and Kentucky region.

Finally, we plan to add approximately 250 guestrooms at a cost of approximately $45 million to L’Auberge du Lac. When completed, L’Auberge du Lac will have approximately 1,000 guestrooms. L’Auberge due Lac is already the largest hotel in Louisiana outside of New Orleans.

Great Exuma, Bahamas:    In early 2006, we entered into a sublease to operate the premises and began construction of our $5 million 5,000-square-foot casino adjacent to the Four Seasons Resort Great Exuma at Emerald Bay in the Bahamas.

Expansion Opportunities

Philadelphia, Pennsylvania:    The Philadelphia metropolitan area has a population of approximately 6 million people. In December 2005, we filed an application for one of two available gaming licenses in Philadelphia, Pennsylvania. We are one of five applicants. We have options to acquire our proposed 33-acre site along Interstate 95 in the Fishtown neighborhood, just north of downtown Philadelphia.

If selected, we intend to build a casino that would include approximately 3,000 slot machines, multiple bars and restaurants, and a multiplex movie theater, with the opportunity to expand to 5,000 total slots and add a hotel tower. We estimate the initial phase, including land and Pennsylvania’s $50 million initial gaming license fee, will cost between $250 million and $400 million.

Boomtown Reno:    In late 2005, we entered an agreement to sell approximately 30 acres of land adjacent to our Boomtown Reno Hotel and Casino to Cabela’s Retail, Inc. Cabela’s has announced its intentions to build a large retail store featuring outdoor sporting goods. According to Cabela’s, similar stores in other locations generally attract approximately three million customers annually.

In connection with the sale, access to the site will need to be improved. Such improvements are expected to be financed through the issuance of industrial revenue bonds through local or state governmental authorities. We have agreed to purchase, if necessary, some of such bonds. We estimate that we may be required to purchase between $4 million and $10 million of these bonds. A portion of the land is currently utilized by our existing truck stop and satellite casino operations. We intend to build a replacement truck stop and satellite casino at another location on the property for approximately $15 million. Cabela’s has agreed to pay us approximately $5.2 million for our land. We have entered into the Cabela’s agreements because we believe that a Cabela’s retail store will bring significant incremental business to our casino hotel.

We continue to evaluate other opportunities to develop, sell or otherwise monetize the excess acreage at Boomtown Reno.

International:    In August 2005, we submitted bids for two of the 17 licenses the Chilean government declared available—one in Antofagasta and one in Rancagua. Each license will permit the exclusive operation of a gaming facility within an approximately 40-mile radius.

8

For the Antofagasta site, our proposed investment is approximately $24 million and is planned to include a casino with approximately 400 slot machines, a 70-guestroom hotel, spa, two restaurants and meeting and convention space. Antofagasta is an important regional center, with a population of approximately 300,000. Our proposal is in conjunction with a large retail complex being planned in downtown Antofagasta by a major Chilean developer. For Rancagua (an approximately 45-minute drive from Santiago, a city of more than 6 million people), our proposed investment is approximately $17 million and is planned to include a casino with approximately 400 slot machines, a boutique hotel with 36 guestrooms, spa, three restaurants and meeting and convention space. We are currently competing with three other applicants in Antofagasta and two other applicants in Rancagua. We expect that the Chilean gaming authorities will select preferred developers in 2006.

In connection with the filing of the applications in August, we posted two letters of credit totaling approximately $2 million. Such letters of credit are for the benefit of the Chilean Superintendent of Gaming in support of our proposed projects. A letter of credit will only be drawn in the event we are awarded a gaming license and do not fulfill our construction obligations for the particular project.

Acquisitions

Aztar Corporation:    On March 13, 2006, we entered into a definitive merger agreement with Aztar Corporation to acquire all outstanding shares of Aztar for cash subject to the terms and conditions thereof. If our acquisition of Aztar is consummated, we would greatly expand our gaming business. Aztar operates the Tropicana Casino and Resort in Atlantic City, New Jersey, the Tropicana Resort and Casino on the “Strip” in Las Vegas, Nevada, as well as other casino facilities in Laughlin, Nevada, Caruthersville, Missouri, and Evansville, Indiana.

Embassy Suites and St. Louis City Land:    In addition to the purchase of the Embassy Suites Hotel in September, we purchased approximately three acres of adjoining land for $6.2 million. In March 2005, we acquired an approximately five-acre parcel also adjacent to the proposed casino site for approximately $7.5 million. Cumulatively, we own or have an option to purchase approximately 18 acres of contiguous land for the St. Louis City Project and future developments.

President Riverboat Casino:    In early 2006, we entered into an agreement to potentially acquire the President Casino—St. Louis, a riverboat casino operating in bankruptcy with approximately 1,025 slot machines and 30 table games, located within walking distance of our city project site. If completed, the acquisition will provide us immediate access to a workforce trained in casino operations and a database of casino customers in the St. Louis market. The proposed purchase price is $31.5 million. This price will serve as the opening bid in a bankruptcy auction that is scheduled to occur on May 16, 2006 and is subject to overbids by third parties and approval by the bankruptcy court. In return for providing the minimum bid, we received the right to purchase President Casino—St. Louis at our then last bid made at the auction (which bid may be $31.5 million) if the bidder with the highest bid at the auction fails to close the acquisition. In addition, the proposed purchase agreement provides that if the bankruptcy court approves a bankruptcy plan for the President Casino—St. Louis which includes a sale of the facility to a competing bidder at the auction, then we will receive a break-up fee of $650,000. The agreement is also subject to approval by the Missouri Gaming Commission and further bankruptcy proceedings. We would expect the transaction to close in the second half of 2006 if we are the winning bidder.

Assets Held For Sale

California Card Club Leases:    We receive lease income from two card clubs in Los Angeles County: the Hollywood Park-Casino and the Crystal Park Casino. We lease the Hollywood Park-Casino under a long-term lease agreement which, including a 10-year renewal option, expires in 2019. Since California law effectively does not permit a public company to operate card clubs, we sublease the Hollywood Park-Casino to an unaffiliated third-party operator under a year-to-year lease. We own the furniture, fixtures, equipment and

9

leasehold improvements within the Hollywood Park-Casino. We own the Crystal Park casino and its approximately 20-acre site. We lease the Crystal Park to the same card club operator that leases and operates the Hollywood Park-Casino.

In 2004, we helped sponsor a voter initiative that would have permitted card clubs to offer slot machines. The measure was heavily opposed by Native American tribal casinos in California, which funded an extensive media campaign, and the measure was defeated. We determined that the upside of continued ownership of such leased facilities was limited and that we would prefer to focus our resources on core businesses that we can manage directly.

In December 2005, we therefore decided to pursue the sale of the two card clubs. In December, we agreed to sell the Crystal Park card club casino for approximately $17 million in cash. The net book value of the assets at December 31, 2005 was approximately $5.8 million. In early 2006, we reached a non-binding agreement in principle to sell our Hollywood Park-Casino leasehold interest and assign certain related receivables to the owner of the Hollywood Park Racetrack for gross proceeds of approximately $23.7 million in cash plus cancellation of all lease obligations, which agreement we anticipate executing by the end of March 2006. At December 31, 2005, the net book value of the leasehold interest and related receivables was approximately $16.7 million, and the capital lease obligation was on our balance sheet for approximately $10.2 million. We anticipate both sales will be completed in mid-2006.

The Hollywood Park-Casino opened in 1994. The facility contains approximately 30,000 square feet of card club gaming space with 102 gaming tables and 21,000 square feet of retail and restaurant space. The Crystal Park Casino opened in October 1996. The Crystal Park Casino contains approximately 18 gaming tables. The adjoining hotel contains 238 rooms, including 36 suites.

Competition

We face significant competition in each of the jurisdictions in which we operate. Such competition may intensify in some of these jurisdictions as new gaming operations enter these markets and existing competitors expand their operations. Our properties compete directly with other gaming properties in Indiana, Louisiana, Nevada, and Argentina, as well as in states adjacent to our properties. We also compete for customers with other casino operators in other markets, including casinos located on Native American reservations, and other forms of gaming, such as lotteries and Internet gaming. Many of our competitors are larger and have substantially greater name recognition and marketing resources, as well as access to lower-cost sources of financing, and sometimes, particularly for Native American casinos, lower or non-existent tax rates. We believe that increased legalized gaming in other states, particularly in areas close to our existing gaming properties such as Alabama, Arkansas, California, Florida, Kentucky, Ohio, Oklahoma or Texas, and the development or expansion of Native American gaming in or near the states in which we operate, could create additional competition for us and could adversely affect our operations.

Government Regulation and Gaming Issues

The ownership and operation of gaming facilities are subject to extensive state and local regulation. The states and localities in which we and our subsidiaries conduct gaming operations require us to hold various licenses, findings of suitability, registrations, permits and approvals. The various regulatory authorities, including the Indiana Gaming Commission, the Louisiana Gaming Control Board, the Mississippi Gaming Commission, the Missouri Gaming Commission, the Nevada State Gaming Control Board, the Nevada Gaming Commission, the Province of Neuquen, Argentina, and The Gaming Board of the Bahamas, may, among other things, limit, condition, suspend, revoke or fail to renew a license or approval to own any of the gaming subsidiaries for any cause deemed reasonable by such licensing authorities. Substantial fines or forfeitures of assets for violations of gaming laws or regulations may be levied against us, our subsidiaries and the persons involved. Holders of our securities are also subject to additional requirements regarding the ownership and disposition of their securities, including possibly being called forward by applicable gaming authorities to be licensed or found suitable to be the beneficial owner of our securities. In addition, our certificate of incorporation permits us to redeem our

10

securities due to gaming regulatory considerations, either as required by gaming regulators or in our discretion. Upon completion of the acquisition of Aztar, we will be subject to regulation in additional jurisdictions, including by the New Jersey Casino Control Commission.

To date, our company and subsidiaries have obtained all governmental licenses, findings of suitability, registrations, permits and approvals necessary for the operation of its gaming facilities. However, there can be no assurance that our company and subsidiaries will be able to obtain any new licenses, findings of suitability, registrations, permits and approvals that may be required in the future or that existing ones will be renewed or will not be suspended or revoked. Any expansion of gaming operations in the existing jurisdictions or into new jurisdictions, including Missouri and the Bahamas, will require various additional licenses, findings of suitability, registrations, permits and approvals of the gaming authorities. The approval process can be time-consuming and costly and has no assurance of success.

For a more detailed description of gaming regulations to which we are subject, see Exhibit 99.1 to this Annual Report on Form 10-K, “Government Regulation and Gaming Issues”, which is incorporated herein by reference.

Employees

The following is a summary of our employees by property at December 31, 2005, some of which are part-time:

Property	Employees (approx.)
Boomtown New Orleans	907
Belterra Casino Resort	1,198
L’Auberge du Lac	2,277
Boomtown Bossier City	869
Boomtown Reno	818
Casino Magic Argentina	520
Casino Magic Biloxi	13
Corporate	114
Total	6,716

We do not employ the staff at the Embassy Suites St. Louis-Downtown, Hollywood Park-Casino or the Crystal Park Casino. Additionally, during busier months, each casino property supplements its permanent staff with seasonal employees.

Other Information

Compliance with federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment have not had a material effect upon our capital expenditures, earnings or the competitive positions. From time to time, certain of our development projects may include, as part of their budget, substantial costs for environmental remediation.

We pay significant taxes in the communities in which we operate. In 2005, we paid or accrued $165.7 million in gaming taxes, $14.5 million in payroll taxes, $8.4 million in property taxes, and $3.6 million in sales taxes during the year. Setting aside income taxes, we paid or accrued $192.2 million for taxes paid to state and local authorities in 2005.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are available free of charge as soon as reasonably practicable after they are filed or furnished to the Securities and Exchange Commission (“SEC”), through our Internet website, www.pnkinc.com. Our filings also are available through a database maintained by the SEC at www.sec.gov.

11

Item 1A.    Risk Factors

Except for the historical information contained herein, the matters addressed in this Annual Report on Form 10-K, as well as in other reports filed with or furnished to the Securities and Exchange Commission or statements made by us, may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. From time to time, we may provide oral or written forward-looking statements in other public materials. All forward-looking statements made in this Annual Report on Form 10-K and any documents we incorporate by reference are made pursuant to the Private Securities Litigation Reform Act. Words such as, but not limited to, “believes,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements include, without limitation, statements regarding our expansion and development plans, cash needs, cash reserves, liquidity, operating and capital expenses, financing options, expense reductions, operating results, insurance recoveries and pending regulatory matters. Although we believe our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations, and actual results may differ materially from those that might be anticipated from forward-looking statements. This can occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties. Factors that may cause our actual performance to differ materially from that contemplated by such forward-looking statements include, among others, the various risk factors discussed below, in addition to general domestic and international economic and political conditions as well as market conditions in our industry.

The Private Securities Litigation Reform Act of 1995 (the “Act”) provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Annual Report on Form 10-K are made pursuant to the Act. For more information on the potential factors that could affect our operating results and financial condition in addition to the risks described below, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Future Operating Results” below and review our other filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

Our pending acquisition of Aztar presents many risks, and we may not realize the financial and strategic goals that were contemplated at the time of the transaction.

On March 13, 2006, we entered into a definitive merger agreement with Aztar Corporation to acquire all outstanding shares of Aztar for cash subject to the terms and conditions thereof. The aggregate transaction value, including the refinancing of Aztar debt, is approximately $2.1 billion. The risks we may face in this pending acquisition include:

• Although we have a financing commitment to fund the acquisition, we cannot assure you that we will be able to obtain the acquisition financing and, because the merger agreement does not contain a financing condition, our failure to close due to our inability to obtain financing could subject us to a claim for substantial damages;

• We may not be able to arrange favorable financing terms for debt securities we may seek to issue in the capital markets and, yet, still be obligated to consummate the acquisition. Our financing commitment provides for an interim loan facility if we are unable to issue debt or other securities by the closing. The interim loan facility provides for an increasing interest rate over time to the extent it is not refinanced. If we are not able to refinance the interim loan facility shortly after the closing, the cost of our financing may increase materially. If we issue equity in lieu of some or all of this debt financing, this could dilute existing stockholders;

• If we consummate the acquisition, the amount of our indebtedness will increase substantially and may constrain our operations and developments;

• Our potential redevelopment of Aztar’s Las Vegas Tropicana site is one of the primary reasons for our pursuing the transaction. We will face significant competition in the Las Vegas market, even relative to the competition we face in other markets. Many of our competitors in Las Vegas are larger and have

12

substantially greater name recognition, marketing resources and access to lower cost sources of financing than we do. Our redevelopment of the Las Vegas Tropicana site would be of a larger scale than any we have undertaken, and would be subject to significant risks and contingencies, including those relating to construction and financing; our financing commitments in connection with the Aztar acquisition do not include funds to develop the Las Vegas Tropicana site.

• The combined company’s results of operations may not meet our expectations, which would then make it difficult to service the debt we would incur;

• We cannot predict whether we will secure all of the gaming approvals required to complete the acquisition, or the terms and conditions of such approvals, although we are already licensed or have development projects underway in Nevada, Indiana and Missouri;

• We may encounter problems integrating the operations and personnel of Aztar; and,

• The significantly larger company may strain our management resources.

The gaming industry is very competitive and increased competition, including by Native American gaming facilities, could adversely affect our profitability.

We face significant competition in all of the markets in which we operate. This competition will intensify if new gaming operations enter our markets or existing competitors expand their operations. Several of our properties are located in jurisdictions that restrict gaming to certain areas and/or are adjacent to states that currently prohibit or restrict gaming operations. Economic difficulties faced by state governments could lead to intensified political pressures for the legalization of gaming in jurisdictions where it is currently prohibited. The legalization of gaming in such jurisdictions could be an expansion opportunity for us or a significant threat to us, depending on where the legalization occurs and our ability to capitalize on it. The legalization or authorization of gaming within or near a geographic market area in which any of our properties is located could make it harder for us to attract customers and therefore adversely affect our business and operating results. In particular, our ability to attract customers would be significantly affected by the legalization or expansion of gaming in Alabama, Arkansas, California, Florida, Kentucky, Ohio, Oklahoma or Texas and the development or expansion of Native American casinos in our markets. In the past, legislation to legalize or expand gaming has been introduced in some of these jurisdictions and federal law favors the expansion of Native American gaming. We expect similar proposals will be made in the future and we cannot assure you that such proposals will not be successful.

Even in gaming markets where the state governments do not choose to increase the maximum number of gaming licenses available, we face the risk that existing casino licensees will expand their operations and the risk that Native American gaming will continue to grow. Furthermore, Native American gaming facilities frequently operate under regulatory requirements and tax environments that are less stringent than those imposed on state licensed casinos, which could provide them with a competitive advantage.

In particular, expanded gaming in California, Oklahoma and Florida would increase the competition faced by Boomtown Reno, Boomtown Bossier City and our Biloxi property, if we decide to build a replacement facility in Biloxi, respectively. In recent years, new Native American casino developments opened in California that compete with the Reno gaming properties and are closer to several primary feeder markets than is our Boomtown Reno property. In 2004, Oklahoma passed a gaming measure that allows Native American tribes to operate electronic gaming machines and some types of card games. The Oklahoma measure also permits three racetracks in Oklahoma to have similar gaming machines. Also in 2004, voters in Broward County, Florida approved the installation of slot machines at four racetracks and jai alai frontons. Because slot machines are now permitted in Broward County, Native American tribes throughout Florida may seek to install slot machines at Native American casinos.

Many of our competitors are larger and have substantially greater name recognition, marketing resources and access to lower cost sources of financing than we do. Moreover, consolidation of companies in the gaming industry could increase the concentration of large gaming companies in the markets in which we operate. This may result in our competitors having even greater resources, name recognition and licensing prospects than such

13

competitors currently enjoy. Upon the acquisition of Aztar, we will face significant competition in the Las Vegas and Atlantic City markets, even relative to the competition we face in other markets. Casinos planned for Pennsylvania and New York could provide additional competition for casinos in Atlantic City.

We face competition from racetracks that offer slot machines on their properties. We also compete with other forms of legalized gaming and entertainment such as online computer gambling, bingo, pull tab games, card parlors, sports books, pari-mutuel or telephonic betting on horse and dog racing, state sponsored lotteries, video lottery terminals, video poker terminals and, in the future, may compete with gaming at other venues. Furthermore, increases in the popularity of, and competition from, Internet lotteries and other account wagering gaming services, which allow their customers to wager on a wide variety of sporting events and play Las Vegas-style casino games from home, could divert customers from our properties and thus adversely affect our business.

Our pending acquisitions and substantial development obligations in connection with the St. Louis projects and other capital-intensive projects could strain our financial resources and might not provide for a sufficient return, if any.

We have entered into a definitive merger agreement to acquire Aztar in a transaction which will require us to pay approximately $2.1 billion in order to complete the acquisition, refinance Aztar debt and pay expenses. In addition, we have begun construction of a planned $350 million facility in downtown St. Louis and site development activities at our planned $375 million facility in south St. Louis County. We also are planning significant expansions of our existing facilities at Belterra, Boomtown New Orleans and L’Auberge du Lac. We recently entered into an agreement to purchase the President Casino—St. Louis for approximately $31.5 million, which agreement will be submitted to a U.S. bankruptcy court and is subject to a potential overbid by third parties. We have applied for licenses in Pennsylvania and Chile which, if granted, would add additional casino developments to our obligations. Moreover, we may decide to rebuild our Biloxi facility, which sustained extensive damage as a result of Hurricane Katrina. In the future, following the completion of the Aztar acquisition, we would evaluate the redevelopment of Aztar’s Tropicana Las Vegas site, which we expect would be the largest development project we have undertaken to date. These pending acquisitions and proposed projects could strain our management resources as well as our financial resources.

The capital required for these acquisitions and projects will use a substantial part of our currently available cash and borrowing resources. We cannot assure you that any additional financing, if needed, will be available; that, once completed, the revenues generated from our acquired businesses and new developments will be sufficient to pay their expenses; or, even if revenues are sufficient to pay expenses, that the acquired businesses and projects will yield an adequate return on our significant investments. Our acquired businesses and projects may take significantly longer than we expect to generate returns, if any.

Many factors could prevent us from completing our construction and development projects as planned, including the escalation of construction costs beyond increments anticipated in our construction budgets.

Construction and expansion projects for our properties entail significant risks including:

• shortages of materials, including slot machines or other gaming equipment;

• shortages of skilled labor or work stoppages;

• unforeseen construction scheduling, engineering, excavation, environmental or geological problems;

• natural disasters, hurricanes, weather interference, floods, fires, earthquakes or other casualty losses or delays;

• unanticipated cost increases or delays in completing the projects;

• delays in obtaining or inability to obtain or maintain necessary licenses or permits;

• changes to plans or specifications;

14

• disputes with contractors;

• construction at our existing properties, which could disrupt our operations; and

• remediation of environmental contamination at some of our proposed construction sites, which may prove more difficult or expensive than anticipated in our construction budgets.

Recent increases in the cost of raw materials for construction, driven by worldwide demand, may cause price increases beyond those anticipated in the budgets for our development projects. Furthermore, the cost of construction in areas of the Gulf Coast that were affected by the hurricanes may rise due to demand for construction material and labor in such locales. Any shortages in materials or labor in such areas could prolong the construction period and increase the cost of our development projects in that area, including the possible replacement of our Biloxi facility.

We cannot assure you that any project will be completed on time or within established budgets. Significant delays or cost overruns on our construction projects could significantly reduce any return on our investment in these projects and adversely affect our earnings and financial resources. Construction of our St. Louis development projects, or any other project, exposes us to risks of cost overruns due to typical construction uncertainties associated with any project or changes in the design, plans or concepts of such project. For these and other reasons, construction costs may exceed the estimated cost of completion notwithstanding any guaranteed maximum price construction contracts we may enter into.

Our present indebtedness and projected future borrowings could have adverse consequences to us; future cash flows may not be sufficient to meet our obligations and we might have difficulty obtaining additional financing; we may experience adverse effects due to interest rate and exchange rate fluctuations.

As of December 31, 2005, we had total indebtedness of approximately $657.8 million (including outstanding indebtedness under our credit facility, our 8.25% senior subordinated notes due 2012, our 8.75% senior subordinated notes due 2013 and other debt) and total shareholders’ equity of approximately $427.8 million. In addition, our credit facility, as amended and restated in December 2005, provides for a $450.0 million revolving credit facility (under which $365.6 million was undrawn and available as of December 31, 2005), to which we expect to have access, subject to the satisfaction of customary conditions to borrowing and satisfaction of certain financial ratios in our indentures. Our substantial development obligations for capital-intensive projects will require us to borrow significant amounts under our credit facility. If we complete our pending acquisition of Aztar, we may refinance all of those obligations and could incur significantly greater indebtedness.

While we believe that we have, and will have after the acquisitions of Aztar and The President, sufficient cash and cash-generating resources to meet our debt service obligations during the next 12 months, we cannot assure you that in the future we will generate sufficient cash flow from operations or through asset sales to meet our long-term debt service obligations. Our present indebtedness and projected future borrowings could have important adverse consequences to us, such as:

• limiting our ability to obtain additional financing without restructuring the covenants in our indebtedness to permit the incurrence of such financing;

• requiring a substantial portion of our cash flow to be used for payments on the debt and related interest, thereby reducing our ability to use cash flow to fund working capital, capital expenditures and general corporate requirements;

• limiting our ability to respond to changing business, industry and economic conditions and to withstand competitive pressures, which may affect our financial condition;

• incurring higher interest expense in the event of increases in interest rates on our borrowings that have variable interest rates;

• limiting our ability to make investments, dispose of assets or pay cash dividends;

15

• heightening our vulnerability to downturns in our business or our industry or the general economy and restricting us from making improvements or acquisitions, or exploring business opportunities;

• restricting our activities compared to those of competitors with less debt or greater resources; and

• subjecting us to financial and other restrictive covenants in our indebtedness, with which a failure to comply could result in an event of default.

If we fail to generate sufficient cash flow from future operations to meet our debt service obligations, we may need to refinance all or a portion of our debt on or before maturity. In such circumstances, we cannot assure you that we will be able to refinance any of our debt particularly because of our anticipated high levels of debt and the debt incurrence restrictions imposed by the various agreements governing our debt. Our future operating performance and our ability to service or refinance the senior subordinated notes and our other debt and to service, extend or refinance our credit facility will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

Our borrowings under our amended credit facility are at variable rates of interest, and to the extent not protected with interest rate hedges, could expose us to market risk from adverse changes in interest rates. If interest rates increase, our debt service obligations on the variable rate indebtedness could increase significantly even though the amount borrowed would remain the same. Additionally, our operation of Casino Magic Argentina exposes us to foreign exchange rate risk from adverse changes in the exchange rate of the dollar to the Argentine Peso.

The terms of our credit facility and the indentures governing our subordinated indebtedness impose operating and financial restrictions on us.

Our credit facility and the indentures governing our 8.25% notes and our 8.75% notes impose various customary covenants on us and our subsidiaries, including among others, reporting covenants, covenants to maintain insurance, comply with laws, covenants to maintain properties and other covenants customary in senior credit financings and indentures. In addition, our credit facility requires that we comply with various financial covenants, including an interest coverage and debt to operating cash flow ratio, and capital spending limits. The financing we incur in connection with the acquisition of Aztar may impose additional or more restrictive covenants. If we utilize the interim loan facility as part of the Aztar acquisition financing, we will be subject to increasing interest rates and more restrictive covenants. Our ability to comply with these provisions may be affected by general economic conditions, industry conditions, and other events beyond our control, including delay in the completion of new projects under construction. As a result, we cannot assure you that we will be able to comply with these covenants. Our failure to comply with the covenants contained in the instruments governing our indebtedness could result in an event of default, which could materially and adversely affect our operating results and our financial condition.

Issues could arise with respect to our insurance policies that could affect our timely recovery of insurance proceeds associated with recent hurricane damage and related business interruption.

We maintain an aggregate of $400 million of property insurance, including business interruption coverage, comprised of multiple layers of coverage underwritten by 11 separate carriers or syndicates. Insurance proceeds from the damage to Casino Magic Biloxi, which remains closed as a result of Hurricane Katrina, will represent a significant source of funds for us. We cannot predict whether we will encounter difficulty in collecting on insurance claims we may submit, including claims for business interruption. The magnitude of claims filed and expected to be filed with insurance companies by all affected persons relating to the damage caused by Hurricanes Katrina and Rita may delay the payment of insurance proceeds or may give rise to disputes and controversies relating to payments in respect of such claims. For example, several of our insurers have recently reserved their rights under the policies to assert, among other things, a flood exclusion and deductibles and other limiting provisions relating to floods. There can be no assurances that we will be fully compensated for all losses sustained due to the closure of the Biloxi facility or that we will be paid on a timely basis.

16

Because of the closure of Casino Magic Biloxi, we have suffered a loss of operating revenues from that facility; changes in the local gaming market could adversely affect our operations in Biloxi if we decide to build a replacement facility.

As a result of Hurricane Katrina, the casino barge at Casino Magic Biloxi was declared a total loss and our high-rise hotel was extensively damaged and remains closed. Accordingly, we will suffer the loss of operating revenues and will incur other costs associated with the closure of our Biloxi property. There can be no assurance that we will be fully compensated by our insurance policies. Moreover, we cannot predict how redevelopment efforts will affect the gaming market in the Biloxi area. Increased competition or changes in the local gaming market could adversely affect our operations in Biloxi if we decide to build a replacement facility.

Damage and closures caused by Hurricanes Katrina and Rita in the New Orleans and Lake Charles areas make our future operating results at Boomtown New Orleans and L’Auberge du Lac less predictable.

The damage caused by the hurricanes to the communities surrounding our New Orleans and Lake Charles properties, including damage to roads, utilities, residential and commercial buildings, could adversely affect the local gaming markets. We cannot predict whether some of our competitors will choose to exit the hurricane damaged areas or reenter such markets on a grander scale and rebuild their facilities with significant capital investments. Operations at our facilities have resumed in New Orleans and Lake Charles. However, the rebuilding decisions of our competitors in those areas, including the mid-February reopening of the large land-based casino in downtown New Orleans, and damage to the local infrastructure near Boomtown New Orleans and L’Auberge du Lac make future operating results at such facilities less predictable.

We operate in a highly taxed industry and may be subject to higher taxes in the future.

In virtually all gaming jurisdictions, state and local governments raise considerable revenues from taxes based on casino revenues and operations. We also pay property taxes, sales and use taxes, payroll taxes, franchise taxes and income taxes.

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 our property taxes and interest expense. From time to time, state and local governments have increased gaming taxes and such increases can significantly impact the profitability of gaming operations. We cannot assure you that legislatures in jurisdictions in which we operate, or the federal government, will not enact legislation that increases gaming tax rates. Such increases, if adopted, could have a material adverse effect on our business, financial condition and results of operation.

We could lose the right to pursue the projects in downtown St. Louis and St. Louis County if we fail to meet the conditions imposed by the Missouri Gaming Commission.

We have entered into a redevelopment agreement with the City of St. Louis and a lease and development agreement with St. Louis County in respect of the two St. Louis casinos and mixed-use facilities. However, we cannot assure you that we will complete the projects. The City of St. Louis may terminate the redevelopment agreement and St. Louis County may terminate the St. Louis County lease and development agreement under certain instances. Under both the City of St. Louis redevelopment agreement and the St. Louis County lease and development agreement, if we fail to complete the applicable project in accordance with the terms of the applicable agreement, we will owe monetary penalties and liquidated damages.

In September 2004, one of our subsidiaries was selected by the Missouri Gaming Commission to proceed for licensing for the operation of the casinos to be developed in the City of St. Louis and St. Louis County. The issuance of the gaming licenses is subject to, among other requirements, (i) the completion of construction of the facilities and obtaining permits and the necessary land for construction of a road for access to the St. Louis County facilities by certain completion dates, (ii) maintaining an interest coverage ratio (as defined by the Missouri Gaming Commission) of at least 2.0x, (iii) compliance with the statutory requirements regarding

17

riverboat gaming, including the requirement that each casino be located within 1,000 feet of the Missouri River or the Mississippi River and (iv) the suitability of Pinnacle and its key persons as defined by Missouri law. The issuance of the gaming licenses is in the discretion of the Missouri Gaming Commission. Although our subsidiary was selected by the Missouri Gaming Commission to proceed for licensing, we cannot assure you that the licenses will ultimately be granted.

The financing incurred to effect the Aztar acquisition may affect our ability to comply with this interest coverage ratio. Management intends to structure such financing so that the Company is in compliance with such interest coverage ratio, but there is no certainty that it can do so. In addition, due to the increased diversity and size of the combined companies, the Company may seek some modification or elimination of the ratio, but there can be no assurance that such modification or elimination would be approved by the Missouri Gaming Commission.

In addition, we have the right to terminate the lease and development agreement if certain conditions are not satisfied, including the feasibility of remediation of the environmental condition of the St. Louis County site.

Our industry is highly regulated, which makes us dependent on obtaining and maintaining gaming licenses and subjects us to potentially significant fines and penalties.

The ownership, management and operation of gaming facilities is subject to extensive state and local regulation. The rules and regulations of the states and local jurisdictions in which we and our subsidiaries conduct gaming operations require us to hold various licenses, registrations, permits and approvals and to obtain findings of suitability. The various regulatory authorities, including the Indiana Gaming Commission, the Louisiana Gaming Control Board, the Mississippi Gaming Commission, the Nevada State Gaming Control Board, the Nevada Gaming Commission and the Missouri Gaming Commission, may, among other things, limit, condition, suspend, revoke or fail to renew a license to conduct gaming operations or prevent us from owning the securities of any of our gaming subsidiaries for any cause deemed reasonable by such licensing authorities. Substantial fines or forfeitures of assets for violations of gaming laws or regulations may be levied against us, our subsidiaries and the persons involved. Upon the completion of the acquisition of Aztar, we will be subject to regulation in additional jurisdictions, including by the New Jersey Casino Control Commission.

To date, we have obtained all governmental licenses, findings of suitability, registrations, permits and approvals necessary for the operation of our gaming facilities. However, we cannot assure you that we will be able to obtain any new licenses, registrations, permits, approvals and findings of suitability that may be required in the future or that existing ones will be renewed or will not be suspended or revoked. Any expansion of our gaming operations in our existing jurisdictions or into new jurisdictions will require various additional licenses, findings of suitability, registrations, permits and approvals of the gaming authorities. The approval process can be time consuming and costly and has no assurance of success.

Potential changes in the regulatory environment could harm our business.

From time to time, legislators and special interest groups have proposed legislation that would restrict or prevent gaming operations. Any new restriction on or prohibition of our gaming operations could force us to curtail operations and incur significant losses.

The concentration and evolution of the slot machine manufacturing industry could impose additional costs on us.

A majority of our revenues are attributable to slot machines at our casinos. It is important, for competitive reasons, that we offer the most popular and up-to-date slot machine games with the latest technology to our customers. We believe that one company in particular provides a majority of all slot machines sold in the U.S.

18

We believe that in recent years the prices of new slot machines have escalated faster than the rate of inflation. Furthermore, in recent years, slot machine manufacturers have frequently refused to sell slot machines featuring the most popular games, instead requiring participating lease arrangements in order to acquire the machines. Generally, a participating lease is substantially more expensive over the long term than the cost to purchase a new machine.

For competitive reasons, we may be forced to purchase new slot machines or enter into participating lease arrangements that are more expensive than our current costs associated with the continued operation of our existing slot machines. If the newer slot machines do not result in sufficient incremental revenues to offset the increased investment and participating lease costs, it could hurt our profitability.

Adverse weather conditions, highway construction, gasoline shortages, and other factors affecting our facilities and the areas in which we operate could make it more difficult for potential customers to travel to our properties and deter customers from visiting our properties.

Our continued success depends upon our ability to draw customers from each of the geographic markets in which we operate. Adverse weather conditions or highway construction can deter our customers from traveling to our facilities or make it difficult for them to frequent our properties. In addition, gasoline shortages or fuel price increases in regions that constitute a significant source of customers for our properties could make it more difficult for potential customers to travel to our properties and deter customers from visiting our properties.

Our dockside gaming facilities in Indiana and Louisiana, as well as any additional riverboat or dockside casino properties that might be developed or acquired, are also subject to risks, in addition to those associated with land-based casinos, which could disrupt our operations. Although none of our vessels leave their moorings in normal operations, there are risks associated with the movement or mooring of vessels on waterways, including risks of casualty due to river turbulence, flooding, collisions with other vessels and severe weather conditions.

Our results of operations and financial condition could be materially adversely affected by the occurrence of natural disasters, such as hurricanes, or other catastrophic events, including war and terrorism.

Natural disasters such as major hurricanes, floods, fires and earthquakes could adversely affect our business and operating results. Hurricanes are common to the areas in which our Louisiana and Mississippi properties are located and the severity of such natural disasters is unpredictable. In 2005, Hurricanes Katrina and Rita caused significant damage in the Gulf Coast region. Our Casino Magic Biloxi property was extensively damaged and remains closed and the barge was declared a total loss. Our Boomtown New Orleans casino was forced to close for 34 days as a result of Hurricane Katrina. Hurricane Rita caused significant damage in the Lake Charles, Louisiana area and forced our L’Auberge du Lac resort to close for 16 days in addition to causing physical damage. The closures and disruptions stemming from Hurricane Rita have delayed the process of normalizing operations and procedures at L’Auberge du Lac, which opened in May of 2005. We cannot currently predict the long-term impact that the recent hurricanes or any future natural disasters will have on our ability to maintain our customer base or to sustain our business activities.

Catastrophic events such as terrorist and war activities in the United States and elsewhere have had a negative effect on travel and leisure expenditures, including lodging, gaming (in some jurisdictions) and tourism. We cannot predict the extent to which such events may affect us, directly or indirectly, in the future. We also cannot assure you that we will be able to obtain any insurance coverage with respect to occurrences of terrorist acts and any losses that could result from these acts. If there is a prolonged disruption at our properties due to natural disasters, terrorist attacks or other catastrophic events, or if several of our properties simultaneously experience such events, our results of operations and financial condition could be materially adversely affected.

The loss of management and other key personnel could significantly harm our business.

Our continued success and our ability to maintain our competitive position is largely dependent upon, among other things, the efforts and skills of our senior management team, including Daniel R. Lee, our Chairman

19

of the Board and Chief Executive Officer. Although we have entered into an employment agreement with Mr. Lee and certain of our other senior managers, we cannot guarantee that these individuals will remain with us. If we lose the services of any members of our management team or other key personnel, our business may be significantly impaired. We cannot assure you that we will be able to retain our existing senior management personnel or attract additional qualified senior management personnel.

In addition, our officers, directors and key employees also are required to file applications with the gaming authorities in each of the jurisdictions in which we operate and are required to be licensed or found suitable by these gaming authorities. If the gaming authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to sever all relationships with that person. Furthermore, the gaming authorities may require us to terminate the employment of any person who refuses to file appropriate applications. Either result could significantly impair our gaming operations.

We experience seasonal fluctuations that significantly impact our quarterly operating results.

We experience significant fluctuations in our quarterly operating results due to seasonality and other factors. Historically, the summer months are our strongest period and the winter months are our slowest period.

We are subject to litigation which, if adversely determined, could cause us to incur substantial losses.

We are, from time to time, during the normal course of operating our businesses, subject to various litigation claims and legal disputes. Some of the litigation claims may not be covered under our insurance policies, or our insurance carriers may seek to deny coverage. As a result, we might be required to incur significant legal fees, which may have a material adverse effect on our financial position. In addition, because we cannot predict the outcome of any action, it is possible that, as a result of current and/or future litigation, we will be subject to adverse judgments or settlements that could significantly reduce our earnings or result in losses.

We face environmental and archaeological regulation of our real estate.

Our business is subject to a variety of federal, state and local governmental regulations relating to the use, storage, discharge, emission and disposal of hazardous materials. Failure to comply with such laws could result in the imposition of severe penalties or restrictions on our operations by government agencies or courts of law or the incurrence of significant costs of remediation of hazardous materials. A material fine or penalty, severe operational or development restriction, or imposition of material remediation costs could adversely affect our business.

In addition, the locations of our current or future developments may coincide with sites containing archaeologically significant artifacts, such as Native American remains and artifacts. Federal, state and local governmental regulations relating to the protection of such sites may require us to modify, delay or cancel construction projects at significant cost to us.

Economic and political conditions, including slowdowns in the economy, and other factors affecting discretionary consumer spending may harm our operating results.

The strength and profitability of our business depends on consumer demand for hotel casino resorts and gaming in general and for the type of amenities we offer. A general downturn in economic conditions, changes in consumer preferences or other factors affecting discretionary consumer spending, including general or regional economic conditions, disposable consumer income, fears of recession and consumer confidence in the economy, could harm our business. An extended period of reduced discretionary spending and/or disruptions or declines in travel could significantly harm our operations.

Item 1B.    Unresolved Staff Comments

None.

20

Item 2.    Properties

The following describes our principal real estate properties:

Pinnacle Entertainment, Inc.:    We lease approximately 29,000 square feet for our corporate offices in Las Vegas, Nevada under lease agreements that expire in June 2009, with renewal options through 2015. We also lease a combined 3,750 square feet of office space outside of Las Vegas for other corporate operations.

Boomtown New Orleans:    We own approximately 54 acres in Harvey, Louisiana that are utilized by Boomtown New Orleans. We also own the facilities and associated improvements at the property, including the riverboat casino.

Belterra Casino Resort:    We own 167 acres and lease 148 acres utilized by our Belterra Casino Resort in southern Indiana. We own the facilities and associated improvements at the property, including the dockside riverboat. In addition, we own a 54-guestroom hotel approximately 10 miles from the Belterra Casino Resort.

L’Auberge du Lac:    We lease 242 acres from the Lake Charles Harbor and Terminal District upon which our L’Auberge du Lac hotel casino resort is located. The lease has an initial term of 10 years, commencing in May 2005, with six renewal options of 10 years each. We also have an option to lease an additional 60 acres of unimproved land adjacent to the 242 acres. The lease option currently expires on August 19, 2006. The terms of the lease, if the option is exercised, would be substantially similar on a per acre basis to the terms of the lease for the 242 acres.

Boomtown Bossier City:    We own 23 acres on the banks of the Red River in Bossier City, Louisiana. The property contains a dockside riverboat casino, hotel, parking structure and other land-based facilities, all of which are owned by us. We also lease approximately one acre of water bottoms from the State of Louisiana. The current lease term expires in September 2006. We have options to extend the lease for eight additional five-year periods.

Boomtown Reno:    We own 569 acres in Reno, Nevada, approximately 11 miles west of downtown Reno, with current operations presently utilizing approximately 61 acres. We own all of the improvements and facilities at the property, including the casino, hotel, truck stop, recreational vehicle park and service station, along with the related water rights and sewage treatment plant. As described above, we have entered into agreements to sell approximately 30 acres to Cabela’s Retail, Inc.

In 2002, the property was annexed into the City of Reno, Nevada. The City of Reno anticipates completing the extension of a municipal sewer line to the Boomtown property in the first half of 2006. The annexation of the property by the City of Reno and the extension of city services, particularly connecting to the sewer line, enhance the value and feasibility of developing our approximately 500 acres of surplus land.

We also own 290 acres in the mountains outside Reno, Nevada, which are surrounded by federal land.

Casino Magic Argentina:    We operate casinos in southern Argentina, in the cities of Neuquen, San Martín de los Andes, Junín de los Andes and Copahue. In Neuquen, we own the 20 acres on which we operate our casino and other amenities. Prior to July 2005, we operated a casino on leased land approximately one mile away. The San Martin de los Andes, the Junin de los Andes and Copahue casinos are currently in leased facilities. At the San Martin de los Andes location, the lease is scheduled to expire in January 2007. We are currently evaluating whether to renew the lease, move to another leased facility, or build or acquire a replacement location.

City of St. Louis, Missouri:    We own or have an option to purchase approximately 18 acres of contiguous land in the City of St. Louis. Approximately 8 acres of such land is being utilized for our $350 million downtown casino and luxury hotel facility scheduled to open in the third quarter of 2007. The 18 acre site also includes the Embassy Suites St. Louis-Downtown, a 297-suite hotel we acquired in early September 2005. In late 2005, we entered into a joint venture with a local partner to develop a $25 million, 10-story condominium project overlooking the Mississippi River, approximately one half city block away from our 18 acre site.

St. Louis County, Missouri:    We lease an 80-acre site in south St. Louis County located approximately 10 miles south of downtown St. Louis, of which we will utilize 56 acres for our casino hotel. The remaining 24 acres

21

will become a public park and include additional community and recreational facilities. We also own or have options to purchase land which will be utilized for a roadway connecting our facility to the nearby interstate highway.

Great Exuma, Bahamas:    In early 2006, we entered into a sublease to operate the premises and began construction of our 5,000-square-foot casino adjacent to the Four Seasons Resort Great Exuma at Emerald Bay in the Bahamas. We expect to open the casino in mid-2006.

Philadelphia, Pennsylvania:    In connection with the proposed casino in Philadelphia, we entered into two option agreements to purchase approximately 33 acres of land located along the Delaware River on which we anticipate the proposed casino would be located. Such option agreements, including renewal periods, expire on December 31, 2007.

Biloxi, Mississippi:    We own approximately six acres and lease approximately five acres, which leases expire in June 2008. We have options to extend the terms of each lease for 15 additional five-year periods. We also lease approximately six acres of submerged tidelands from the State of Mississippi, which leases expire in May 2008 and which we have the right of first refusal to re-lease at lease expiration. We operated the former casino barge and own the formerly operated land-based facilities, which assets are a part of a significant insurance claim related to Hurricane Katrina. We have not determined if we will rebuild at the site.

Hollywood Park-Casino:    In early 2006, we reached a non-binding agreement in principle to sell our Hollywood Park-Casino leasehold interest and certain related assets for approximately $23.7 million in cash. The lease is a long-term agreement that, including a 10-year renewal option, would otherwise expire in 2019. The Hollywood Park-Casino has historically been subleased to an unaffiliated third-party operator under a year-to-year lease. Such lease has expired and the status of the tenant’s occupancy is now month-to-month.

Crystal Park Casino:    In December 2005, we agreed to sell the card club casino, adjoining hotel and parking and approximately 20 acres for approximately $17 million in cash. The facility has historically been leased to the same operator as the Hollywood Park-Casino under a year-to-year lease. This lease has also expired and the tenant’s occupancy is also now month-to-month.

Warehouse Leases:    We lease warehouse space at various locations close to our properties for various operating purposes.

Item 3.    Legal Proceedings

Indiana State Tax Dispute:    The State of Indiana conducted a sales and use tax audit at our Belterra entity in 2001. In October 2002, we received a proposed assessment in the amount of $3,070,000 with respect to the Miss Belterra casino riverboat, including interest and a penalty. A protest was filed by us in December of 2002. On June 16, 2003, the Indiana Tax Court issued two favorable rulings for other taxpayers with situations similar to ours. On September 21, 2004, the Indiana Supreme Court reversed the Tax Court’s ruling with respect to one of those taxpayers. The other taxpayer settled its assessment with the State. We believe that these recent cases do not apply to our case because of the different facts involved. A hearing date of March 24, 2006 has been scheduled with the Indiana Department of Revenue and a determination should be made shortly thereafter.

Louisiana Use Tax Matter:    The Department of Revenue (the “Department”) for the State of Louisiana filed suit against several licensees in that state, asserting that payments made to third parties on participating progressive slot machines are lease obligations and subject to a use tax. Our Bossier City property was served such suit in December 2002, and the case has been stayed pending resolution of a similar case. In 2003, a federal bankruptcy court in a similar case involving a third-party casino ruled the vendor relationship represents a service arrangement and therefore not a taxable lease arrangement. The U.S. District Court affirmed the bankruptcy court decision. The Department appealed the U.S. District Court decision and the 5th Circuit Court of Appeals ruled in favor of the taxpayer, holding that the payments under the agreements in that case are not taxable. In a decision rendered on August 25, 2005, and by judgment entered on September 27, 2005 the 19^th Judicial District Court in the Parish of East Baton Rouge in another similar case reached the same conclusions reached by the bankruptcy court as affirmed

22

by the District Court and the Fifth Circuit Court of Appeals. On August 29, 2005, we were informed by the Department that it will no longer pursue this issue for the current audit cycle. We are in the process of seeking and believe that we are entitled to receive a full dismissal of its pending lawsuit based on the latest development.

Hubbard Litigation:    In connection with the resignation of R.D. Hubbard as our Chairman in 2002 (“former Chairman”), we agreed to extend the exercise period for stock options (“subject options”) covering 322,000 shares held by the former Chairman with a weighted average exercise price of $10.60 per share provided that the Indiana Gaming Commission approved his exercise of these options as so extended. In December 2004, the former Chairman sought to exercise stock options (“specific options”) covering an aggregate of 185,000 of these shares (“requested option shares”). On January 21, 2005, the Indiana Gaming Commission advised us that it did not approve the former Chairman’s option exercise. In order to clarify the status of such options, on January 25, 2005, we filed an action seeking a declaratory judgment in the U.S. District Court for the Southern District of Indiana (“Indiana Action”), naming the former Chairman and the Indiana Gaming Commission as defendants, and requesting an order from the court determining whether the former Chairman is entitled to exercise the subject options and whether we are obligated to sell the former Chairman the requested option shares. On or about January 26, 2005, the former Chairman commenced litigation against us and our current Chairman and CEO by filing a Complaint in the Superior Court of the County of Riverside, California (“California Action”). The former Chairman, in that action, has asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud and equitable estoppel. The former Chairman seeks compensatory damages in an amount greater than $5 million and punitive damages based on our allegedly wrongful failure to sell to the former Chairman the requested option shares pursuant to the former Chairman’s attempted exercise of the specific options. In the California Action, we have removed the action from the state court in California to the United States District Court for the Central District of California. At the initial pretrial conference in the Indiana Action held on April 11, 2005, the parties agreed to stay both the Indiana Action and the California Action to help facilitate settlement negotiations and to allow the parties to participate in court-sponsored settlement discussions in the Indiana Action. The stay in the Indiana Action was lifted as of October 7, 2005. On November 16, 2005, we dismissed the Indiana Gaming Commission from the Indiana Action. On November 30, 2005, we dismissed the former Chairman from the Indiana Action. The stay was lifted in the California Action as of November 14, 2005. The parties are engaging in discovery, and trial is currently set for November 13, 2006. While we cannot predict the outcome of this litigation, we intend to defend it vigorously. Due to the uncertainty surrounding the extension of the subject options, we continue to include the subject options in the balance of our outstanding options for the presentation of our financial statements.

Columbia Sussex Litigation:    On January 26, 2005, Columbia Sussex Corporation and three other plaintiffs filed a petition against the Missouri Gaming Commission and Casino One Corporation, our wholly owned subsidiary, in the Circuit Court of Cole County, Missouri. At that time, Columbia Sussex had an agreement to purchase an existing bankrupt casino in downtown St. Louis that will compete with our casino now under construction. In addition to Columbia Sussex, named plaintiffs are Wimar Tahoe Corporation, as an owner of property near the proposed Casino One site; President of Columbia Sussex, William J. Yung, as a Missouri taxpayer; and Fred Dehner, a resident of Osage Beach, Missouri, as a registered Missouri voter and taxpayer. . The City of St. Louis filed a motion to intervene as defendants in the case, which was granted by the Court on April 8, 2005. The plaintiffs seek to undo the Missouri Gaming Commission’s approval of Casino One’s docking site on the St. Louis riverfront under a claim for judicial review by original writ, declaratory judgment, writ of prohibition, and appeal of the decision of the Missouri Gaming Commission to the Missouri Court of Appeals. The factual allegations for each claim are that the Commission could not grant approval to Casino One because the facility’s planned gaming floor is allegedly not within 1,000 feet of the main channel of the Mississippi River, as required under the Missouri constitution.

On March 7, 2005, the Defendants filed a motion to dismiss this lawsuit on the grounds that the court lacks subject matter jurisdiction over decisions of the MGC. On April 8, 2005, the court granted Defendants’ motion and dismissed the suit. On May 11, 2005, the plaintiffs filed an appeal of the April 8, 2005 decision of the Circuit Court of Cole County, Missouri. On September 28, 2005, the plaintiffs filed a motion for an extension of time until October 18, 2005 to file an appellate brief in the matter.

23

On April 18, 2005, the plaintiffs filed a petition with the Missouri Court of Appeals Western District, seeking a hearing and de novo review of the MGC’s approval of Casino One’s docking site. On August 8, 2005, plaintiffs filed a motion to consolidate the case with the appeal of the decision of the Circuit Court of Cole County, Missouri. The Court denied plaintiffs’ motion on August 18, 2005. On September 13, 2005, plaintiffs filed a motion to stay or, alternatively, for appointment of a special master pending resolution of the appeal of the decision of the Circuit Court of Cole County, Missouri. On September 27, 2005, the Court of Appeals ruled that the briefing schedule in the April 18, 2005 Petition is to be stayed pending the Court of Appeals’ opinion in the appeal of the decision of the Circuit Court of Cole County, Missouri.

On October 25, 2005, the bankrupt casino indicated publicly that Columbia Sussex had withdrawn its application for licensure in Missouri related to its planned purchase of such facility. We believe that such licensure is required for Columbia Sussex to consummate the planned purchase. The bankrupt casino then moved to intervene in both appeals which motion has been denied by the Court of Appeals. The appeal of the decision of the Circuit Court of Cole County dismissing that case for lack of subject matter jurisdiction has been fully briefed by the City of St. Louis, the Missouri Gaming Commission and by us. The direct appeal from the decision of the Missouri Gaming Commission remains stayed pending a resolution of the appeal of the Cole County decision. The appeal of the Cole County decision was argued before a three judge panel of the Court of Appeals on February 9, 2006. We are currently awaiting a decision.

President Casinos, Inc., owner of the bankrupt casino involved in this action, is planning a new bankruptcy auction to sell the facility. We have entered a purchase agreement to acquire the facility. The agreement will serve as the opening bid in the auction and is subject to potential overbids by third parties.

While we cannot predict the outcome of this litigation, management intends to defend it vigorously.

Action by Greek Authorities:    Prior to our acquisition of Casino Magic Corp. in 1998, Casino Magic had a Greek subsidiary that conducted gaming-related operations in Greece in 1995 and 1996. By the time of our acquisition of Casino Magic, that Greek subsidiary had become inactive. The Greek taxing authorities assessed penalties against the subsidiary and against certain former representatives of the Greek subsidiary arising out of its pre-acquisition activities and such representatives were also prosecuted and convicted in absentia. We defended those former representatives, one of whom was then a director of our company and one of whom was then an employee of our company. Their criminal convictions were overturned by a Greek court in 2003. In October 2005, we learned that the Greek taxing authorities had commenced a new proceeding against the former employee and another former representative of the Greek subsidiary seeking to collect fines and assessments of approximately $6.7 million from these individuals stemming from their status as representatives of the Greek subsidiary. Some or all of the fines and assessments involved in this new action relate to the penalties originally assessed against the Greek subsidiary. We are obligated to indemnify the former employee and are defending him in this current action. The other former representative is now deceased.

Other:    In September 2004, we learned that an attorney who had previously represented the company in connection with regulatory and legal matters in Louisiana may have billed us for services which had not been rendered. The same attorney had also allegedly misappropriated from his law firm fees that we had paid for those and other services. We understand that other gaming companies which utilized this attorney may have had similar experiences. We have conducted an internal investigation into this matter and have filed suit against the law firm in order to recoup those fees for which the law firm cannot provide adequate documentation that the services were performed and that the fees charged for such services were reasonable.

We are a party to a number of other pending legal proceedings, though we do not expect that the outcome of such proceedings, either individually or in the aggregate, will have a material effect on our financial position, cash flows or results of operations.

Item 4.    Submission of Matters to a Vote of Security Holders

None

24

PART II

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

Our common stock is quoted on the New York Stock Exchange under the symbol “PNK”. The table below sets forth the high and low sales prices of our common stock as reported on the New York Stock Exchange:

	Price Range
	High		Low
2005
Fourth Quarter	$	25.40	$	16.78
Third Quarter		25.67		16.05
Second Quarter		20.33		14.38
First Quarter		20.10		15.31
2004
Fourth Quarter	$	20.60	$	13.17
Third Quarter		14.39		10.56
Second Quarter		14.38		10.71
First Quarter		14.93		9.34

As of March 10, 2006, there were 2,772 stockholders of record of our common stock.

Dividends:    We did not pay any dividends in 2005 or 2004. Our 8.25% Notes and 8.75% Notes (each as defined below) and existing credit facility limit the amount of dividends that we are permitted to pay. The Board of Directors does not anticipate paying any cash dividends on our common stock in the foreseeable future, as our financial resources are being reinvested into the business, including our development projects and pending acquisitions.

25

Item 6.    Selected Financial Data

The following selected financial information for the years 2001 through 2005 was derived from our consolidated financial statements. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the consolidated financial statements and related notes thereto. In addition, see note (a) below for a discussion of discontinued operations.

	For the years ending December 31,
	2005(b)			2004(c)			2003(d)			2002(e)			2001(f)
	(in thousands, except per share data)
Results of Operations (a):
Revenues	$	725,900		$	547,071		$	524,162		$	507,761		$	501,083
Operating income		37,233			77,539			34,425			24,789			11,781
Income (loss) from continuing operations before cumulative effect of accounting change		3,589			7,180			(29,871	)		(14,474	)		(17,578	)
Income (loss) from continuing operations before cumulative effect of accounting change per common share:
Basic	$	0.09		$	0.20		$	(1.15	)	$	(0.56	)	$	(0.68	)
Diluted	$	0.08		$	0.20		$	(1.15	)	$	(0.56	)	$	(0.68	)
Other Data:
EBITDA (g), (h)	$	98,404		$	123,645		$	78,801		$	67,438		$	57,464
Capital expenditures		240,109			209,597			82,931			48,596			52,264
Ratio of Earnings to Fixed Charges (i)		—			1.15x			—			—			—
Cash flows provided by (used in):
Operating activities	$	61,746		$	30,374		$	55,386		$	39,030		$	39,517
Investing activities		(138,602	)		(109,094	)		(181,575	)		(77,037	)		(43,304	)
Financing activities		23,226			181,387			109,097			826			(12,442	)
Balance Sheet Data—December 31:
Cash, restricted cash and equivalents	$	156,470		$	287,788		$	229,036		$	147,541		$	156,639
Total assets		1,244,877			1,208,768			954,936			840,438			919,349
Long-term debt		657,673			640,488			645,935			493,498			497,147
Stockholders’ equity		427,814			415,190			200,859			248,486			319,516

(a) In December 2005, we elected to pursue the sale of our two card clubs in southern California, including signing an agreement for the sale of the Crystal Park casino in December and reaching a non-binding agreement in principle for the sale of the Hollywood Park-Casino in early 2006. Accordingly, the card club assets and related liabilities have been reclassified as of December 31, 2005 to assets held for sale and liabilities associated with assets held for sale, respectively. Prior period financial results have been reclassified to present the card club operations as discontinued operations and conform to the new presentation. This reclassification had no effect on previously reported net income (loss). Income (loss) from discontinued operations, net of taxes, in 2005, 2004, 2003, 2002 and 2001 was $2,536,000, $1,981,000, $1,629,000, $1,549,000 and $(11,071,000) (inclusive of an after-tax impairment charge of $12,114,000 in 2001), respectively.

(b) The results of 2005 include $29,608,000 for pre-opening and development costs, $3,752,000 for losses on the early extinguishment of debt and $11,402,000 of certain non-cash tax benefits.

(c) The results of 2004 include $14,399,000 for pre-opening and development costs, $42,410,000 for a gain on sale of assets (net of other items) and $14,921,000 for losses on the early extinguishment of debt.

(d) The results of 2003 include $1,261,000 for pre-opening and development costs, benefits of $2,255,000 for Indiana regulatory, corporate relocation and derivative action matters, $7,832,000 for a non-cash goodwill impairment charge, $19,908,000 for losses on the early extinguishment of debt and $4,248,000 for certain non-cash tax charges.

26

(e) The results of 2002 include $1,948,000 for pre-opening and development costs, $6,609,000 for Indiana regulatory and related costs, $2,753,000 for asset write-offs and $1,601,000 for relocating corporate offices. In addition, 2002 includes a cumulative effect of a change in accounting principle charge of $56,704,000, net of tax benefit, related to the adoption of a new accounting principle.

(f) The results of 2001 include $1,068,000 for pre-opening and development costs and $3,171,000 of asset impairment charges.

(g) We define EBITDA as earnings before interest expense and interest income, income taxes, depreciation, amortization, loss on early extinguishment of debt, discontinued operations and cumulative effect of a change in accounting principle. There are non-routine items included in EBITDA which are set forth in note (h) below. Management uses EBITDA adjusted for the non-routine items noted below as a relevant and useful measure to compare operating results among its properties and between accounting periods. The presentation of EBITDA has economic substance because it is used by us as a performance measure to analyze the performance of its business segments. EBITDA is specifically relevant in evaluating large, long-lived hotel casino projects, because EBITDA provides a perspective on the current effects of operating decisions separated from the substantial, non-operational depreciation charges and financing costs of such projects. Management eliminates the results from discontinued operations as they are discontinued. Additionally, management believes some investors consider EBITDA to be a useful measure in determining a company’s apparent ability to service or incur indebtedness and for estimating a company’s underlying cash flow from operations before capital costs, taxes and capital expenditures. EBITDA, subject to certain adjustments, is also a measure used in debt covenants in our debt agreements. Unlike net income, EBITDA does not include depreciation or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. Management compensates for these limitations by using EBITDA as only one of several comparative tools, together with the common GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include operating income (loss), net income (loss), cash flows from operations and cash flow data. EBITDA is not calculated in the same manner by all companies and accordingly, may not be an appropriate measure of comparing performance amongst different companies. For an additional explanation of matters concerning EBITDA, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other Supplemental Data.” The reconciliation between net income (loss) to EBITDA is as follows:

	For the years ending December 31,
	2005			2004			2003			2002			2001
	(in thousands)
Net income (loss)	$	6,125		$	9,161		$	(28,242	)	$	(69,629	)	$	(28,649	)
Cumulative effect of accounting change, net of taxes		0			0			0			56,704			0
Income (loss) before cumulative effect of accounting change		6,125			9,161			(28,242	)		(12,925	)		(28,649	)
(Income) loss from discontinued operations, net		(2,536	)		(1,981	)		(1,629	)		(1,549	)		11,071
Income (loss) from continuing operations before cumulative effect of accounting change		3,589			7,180			(29,871	)		(14,474	)		(17,578	)
Income tax expense (benefit)		(15,975	)		7,244			(7,502	)		(7,200	)		(14,371	)
Income (loss) from continuing operations before income taxes and cumulative effect of accounting change		(12,386	)		14,424			(37,373	)		(21,674	)		(31,949	)
Loss on early extinguishment of debt		3,752			14,921			19,908			0			0
Interest expense, net of capitalized interest and interest income		45,867			48,194			51,890			46,463			43,730
Operating income		37,233			77,539			34,425			24,789			11,781
Depreciation and amortization		61,171			46,106			44,376			42,649			45,683
EBITDA	$	98,404		$	123,645		$	78,801		$	67,438		$	57,464

27

(h) “Operating income (loss)” and “EBITDA” disclosed above include the following non-routine items:

	2005		2004			2003			2002		2001
Pre-opening and development costs	$	29,608	$	14,399		$	1,261		$	1,948	$	1,068
Gain on sale of assets, net of other items		0		(42,410	)		0			0		0
Indiana regulatory and related costs (benefit)		0		(194	)		(2,056	)		6,609		0
Goodwill and other asset impairment charges		0		0			7,832			2,753		3,171
Corporate relocation costs (benefit)		0		0			(199	)		1,601		0
Terminated merger benefit		0		0			0			0		(464	)
Gain on disposition of assets, sold operations		0		0			0			0		(500	)
Total Net Non-Routine Items	$	29,608	$	(28,205	)	$	6,838		$	12,911	$	3,275

(i) In computing the ratio of earnings to fixed charges: (x) earnings were the income from continuing operations before income taxes and fixed charges and excluding capitalized interest; and (y) fixed charges were the sum of interest expense, amortization of debt issuance costs, capitalized interest and the estimated interest included in rental expense. Prior period ratio of earnings to fixed charges have been reclassified to present the card club operations as discontinued operations and conform to the new presentation. Due principally to our large non-cash charges deducted to compute such earnings, earnings so calculated were less than fixed charges by $19,516,000, $38,886,000, $22,462,000 and $32,430,000 for the years ended December 31, 2005, 2003, 2002 and 2001, respectively.

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

The following discussion and analysis of financial condition, results of operations, liquidity and capital resources should be read in conjunction with, and is qualified in its entirety by, our audited Consolidated Financial Statements and the notes thereto, and other filings with the Securities and Exchange Commission.

Overview and Summary

We are a rapidly growing, diversified, multi-jurisdictional owner and operator of gaming entertainment facilities. We own and operate five domestic casinos in Nevada, Louisiana and Indiana. We also own a hotel in St. Louis, Missouri and have recently signed an agreement to purchase a riverboat casino near this site. We are developing a major casino in downtown St. Louis and another major casino in St. Louis County, Missouri. We have filed a gaming license application in Philadelphia. We own a hotel casino site and have significant insurance claims related to the hotel casino we previously operated in Biloxi, Mississippi. Outside of the United States, we operate four small casinos in Argentina; have begun construction of a small casino in the Bahamas; and have filed two applications for gaming licenses in Chile. Finally, we are in the process of selling our interest in the two southern California card clubs from which we have historically received lease income.

On March 13, 2006, we entered into a definitive merger agreement with Aztar Corporation to acquire all the outstanding shares of Aztar for cash, subject to the terms and conditions thereof, in a transaction having a value of $2.1 billion including the refinancing of Aztar debt. In the transaction, we might also refinance our existing credit agreement and senior subordinated debt. Consummation of the merger is subject to certain conditions, including approval of the transaction by stockholders of Aztar and receipt of certain required gaming regulatory approvals.

After completion of the acquisition, we intend to develop a comprehensive plan for Aztar’s 34-acre Las Vegas “Strip” Tropicana site. We estimate that the design phase of this project will require at least two years from the close of the acquisition. When we are ready to proceed with the redevelopment, we would likely need substantial additional financing for the project, which we expect to be the largest development project we have undertaken to date.

In May 2005, we opened L’Auberge du Lac, our hotel casino resort in Lake Charles, Louisiana. In July we opened our replacement casino in Neuquen, our principal Casino Magic Argentina property. In September, we

28

completed the acquisition of the Embassy Suites St. Louis-Downtown, a 297-suite hotel adjacent to our St. Louis City project, for approximately $38 million. In September, we broke ground on the $350 million St. Louis City project, which is scheduled to open in the third quarter of 2007, and in November began site development work for our $375 million St. Louis County project, which is scheduled to open in 2008 approximately one year after the opening of the city project. We have also begun construction of our $5 million small casino in Great Exuma, Bahamas.

In late December 2005, we filed for one of two slots-only casino licenses in Philadelphia, Pennsylvania. We were one of five applicants. According to the Pennsylvania Gaming Control Board, gaming licenses could be issued by December 2006. If selected, we intend to build a casino that would include 3,000 slot machines, multiple bars and restaurants, and other amenities. We estimate this initial phase, including land and Pennsylvania’s $50 million initial gaming license fee, will cost between $250 million and $400 million. Earlier in 2005, we submitted bids for two casino licenses in Chile, a $24 million planned casino in Antofagasta and a $17 million planned casino in Rancagua. We anticipate a determination regarding the licenses by Chilean authorities in mid-2006.

Our Biloxi, Mississippi property was severely damaged as a result of Hurricane Katrina and has remained closed since late August 2005. We intend to file an insurance claim for both property damage and business interruption in relation to our Casino Magic Biloxi property. We believe our aggregate $400 million of property insurance is sufficient to cover the reconstruction of the Biloxi facility and cover its business interruption claims. As of February 28, 2006, we had received a total of $50 million towards the insurance claims. We are evaluating whether to build a replacement Biloxi facility. We will base our decision on management’s forecasted profitability of a new facility, taking into consideration the competitive, regulatory and infrastructure conditions, among other factors.

On December 14, 2005, we executed a $750 million amended and restated senior secured credit facility, replacing our then existing $380 million facility. The new credit facility consists of a $450 million five-year revolving credit facility and a $300 million six-year term loan, of which $200 million was drawn immediately and $100 million of which can be drawn on a delayed basis. At year end, some $430 million of the revolving credit facility was undrawn. Under our existing debt structure, until the company meets the consolidated coverage ratio as defined in its senior subordinated note indentures, additional borrowings are limited under the most restrictive indenture to not more than approximately $419 million except under certain circumstances, such as using such additional funding to repay other debt. In connection with the Aztar acquisition, we plan to refinance our existing bank financing, and may also refinance our existing senior subordinated debt.

In early 2006, we completed the issuance of 6.9 million newly issued common shares (including the over-allotment shares), resulting in net proceeds of approximately $179 million after underwriters’ fees and expenses. Also in early 2006, we announced plans for the expansion of three of our existing casino properties: a 200-guestroom hotel at Boomtown New Orleans for approximately $30 million, a 250-guestroom hotel expansion at Belterra Casino Resort for approximately $45 million and a 250-guestroom expansion at L’Auberge du Lac for approximately $45 million.

We are in the process of selling our leasehold interest, among other things, in the Hollywood Park Casino card club for approximately $23.7 million in cash and our Crystal Park card club casino for approximately $17 million in cash. We anticipate both transactions will close in mid-2006.

Management believes the outlook for the gaming industry is positive and that we can benefit from its potential growth. Management believes that the growth prospects for the Company are very positive; that we have the financial resources and access to the capital markets to achieve our goals; and that we have the management expertise to execute our plans. There is no certainty, however, that this will be the case.

29

RESULTS OF OPERATIONS

The following table highlights our results of operations for the three years ended December 31, 2005, 2004 and 2003 (a).

	For the years ended December 31,
	2005			2004			2003
	(in thousands)
Revenues from continuing operations
Boomtown New Orleans	$	143,122		$	111,129		$	106,398
Belterra Casino Resort		168,847			155,534			133,704
L’Auberge du Lac (b)		148,437			0			0
Boomtown Bossier City		95,369			99,821			104,295
Boomtown Reno		88,167			84,506			83,645
Casino Magic Argentina (c)		20,466			15,553			12,517
Embassy Suites and other (d)		4,055			0			0
Casino Magic Biloxi (e)		57,437			80,528			83,603
Total revenues from continuing operations	$	725,900		$	547,071		$	524,162
Operating income
Boomtown New Orleans	$	44,377		$	25,451		$	22,814
Belterra Casino Resort		21,961			15,496			9,474
L’Auberge du Lac (b)		(24,110	)		(7,081	)		(559	)
Boomtown Bossier City		12,353			13,920			8,366
Boomtown Reno		4,012			3,257			6,538
Casino Magic Argentina (c)		5,426			5,963			4,455
Embassy Suites and other		315			0			0
Casino Magic Biloxi (e)		4,964			8,345			8,127
Corporate		(24,255	)		(23,098	)		(18,511	)
Other pre-opening and development costs (f)		(7,810	)		(7,318	)		(702	)
Indiana regulatory and related benefit (costs) and other		0			194			2,255
Gain on sale of assets, net of other items		0			42,410			0
Goodwill and other asset impairment charges		0			0			(7,832	)
Operating income	$	37,233		$	77,539		$	34,425
Depreciation and amortization	$	61,171		$	46,106		$	44,376
Revenue by Property as % of Revenues From Continuing Operations
Boomtown New Orleans		19.7	%		20.3	%		20.3	%
Belterra Casino Resort		23.3	%		28.4	%		25.5	%
L’Auberge du Lac		20.5	%		0.0	%		0.0	%
Boomtown Bossier City		13.1	%		18.3	%		19.9	%
Boomtown Reno		12.1	%		15.5	%		16.0	%
Casino Magic Argentina		2.8	%		2.8	%		2.4	%
Embassy Suites and other		0.6	%		0.0	%		0.0	%
Casino Magic Biloxi		7.9	%		14.7	%		15.9	%
		100.0	%		100.0	%		100.0	%
Operating margins (g)
Boomtown New Orleans		31.1	%		22.9	%		21.4	%
Belterra Casino Resort		13.0	%		10.0	%		7.1	%
L’Auberge du Lac		(16.2	)%		N/M			N/M
Boomtown Bossier City		13.0	%		13.9	%		7.9	%
Boomtown Reno		4.6	%		3.9	%		7.8	%
Casino Magic Argentina		26.5	%		38.3	%		35.6	%
Embassy Suites and other		7.8	%		0.0	%		0.0	%
Casino Magic Biloxi		8.6	%		10.4	%		9.7	%

30

(a) The table excludes the results of operations for our two southern California card clubs – see “Discontinued Operations” below.

(b) L’Auberge du Lac opened in May 2005. Operating income includes pre-opening costs of $21.1 million, $7.1 million and $0.6 million in 2005, 2004 and 2003, respectively.

(c) Casino Magic Argentina opened its replacement casino for the Neuquen location in July 2005. Operating income for 2005 includes pre-opening costs of $702,000.

(d) Includes $94,000 of other revenue attributed to corporate.

(e) Casino Magic Biloxi closed on August 28, 2005 due to Hurricane Katrina and remains closed.

(f) Other pre-opening and development costs include: St. Louis projects of $6.1 million and $4.3 million in 2005 and 2004, respectively; expenses associated with a California gaming initiative of approximately $3.0 million in 2004; and, other activities in 2005 of $1.7 million. Excludes pre-opening and development activities for L’Auberge du Lac and Casino Magic Argentina.

(g) Operating margin at each property is calculated by dividing operating income by revenues.

Comparisons of the Years Ended December 31, 2005, 2004 and 2003

The following commentary reflects our results in accordance with several GAAP measures. An additional, supplemental analysis of our results using EBITDA, including our definition of EBITDA and a reconciliation of such EBITDA to GAAP accounting measures is provided in the “Other Supplemental Data” section below.

Operating Results    Hurricanes Katrina and Rita On August 29, 2005, Hurricane Katrina struck the Gulf Coast of the United States, hitting shore near Biloxi, Mississippi, destroying our casino barge and causing severe damage to the hotel structure at our Casino Magic Biloxi property and some damage to our Boomtown New Orleans facility. Our Boomtown New Orleans property reopened on September 30 after closing on August 28, while our Biloxi property remains closed.

On September 23, Hurricane Rita passed almost directly over Lake Charles and caused damage to L’Auberge du Lac, which casino partially reopened on October 8 after closing on September 22. By the end of October, all amenities, including the golf course, had been reopened.

We continue to prepare our property damage and business interruption insurance claims associated with the storms. As of year-end, we recorded certain property damage and business interruption insurance receivables for damage to the facility and expenses incurred; however, we have not recorded any lost profit business interruption insurance as of December 31 (see “Casino Magic Biloxi” below).

At our New Orleans and Lake Charles facilities, besides the hurricane closure periods, we expensed hurricane related costs of approximately $2.0 million and $4.5 million, respectively. We have not yet determined whether we will file insurance claims for either facility, as we have not yet determined whether our costs will exceed the property specific deductibles. We did not record any lost profit recovery at either property.

Both storms caused significant damage to the communities in and along the path of each hurricane; affected other communities that housed and supported the many evacuees, including the Bossier City/ Shreveport, Dallas and Houston areas; and resulted in an overall distraction to many potential customers during and after the storms. Overall, the operating results of our company have been affected, both positively and negatively, from these natural disasters.

Discontinued Operations    In December 2005, we elected to pursue the sale of our two card clubs in southern California, including executing an agreement for the sale of the Crystal Park facility in December and reaching a non-binding agreement in principle for the sale of our interests in the Hollywood Park Casino. Accordingly, the results of operations table and the discussion of financial results reflect such card club assets and related liabilities as held for sale and the operations as discontinued.

Revenues    increased to $725,900,000 in 2005 from $547,071,000 in 2004, primarily from the May 2005 opening of L’Auberge du Lac and record results at Boomtown New Orleans, and despite the closure of our Biloxi

31

property since late August. Gaming revenues represented the majority of the increase, or $153,943,000, while food and beverage and hotel increased by $9,255,000 and $6,813,000, respectively, over the comparable 2004 period. Other income (comprised primarily of retail, arcade and showroom revenue) increased by $4,745,000 when compared to 2004 primarily due to the opening of such amenities at L’Auberge du Lac. Revenues in 2004 exceeded 2003 revenues of $524,162,000 primarily due to Belterra Casino Resort’s improved results from the completion of the hotel expansion in May 2005.

Operating income    for 2005 was $37,233,000, net of pre-opening and development costs of $29,608,000, compared to $77,539,000 in 2004, which year includes a gain on the sale of assets, net of other items, of $42,410,000, partially off-set by pre-opening and development costs of $14,399,000. Operating income was $34,425,000 in 2003, which includes an asset impairment charge of $7,832,000 and other unusual items with a net benefit of $994,000. For a listing of these and other non-routine items, see notes (g) and (h) to Item 6 above.

Each property’s contribution to these results is as follows:

As noted above, our Boomtown New Orleans property reopened on September 30 and has since benefited from reduced competition and the sizable rebuilding effort that has begun in the New Orleans area. Consequently, Boomtown New Orleans achieved revenue and operating income records in 2005. Revenues grew by $31,993,000, or 28.8%, to $143,122,000 compared to $111,129,000 in 2004, primarily from an increase in gaming revenue of $30,817,000.

Due to limited housing in the greater New Orleans area and the permanent departure of a number of our New Orleans employees, and despite paying increased wages, our labor costs in the fourth quarter were below historical levels. Hence, benefiting from the fourth quarter increased revenue and reduced labor costs, despite expensing approximately $2.0 million of hurricane-related costs, operating income for 2005 was $44,377,000, an increase from $25,451,000 in 2004. The operating margin in 2005 increased to 31.1% from 22.9% in 2004. Such increased operating income is expected to decline as competing casinos in New Orleans and the Gulf Coast reopen, including the large land-based casino in downtown New Orleans that re-opened in mid-February 2006.

Revenues in 2004 grew to $111,129,000 from $106,398,000 in 2003, primarily due to gaming revenue improvement. Operating income grew to $25,451,000 in the year from $22,814,000 in the prior year, a 1.5 percentage point increase in the operating margin.

In 2005, our Belterra Casino Resort facility benefited from a full year of the May 2004 opening of its 300-guestroom tower addition (bringing the total to 608 guestrooms). In addition, in June 2005, Belterra opened its new poker room, increasing the total number of gaming positions by 114. According to the Indiana Gaming Commission, the southern Indiana gaming market produced a $31,406,000, or 2.7%, increase in gaming revenues in 2005 compared to 2004. Belterra’s revenues for 2005 increased by $13,313,000, or 8.6%, to $168,847,000 from $155,534,000 in 2004, primarily from gaming revenues.

Benefiting from controlled labor and marketing costs and economies of scale, operating income in 2005 grew by $6,465,000, or 41.7%, to $21,961,000 from the prior-year period of $15,496,000; for the year, the operating margin increased three percentage points over 2004.

For 2004, revenues at Belterra grew by $21,830,000, or 16.3%, to $155,534,000 from $133,704,000 in 2003, primarily from gaming revenue growth from the May 2004 completion of the $37 million guestroom expansion project. Operating income in 2004 also grew substantially, improving by $6,022,000, or 63.6%, to $15,496,000 from $9,474,000 in 2003.

32

On May 26, 2005, we opened L’Auberge du Lac, which we believe is the premier hotel-casino in southeastern Louisiana. Located on 242 acres of land, L’Auberge du Lac offers 743 guestrooms and suites, several restaurants, approximately 28,000 square feet of meeting space, a championship golf course designed by Tom Fazio, retail shops and a full-service spa. Unlike most other riverboat casinos, most of the public areas at L’Auberge du Lac, and in particular the casino, are situated entirely on one level. The casino is surrounded on three sides by the hotel facility and other guest amenities, providing convenient access to the approximately 1,600 slot machines and 60 table games.

As noted above, L’Auberge du Lac reopened its casino on October 8 after closing on September 22 due to Hurricane Rita. While the facility was closed, L’Auberge du Lac housed hundreds of reconstruction and security personnel and served more than 20,000 meals. Overall, the property expensed approximately $4.5 million of costs associated with the hurricane, including asset write-offs, repair costs, labor and other expenses during the closure period. As noted above, we have not recorded any potential lost profit insurance proceeds.

Revenues for 2005 were $148,437,000. Expenses in 2005 of $172,547,000 include hurricane related costs of $4,511,000, pre-opening and development costs of $21,096,000, and depreciation charges of $14,345,000. Consistent with opening a hotel casino in a highly competitive market, we also incurred significant marketing and promotional costs. We anticipate such costs declining in the future. Generally, the cost to retain customers is less expensive than attracting new customers.

Pre-opening and development costs in 2004 and 2003 were $7,081,000 and $559,000.

The Bossier City/Shreveport gaming market continued to be highly competitive in 2005, as reflected in our Boomtown Bossier City results. Revenues for the year were $95,369,000 compared to $99,821,000 in 2004. The majority of the decline was table game revenue. In 2003, Native American gaming facilities opened in Oklahoma, including a facility approximately one hour from the Dallas/Fort Worth area. Beginning in the 2005 first quarter, such properties were also permitted to operate table games.

Operating income for 2005 was $12,353,000 compared to $13,920,000 in 2004, as the decline in revenue was not fully offset by labor and other operating efficiencies. Hurricanes Katrina and Rita were also factors, as evacuees from New Orleans and the Gulf Coast occupied many of the facility’s guestrooms and understandably did not gamble as much as the hotel’s usual clientele.

In 2004, Boomtown Bossier City benefited from operating efficiencies related to its labor and marketing costs, as it was able to improve its operating income to $13,920,000 from $8,366,000. As noted above, the expansion of Native American gaming in Oklahoma has adversely affected the Bossier City/Shreveport market. Boomtown Bossier City’s 2004 revenues were $99,821,000 compared to 2003 revenues of $104,295,000.

Revenues at our Boomtown Reno property increased to $88,167,000 in 2005 compared to $84,506,000 in 2004, primarily from truck stop/service station revenue.

During 2003, new Native American casino operations that are closer to several of Boomtown Reno’s feeder markets opened or expanded in northern California. We believe that the effect of this has now been substantially absorbed by the Reno gaming market. Due to increasing fuel prices over a similar period, Boomtown Reno has experienced a shift from high-margin gaming revenue to lower-margin fuel revenue.

Operating income for Boomtown Reno in 2005 was $4,012,000 compared to $3,257,000 in 2004. The increase was primarily due to reduced depreciation costs (approximately $620,000), as expansions and improvements made in past years reached the end of their depreciation lives.

As discussed above, Boomtown Reno has approximately 500 developable acres. We have agreed to sell approximately 30 acres to Cabela’s Retail, Inc., which has indicated its plans to build an outdoor sporting goods store on such land. We continue to evaluate for future development or other uses for the remaining excess acres.

33

Revenues for the year ended December 31, 2004 at Boomtown Reno were $84,506,000, compared to $83,645,000 for the year ended December 31, 2003, and operating income was $3,257,000 in 2004 versus $6,538,000 in 2003, reflecting the mid-2003 expansion of Native American gaming in California.

The 2005 operating results for Casino Magic Argentina reflect the July opening of our replacement casino at our principle site in Neuquen, which facility includes a larger, more luxurious casino, restaurant, and an entertainment venue on land owned by us approximately one mile from the former leased facility. Revenues in 2005 grew $4,913,000, or 31.6%, to $20,466,000 from $15,553,000 in 2004.

Consistent with the opening of a new facility, Casino Magic Argentina incurred pre-opening costs of $702,000, as well as an increase in depreciation charges of $721,000 now that we own the building. Overall, operating income in 2005 was $5,426,000 compared to $5,963,000 in 2004.

Revenues and operating income in 2004 exceeded the 2003 results of $12,517,000 and $4,455,000, respectively, primarily due to the stabilized economic and political environment in Argentina since the 2001 currency devaluation.

In September 2005, we acquired the Embassy Suites St. Louis-Downtown, a 297-suite hotel adjacent to our St. Louis City project. Revenues in 2005 were $3,961,000. Net of depreciation charges of $604,000, operating income for 2005 was $315,000.

Casino Magic Biloxi:    As a result of Hurricane Katrina, the casino barge at Casino Magic Biloxi was destroyed. We are still in the process of assessing the substantial damage to the hotel structure and its contents. At this time, we intend to file a claim for both property damage and business interruption in relation to our Casino Magic Biloxi property.

We maintain an aggregate of $400 million of property insurance on a per occurrence basis, including business interruption coverage. This insurance is comprised of multiple layers of coverage underwritten by 11 separate carriers or syndicates, all of which are currently rated A- or better by a major rating agency. The insurance provides $400 million of coverage per occurrence for a “Weather Catastrophe Occurrence” and at least $100 million on an annual basis for flood coverage.

As of February 28, 2006, we have been paid $50 million by certain insurance carriers. A number of the insurance carriers have reserved their rights to characterize the loss as one caused, at least in part, by a flood. Such insurance carriers have further reserved their rights to assert that such flood loss would fall within the policies’ limited flood coverage, if any. We have reserved all rights to sue any carrier for “bad faith” or any other reason in asserting our full rights under law and under our insurance policies. We intend to vigorously oppose any effort by any of our insurance carriers to limit their obligations under the policies by improperly characterizing the losses sustained by us.

We wrote down by $57,813,000 the net book value of property and equipment that was impaired by the storm and a corresponding insurance receivable was recorded. Such amount has no relevance to the actual insurance claims, which are based on the cost in future periods of rebuilding a new property of like kind and quality to the property that was destroyed. Such receivable was reduced by $25 million of insurance proceeds received through December 2005, and by another $25 million for receipts received through February 28, 2006. We also recorded a receivable for inventory write-downs and expenses incurred at Biloxi during and since the storm of $16,734,000, but not for any hurricane-related lost profits. We are insured for both the ongoing expenses and the lost profits, but accounting principles do not permit recognition of such lost profits until the ultimate resolution of such claims with the insurance carriers. We anticipate incurring additional impairment charges and recording insurance receivables in the upcoming periods as a more detailed assessment of the remaining assets is completed. In addition, we anticipate recording additional insurance receivables for other insured expenses as we evaluate our business interruption claim. We are also incurring certain uninsured costs, such as certain legal

34

expenses. Management expects the Company’s ultimate insurance claim and recovery will be significantly larger than the insurance receivables of $49.5 million currently shown on our balance sheet.

Due to the shortened operating year, Casino Magic Biloxi’s revenues and operating income for 2005 were $57,437,000 and $4,964,000, respectively, compared to $80,528,000 and $8,345,000, respectively, in 2004. The 2005 operating income includes approximately $1,694,000 of costs related to the hurricane.

For the year ended December 31, 2004, revenues were $80,528,000, compared to $83,603,000 in 2003. Operating income improved to $8,345,000 in 2004 from $8,127,000 in 2003, as the property increased its focus on more profitable promotional offers.

Corporate Costs    Corporate costs in 2005 were $24,255,000 compared to $23,098,000 in 2004. The additional costs are due primarily to the increased staffing costs consistent with a growing company, offset by a decline in audit-related expenses.

Corporate costs were $18,511,000 in 2003. Corporate costs increased in 2004 as compared to 2003 primarily due to audit and related service costs of approximately $1,800,000 and additional corporate staffing and related costs of $1,971,000, consistent with our long-term growth strategies.

Other Pre-opening and development costs    As noted above, other pre-opening and development costs exclude such expenses associated with L’Auberge du Lac and Casino Magic Argentina, which costs are included in the respective operating income amounts discussed above. Other pre-opening and development costs for 2005 were $7,810,000, primarily for the St. Louis projects. In 2004, other pre-opening and development costs were $7,318,000, including the St. Louis opportunities and an unsuccessful gaming initiative we helped sponsor in California. In 2003, other pre-opening and development costs were $702,000.

Gain on Sale of Assets, Net of Other Items    In 2004, we sold 97 acres of surplus land for approximately $57 million in cash and recorded a gain, net of transactional and other costs, of $43,976,000. In addition, we recorded a charge of $1,566,000 for the expensing of an agreement for a consultant that assisted with the disposition of the surplus land.

Indiana Regulatory Matters    In 2003, we received funds and settled certain legal matters in connection with an investigation by the Indiana Gaming Commission into events surrounding a golf tournament in 2001, and therefore recorded a benefit of $2,056,000 in 2003. In 2004, a benefit of $194,000 was recorded in connection with the reversal of reserves no longer deemed necessary.

Goodwill and Asset Impairment Charges    During 2003, we identified certain pre-acquisition deferred tax assets related to Casino Magic Corp., which estimated future realization had changed based on facts identified in the year. Pursuant to SFAS No. 109, “Accounting for Income Taxes,” pre-acquisition contingent tax matters, including changes in a deferred tax asset’s estimated future realization, that are resolved beyond the one-year post-acquisition period are required to be reclassified from the deferred tax accounts to goodwill. Pursuant to SFAS No. 142, “Goodwill and Other Intangible Assets,” we included such amounts in our annual goodwill assessment. Based on the evaluation completed, we recorded a goodwill impairment charge of $7,832,000 in 2003.

Interest Income    Interest income in 2005 was $3,668,000 compared to $3,584,000 in 2004 and $2,111,000 in 2003 with the increase in 2005 primarily attributed to higher interest rates on invested funds offset by reduced invested funds. The improvement in 2004 versus 2003 is primarily due to an increase in invested funds from the various financings.

35

Interest Expense    Interest expense in 2005 before capitalized interest was $56,665,000 compared to $56,880,000 in 2004 and $55,514,000 in 2003. Capitalized interest was $7,130,000, $5,102,000 and $1,513,000 in 2005, 2004 and 2003, respectively.

Loss on Early Extinguishment of Debt    In December 2005, we entered into a new credit facility which facility reduced our overall incremental borrowing costs and provided more flexible covenants. In early 2005, we retired the remaining portion of our 9.25% senior subordinated notes using borrowings from the then credit facility. Although advantageous to our overall capital structure, we incurred charges of $3,752,000 in 2005 related to unamortized debt issuance costs and similar items associated with the retired debt. During 2004 and 2003, we also improved our overall capital structure through various debt refinancings and consequently incurred similar charges of $14,921,000 and $19,908,000, respectively.

Income Tax (Expense) Benefit    During 2005, we recorded a tax benefit of $15,975,000 from continuing operations. We had previously recorded a valuation allowance against a substantial portion of our Indiana state income tax Net Operating Losses (“NOLs”) related to our Belterra operations, as the ultimate utilization of such state NOLs was deemed uncertain. During the 2005 third quarter, we determined it is more likely than not that we will utilize the Indiana state NOLs based on an analysis of the deferred tax assets, the level of recent and projected performance of Belterra and current Indiana state tax law. Accordingly and based on our best estimates, we recorded a non-cash benefit of $9,807,000, reversing the previously established valuation allowance. In addition, during the 2005 fourth quarter, we recorded net federal income tax credits of approximately $1,594,000 relating to wage continuation payments to workers displaced by Hurricanes Katrina and Rita. Such benefits are reflected in the provision for income taxes for the year ended December 31, 2005. Excluding such benefits, our effective income tax rate for 2005 was approximately 37%.

Our effective tax rate in 2004 was approximately 50%, or a tax provision of $7,244,000. This was higher than the statutory rate primarily due to non-deductible California gaming initiative costs.

The effective tax rate in 2003 was 20%, or a tax benefit of $7,502,000. During 2003, we revised our estimate of tax reserves to cover certain tax exposures. We recorded a tax provision of $4,248,000 in the year in connection with such activity. Excluding the goodwill impairment charge from pre-tax losses and the non-routine tax charge, the effective tax rate in 2003 was 40%.

Discontinued Operations    In December 2005, our board of directors approved management’s plan to sell our two card clubs in southern California. Pursuant to California law, publicly traded companies are effectively not permitted to operate card clubs. Accordingly, we have leased these facilities to a third party operator. In 2004, we sponsored a voter initiative that would have permitted card clubs to offer slot machines. The measure was heavily opposed by Native American tribal casinos in California, which funded an extensive media campaign, and the measure was defeated. We recently determined the upside of continued ownership of such leased facilities was limited and that we would prefer to focus our resources on core businesses that we can manage directly.

In December, we entered into an agreement to sell the Crystal Park card club to an investor group for gross proceeds of $17 million in cash. At December 31, 2005, the net book value of the assets to be sold was approximately $5.8 million. Such amount is primarily property and equipment and has been reclassified to “Assets Held for Sale” as of December 31, 2005 on the Consolidated Balance Sheet. The facility is leased to a third-party operator, which rent has been $240,000 per annum since 2001. Such lease has historically been a year-to-year arrangement.

In early 2006, we reached a non-binding agreement in principle to sell our leasehold interest, and assign certain related receivables, of the Hollywood Park Casino to the owners of the Hollywood Park Racetrack for gross proceeds of approximately $23.7 million in cash plus cancellation of the existing lease obligation. In 1999, in connection with the sale of the Hollywood Park Racetrack, we entered into a lease agreement that, inclusive of a 10-year renewal period, expires in September 2019 for the Hollywood Park Casino. Current lease obligations

36

are $3 million per annum, with an increase in the annual rent on the 2009 renewal date based on the change in consumer price index between lease inception and renewal. We sub-lease the facility to the same third party operator of our Crystal Park casino. Prior to 2005, the annual sub-lease rent to us was $6 million, which lease obligation increased to $7 million in 2005 with a commitment for us to fund approximately $1 million of capital improvements at the card club during the year. As with Crystal Park, the lease has historically been a year-to-year lease.

As of December 31, 2005, the net book value of the Hollywood Park Casino assets to be sold and the receivables assigned was approximately $16.7 million, which is also included as “Assets Held for Sale” at year-end on the Consolidated Balance Sheet. In addition, the capital lease obligation to be cancelled in connection with the transaction of $10.2 million has been reclassified to “Liabilities Associated with Assets Held for Sale” as of December 31, 2005. The book value of the lease does not reflect the rent obligations that would occur if the renewal option in 2009 is exercised.

We anticipate executing an agreement for sale of our interests in the Hollywood Park Casino shortly and completing both transactions in mid-2006.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2005, we had $156,470,000 of cash and cash equivalents and restricted cash, and approximately $134 million of availability under our credit facility (see detail discussion below). We estimate that approximately $50 million is currently used to fund our casino cages, slot machines, operating accounts and day-to-day working capital needs. We generally produce significant positive cash flows from operations, though this is not reflected in our reported net income due to our large depreciation charges and other non-cash costs.

Our working capital (current assets less current liabilities, excluding restricted cash) was $70,948,000 at December 31, 2005, versus $106,471,000 at December 31, 2004. The decline was principally due to the utilization of excess cash in 2005 for construction and pre-opening costs for L’Auberge du Lac which opened in May, construction of the replacement casino in Argentina that opened in July and pre-opening costs for the St. Louis projects. In addition, we utilized, for the L’Auberge du Lac construction, funds held in a completion reserve account. Such account was required by the prior credit agreement and was classified as a long-term asset and therefore not a component of working capital.

Cash provided by operations was $61,746,000 for the year ended December 31, 2005, compared to $30,374,000 in the 2004 period. The increase is principally due to the opening of L’Auberge du Lac and the increased cash flow from the Boomtown New Orleans facility. Such improvements over 2004 were achieved despite the closure of our Biloxi facility and other storm-related items. We anticipate cash flow from operations will improve further in 2006 as we benefit from a full year of operating L’Auberge du Lac. Operating cash flow in 2006 also may benefit from business interruption insurance proceeds that we may receive during the year.

Cash invested in property and equipment in 2005 was $240 million, including approximately $138.2 million for construction at L’Auberge du Lac, $31.7 million for the St. Louis projects (including the purchase of land adjacent to the city project), $38 million for the Embassy Suites Hotel and approximately $11.5 million for the replacement casino in Argentina.

In 2006 and for the next few years, our anticipated capital needs may include the following:

• We have entered into a definitive merger agreement to acquire Aztar, which operates the Tropicana Casino and Resort in Atlantic City, New Jersey, the Tropicana Resort and Casino on the “Strip” in Las Vegas, Nevada, as well as other casino facilities in Laughlin, Nevada, Caruthersville, Missouri, and Evansville, Indiana. The acquisition will require approximately $2.1 billion, including refinancing Aztar’s debt. We expect the transaction to close by the end of 2006.

37

• After completion of the acquisition, we intend to develop a comprehensive plan for Aztar’s 34-acre Las Vegas “Strip” Tropicana site. We estimate that the design phase of this project will require at least two years from the close of the acquisition. When we are ready to proceed with the redevelopment, we will likely need substantial additional financing for the project, which we expect to be the largest development project we have undertaken to date.

• We have development agreements with government agencies for both of our St. Louis projects. These require investments of at least $258 million (consisting of a $208 million hotel and casino and $50 million of other real estate projects) for the city project and $300 million for the county project. In August 2005, our Board of Directors approved an increase in the investment for the St. Louis City hotel and casino to approximately $350 million and an increase in the St. Louis County project to $375 million. Most of such amounts are expected to be invested over the next three years.

• We have announced plans for $120 million of expansion projects at three of our properties, with completion of all three planned for 2007.

• We have entered into a purchase agreement to potentially acquire the President Casino—St. Louis for approximately $31.5 million.

• We intend to invest approximately $15 million for a replacement truck stop and satellite casino at Boomtown Reno in connection with the proposed Cabela’s transaction.

• We anticipate investing approximately $7 million to refurbish the Embassy Suites Hotel.

• We are currently constructing our $5 million casino in the Bahamas.

• We continue to review alternatives for our Biloxi facility.

• We intend to continue to maintain our current properties in good condition and estimate that this will require maintenance capital spending of approximately $30 million per year. After the consummation of the Aztar acquisition, we expect that our annual maintenance capital spending will increase substantially.

In 2005, we generated cash from financing activities of $23,226,000, primarily from our bank financing activities discussed below. In early 2006, we completed the issuance of 6.9 million newly issued common shares resulting in net proceeds to the company of approximately $179 million.

We expect to complete the sale of our two southern California card clubs in mid-2006 and therefore generate approximately $40 million of cash before expenses and closing costs. Such card clubs generated lease income of approximately $7.2 million to us in 2005 before payment by us of $3 million on the capital lease and reinvestment of $1 million in capital improvements, as required under the sublease. Upon closing, we expect to cancel the long-term lease obligation to the owner of the Hollywood Park Racetrack. We will continue to pay our lease obligation and expect to receive monthly rent from the tenant of the facilities, on a month-to-month basis until the sales are complete.

As of December 31, 2005, our debt consisted of $200 million of term loans and $20 million of revolver facility borrowings under the credit facility entered into in December 2005 (discussed below); letters of credit of approximately $64.4 million and two issues of senior subordinated indebtedness: $300 million aggregate principal amount of 8.25% senior subordinated notes due March 2012 (the “8.25% Notes”) and $135 million aggregate principal amount of 8.75% senior subordinated notes due October 2013 (the “8.75% Notes”). There are no sinking fund requirements or significant principal repayment obligations on this debt prior to maturity.

On December 14, 2005, we executed a $750 million amended and restated senior secured credit facility, replacing our prior $380 million senior secured credit facility. The credit facility consists of a $450 million five-year revolving credit facility and a $300 million six-year term loan facility, of which $200 million is currently

38

outstanding and $100 million of which can be drawn on a delayed basis through July 2, 2007. In addition, the revolver credit facility, effective with an amendment executed on December 22, provides for a sub-limit for letters of credit for up to $75 million, approximately $64.4 million of which is currently outstanding. Finally, the credit facility provides for up to an aggregate amount of $250 million in incremental loans, subject to the agreement of existing and/or new lenders to provide the same.

Our debt repayment obligations prior to 2010 are nominal. The term loan is repayable in quarterly installments of 0.25% of the principal amount of the term loan outstanding on July 2, 2007, commencing in December 2007. We are obligated to make mandatory prepayments of indebtedness under the credit facility from the net proceeds of certain debt offerings and certain asset sales and dispositions. In addition, we will be required to prepay borrowings under the credit facility with a percentage of our “excess cash flow” (as defined in the credit facility) beginning with the fiscal year 2006. Management does not believe such payments will be required in the foreseeable future, as the definition of excess cash flow adjusts for capital spending activities in a given year. We have the option to prepay all or any portion of the indebtedness under the credit facility at any time without premium or penalty.

Interest on the credit facility is subject to change based on the floating rate index selected. For the revolving loan facility, the interest rate margin is based on our “leverage ratio,” and the total interest rate was 6.87% per annum (2.50% over LIBOR) as of December 31, 2005. The term loan bore an interest rate of 6.37% per annum (2.00% over LIBOR) as of December 31, 2005. The undrawn revolver facility bore a facility fee for unborrowed amounts of 0.50% per annum, which rate is also based on our leverage ratio. The delayed draw term loan bore a commitment fee of 0.75% per annum at December 31, 2005, which fee will increase in December 2006 to 1.00% per annum for the duration of the delayed draw period. We may also, at our option, borrow at a base rate, as defined in the agreement. Under the credit facility, at least 40% of our debt obligations must be subject to fixed interest rates or hedge agreements or other interest rate protection agreements. As of December 31, 2005, approximately 66% of our debt was at fixed versus floating interest rates.

The credit facility has, among other things, restrictive financial covenants and capital spending limits and other affirmative and negative covenants. The obligations under the credit facility are secured by substantially all of our assets and our domestic restricted subsidiaries, including a pledge of the equity interests in our domestic subsidiaries. Our obligations under the credit facility are also guaranteed by our domestic restricted subsidiaries. We believe we are in compliance with our bank debt covenants as of December 31, 2005.

Under our most restrictive indenture, we are permitted to incur up to $350 million of bank credit facility indebtedness or other senior indebtedness, of which approximately $216 million was outstanding at December 31, 2005. Additional borrowings under the credit facility may account for most or all of such permitted indebtedness. Our indenture also permits the incurrence of additional indebtedness (senior or otherwise) in excess of $350 million for debt refinancing, such as the $69 million of borrowings used to refinance our 9.25% senior subordinated notes in February 2005 (see Note 6 to the Consolidated Financial Statements); or under a provision that permits additional incurrence if at the time the indebtedness is proposed to be incurred, our consolidated coverage ratio on a pro forma basis (as defined in the indenture) would be at least 2.0 to 1.0. Our consolidated coverage ratio at December 31, 2005 was under 2.0 to 1.0.

The credit facility provides for permitted capital expenditures for our St. Louis projects (including the condominium component), the rebuilding, if we elect, of our Biloxi facility and maintaining existing facilities. In addition, the credit facility permits us to expend funds on various new capital projects (such as the $120 million of hotel expansion plans) in an amount up to $379 million (inclusive of the $179 million of proceeds generated from our early 2006 commons stock offering), which amount can be increased from certain asset sales or additional equity transactions.

In 2004, we issued $300 million in aggregate principal amount of 8.25% Notes, $200 million of which were issued at a price of 99.282% of par, thereby yielding 8.375% to first call and maturity and $100 million of which

39

were issued at a price of 105.00% of par, thereby yielding 7.10% to the first call date (7.35% to maturity). In 2003, we issued $135 million in aggregate principal amount of 8.75% Notes, which notes were issued at 98.369% of par, thereby yielding 9.00% to first call and maturity. Net proceeds of these offerings were used to refinance our then-existing higher coupon senior subordinated notes with maturity dates in 2007.

Both the 8.25% and the 8.75% Notes are our unsecured obligations, guaranteed by all of our domestic material restricted subsidiaries, as defined in the indentures. The indentures governing the 8.25% Notes and 8.75% Notes contain certain covenants limiting our ability and the ability of our restricted subsidiaries to incur additional indebtedness, issue preferred stock, pay dividends or make certain distributions, repurchase equity interests or subordinated indebtedness, create certain liens, enter into certain transactions with affiliates, sell assets, issue or sell equity interests in its subsidiaries, or enter into certain mergers and consolidations.

The 8.25% Notes and 8.75% Notes become callable at a premium over their face amount on March 15, 2008 and October 1, 2008, respectively. Such premiums decline periodically as the bonds near their respective maturities. Neither series of notes has any required sinking fund or other principal payments prior to their maturities.

On December 28, 2005, we issued a $50 million irrevocable letter of credit for the benefit of the Pennsylvania Gaming Control Board in connection with the filing our Philadelphia, Pennsylvania casino proposal and filing. In 2005, we issued irrevocable letters of credit totaling approximately $2 million in connection with our Chilean gaming applications and $2.4 million in connection with our self-insured workers compensation programs. In September 2004, we issued a $10 million irrevocable letter of credit for the benefit of an affiliate of the City of St. Louis, which remains outstanding as of December 31, 2005. The letters of credit bear a facility fee of 2.50% per annum as of December 31, 2005. In addition, at December 31, 2005, we maintained an additional letter of credit for workers compensation collateralized by cash of approximately $3.3 million.

We currently believe that our existing cash resources, including the net proceeds from the 2006 common stock offering, cash flows from operations, cash anticipated from asset sales and funds available under the credit facility will be sufficient to fund operations, maintain existing properties, make necessary debt service payments and fund the St. Louis and certain other expansion capital projects. Depending on the scale of the facility that we might choose and build, we also believe the anticipated proceeds associated with the insurance claim for Casino Magic Biloxi will be sufficient to pay a substantial part of the costs to replace the facility if we choose to do so. We believe the actual development timeline for Philadelphia will be quite extended, given the many political, regulatory and construction related issues involved. We believe, based on our successful access to the capital markets in 2004, 2005 and recently in 2006, that we will be able to raise necessary incremental funding to build the Philadelphia project and may, depending on timing, be able to fund a portion of such project out of free cash flow at such time. However, there can be no assurances such funds will be available, and if so, on terms acceptable to us.

We have entered into a definitive merger agreement with Aztar to acquire all of Aztar’s outstanding shares at a purchase price of $38.00 in cash per share of Aztar common stock subject to the terms and conditions thereof. We will need approximately $2.9 billion to acquire Aztar (net of estimated cash on hand), to refinance Aztar’s existing credit agreement and senior subordinated debt (assuming we decide to refinance all of such debt), to refinance our existing credit agreement and the 8.25% Notes and 8.75% Notes (assuming we decide to refinance all of such debt), and to pay fees and expenses related to the acquisition.

Certain banks have committed to provide us up to approximately $3.4 billion in financing, which includes a $1.25 billion seven-year term loan facility, a $400 million six and one-half-year term loan facility, a $500 million five-year revolving credit facility and a $1.25 billion 365-day unsecured senior subordinated interim loan facility which, if not repaid at maturity, would be extended, subject to certain limited terms and conditions, to a 10-year term loan facility. The term loan and revolving credit facility will bear interest at LIBOR or a base rate plus an interest margin of approximately 1.50% and 2.50%, respectively, depending upon loan market conditions and

40

other factors. The financing commitment contemplates that we would issue approximately $1.25 billion in debt or other securities prior to or concurrently with the closing of the acquisition in lieu of utilizing the interim loan facility. If such debt or other securities are not issued by the closing, then we would seek to issue such securities as soon as practicable following the closing to refinance the interim loan facility. The interim loan facility, if utilized, would bear an interest rate of LIBOR plus 4.50%, increasing by 75 basis points 180 days after funding and an additional 50 basis points each 90 days thereafter up to a maximum interest rate of 11% per annum. We would also expect to use a total of approximately $150 million of cash on hand of ours and Aztar’s to fund the transaction.

After completion of the acquisition, we intend to develop a comprehensive plan for Aztar’s 34-acre Las Vegas “Strip” Tropicana site. We estimate that the design phase of this project will take at least two years from the close of the acquisition. When we are ready to proceed with the redevelopment, we would likely need substantial additional financing for the project, which we expect to be the largest development project we have undertaken to date.

OTHER SUPPLEMENTAL DATA

EBITDA:    We define EBITDA as earnings before interest expense and interest income, income taxes, depreciation, amortization, loss on early extinguishment of debt, discontinued operations and cumulative effect of a change in accounting principles. We use EBITDA as a relevant and useful measure to compare operating results among our properties and between accounting periods. The presentation of EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business segments. EBITDA is specifically relevant in evaluating large, long-lived hotel casino projects because it provides a perspective on the current effects of operating decisions separated from the substantial, non-operational depreciation charges and financing costs of such projects. Management eliminates the results from discontinued operations as they are discontinued. Additionally, we believe some investors consider EBITDA to be a useful measure in determining a company’s ability to service or incur indebtedness and for estimating a company’s underlying cash flow from operations before capital costs, taxes and capital expenditures. EBITDA, subject to certain adjustments, is also a measure used in debt covenants in our debt agreements. Unlike net income, EBITDA does not include depreciation or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. We compensate for these limitations by using EBITDA as only one of several comparative tools, together with the common GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include operating income (loss), net income (loss), cash flows from operations and cash flow data. EBITDA is not calculated in the same manner by all companies and accordingly, may not be an appropriate measure of comparing performance amongst different companies. See Notes (g) and (h) to the “Selected Financial Data” for a reconciliation from net income (loss) to EBITDA and for details regarding certain costs that are included in this table. The table below is the reconciliation from operating income to EBITDA, in each case by year, for 2005, 2004 and 2003.

41

	For the years ended December 31, (a)
	2005			2004			2003
	(in thousands)
Operating Income
Boomtown New Orleans	$	44,377		$	25,451		$	22,814
Belterra Casino Resort		21,961			15,496			9,474
L’Auberge du Lac (b)		(24,110	)		(7,081	)		(559	)
Boomtown Bossier City		12,353			13,920			8,366
Boomtown Reno		4,012			3,257			6,538
Casino Magic Argentina (c)		5,426			5,963			4,455
Embassy Suites and other		315			0			0
Casino Magic Biloxi		4,964			8,345			8,127
Corporate		(24,255	)		(23,098	)		(18,511	)
Other pre-opening and development costs (d)		(7,810	)		(7,318	)		(702	)
Indiana regulatory and related benefit (costs) and other		0			194			2,255
Gain on sale of assets, net of other items		0			42,410			0
Goodwill and other asset impairment charges		0			0			(7,832	)
Operating Income	$	37,233		$	77,539		$	34,425
Depreciation and Amortization
Boomtown New Orleans	$	7,065		$	6,763		$	6,525
Belterra Casino Resort		17,613			16,265			13,768
L’Auberge du Lac		14,345			0			0
Boomtown Bossier City		7,283			6,757			8,131
Boomtown Reno		6,344			6,964			7,129
Casino Magic Argentina		1,649			928			723
Embassy Suites and other		604			0			0
Casino Magic Biloxi		5,486			7,884			7,902
Corporate		782			545			198
Depreciation and Amortization	$	61,171		$	46,106		$	44,376
EBITDA
Boomtown New Orleans	$	51,442		$	32,214		$	29,339
Belterra Casino Resort		39,574			31,761			23,242
L’Auberge du Lac (b)		(9,765	)		(7,081	)		(559	)
Boomtown Bossier City		19,636			20,677			16,497
Boomtown Reno		10,356			10,221			13,667
Casino Magic Argentina (c)		7,075			6,891			5,178
Embassy Suites and other		919			0			0
Casino Magic Biloxi		10,450			16,229			16,029
Corporate		(23,473	)		(22,553	)		(18,313	)
Other pre-opening and development costs (d)		(7,810	)		(7,318	)		(702	)
Indiana regulatory and related benefit (costs) and other		0			194			2,255
Gain on sale of assets, net of other items		0			42,410			0
Goodwill and other asset impairment charges		0			0			(7,832	)
EBITDA	$	98,404		$	123,645		$	78,801

(a) The table excludes the results of operations for our two southern California card clubs.

(b) L’Auberge du Lac opened in May 2005. Results for 2005, 2004 and 2003 include pre-opening costs of $21.1 million, $7.1 million and $0.6 million, respectively.

(c) Casino Magic Argentina opened its replacement casino for the Neuquen location in July 2005. Results for 2005 include pre-opening costs of $0.7 million.

42

(d) Other pre-opening and development costs include: St. Louis projects of $6.1 million and $4.3 million in 2005 and 2004, respectively; expenses associated with a California gaming initiative of $3 million in 2004; and, other activities in 2005 of $1.7 million. Excludes pre-opening and development activities for L’Auberge du Lac and Casino Magic Argentina.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

The following table summarizes our contractual obligations and other commitments as of December 31, 2005:

	Total		Payments due by Period
Contractual Obligations, Including Interest			Less than 1 year		1-3 years		4-5 years		After 5 years
	(in thousands)
Debt obligations(a)	$	999,065	$	50,826	$	104,151	$	125,651	$	718,437
Capital lease obligations(a)		175		79		96		0		0
Operating lease obligations (b)		562,809		5,849		8,296		13,070		535,594
Other purchase obligations:(c)
Construction contractual obligations (d)		13,591		13,591		0		0		0
Other(e)		26,513		14,272		10,794		1,447		0

(a) Includes interest obligations associated with the debt and capital lease obligations outstanding as of December 31, 2005, and through the debt or lease maturity date.

(b) We lease 56 acres in connection with our St. Louis County project. We began recording lease expense in September 2005 in connection with the site development activities. The table reflects the minimum lease obligations of approximately $4 million per annum through the 99 year term of the lease, inclusive of the renewal periods.

(c) Purchase obligations represent agreements to purchase goods or services that are enforceable and legally binding to us.

(d) Includes contracts executed as of December 31, 2005 for the St. Louis City and St. Louis County projects, which contracts are included in the $350 million and $375 million budgets, respectively.

(e) Includes open purchase orders, employment agreements and deferred bonus obligations.

The table above excludes certain commitments as of December 31, 2005, as the timing of expenditures associated with such commitments is unknown, or contractual agreements have not been executed. Such commitments include: (i) the $25 million condominium project and the remaining $25 million commitment for residential housing, retail, or mixed-use development stipulated by our St. Louis City project redevelopment agreement; (ii) the funding, in certain circumstances, of an additional $5.0 million into an indemnification trust we created in 2005; the $4 million to $10 million of industrial revenue bonds for the access road at Boomtown Reno we have agreed to purchase, if necessary; and (iv) expenditures associated with our proposed developments in Philadelphia and Chile, as such applications are pending regulatory review and selection.

43

FACTORS AFFECTING FUTURE OPERATING RESULTS

Pending Acquisition of Aztar Corporation.    We have entered into a definitive merger agreement to acquire Aztar in a transaction having a value of $2.1 billion including the refinancing of Aztar debt. Aztar operates the Tropicana Casino and Resort in Atlantic City, New Jersey, the Tropicana Resort and Casino on the “Strip” in Las Vegas, Nevada, as well as other casino facilities in Laughlin, Nevada; Caruthersville, Missouri; and Evansville, Indiana. We will likely incur substantial costs in continuing the process and consummating the acquisition of Aztar. The closing of the transaction is subject to numerous conditions.

In connection with the acquisition of Aztar, we expect to incur a substantial amount of debt to finance the transaction and to refinance some or all of our existing credit agreement and senior subordinated debt. Following the acquisition and after substantial completion of our St. Louis development projects, we may incur substantial additional debt to finance redevelopment of Aztar’s Las Vegas Tropicana site, which we expect to be the largest development project we have undertaken to date. We cannot assure you that the results of operations for the combined company will meet our expectations or that it will be sufficient to service the substantial debt we expect to incur.

Boomtown New Orleans:    As discussed above, Boomtown New Orleans reopened on September 30, 2005 after being closed for approximately five weeks due to Hurricane Katrina. Boomtown is located, and most of its customers reside, on the “West Bank” of the Mississippi River, across the river from downtown New Orleans. This area generally did not suffer substantial damage. Much of the recovery effort of New Orleans is being staged from the West Bank. Additionally, much of the competing casino capacity along the Mississippi Gulf Coast has not reopened. The facility’s revenues since reopening have been above those experienced prior to the hurricane. Such increased operating levels may decline in the future as casino capacity in New Orleans reopens, including the mid-February 2006 reopening of the large land-based casino in downtown New Orleans.

During 2005, we expensed hurricane repair and related costs of approximately $2.0 million. There can be no assurances we will not incur additional costs in 2006. In addition, we continue to evaluate whether the hurricane expenses and estimated lost profits exceed our insurance deductibles and therefore whether an insurance claim will be filed.

L’Auberge du Lac:    L’Auberge du Lac opened May 26, 2005. The facility reopened in October after closing on September 22 due to Hurricane Rita. Although most of the Lake Charles, Louisiana and surrounding communities have recovered, not all businesses have reopened, including a major dockside casino operator in the Lake Charles market that has not committed to when, or if, it will reopen.

During 2005, we expensed hurricane repair and related costs of approximately $4.5 million. There can be no assurances we will not incur additional costs in 2006. In addition, we continue to evaluate whether the hurricane expenses and estimated lost profits exceed our insurance deductibles and therefore whether an insurance claim will be filed.

Boomtown Reno:    We anticipate selling approximately 30 acres of land adjacent to our Boomtown Reno Hotel and Casino to Cabela’s Retail, Inc. in 2006 consistent with the agreement signed in late December 2005. Cabela’s has announced its intentions to build a large retail store featuring outdoor sporting goods on the land. A portion of the cost needed to improve access to the site is expected to be financed through the issuance of industrial revenue bonds through local or state governmental authorities. We have agreed to purchase, if necessary, some of such bonds. We estimate that we may be required to purchase between $4 million and $10 million of these bonds. A portion of the land is currently utilized by our existing truck stop and satellite casino operations. We intend to build a replacement truck stop and satellite casino at another location on the Boomtown Reno property for approximately $15 million. We expect to continue operating the existing truck stop and satellite casino until such time. Cabela’s has agreed to pay us approximately $5.2 million.

44

Casino Magic Argentina:    In July 2005, we opened a replacement facility for the existing Neuquen casino, the principal Casino Magic Argentina property. The new facility includes a larger and more lavish casino, a restaurant, several bars and an entertainment venue.

St. Louis Development Projects:    In September 2005, we broke ground on our St. Louis City project, and in November began site development activities on our St. Louis County project. The St. Louis City project is expected to open in the third quarter of 2007. Development of the County site requires some environmental remediation and construction of a new road to the site. We therefore estimate that development of the County project will take approximately one year longer than the City project. Both of the projects are subject to ongoing Missouri Gaming Commission (“MGC”) approval and licensing. The issuance of the operating licenses is subject to, among other requirements, maintaining a fixed-charge coverage ratio (as defined by the MGC) of at least 2.0x, beginning the period ended September 30, 2005 (such ratio, which is calculated differently than the calculation under our indentures, for the period ended December 31, 2005 was 2.57x). We believe that future operating results should provide sufficient earnings to meet such ratio; however, no assurances can be given. We intend to seek to structure the Aztar acquisition financing so that the company is in compliance with such ratio, but there is no certainty that we can do so. In addition, due to the increased diversity and size of the combined companies, we may seek some modification or elimination of the ratio, but there can be no assurance that such modification or elimination would be approved by the Missouri Gaming Commission.

President Riverboat Casino:    In early 2006, we entered into an agreement to potentially acquire the President Casino—St. Louis, a riverboat casino operating in bankruptcy with approximately 1,025 slot machines and 30 table games, located within walking distance of our St. Louis City project site. If completed, the acquisition will provide us immediate access to a workforce trained in casino operations and a database of casino customers in the St. Louis area. The proposed purchase price is $31.5 million. This price will serve as the opening bid in a bankruptcy auction that is scheduled to occur on May 16, 2006 and is subject to overbids by third parties and approval by the bankruptcy court. In return for providing the minimum bid, we received the right to purchase President Casino—St. Louis at our then last bid made at the auction (which bid may be $31.5 million) if the bidder with the highest bid at the auction fails to close the acquisition. In addition, the proposed purchase agreement provides that if the bankruptcy court approves a bankruptcy plan for the President Casino—St. Louis which includes a sale of the facility to a competing bidder at the auction, then we will receive a break-up fee of $650,000. The proposed purchase price and the break-up fee is subject to approval by the bankruptcy court at a hearing scheduled for March 27, 2006. The agreement is also subject to approval by the Missouri Gaming Commission and further bankruptcy proceedings. We would expect the transaction to close in the second half of 2006 if we are the winning bidder.

Construction Disruption:    As noted above, in early 2006 we announced guestroom expansion plans at Boomtown New Orleans, Belterra Casino Resort and L’Auberge du Lac, with construction beginning in 2006 and completion planned for 2007. Although the expansions are being planned carefully around existing operations, one or all of such locations may experience some level of construction disruption.

Pre-Opening Costs:    Although anticipated pre-opening costs are included in our various expansion and development project budgets, such costs are and will continue to be expensed as incurred, in accordance with GAAP.

Biloxi, Mississippi:    As discussed above, Casino Magic Biloxi was substantially damaged by Hurricane Katrina and has been closed since late August 2005. At this time, we intend to file an insurance claim for both property damage and business interruption in relation to our Casino Magic Biloxi property. We believe our aggregate $400 million of property insurance is sufficient to cover both the reconstruction of the Biloxi facility and our business interruption claims.

45

As a result of Hurricane Katrina, the casino barge was destroyed. We continue to assess the substantial damage to the hotel structure and its contents. During 2005, we had recorded insurance receivables of $74.5 million ($25 million of which was received in 2005 and $25 million of which was received in as of the end of February 2006), including $57.8 million for impairment charges for various assets at the facility and $16.7 million for costs covered by insurance. We anticipate recording additional insurance receivables as we continue to assess the physical damage to our Biloxi facility and evaluate our business interruption claim. Our ultimate claim and likely recovery are unrelated and computed differently from the impairment charges.

We continue to believe we have insurance sufficient to cover the reconstruction or replacement of our Biloxi facility, subject to any applicable deductible or other policy limitations. However, our insurance policies permit the “replacement facility” to be built anywhere in the U.S. If the replacement facility is not in Biloxi, our insurance policies call for payment of the lesser of the cost to build such replacement facility or the then-theoretical cost to rebuild the Biloxi facility. We believe that each of our facilities in St. Louis, where in each case we have begun construction, would qualify as a replacement facility. Each facility in St. Louis is significantly larger than the Biloxi facility that was damaged. Hence, we believe that we could designate either of the St. Louis facilities as the replacement facility and receive approximately the same insurance proceeds as if we actually rebuilt the Biloxi facility. Therefore, management expects to determine whether or not to rebuild the Biloxi facility independent of insurance issues and based on management’s forecasted profitability of a new facility, taking into consideration the competitive and regulatory market, among other factors. Among such other factors will be our availability of capital and management resources and the expected returns of other investment opportunities. Many of these factors are still highly uncertain in Biloxi. Management continues to estimate that it will be months, and perhaps much longer, before we make the final decision to build or not build a new Biloxi facility. In the meantime, we have begun the design work for reconstruction of a replacement facility, so that if conditions are deemed favorable at some future date, reconstruction can begin without delay.

Contingencies:    We assess our exposure to loss contingencies including legal and income tax matters and provides for an exposure if it is judged to be probable and estimable. If the actual loss from a contingency differs from management’s estimate, operating results could be affected.

CRITICAL ACCOUNTING POLICIES

The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States. Certain of the accounting policies require management to apply significant judgment in defining the estimates and assumptions for calculating financial estimates. These judgments are subject to an inherent degree of uncertainty. Management’s judgments are based on our historical experience, terms of various past and present agreements and contracts, industry trends, and information available from other sources, as appropriate. There can be no assurance that actual results will not differ from those estimates. Changes in these estimates could adversely affect our financial position or our results of operations.

We have determined that the following accounting policies and related estimates are critical to the preparation of our consolidated financial statements:

Property and Equipment:    We have a significant investment in long-lived property and equipment, which represents approximately 71.5% of our total assets. Judgments are made in determining the estimated useful lives of assets, the salvage values to be assigned to assets and if or when an asset has been impaired. The accuracy of these estimates affects the amount of depreciation expense recognized in the financial results and whether to record a gain or loss on disposition of an asset. We review the carrying value of our property and equipment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable from estimated future undiscounted cash flows expected to result from its use and eventual disposition.

Self-insurance Reserves:    We are self-insured up to certain limits for costs associated with general liability, workers’ compensation and employee medical coverage. Insurance claims and reserves include accruals of estimated settlements for claims. In estimating these accruals we consider historical loss experience, make judgments about the expected levels of cost per claim and rely on independent consultants.

46

Income Tax Assets and Liabilities:    We utilize estimates related to cash flow projections for the application of SFAS No. 109 to the realization of deferred income tax assets. The estimates are based upon recent operating results and budgets for future operating results. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in this assessment.

In accordance with Statement of Financial Accounting Standards No. 5 “Accounting for Contingencies,” we record tax contingencies when the exposure item becomes probable and reasonably estimable. We assess the tax uncertainties on a quarterly basis and maintain the required tax reserves until the underlying issue is resolved or upon the expiration of the statue of limitations. Our estimate of the potential outcome of any uncertain tax issue is highly judgmental and we believe we have adequately provided for any reasonable and foreseeable outcomes related to uncertain tax matters.

Goodwill and Other Intangible Assets:    In January 2002, we adopted SFAS No. 142 “Goodwill and Other Intangible Assets,” which requires an annual review of goodwill and other non-amortizing intangible assets for impairment. The annual evaluation of goodwill and other non-amortizing intangible assets requires the use of estimates, including recent and future operating results, discount rates, risk premiums and terminal values, to determine the estimated fair values of our reporting units and gaming licenses.

Insurance Receivables:    We have significant receivables due from insurance companies related to the Biloxi property. We record receivables to the extent of our net book value for physical property damage and for actual costs incurred under the business interruption coverage. Until such claims are resolved, no gains for coverage in excess of net book value and no potential insurance recoveries for lost profits are recorded. Significant estimates are required in determining the amount of our insurance claims. We utilize third party insurance claim specialists to assist us in determining the amount of the initial claims and for ongoing monitoring.

RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS

Statement of Financial Accounting Standards No. 123R (“SFAS No. 123R”)    In December 2004, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 123R, “Share-Based Payment,” which requires all companies to measure compensation costs for all share-based payments (including employee stock options) at “fair value.” In April 2005, the SEC announced a phased-in implementation process for SFAS No. 123R, such that this statement became effective for us January 1, 2006. We adopted SFAS 123R in the 2006 first quarter using the modified prospective method and therefore we will record expense relating to our stock-based compensation in the periods subsequent to adoption. The expense will be based on all unvested options as of the adoption date as well as all future stock-based compensation awards. Based on the options outstanding as of December 31, 2005 and assumptions reflecting currently available information, we expect the incremental pre-tax expense in fiscal 2006 to be approximately $5 million. Such expense is non-cash and does not reflect actual stock price performance.

FASB Staff Position No. FAS 13-1 (“FSP FAS 13-1”)    On October 5, 2005 the FASB issued FSP FAS 13-1, “Accounting for Rental Costs Incurred during a Construction Period,” which requires companies to expense construction period lease costs and no longer permits capitalizing such costs. FSP 13-1 is effective for periods after December 15, 2005, with early adoption permitted, which we elected. Accordingly, we are in compliance with FSP FAS 13-1.

Accounting for Uncertain Tax Positions    In July 2005 the FASB released an Exposure Draft for its proposed interpretation regarding accounting for uncertain tax positions. The proposed guidance addresses the recognition, measurement, classification, and disclosure issues related to the recording of financial statement benefits for income tax positions that have some degree of uncertainty.

The FASB comment period ended in September 2005. In early January 2006, the FASB resumed discussions of the pending interpretation. The release of a final interpretation is scheduled for March or April

47

2006. The new proposed effective date is for the first fiscal year beginning after December 15, 2006. We are unable to predict the final action by FASB, or the impact of such interpretation on our financial statements.

FASB Interpretation No. 47 (“FIN 47”)    In March 2005, the FASB issued FIN 47 “Accounting for Conditional Asset Retirement Obligations.” We adopted FIN 47 in December 2005 consistent with the effective date of the statement. The adoption of FIN 47 did not have a material impact on our consolidated financial statements. FIN 47 refers to a legal obligation to perform an asset retirement activity even if the timing and/or settlement is conditional on a future event that may or may not be within the control of the entity. Accordingly, the entity must record a liability for the conditional asset retirement obligation if the fair value of the obligation can be reasonably estimated.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from adverse changes in interest rates with respect to the short-term floating interest rate on borrowings under our bank credit facility. At December 31, 2005, approximately 34% of the aggregate principal amount of our funded debt obligations and virtually all of our invested cash balances were subject to floating interest rates. However, if LIBOR rates were to increase by one percentage point, our interest expense for the term loan facility would increase by $2 million per year, assuming we did not increase our term loan borrowings and the increased rate was in effect throughout 2006 (note we repaid the revolver facility in mid-February 2006). We would expect that such an increase would be partially offset by increased interest income from our substantial invested funds that are also subject to floating interest rates.

We are also exposed to market risk from adverse changes in the exchange rate of the dollar to the Argentine peso. The total assets of Casino Magic Argentina at December 31, 2005 were $23.5 million, or approximately 1.9% of our consolidated assets. In addition, at this time the Bahamian dollar is pegged to the U.S. dollar. If the Bahamian government should choose to no longer peg its currency to the U.S. dollar, we would be subject to exchange rate fluctuations. Finally, in the event we are awarded a gaming license in Chile, we would be also be subject to exchange rate fluctuations.

The table below provides the principal cash flows and related weighted average interest rates by contractual maturity dates for our debt obligations at December 31, 2005. At December 31, 2005, we did not hold any material investments in market risk sensitive instruments of the type described in Item 305 of Regulation S-K.

Liabilities	2006			2007			2008			2009			2010			Thereafter			Total			Fair Value
	(in thousands)
Revolver Loan Facility(a)	$	0		$	0		$	0		$	0		$	20,000		$	0		$	20,000		$	20,000
Rate		6.87	%		6.87	%		6.87	%		6.87	%		6.87	%		6.87	%		6.87	%
Term Loan Facility(b)	$	0		$	500		$	2,000		$	2,000		$	2,000		$	193,500		$	200,000		$	201,500
Rate		6.37	%		6.37	%		6.37	%		6.37	%		6.37	%		6.37	%		6.37	%
8.25% Notes	$	0		$	0		$	0		$	0		$	0		$	300,000		$	300,000		$	309,000
Fixed rate		8.25	%		8.25	%		8.25	%		8.25	%		8.25	%		8.25	%		8.25	%
8.75% Notes	$	0		$	0		$	0		$	0		$	0		$	135,000		$	135,000		$	143,269
Fixed rate		8.75	%		8.75	%		8.75	%		8.75	%		8.75	%		8.75	%		8.75	%
All Other	$	139		$	149		$	82		$	76		$	83		$	773		$	1,302		$	1,302
Avg. Interest rate		6.1	%		6.8	%		7.8	%		8.0	%		8.0	%		8.0	%		7.6	%

(a) As of December 31, 2005, the revolver loan facility of the bank agreement has a floating interest rate based on 2.50% over LIBOR, or 6.87% per annum including LIBOR. Although the facility matures in 2010, we repaid the $20 million outstanding as of December 31, 2005 in February 2006.

(b) As of December 31, 2005, the term loan facility of the bank agreement has a floating interest rate based on 2.00% over LIBOR, or 6.37% per annum including LIBOR.

48

Item 8.    Financial Statements

Financial statements and accompanying footnotes are attached hereto.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None

Item 9A.    Controls and Procedures

(a) Management’s Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Our management, with the participation of the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2005. Based on this evaluation, the CEO and CFO concluded that, as of December 31, 2005, our disclosure controls and procedures were (1) designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the CEO and CFO by others within those entities, particularly during the period in which this report was being prepared and (2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended December 31, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.

(b) Management’s Annual Report on Internal Control Over Financial Reporting

Internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) refers to the process designed by, or under the supervision of, our CEO and CFO, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management is responsible for establishing and maintaining adequate internal control over our financial reporting.

We have evaluated the effectiveness of our internal control over financial reporting as of December 31, 2005. This evaluation was performed using the internal control evaluation framework developed by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, management has concluded that, as of such date, our internal control over financial reporting was effective.

Deloitte & Touche LLP has issued an attestation report on management’s assessment of our internal control over financial reporting. This report follows in Item 9A(c).

49

(c) Attestation report of the independent registered public accounting firm.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

of Pinnacle Entertainment, Inc.

We have audited management’s assessment, included in the accompanying “Management’s Annual Report on Internal Control Over Financial Reporting”, that Pinnacle Entertainment, Inc. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

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

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

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

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year

50

ended December 31, 2005 of the Company and our report dated March 15, 2006 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.

/s/    DELOITTE & TOUCHE LLP

Las Vegas, Nevada

March 15, 2006

Item 9B.    Other Information

The following information is being provided in lieu of filing an Item 1.01 Form 8-K.

The Aztar Merger Agreement

On March 13, 2006, Pinnacle Entertainment, Inc., a Delaware corporation (“Pinnacle”), and its wholly-owned subsidiary, PNK Development 1, Inc., a Delaware corporation (“Merger Subsidiary”), entered into a definitive agreement and plan of merger (the “Merger Agreement”) with Aztar Corporation, a Delaware corporation (“Aztar”). Under the terms of the Merger Agreement, which have been approved by each company’s Board of Directors, Pinnacle will pay $38 in cash for each share of Aztar common stock and $401.90 in cash for each share of Aztar’s preferred stock outstanding at the effective time (as defined in the Merger Agreement). Pursuant to the Merger Agreement, Merger Subsidiary will merge with and into Aztar (the “Merger”), whereupon the separate existence of Merger Subsidiary shall cease and Aztar shall become a wholly-owned subsidiary of Pinnacle. The Merger is subject to the approval of Aztar’s stockholders and other closing conditions, including the obtaining of certain required gaming and antitrust approvals, however, Pinnacle’s obligation to close are not subject to a financing condition. The Merger Agreement provides for a termination fee of $42 million and reimbursement of up to a maximum of $13 million for incurrence of fees and expenses in connection with the transactions contemplated by the Merger Agreement, which are payable by Aztar under certain circumstances.

The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is attached as Exhibit 2.1 hereto, and is incorporated herein by reference.

The Financing Commitment Letter

On March 13, 2006, Pinnacle entered into a commitment letter providing commitments for $3.4 billion of credit facilities with Lehman Commercial Paper Inc., Lehman Brothers Inc., Bear, Stearns & Co. Inc. and Bear Stearns Corporate Lending Inc. (the “Commitment Letter”) in connection with the financing of the Merger.

The credit facilities described in the Commitment Letter include: (a) a $1.25 billion seven-year term loan facility, (b) a $400 million six and one-half-year term loan facility, (c) a $500 million five-year revolving credit facility and (d) a $1.25 billion 365-day unsecured senior subordinated interim loan facility.

The proceeds from the credit facilities may be used by Pinnacle (i) to finance the Aztar acquisition pursuant to the Merger Agreement (including related fees and expenses (including severance costs)); (ii) to refinance certain existing indebtedness of Aztar and Pinnacle; and (iii) for general corporate purposes of Pinnacle and its subsidiaries, including without limitation to finance capital expenditures, asset purchases, other investments (including certain construction projects).

51

The financing commitment contemplates that Pinnacle will issue approximately $1.25 billion in debt or other securities prior to or concurrently with the closing of the Merger in lieu of utilizing the interim loan facility. If such debt or other securities are not issued by the closing, then Pinnacle would seek to issue such securities as soon as practicable following the closing to refinance the interim loan facility.

The term loan and revolving credit facility will bear interest at LIBOR or a base rate plus an interest margin of approximately 1.50% and 2.50%, respectively, depending upon loan market conditions and other factors. The interim loan facility, if utilized, would bear an interest rate of LIBOR plus 4.50%, increasing by 75 basis points 180 days after funding and an additional 50 basis points each 90 days thereafter up to a maximum interest rate of 11% per annum.

The lenders’ financing commitments under the Commitment Letter are subject to conditions including: there not having been a material adverse effect (as defined in the Commitment Letter) since December 31, 2005 and other funding conditions set forth in the Commitment Letter.

The forgoing description of the Commitment Letter does not purport to be complete and is qualified in its entirety by reference to the Commitment Letter, which is attached as Exhibit 10.63 hereto, and is incorporated herein by reference.

For additional information regarding our acquisition of Aztar and the financing thereof, see the information regarding such acquisition and financing contained in this Form 10-K, including in Item 1. Description of Business, Item 1A. Risk Factors, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, which information is incorporated by reference into this Item 9B.

PART III

Item 10.    Directors and Executive Officers of the Registrant

The information required under this item is incorporated by reference herein from our definitive 2006 proxy statement anticipated to be filed with the Securities and Exchange Commission within 120 days after December 31, 2005.

Item 11.    Executive Compensation

The information required under this item is incorporated by reference herein from our definitive 2006 proxy statement anticipated to be filed with the Securities and Exchange Commission within 120 days after December 31, 2005.

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

The information required under this item is incorporated by reference herein from our definitive 2006 proxy statement anticipated to be filed with the Securities and Exchange Commission within 120 days after December 31, 2005.

Item 13.    Certain Relationships and Related Transactions

The information required under this item is incorporated by reference herein from our definitive 2006 proxy statement anticipated to be filed with the Securities and Exchange Commission within 120 days after December 31, 2005.

Item 14.    Principal Accountant Fees and Services

The information required under this item is incorporated by reference herein from our definitive 2006 proxy statement anticipated to be filed with the Securities and Exchange Commission within 120 days after December 31, 2005.

52

PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)  Documents filed as a part of this report.

1. The consolidated financial statements are set forth in the Index to Consolidated Financial Statements attached hereto.

2. Financial Statement Schedule II—Valuation and Qualifying Accounts is set forth on page [XX] of this report.

3. Exhibit

Exhibit Number	Description of Exhibit
2.1*	Agreement and Plan of Merger by and Among Pinnacle Entertainment, Inc., PNK Development 1, Inc. and Aztar Corporation dated March 13, 2006.
3.1	Restated Certificate of Incorporation of Pinnacle Entertainment, Inc., as amended, is hereby incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on May 9, 2005. (SEC File No. 001-13641).
3.2	Restated By-laws of Pinnacle Entertainment, Inc., as amended, are hereby incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 9, 2005. (SEC File No. 001-13641).
3.3	Articles of Incorporation of HP/Compton, Inc., are hereby incorporated by reference to Exhibit 3.9 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on October 30, 1997. (SEC File No. 333-34471).
3.4	By-laws of HP/Compton, Inc., are hereby incorporated by reference to Exhibit 3.10 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on October 30, 1997. (SEC File No. 333-34471).
3.5	Articles of Organization of Crystal Park Hotel and Casino Development Company, LLC, are hereby incorporated by reference to Exhibit 3.11 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on October 30, 1997. (SEC File No. 333-34471).
3.6	Operating Agreement of Crystal Park Hotel and Casino Development Company, LLC, is hereby incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. (SEC File No. 001-13641).
3.7	Certificate of Formation of Boomtown, LLC, is hereby incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on January 30, 2004. (SEC File No. 001-13641).
3.8	Operating Agreement of Boomtown, LLC, is hereby incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on January 30, 2004. (SEC File No. 001-13641).
3.9	Articles of Organization of PNK (Reno), LLC, are hereby incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 19, 2003. (SEC File No. 001-13641).
3.10	Operating Agreement of PNK (Reno), LLC, is hereby incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on September 19, 2003. (SEC File No. 001-13641).
3.11	Second Amended and Restated Partnership Agreement of Louisiana-I Gaming, a Louisiana Partnership in Commendam, is hereby incorporated by reference to Exhibit 3.26 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).

53

Exhibit Number	Description of Exhibit
3.12	Amendment to Second Amended and Restated Partnership Agreement of Louisiana-I Gaming, a Louisiana Partnership in Commendam, is hereby incorporated by reference to Exhibit 3.12 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. (SEC File No. 001-13641).
3.13	Articles of Incorporation of Casino Magic Corp., are hereby incorporated by reference to Exhibit 3.29 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).
3.14	Amended By-laws of Casino Magic Corp., are hereby incorporated by reference to Exhibit 3.30 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).
3.15	Articles of Incorporation of Biloxi Casino Corp., are hereby incorporated by reference to Exhibit 3.33 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).
3.16	By-laws of Biloxi Casino Corp., are hereby incorporated by reference to Exhibit 3.34 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).
3.17	Articles of Incorporation of Casino One Corporation, are hereby incorporated by reference to Exhibit 3.37 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).
3.18	By-laws of Casino One Corporation, are hereby incorporated by reference to Exhibit 3.38 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).
3.19	Amended and Restated Articles of Organization of Belterra Resort Indiana, LLC, are hereby incorporated by reference to Exhibit 4.1 to the Company’s Post-Effective Amendment No. 1 to Registration Statement on Form S-3 filed on November 16, 2004. (SEC File No. 333-90426).
3.20	Amended and Restated Operating Agreement of Belterra Resort Indiana, LLC, is hereby incorporated by reference to Exhibit 4.2 to the Company’s Post-Effective Amendment No. 1 to Registration Statement on Form S-3 filed on November 16, 2004. (SEC File No. 333-90426).
3.21	Articles of Incorporation of Casino Magic of Louisiana, Corp. (subsequently renamed PNK (Bossier City), Inc.), are hereby incorporated by reference to Exhibit 3.44 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000. (SEC File No. 001-13641).
3.22	By-Laws of Casino Magic of Louisiana, Corp. (subsequently renamed PNK (Bossier City), Inc.), are hereby incorporated by reference to Exhibit 3.45 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000. (SEC File No. 001-13641).
3.23	Articles of Organization of PNK (LAKE CHARLES), L.L.C. (formerly HPK (Lake Charles), L.L.C.), are hereby incorporated by reference to Exhibit 4.24 to the Company’s Amendment No. 2 to Registration Statement on Form S-3 filed on August 6, 2002. (SEC File No. 333-90426).
3.24	Operating Agreement of PNK (LAKE CHARLES), L.L.C. (formerly HPK (Lake Charles), L.L.C.), are hereby incorporated by reference to Exhibit 4.25 to the Company’s Amendment No. 2 to Registration Statement on Form S-3 filed on August 6, 2002. (SEC File No. 333-90426).
3.25	Certificate of Incorporation of PNK Development 1, Inc., is hereby incorporated by reference to Exhibit 4.26 to the Company’s Registration Statement on Form S-3 filed on June 13, 2002. (SEC File No. 333-90426).
3.26	By-laws of PNK Development 1, Inc., are hereby incorporated by reference to Exhibit 4.27 to the Company’s Registration Statement on Form S-3 filed on June 13, 2002. (SEC File No. 333-90426).

54

Exhibit Number	Description of Exhibit
3.27	Certificate of Incorporation of PNK Development 2, Inc., is hereby incorporated by reference to Exhibit 4.28 to the Company’s Registration Statement on Form S-3 filed on June 13, 2002. (SEC File No. 333-90426).
3.28	By-laws of PNK Development 2, Inc., are hereby incorporated by reference to Exhibit 4.29 to the Company’s Registration Statement on Form S-3 filed on June 13, 2002. (SEC File No. 333-90426).
3.29	Certificate of Incorporation of PNK Development 3, Inc., is hereby incorporated by reference to Exhibit 4.30 to the Company’s Registration Statement on Form S-3 filed on June 13, 2002. (SEC File No. 333-90426).
3.30	By-laws of PNK Development 3, Inc., are hereby incorporated by reference to Exhibit 4.31 to the Company’s Registration Statement on Form S-3 filed on June 13, 2002. (SEC File No. 333-90426).
3.31	Amended and Restated Articles of Organization of OGLE HAUS, LLC, are hereby incorporated by reference to Exhibit 4.37 to the Company’s Amendment No. 2 to Registration Statement on Form S-3 filed on August 6, 2002. (SEC File No. 333-90426).
3.32	Operating Agreement of OGLE HAUS, LLC (f/k/a OHIRC, LLC), is hereby incorporated by reference to Exhibit 4.38 to the Company’s Amendment No. 2 to Registration Statement on Form S-3 filed on August 6, 2002. (SEC File No. 333-90426).
3.33	Articles of Incorporation of St. Louis Casino Corp., are hereby incorporated by reference to Exhibit 4.39 to the Company’s Amendment No. 2 to Registration Statement on Form S-3 filed on August 6, 2002. (SEC File No. 333-90426).
3.34	By-Laws of St. Louis Casino Corp., are hereby incorporated by reference to Exhibit 4.40 to the Company’s Amendment No. 2 to Registration Statement on Form S-3 filed on August 6, 2002. (SEC File No. 333-90426).
4.1†	Hollywood Park, Inc. 1996 Stock Option Plan, is hereby incorporated by reference to Exhibit 10.24 to the Company’s Registration Statement on Form S-4 filed on September 18, 1996. (SEC File No. 333-12253).
4.2†	Form of Non-Qualified Stock Option Agreement for Hollywood Park, Inc. 1996 Stock Option Plan is hereby incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. (SEC File No. 001-13641).
4.3†	Hollywood Park, Inc. 1993 Stock Option Plan, is hereby incorporated by reference to Exhibit 4.2 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).
4.4†	Pinnacle Entertainment, Inc. 2001 Stock Option Plan, is hereby incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8 filed on June 6, 2001. (SEC File No. 333-62378).
4.5†	Form of Stock Option Agreement for Pinnacle Entertainment, Inc. 2001 Stock Option Plan is hereby incorporated by reference to Exhibit 4.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. (SEC File No. 001-13641).
4.6†	Form of First Amendment to Pinnacle Entertainment, Inc. 2001 Stock Option Plan, is hereby incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on January 30, 2004. (SEC File No. 001-13641).
4.7†	Pinnacle Entertainment, Inc. 2002 Stock Option Plan, is hereby incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-8 filed on July 16, 2003. (SEC File No. 333-107081).
4.8†	First Amendment to Pinnacle Entertainment, Inc. 2002 Stock Option Plan, is hereby incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-8 filed on July 16, 2003. (SEC File No. 333-107081).

55

Exhibit Number	Description of Exhibit
4.9†	Second Amendment to Pinnacle Entertainment, Inc. 2002 Stock Option Plan, is hereby incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form S-8 filed on July 16, 2003. (SEC File No. 333-107081).
4.10†	Form of Stock Option Agreement for Pinnacle Entertainment, Inc. 2002 Stock Option Plan is hereby incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. (SEC File No. 001-13641).
4.11†	2005 Equity and Performance Incentive Plan of Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 9, 2005. (SEC File No. 001-13641).
4.12†	Form of Stock Option Grant Notice and Form of Stock Option Agreement for 2005 Equity and Performance Incentive Plan of Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 20, 2005. (SEC File No. 001-13641).
4.13†	Nonqualified Stock Option Agreement dated as of January 11, 2003 by and between the Company and Stephen H. Capp, is hereby incorporated by reference to Exhibit 4.7 to the Company’s Registration Statement on Form S-8 filed on July 16, 2003. (SEC File No. 333-107081).
4.14†	Nonqualified Stock Option Agreement dated as of April 10, 2002 by and between the Company and Daniel R. Lee, is hereby incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. (SEC File No. 001-13641).
4.15†	Nonqualified Stock Option Agreement dated as of April 10, 2002 by and between the Company and Daniel R. Lee, is hereby incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. (SEC File No. 001-13641).
4.16	Indenture dated as of September 25, 2003 by and among the Company, the guarantors named therein and The Bank of New York Trust Company, as successor trustee to The Bank of New York, is hereby incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on October 7, 2003. (SEC File No. 001-13641).
4.17	First Supplemental Indenture dated as of September 25, 2003, governing the 8.75% Senior Subordinated Notes due 2013, by and among the Company, the guarantors named therein and The Bank of New York Trust Company, as successor trustee to The Bank of New York, is hereby incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on October 7, 2003. (SEC File No. 001-13641).
4.18	Form of 8.75% Senior Subordinated Note due 2013 (included in Exhibit 4.12), is hereby incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on October 7, 2003. (SEC File No. 001-13641).
4.19	Indenture dated as of March 15, 2004, governing the 8.25% Senior Subordinated Notes due 2012, by and among the Company, the guarantors identified therein and The Bank of New York Trust Company, as successor trustee to The Bank of New York, is hereby incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 30, 2004. (SEC File No. 001-13641).
4.20	Form of 8.25% Senior Subordinated Note due 2012 (included in Exhibit 4.12), is hereby incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 30, 2004. (SEC File No. 001-13641).
4.21	First Supplemental Indenture dated as of December 3, 2004, governing the 8.25% Senior Subordinated Notes due 2012, by and among the Company, the guarantors identified therein and The Bank of New York Trust Company, as successor trustee to The Bank of New York, is hereby incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 7, 2004. (SEC File No. 001-13641).

56

Exhibit Number	Description of Exhibit
10.1	Credit Agreement dated as of December 17, 2003 by and among the Company, the Lenders referred to therein, Lehman Brothers Inc. and Bear, Stearns & Co. Inc., as Joint Lead Arrangers, and Joint Book Runners, Société Générale, as Documentation Agent, Bear Stearns Corporate Lending Inc., as Syndication Agent, and Lehman Commercial Paper Inc., as Administrative Agent, is hereby incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on December 30, 2003. (SEC File No. 001-13641).
10.2	Amended and Restated Credit Agreement, dated as of August 27, 2004, by and among the Company, the Lenders referred to therein, Lehman Brothers Inc., and Bear, Stearns & Co. Inc., as Joint Advisors, Joint Lead Arrangers and Joint Book Runners, Société Générale and Wells Fargo Bank, N.A., as Joint Documentation Agents, Bear Stearns Corporate Lending Inc., as Syndication Agent, and Lehman Commercial Paper Inc., as Administrative Agent, is hereby incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on September 2, 2004. (SEC File No. 001-13641).
10.3	First Amendment dated as of October 11, 2005, to the Amended and Restated Credit Agreement dated as of August 27, 2004, by and among the Company, Lehman Commercial Paper Inc., as Administrative Agent, and other parties identified therein is hereby incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. (SEC File No. 001-13641.)
10.4	Second Amended and Restated Credit Agreement, dated as of December 14, 2005, among the Company, the Lenders referred to therein, Lehman Brothers Inc., and Bear, Stearns & Co. Inc., as Joint Advisors, Joint Lead Arrangers and Joint Book Runners, Wells Fargo, N.A., as Lead Arranger, Societe Generale, Deutsche Bank Securities Inc., and Wells Fargo Bank, N.A., as Joint Documentation Agents, Bear Stearns Corporate Lending Inc., as Syndication Agent, and Lehman Commercial Paper Inc., as Administrative Agent, is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 20, 2005. (SEC File No. 001-12641).
10.5	First Amendment dated as of December 22, 2005, to the Second Amended and Restated Credit Agreement, dated as of December 14, 2005, among the Company, the Lenders referred to therein, Lehman Brothers Inc., and Bear, Stearns & Co. Inc., as Joint Advisors, Joint Lead Arrangers and Joint Book Runners, Wells Fargo, N.A., as Lead Arranger, Societe Generale, Deutsche Bank Securities Inc., and Wells Fargo Bank, N.A., as Joint Documentation Agents, Bear Stearns Corporate Lending Inc., as Syndication Agent, and Lehman Commercial Paper Inc., as Administrative Agent, is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 23, 2005. (SEC File No. 001-12641).
10.6†	Amended and Restated Hollywood Park, Inc. Directors Deferred Compensation Plan, is hereby incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8 filed on August 31, 1999. (SEC File No. 333-86223).
10.7†	Pinnacle Entertainment, Inc. (formerly Hollywood Park, Inc.) Executive Deferred Compensation Plan effective January 1, 2000, is hereby incorporated by reference to Exhibit 10.48 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999. (SEC File No. 001-13641).
10.8†	First Amendment to the Pinnacle Entertainment, Inc. (formerly Hollywood Park, Inc.) Executive Deferred Compensation Plan, is hereby incorporated by reference to Exhibit 10.55 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. (SEC File No. 001-13641).
10.9†	Second Amendment to the Pinnacle Entertainment, Inc. Executive Deferred Compensation Plan, is hereby incorporated by reference to Exhibit 10.56 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. (SEC File No. 001-13641).

57

Exhibit Number	Description of Exhibit
10.10†	Summary of 2004 Provisions of Pinnacle Entertainment, Inc. Executive Deferred Compensation Plan, is hereby incorporated by reference to Exhibit 10.29 to the Company’s Current Report on Form 8-K filed on December 30, 2004. (SEC File No. 001-13641).
10.11†	Employment Agreement, effective as of May 1, 2005, by and between the Company and Daniel R. Lee, is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 13, 2005. (SEC File No. 001-13641).
10.12†	Employment Agreement dated as of August 13, 2002 by and between the Company and John A. Godfrey, is hereby incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. (SEC File No. 001-13641).
10.13†	Employment Agreement dated as of January 11, 2003 by and between the Company and Stephen H. Capp, is hereby incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003. (SEC File No. 001-13641).
10.14†	Employment Agreement dated as of March 14, 2003 by and between the Company and Wade W. Hundley, is hereby incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003. (SEC File No. 001-13641).
10.15†	Amended and Restated Employment Agreement dated May 5, 2003 by and between the Company and Alain Uboldi is hereby incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005. (SEC File No. 001-13641).
10.16	Purchase Agreement dated June 14, 2002 by and between Rothbart Development Corporation and the Company, is hereby incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. (SEC File No. 001-13641).
10.17	Amendment to the Purchase Agreement dated November 14, 2002 by and between Rothbart Development Corporation and the Company, is hereby incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003. (SEC File No. 001-13641).
10.18	Amendment to the Purchase Agreement dated January 16, 2003 by and between Rothbart Development Corporation and the Company, is hereby incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003. (SEC File No. 001-13641).
10.19	Second Amendment to Purchase Agreement dated as of February 11, 2004 by and between the Company and Rothbart Development Corporation, is hereby incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. (SEC File No. 001-13641).
10.20	Lease and Agreement dated September 10, 1999 by and between the Company and Century Gaming Management, Inc., is hereby incorporated by reference to Exhibit 10.38 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 1999, filed on September 8, 2000. (SEC File No. 001-13641).
10.21	First Amendment to Lease and Agreement dated September 6, 2000 by and between the Company and Century Gaming Management, Inc., is hereby incorporated by reference to Exhibit 2.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000. (SEC File No. 001-13641).
10.22	Second Amendment to Lease and Agreement dated as of October 1, 2001 by and between the Company and Century Gaming Management, Inc., is hereby incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K the year ended December 31, 2002. (SEC File No. 001-13641).

58

Exhibit Number	Description of Exhibit
10.23	Third Amendment to Lease and Agreement dated as of December 4, 2002 by and between the Company and Century Gaming Management, Inc., is hereby incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K the year ended December 31, 2002. (SEC File No. 001-13641).
10.24	Fourth Amendment to Lease and Agreement dated as of October 13, 2003 by and between the Company and Century Gaming Management, Inc., is hereby incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K the year ended December 31, 2002. (SEC File No. 001-13641).
10.25	Fifth Amendment to Lease and Agreement dated as of October 29, 2004 by and between the Company and Century Gaming Management, Inc. is hereby incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. (SEC File No 001-13641).
10.26	Lease Agreement dated April 4, 1992 by and between G&W Enterprises, Inc. and Biloxi Casino Corp., is hereby incorporated by reference to Exhibit 10.7 to Casino Magic Corp.’s Registration Statement on Form S-1 filed on August 28, 1992. (SEC File No. 033-51438).
10.27	Amendment to Lease Agreement dated February 26, 1999 by and between G&W Enterprises, Inc. and Biloxi Casino Corp., is hereby incorporated by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. (SEC File No. 001-13641).
10.28	Lease Agreement dated November 23, 1992 by and between Gary Gollott, Tommy Gollot, and Tyrone Gollott, and Biloxi Casino Corp., is hereby incorporated by reference to Casino Magic Corp.’s Registration Statement on Form S-4 filed on November 12, 1993. (SEC File No. 033-71572).
10.29	Amendment to Lease Agreement dated February 26, 1999 by and between Gary Gollott, Tommy Gollott and Tyrone Gollott, and Biloxi Casino Corp., is hereby incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. (SEC File No. 001-13641).
10.30	Public Trust Tidelands Lease dated May 27, 1993 by and between Biloxi Casino Corp. and the State of Mississippi, is hereby incorporated by reference to Exhibit 10.10 to Casino Magic Corp.’s Registration Statement on Form S-4 filed on November 12, 1993. (SEC File No. 033-71572).
10.31	Public Trust Tidelands Lease Amendment dated October 28, 2004 by and between Biloxi Casino Corp. and the State of Mississippi is hereby incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. (SEC File No. 001-13641).
10.32	Form of Lease by and between the Webster Family Limited Partnership and the Diuguid Family Limited Partnership and Pinnacle Gaming Development Corp. (executed by the parties on December 11, 1998 and subsequently assigned by Pinnacle Gaming Development Corp. to Belterra Resort Indiana, LLC), is hereby incorporated by reference to Exhibit B contained in Exhibit 10.47 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998. (SEC File No. 001-13641).
10.33	Form of Lease by and between Daniel Webster, Marsha S. Webster, William G. Diuguid, Sara T. Diuguid, J.R. Showers, III and Carol A. Showers, and Pinnacle Gaming Development Corp. (executed by the parties on December 11, 1998 and subsequently assigned by Pinnacle Gaming Corp. to Belterra Resort Indiana, LLC), is hereby incorporated by reference to Exhibit B contained in Exhibit 10.51 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998. (SEC File No. 001-13641).
10.34	Lease Agreement dated September 29, 1995 by and between the State of Mississippi and Casino One Corporation, is hereby incorporated by reference to Exhibit 10.2 to Casino Magic Corp.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1995. (SEC File No. 000-20712).

59

Exhibit Number	Description of Exhibit
10.35	Lease dated September 10, 1999 by and between Churchill Downs California Company and the Company, is hereby incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003. (SEC File No. 001-13641).
10.36	Commercial Lease dated September 9, 1996 by and between State of Louisiana, State Land Office and PNK (Bossier City), Inc. (f/k/a Casino Magic of Louisiana, Corp.), is hereby incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003. (SEC File No. 001-13641).
10.37	Ground Lease Agreement dated as of August 21, 2003 by and between PNK (LAKE CHARLES), L.L.C., and Lake Charles Harbor & Terminal District, is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 19, 2003. (SEC File No. 001-13641).
10.38	Addendum Number One dated as of July 5, 2005 to Memorandum of Lease dated August 21, 2003, by and between PNK (LAKE CHARLES) L.L.C. and Lake Charles Harbor and Terminal District is hereby incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. (SEC File No. 001-013641).
10.39	Statement of Conditions to Riverboat Gaming License of PNK (LAKE CHARLES), L.L.C., is hereby incorporated by reference to Exhibit 10.57 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. (SEC File No. 001-13641).
10.40	Standard Form of Agreement between Owner and Contractor by and between PNK (LAKE CHARLES), L.L.C. and Manhattan Construction Company, is hereby incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 19, 2003. (SEC File No. 001-13641).
10.41	First Amendment to Standard Form of Agreement by and between Owner and Contractor dated as of September 18, 2003 by and between PNK (LAKE CHARLES), L.L.C. and Manhattan Construction Company, is hereby incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on September 19, 2003. (SEC File No. 001-13641).
10.42	Vessel Construction Agreement dated as of August 27, 2003 by and between Leevac Industries, LLC and PNK (LAKE CHARLES), L.L.C., is hereby incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on September 19, 2003. (SEC File No. 001-13641).
10.43	Redevelopment Agreement dated as of April 22, 2004 by and between the Land Clearance for Redevelopment Authority of the City of St. Louis and the Company, is hereby incorporated by reference to Exhibit 10.43 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on June 7, 2004. (SEC File No. 333-115557).
10.44	Lease and Development Agreement, dated as of August 12, 2004, by and between the St. Louis County Port Authority and the Company, is hereby incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004. (SEC File No. 001-13641).
10.45	Stock Agreement dated as of July 1, 2003 by and between the Company and R.D. Hubbard, is hereby incorporated by reference to Exhibit 10.1 to Amendment No. 25 to the Schedule 13D filed by R.D. Hubbard on August 4, 2003. (SEC File No. 005-33517).
10.46	Underwriting Agreement dated as of September 19, 2003 by and among the Company, the guarantors identified therein and Bear, Stearns & Co. Inc., as representative for itself and Banc of America Securities LLC, Lehman Brothers Inc., SG Cowen Securities Corporation, CIBC World Markets Corp. and UBS Securities LLC, is hereby incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on September 25, 2003. (SEC File No. 001-13641).

60

Exhibit Number	Description of Exhibit
10.47	Equity Underwriting Agreement dated January 27, 2004 by and between the Company and Deutsche Bank Securities Inc., as representative for itself and Bear, Stearns & Co. Inc., Lehman Brothers Inc., SG Cowen Securities Corporation, B. Riley & Co., Crowell Weedon & Co., Hibernia Southcoast Capital, Sterne, Agee & Leach, Inc., UBS Securities LLC, The Seidler Companies Incorporated, Thomas Weisel Partners LLC and CIBC World Markets Corp., is hereby incorporated by reference to Exhibit 1.1 to the Company Current Report on Form 8-K filed on January 30, 2004. (SEC File No. 001-13641).
10.48	Registration Rights Agreement dated as of March 15, 2004 by and among the Company, the guarantors identified therein and Lehman Brothers Inc., as representative for itself and Bear, Stearns & Co. Inc., Deutsche Bank Securities Inc., SG Cowen Securities Corporation, UBS Securities LLC and Hibernia Southcoast Capital, Inc., is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 30, 2004. (SEC File No. 001-13641).
10.49	Purchase Agreement dated as of February 27, 2004 by and among the Company, the guarantors identified therein and Lehman Brothers, Inc., as representative for itself and Bear, Stearns & Co. Inc., Deutsche Bank Securities Inc., SG Cowen Securities Corporation, UBS Securities LLC and Hibernia Southcoast Capital, Inc., is hereby incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 30, 2004. (SEC File No. 001-13641).
10.50	Underwriting Agreement dated as of November 18, 2004 by and among the Company, the guarantors named therein and Lehman Brothers Inc., as representative for itself and Bear, Stearns & Co. Inc., Deutsche Bank Securities Inc, Wells Fargo Securities, LLC, SG Cowen Securities Corporation, CIBC World Markets Corp, Hibernia Southcoast Capital, Inc., CommerzBank Securities, Crowell, Weedon & Co and Merrill Lynch, Pierce, Fenner & Smith Incorporated, is hereby incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on November 24, 2004. (SEC File No. 001-13641).
10.51*	First Amendment to Redevelopment Agreement and First Amendment to Option Agreement dated as of December 23, 2004 by and between the Land Clearance Redevelopment Authority of the City of St. Louis and the Company.
10.52*	Second Amendment to Redevelopment Agreement dated as of July 21, 2005 by and between the Land Clearance Redevelopment Authority and the Company.
10.53	Equity Underwriting Agreement dated as of December 16, 2004 by and among the Company and Lehman Brothers Inc. and Deutsche Bank Securities Inc., as representatives for themselves and Bear, Stearns & Co. Inc., Crowell, Weedon & Co., B. Riley & Co., Inc. and Sterne, Agee & Leach, Inc., is hereby incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on December 20, 2004. (SEC File No. 001-13641).
10.54*	Letter Agreement dated as of August 12, 2004 by and between the St. Louis County Port Authority and the Company.
10.55*	Second Amendment to Lease and Development Agreement dated as of October 28, 2005 by and between St. Louis County Port Authority and the Company.

61

Exhibit Number	Description of Exhibit
10.56	Equity Underwriting Agreement dated as of January 12, 2006 by and between the Company and Lehman Brothers Inc. and Deutsche Bank Securities Inc., as representatives of several underwriters named therein is hereby incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on January 13, 2006. (SEC File No. 001-12641).
10.57	Indemnification Trust Agreement dated as of August 16, 2005, by and between the Company and Wilmington Trust Company and, as an additional party, Bruce Leslie, as Beneficiaries’ Representative, is hereby incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. (SEC File No. 001-13641).
10.58	Summary of the Deferred Bonus Plan is hereby incorporated by reference to Exhibit 10.56 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2004, filed on May 9, 2005.
10.59	Summary of 2004 Award Schedule Under the Deferred Bonus Plan is hereby incorporated by reference to Exhibit 10.55 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2004, filed on May 9, 2005.
10.60	Summary of 2005 Bonus Award Schedule is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 10, 2006. (SEC File No. 001-13641).
10.61*	Purchase Agreement dated February 24, 2006 by and between the Company and President Casinos, Inc. and its wholly owned subsidiary, President Casino-Missouri.
10.62*	Side Letter dated February 24, 2006 by and between President Casino, Inc.
10.63*	Commitment Letter by and among Lehman Brothers Inc., Bear, Stearns & Co. Inc. and Bear Stearns Corporate Lending Inc. and Pinnacle Entertainment, Inc., dated March 13, 2006.
11.1*	Statement re: Computation of Per Share Earnings.
12.1*	Computation of Ratio of Earnings to Fixed Charges
21.1*	Subsidiaries of Pinnacle Entertainment, Inc.
23.1*	Consent of Deloitte & Touche LLP.
31.1*	Chief Executive Officer Certification Pursuant to Section 13a-14 of the Securities Exchange Act.
31.2*	Chief Financial Officer Certification Pursuant to Section 13 a-14 of the Securities Exchange Act.
32.1**	Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1*	Government Regulation and Gaming Issues.

  * Filed herewith.

** Furnished herewith.

  † Management contract or compensatory plan or arrangement.

62

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

PINNACLE ENTERTAINMENT, INC. (Registrant)
By:	/s/    DANIEL R. LEE	Dated: March 15, 2006
	Daniel R. Lee
	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
By:	/s/    STEPHEN H. CAPP	Dated: March 15, 2006
	Stephen H. Capp
	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
By:	/s/    DANIEL R. LEE	Dated: March 15, 2006
	Daniel R. Lee
	Director
By:	/s/    JOHN V. GIOVENCO	Dated: March 15, 2006
	John V. Giovenco
	Director
By:	/s/    RICHARD GOEGLEIN	Dated: March 15, 2006
	Richard Goeglein
	Director
By:	/s/    BRUCE A. LESLIE	Dated: March 15, 2006
	Bruce A. Leslie
	Director
By:	/s/    JAMES L. MARTINEAU	Dated: March 15, 2006
	James L. Martineau
	Director
By:	/s/    MICHAEL ORNEST	Dated: March 15, 2006
	Michael Ornest
	Director
By:	/s/    TIMOTHY J. PARROTT	Dated: March 15, 2006
	Timothy J. Parrott
	Director
By:	/s/    LYNN P. REITNOUER	Dated: March 15, 2006
	Lynn P. Reitnouer
	Director

63

PINNACLE ENTERTAINMENT, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	65
Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003	66
Consolidated Balance Sheets as of December 31, 2005 and 2004	67
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2005, 2004 and 2003	68
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003	69
Notes to Consolidated Financial Statements	70

64

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

of Pinnacle Entertainment, Inc.

We have audited the accompanying consolidated balance sheets of Pinnacle Entertainment, Inc. and subsidiaries (the “Company”) as of December 31, 2005 and 2004, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Pinnacle Entertainment, Inc. and subsidiaries as of December 31, 2005 and 2004 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 15, 2006 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/    DELOITTE & TOUCHE LLP

Las Vegas, Nevada

March 15, 2006

65

PINNACLE ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the years ended December 31,
	2005			2004			2003
	(in thousands, except per share data)
Revenues:
Gaming	$	616,561		$	462,618		$	448,237
Food and beverage		40,116			30,861			28,955
Truck stop and service station		28,397			24,324			21,272
Hotel and recreational vehicle park		24,521			17,708			14,674
Other operating income		16,305			11,560			11,024
		725,900			547,071			524,162
Expenses and Other Costs (Benefits):
Gaming		368,475			269,166			264,898
Food and beverage		39,629			29,257			28,745
Truck stop and service station		26,800			22,887			19,621
Hotel and recreational vehicle park		12,267			8,854			7,344
General and administrative		139,430			112,962			109,491
Depreciation and amortization		61,171			46,106			44,376
Other operating expenses		11,287			8,505			8,424
Pre-opening and development costs		29,608			14,399			1,261
Indiana regulatory and related benefit		0			(194	)		(2,056	)
Gain on asset sales, net of other items		0			(42,410	)		0
Goodwill and other asset impairment charges		0			0			7,832
Corporate relocation benefit		0			0			(199	)
		688,667			469,532			489,737
Operating income		37,233			77,539			34,425
Interest income		3,668			3,584			2,111
Interest expense, net of capitalized interest		(49,535	)		(51,778	)		(54,001	)
Loss on early extinguishment of debt		(3,752	)		(14,921	)		(19,908	)
Income (loss) from continuing operations before income taxes		(12,386	)		14,424			(37,373	)
Income tax (expense) benefit		15,975			(7,244	)		7,502
Income (loss) from continuing operations		3,589			7,180			(29,871	)
Income from discontinued operations, net of taxes		2,536			1,981			1,629
Net income (loss)	$	6,125		$	9,161		$	(28,242	)
Net income (loss) per common share—basic
Income (loss) from continuing operations	$	0.09		$	0.20		$	(1.15	)
Income from discontinued operations, net of tax		0.06			0.06			0.06
Net income (loss) per common share—basic	$	0.15		$	0.26		$	(1.09	)
Net income (loss) per common share—diluted
Income (loss) from continuing operations	$	0.08		$	0.20		$	(1.15	)
Income from discontinued operations, net of tax		0.06			0.05			0.06
Net income (loss) per common share—diluted	$	0.14		$	0.25		$	(1.09	)
Number of shares—basic		40,703			34,730			25,861
Number of shares—diluted		42,951			36,170			25,861

See accompanying notes to the consolidated financial statements.

66

PINNACLE ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2005			2004
	(in thousands, except share data)
ASSETS
Current Assets:
Cash and cash equivalents	$	147,332		$	202,374
Insurance receivable related to inventory and interim costs		16,734			0
Accounts receivable, net of doubtful accounts of $3,349 and $1,557		16,777			11,501
Inventories		6,435			5,128
Prepaid expenses and other assets		16,141			14,542
Income tax receivable		4,742			4,742
Deferred income taxes		5,819			3,023
Total current assets		213,980			241,310
Restricted cash		9,138			85,414
Insurance receivable related to property and equipment impairment charges		32,813			0
Property and equipment, net		890,318			813,987
Goodwill		26,656			26,656
Gaming licenses, net		21,082			21,482
Debt issuance costs, net		21,091			18,867
Other assets		7,330			1,052
Assets held for sale		22,469			0
	$	1,244,877		$	1,208,768
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	40,651		$	45,952
Accrued interest		10,766			12,554
Accrued compensation		34,064			24,504
Other accrued liabilities		57,412			49,312
Current portion of long-term debt		139			2,517
Total current liabilities		143,032			134,839
Long-term debt		657,534			637,971
Other long-term liabilities		1,474			0
Deferred income taxes		4,497			20,768
Liabilities associated with assets held for sale		10,526			0
Commitments and contingencies (Note 11)
Stockholders’ Equity:
Preferred stock		0			0
Common—$0.10 par value, 40,975,588 and 40,501,605 shares outstanding, net of treasury shares		4,298			4,251
Capital in excess of par value		435,512			428,042
Retained earnings		19,203			13,078
Accumulated other comprehensive loss		(11,109	)		(10,091	)
Treasury stock, at cost		(20,090	)		(20,090	)
Total stockholders’ equity		427,814			415,190
	$	1,244,877		$	1,208,768

See accompanying notes to the consolidated financial statements.

67

PINNACLE ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the years ended December 31, 2005, 2004 and 2003

	Common Stock		Capital in Excess of Par Value		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total Stockholders’ Equity
	(in thousands)
Balance as of January 1, 2003	$	2,594	$	224,216	$	32,159		$	(10,483	)	$	0		$	248,486
Net loss		0		0		(28,242	)		0			0			(28,242	)
Foreign currency translation loss		0		0		0			544			0			544
Total comprehensive loss															(27,698	)
Treasury stock purchases		0		0		0			0			(20,090	)		(20,090	)
Executive stock option compensation		0		151		0			0			0			151
Common stock options exercised		0		10		0			0			0			10
Balance as of December 31, 2003		2,594		224,377		3,917			(9,939	)		(20,090	)		200,859
Net income		0		0		9,161			0			0			9,161
Foreign currency translation loss		0		0		0			(152	)		0			(152	)
Total comprehensive income															9,009
Executive stock option compensation		0		154		0			0			0			154
Common stock options exercised		47		4,632		0			0			0			4,679
Equity offerings		1,610		197,990		0			0			0			199,600
Tax benefit from stock option exercises		0		889		0			0			0			889
Balance as of December 31, 2004		4,251		428,042		13,078			(10,091	)		(20,090	)		415,190
Net income		0		0		6,125			0			0			6,125
Foreign currency translation loss		0		0		0			(1,018	)		0			(1,018	)
Total comprehensive income															5,107
Executive stock option compensation		0		157		0			0			0			157
Common stock options exercised		47		4,796		0			0			0			4,843
Tax benefit from stock option exercises		0		2,517		0			0			0			2,517
Balance as of December 31, 2005	$	4,298	$	435,512	$	19,203		$	(11,109	)	$	(20,090	)	$	427,814

See accompanying notes to the consolidated financial statements.

68

PINNACLE ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the years ended December 31,
	2005			2004			2003
	(in thousands)
Cash flows from operating activities:
Net income (loss)	$	6,125		$	9,161		$	(28,242	)
Depreciation and amortization		63,024			48,187			46,833
Amortization of debt issuance costs		3,145			3,303			4,524
Loss on early extinguishment of debt		3,752			14,921			16,939
Gain on sale of assets, net of other items		0			(42,410	)		0
Goodwill impairment write-down		0			0			7,832
Tax benefit from stock option exercises		2,517			889			0
Changes in working capital:
Accounts and insurance receivables, net		(24,470	)		(4,142	)		2,498
Income tax receivable		0			(4,742	)		6,364
Prepaid expenses and other assets		(2,906	)		(4,246	)		516
Accounts payable		15,292			(2,226	)		343
Other accrued liabilities		18,230			6,849			8,653
Accrued interest		(1,788	)		(2,905	)		(1,670	)
Change in deferred taxes		(19,067	)		6,095			(10,718	)
All other, net		(2,108	)		1,640			1, 514
Net cash provided by operating activities		61,746			30,374			55,386
Cash flows from investing activities:
Decrease (increase) in restricted cash		76,276			43,515			(98,829	)
Additions to property and equipment		(240,109	)		(209,597	)		(82,931	)
Receipts from dispositions of property and equipment		231			56,988			185
Receipts from insurance proceeds		25,000			0			0
Net cash used in investing activities		(138,602	)		(109,094	)		(181,575	)
Cash flows from financing activities:
Proceeds from credit facility		419,008			125,000			270,438
Payments of credit facility		(324,008	)		(147,000	)		(125,000	)
Proceeds from senior subordinated notes		0			303,564			132,798
Payment of senior subordinated notes		(65,000	)		(285,000	)		(125,000	)
Payment of other secured and unsecured notes payable		(2,473	)		(2,341	)		(2,361	)
Debt issuance costs		(9,171	)		(17,800	)		(21,698	)
Common stock options exercised		4,843			4,679			10
Common stock equity offerings		0			200,137			0
Purchase of treasury shares		0			0			(20,090	)
Other financing activities, net		27			148			0
Net cash provided by financing activities		23,226			181,387			109,097
Effect of exchange rate changes on cash and cash equivalents		(1,412	)		(400	)		(242	)
Increase (decrease) in cash and cash equivalents		(55,042	)		102,267			(17,334	)
Cash and cash equivalents at the beginning of the year		202,374			100,107			117,441
Cash and cash equivalents at the end of the year	$	147,332		$	202,374		$	100,107
Cash, cash equivalents and restricted cash at the end of the year	$	156,470		$	287,788		$	229,036
Supplemental Cash Flow Information:
Cash paid (received) during the year for:
Interest	$	53,099		$	58,389		$	52,208
Income taxes, net		1,085			756			(10,479	)
Non-cash currency translation rate adjustment		412			152			(544	)
Construction payable		6,018			32,220			0

See accompanying notes to the consolidated financial statements.

69

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Summary of Significant Accounting Policies

General    Pinnacle Entertainment, Inc. owns and operates gaming entertainment facilities in numerous gaming markets. These include five properties in the United States, located in southeastern Indiana (“Belterra Casino Resort”); Lake Charles, New Orleans and Bossier City, Louisiana (“L’Auberge du Lac,” “Boomtown New Orleans” and “Boomtown Bossier City,” respectively); and Reno, Nevada (“Boomtown Reno”). As of September 2005, we own the Embassy Suites St. Louis – Downtown hotel (“Embassy Suites Hotel”). In addition, we are building a major casino in downtown St. Louis, Missouri (“St. Louis City”) adjacent to our Embassy Suites Hotel and a major casino in South St. Louis County, Missouri (“St. Louis County”). We also filed a gaming license application for one of two available licenses in Philadelphia, Pennsylvania. We also own a hotel casino site and have significant insurance claims related to a hotel casino previously operated in Biloxi, Mississippi (“Casino Magic Biloxi”—see Note 2). Outside of the United States, we opened our replacement casino in late July 2005 in the City of Neuquen, the largest of the casinos we operate in Argentina (“Casino Magic Argentina”); have begun construction of a casino adjoining the Four Seasons Resort Great Exuma at Emerald Bay in the Bahamas (“Great Exuma”); and have filed two gaming applications for licenses in Chile. Finally, we are in the process of selling our interests in the southern California card clubs for which we receive lease income (see Note 5).

The Lake Charles region offers the closest casinos to the cities of Houston, Austin and San Antonio. The Belterra Casino Resort is near Cincinnati, Ohio and Louisville, Kentucky. The twin cities of Bossier City/Shreveport are convenient to the Dallas/Fort Worth metropolitan area. The St. Louis City casino will serve downtown businesses, tourists and residents, while the St. Louis County casino is expected to cater largely to the regional residents of Missouri and Illinois.

Basis of Presentation    The accompanying consolidated financial statements include the accounts of Pinnacle Entertainment, Inc. and subsidiaries and have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements and these notes to the consolidated financial statements reflect the card club assets held for sale and the related treatment of such operations as discontinued for all periods presented (see Note 5). All significant inter-company accounts and transactions have been eliminated.

Use of Estimates    The preparation of consolidated financial statements in conformity with accounting principles used in the United States requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. Estimates used by us include, among other things, (i) the evaluation of the non-impairment of property, equipment and other long-term assets, (ii) the evaluation of the future realization of deferred tax assets, and (iii) determining the adequacy of reserves. Actual results could differ from those estimates.

Cash and Cash Equivalents    Cash and cash equivalents consist of cash, certificates of deposit and short term investments with maturities at the date of purchase of 90 days or less. The carrying amount of cash equivalents approximates fair value due to the short maturities.

Accounts Receivable    Accounts receivable consist primarily of casino, hotel and other receivables, net of an allowance for doubtful accounts of $3,349,000 and $1,557,000 as of December 31, 2005 and 2004, respectively. The allowance for doubtful accounts is estimated based upon, among other things, collection experience, customer credit evaluations and the age of the receivables.

70

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We extend casino credit to approved customers following background checks and investigations of creditworthiness. In May 2005, we opened L’Auberge du Lac, wherein we have experienced, and anticipate continuing to experience, a higher volume of credit play than has historically been experienced at our other casinos.

Inventories    Inventories, which consist primarily of food, beverage and operating supplies, are stated at the lower of cost or market value. Costs are determined using the first-in, first-out method and the weighted average methods.

Restricted Cash    Restricted cash at December 31, 2005 consists primarily of a $5,000,000 indemnification trust deposit and $3,300,000 cash collateralizing a workers compensation bond, as well as other nominal restricted cash. Restricted cash at December 31, 2004 was primarily an $81,620,000 completion reserve account established in connection with our prior credit facility (which account is not required in our new credit facility), as well as other nominal restricted cash. Restricted cash is invested in highly liquid instruments with original maturities of 90 days or less, which carrying amounts approximate fair value.

Property and Equipment    Additions to property and equipment and construction-in-progress are recorded at cost, including capitalized interest. Depreciation and amortization are provided based on the straight-line method over the assets’ estimated useful lives as follows:

	Years
Land improvements	5 to 40
Buildings and improvements	15 to 50
Vessels and barges	10 to 39
Equipment	3 to 20

Maintenance, repairs and assets purchased below $2,500 (or a group of like-type assets purchased below $10,000) are charged to expense, as incurred. Betterments which extend the life of the asset are capitalized. The costs of property sold or otherwise disposed of and their associated accumulated depreciation are eliminated from both the property and accumulated depreciation accounts.

Pursuant to Statement of Financial Accounting Standards No. 144 (“SFAS No. 144”), “Accounting for the Impairment or Disposal of Long-lived Assets,” we review our long-lived assets for impairment whenever events or changes in circumstances indicate that the book value of an asset may not be recoverable. If a long-lived asset is to be retained, we assess recoverability based on the sum of the asset’s future undiscounted cash flows over the estimated remaining life compared to the asset’s book value. If an impairment exists, the asset is written down to fair value, based on quoted market prices, insured values, or another valuation technique, such as discounted cash flow analysis. If a long-lived asset is to be sold, the asset is reported at the lower of carrying value or fair value, including an agreed upon sales price.

In August 2005, our Casino Magic Biloxi casino was destroyed, and the hotel and other improvements were severely damaged, all as a result of Hurricane Katrina (see Note 2) and in December we decided to pursue the sale of our two card clubs in southern California (see Note 5). There were no impairment charges in 2004 and 2003.

Capitalization of Interest    We capitalize interest expense on construction in progress based on an imputed interest rate estimating our average cost of borrowed funds. Interest is no longer capitalized once the project is substantially complete. Capitalized interest was $7,130,000, $5,102,000 and $1,513,000 in fiscal 2005, 2004 and 2003, respectively. Such capitalized interest becomes part of the cost of the related asset and is depreciated over the estimated useful life.

71

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Goodwill and Other Intangible Assets    Pursuant to SFAS No. 142, “Goodwill and Other Intangible Assets,” (“SFAS No. 142”), goodwill and other non-amortizing intangible assets are not amortized, but instead are subject to an annual assessment for impairment by applying a fair-value-based test. Any future acquired intangible asset will be separately recognized if the benefit of the intangible is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented, or exchanged, regardless of the acquirer’s intent to do so. Intangible assets with finite lives are amortized over their useful lives.

Goodwill at December 31, 2005 and 2004 was $26,656,000, which consisted of $16,743,000 and $9,913,000 for Boomtown New Orleans and Boomtown Reno, respectively. Goodwill consists of the excess of the acquisition cost over the fair value of the net assets acquired in business combinations. Goodwill related to the 1997 Boomtown, Inc. acquisition was allocated to the New Orleans and Reno facilities.

Based on assessments performed, there were no impairments in 2005 and 2004. However, during 2003, we identified certain pre-acquisition deferred tax assets related to Casino Magic Corp. whose estimated future realization had changed based on facts identified in the year. Pursuant to SFAS No. 109 (defined below), pre-acquisition contingent tax matters, including changes in a deferred tax asset’s estimated future realization, that are resolved beyond the one-year post-acquisition period are required to be reclassified from the deferred tax accounts to goodwill. Pursuant to SFAS No. 142, we included such amounts in our annual goodwill assessment. Based on the evaluation completed, we recorded a goodwill impairment charge of $7,832,000 in 2003.

Other intangible assets at December 31, 2005 and 2004 consisted of the Boomtown Bossier City non-amortizing gaming license and Casino Magic Argentina amortizing gaming license. Balances at December 31 were as follows:

	2005		2004
	(in thousands)
Gaming Licenses:
Boomtown Bossier City non-amortizing license	$	19,865	$	19,865
Casino Magic Argentina amortizing gaming license		1,217		1,617
	$	21,082	$	21,482

Boomtown Bossier City    In connection with the acquisition of Casino Magic Corp. in 1998, a portion of the purchase price was allocated to that Company’s Louisiana gaming license, which license permits us to conduct the gaming operations of Boomtown Bossier City. In connection with the implementation of SFAS No. 142 in 2002, we classified such asset as a non-amortizing intangible asset with an indefinite useful life and subject to an annual assessment for impairment by applying a fair-value-based test. Based on assessments performed, there was no impairment in 2005, 2004 or 2003.

Casino Magic Argentina    A portion of the acquisition price of Casino Magic Corp. in 1998 was allocated to a concession agreement to operate casinos in Argentina, which agreement provides us certain exclusive rights to operate casinos in major cities of the Province of Neuquen. In 2003, we and the Province of Neuquen amended the concession agreement, permitting extensions of the concession contract through 2016 provided we build a replacement casino of our casino in Neuquen, which we completed and opened in July 2005. We can also receive an additional five-year extension to 2021 if we invest 5 million pesos (or $1,650,000 based on the December 31, 2005 exchange rate) in a minimum three-star hotel facility with a minimum of 10 guestrooms.

Amortization expense of the license cost for the years ended December 31, 2005, 2004 and 2003 was $383,000, $380,000, and $377,000, respectively. Based on our ability and intent to satisfy the 2003 amended

72

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

concession agreement conditions, we amortized the gaming license through 2016 in each of 2005, 2004 and 2003. The unamortized gaming license costs as of December 31, 2005 and 2004 were $1,217,000 and $1,617,000, respectively. Estimated future amortization expense for each of the next five years, applying the average peso-to-dollar exchange rate for the year ended December 31, 2005 to each such period, is approximately $383,000.

Debt Issuance Costs and Related Amortization    Debt issuance costs incurred in connection with long-term debt and bank financing are capitalized and amortized to interest expense over the expected term of the related debt agreement. We use the straight-line method that approximates the effective interest method for such amortization. Amortization of debt issuance costs included in interest expense was $3,145,000, $3,246,000 and $4,524,000 for the years ended December 31, 2005, 2004 and 2003, respectively. Accumulated amortization as of December 31, 2005 and 2004 was $4,601,000 and $5,559,000, respectively.

Self Insurance    We self-insure various levels of general liability, property, workers’ compensation and medical coverage. Insurance reserves include accruals of estimated settlements for known claims, as well as accruals of estimates of incurred but not reported claims, which are included in accrued compensation and other accrued liabilities on the consolidated balance sheet.

Income Taxes    We account for income taxes under SFAS No. 109, “Accounting for Income Taxes” (“SFAS No. 109”), whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized. Loss contingencies resulting from tax audits or certain tax positions are accrued when the potential loss can be reasonably estimated and where occurrence is probable.

Revenue Recognition    Gaming revenues consist of the difference between gaming wins and losses. Food and beverage, truck stop, service station, hotel and other operating revenues are recognized as products are delivered or services are performed.

We reward certain customers with cash based upon their level of play on certain casino games (primarily slot machines), including the cash value of frequent-player “points” and coin coupon offerings. The cash values are recorded as a reduction in revenues.

Revenues in the accompanying statements of operations exclude the retail value of hotel rooms, food and beverage and other items provided to patrons on a complimentary basis. Complimentary revenues which have been excluded from the accompanying consolidated statements of operations are $67,664,000, $47,981,000 and $49,171,000 for 2005, 2004 and 2003, respectively. The estimated cost of providing these promotional allowances (which is included in gaming expenses) was $55,151,000 $35,006,000 and $39,420,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

Advertising Costs    Advertising costs are expensed as incurred, consistent with Statement of Position 93-7 “Reporting on Advertising Costs.” Such costs (excluding expenses included in pre-opening and development costs below) were $20,215,000, $11,853,000, and $11,379,000 for the years ended December 31, 2005, 2004 and 2003, respectively, and are included in gaming expenses on the accompanying consolidated statements of operations.

73

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Pre-opening and Development Costs    Pre-opening and development costs are expensed as incurred, consistent with Statement of Position 98-5 “Reporting on the Costs of Start-up Activities.” For 2005 and 2004, pre-opening and development costs were $29,608,000 and $14,399,000, respectively. Such costs were primarily associated with L’Auberge and the St. Louis opportunities, and in 2004 our sponsorship of an unsuccessful gaming initiative in California. Such costs were $1,261,000 for 2003.

Construction Period Lease Costs    Historically, construction period rent expense was not recorded until commencement of cash rent obligations. Effective September 2005, our policy is to expense construction period lease costs pursuant to FASB Staff Position No. FAS 13-1 “Accounting for Rental Costs Incurred During a Construction Period” (“FSP FAS 13-1”).

Such costs primarily occur in our case when we enter into a lease arrangement whereby rent is not scheduled to be paid until the opening of a new facility. Pursuant to FSP FAS 13-1, we expense construction period lease costs once possession and control of the leased asset has passed to us regardless of the timing of cash rent obligations, and the construction period lease cost can be reasonably estimated. Simultaneous with the recording of the lease cost, we record a deferred rent obligation until cash rent obligations commence. At such time, the liability will be amortized as a reduction in rent expense for the remainder of the lease term.

In late September 2005, in connection with the commencement of site development activities at our St. Louis County project site, we began expensing lease costs associated with the 99-year lease obligation for the land underlying the planned project. Based on the minimum cash lease obligation of $4 million per annum, and the assumption of a three-year construction period, we recorded a charge of approximately $1,118,000 in 2005.

Stock-based Compensation    We account for employee stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”) and related interpretations, as permitted by Statement of Financial Accounting Standard No. 123 “Accounting for Stock-Based Compensation” (“SFAS No. 123”). Pursuant to APB No. 25, no compensation cost is recognized in the financial statements for stock options granted at exercise prices equal to or greater than the market price of the underlying common stock on the date of grant.

The theoretical costs of employee stock-based compensation are disclosed in the notes to the financial statements. Such costs are theoretical as the cost may not materialize if the stock price does not appreciate or the employee does not stay employed long enough to vest in the options.

For purposes of estimating the theoretical pro forma effect of stock-based compensation, we use a Black-Scholes option-pricing model. Such model requires the use of subjective assumptions, including the expected life of the option, the expected volatility of the underlying stock, the expected dividend on the stock, and the risk-free interest rate for the expected life of the option.

In computing the stock-based compensation, the following assumptions were made:

	Risk- Free Interest Rate		Expected Life at Issuance	Expected Volatility		Expected Dividends
Options granted in the following periods:
2005	4.0	%	6.7 years	44.7	%	None
2004	3.4	%	6.2 years	53.1	%	None
2003	2.9	%	5.0 years	54.7	%	None

74

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For December 31, 2005, the expected volatility was derived from the implied volatilities of traded options in our common stock. In 2004 and prior periods, the expected volatility was derived from the historical performance of our common stock. Further volatility may be substantially less or greater than historical volatility. We do not currently pay dividends and, based on our debt covenants and expansion plans, we do not anticipate that dividends will be paid within the average expected life of existing options. U.S. Treasury strip rates are used as the proxy for the risk-free rate. The expected life at issuance is based on our experience as to the average life of option grants before being exercised or forfeited.

The following sets forth the theoretical pro forma costs and impact on net income (losses) as if we had applied the fair value recognition provisions of SFAS No. 123 to our employee stock-based compensation plans. For pro forma disclosures, the estimated fair values of the options were amortized over the vesting period of the options.

	For the year ended December 31,
	2005			2004			2003
	(in thousands, except per share data)
Income (loss) from continuing operations before stock-based compensation expense	$	3,589		$	7,180		$	(29,871	)
Theoretical stock-based compensation expense, net of taxes		(2,912	)		(1,592	)		(1,797	)
Pro forma income (loss) from continuing operations		677			5,588			(31,668	)
Income from discontinued operations, net of taxes		2,536			1,981			1,629
Pro forma income (loss)	$	3,213		$	7,569		$	(30,039	)
As reported:
Income (loss) from continuing operations	$	0.09		$	0.20		$	(1.15	)
Income from discontinued operations, net of taxes		0.06			0.06			0.06
Net income (loss) per share—basic	$	0.15		$	0.26		$	(1.09	)
Income (loss) from continuing operations	$	0.08		$	0.20		$	(1.15	)
Income from discontinued operations, net of taxes		0.06			0.05			0.06
Net income (loss) per share—diluted	$	0.14		$	0.25		$	(1.09	)
Pro forma:
Pro forma income (loss) from continuing operations	$	0.02		$	0.16		$	(1.22	)
Income from discontinued operations, net of taxes		0.06			0.06			0.06
Pro forma net income (loss) per share—basic	$	0.08		$	0.22		$	(1.16	)
Pro forma income (loss) from continuing operations	$	0.01		$	0.15		$	(1.22	)
Income from discontinued operations, net of taxes		0.06			0.06			0.06
Pro forma net income (loss) per share—diluted	$	0.07		$	0.21		$	(1.16	)
Number of shares—basic		40,703			34,730			25,861
Number of shares—diluted		42,951			36,170			25,861

Currency Translation    We account for currency translation in accordance with Statement of Financial Accounting Standards No. 52, “Foreign Currency Translation.” Balance sheet accounts are translated at the exchange rate in effect at each balance sheet date. Income statement accounts are translated at the average rate of exchange prevailing during the period. Translation adjustments resulting from this process are charged or credited to other comprehensive income (loss).

75

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Comprehensive Income    Statement of Financial Accounting Standards No. 130 “Reporting Comprehensive Income” (“SFAS No. 130”) requires that a company disclose other comprehensive income (loss) and the components of such income (loss). The objective of SFAS No. 130 is to report a measure of all changes in equity other than transactions with stockholders, such as the issuance or repurchase of shares. “Comprehensive income (loss)” is the sum of net income (loss) and other comprehensive income (loss).

Earnings per Share    Basic earnings per share are based on net income (loss) less preferred stock dividend requirements, if any, divided by the weighted average common shares outstanding during the period. Diluted earnings per share assume exercise of in-the-money stock options (those options with exercise prices at or below the weighted average market price for the periods presented) outstanding at the beginning of the year or at the date of the issuance, unless the assumed exercises are antidilutive.

For the year ended December 31, 2005 and 2004, the dilutive effect of in-the-money common stock options was 2,248,000 and 1,440,000 shares, respectively, whereas excluded from the determination of diluted shares was approximately 78,000 and 410,000 common stock options not in-the-money, respectively.

For the year ended December 31, 2003, there were 77,000 potentially dilutive in-the-money stock options, which shares were not included in the diluted calculation as we incurred a net loss and such inclusion would have been antidilutive. In addition, for 2003 there were approximately 3,383,000 stock options not in-the-money.

Recently Issued Accounting Standards    FASB Interpretation No. 47 (“FIN 47”) In March 2005, the Financial Accounting Standards Board (“FASB”) issued FIN 47 “Accounting for Conditional Asset Retirement Obligations.” FIN 47 refers to a legal obligation to perform an asset retirement activity even if the timing and/or settlement is conditional on a future event that may or may not be within the control of the entity. Accordingly, the entity must record a liability for the conditional asset retirement obligation if the fair value of the obligation can be reasonably estimated. We adopted FIN 47 in December 2005 consistent with the effective date of the statement. The adoption of FIN 47 did not have a material impact on our consolidated financial statements.

Statement of Financial Accounting Standards No. 123R (“SFAS No. 123R”)    In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment,” which requires all companies to measure compensation costs for all share-based payments (including employee stock options) at “fair value.” In April 2005, the SEC announced a phased-in implementation process for SFAS No. 123R, such that this statement became effective for us January 1, 2006. We will adopt SFAS 123R in the 2006 first quarter using the modified prospective method and therefore we will record expense relating to our stock-based compensation in the periods subsequent to adoption. The expense will be based on all unvested options as of the adoption date as well as all future stock-based compensation awards. Based on the options outstanding as of December 31, 2005 and assumptions reflecting currently available information, we expect the incremental pre-tax expense in fiscal 2006 to be approximately $5 million.

FASB Staff Position No. FAS 13-1 (“FSP FAS 13-1”)    On October 5, 2005 the FASB issued FSP FAS 13-1, “Accounting for Rental Costs Incurred During a Construction Period,” which requires companies to expense construction period lease costs and no longer permits capitalizing such costs. FSP FAS 13-1 is effective for periods after December 15, 2005, with early adoption permitted, which we elected.

Accounting for Uncertain Tax Positions    In July 2005 the FASB released an Exposure Draft for its proposed interpretation regarding accounting for uncertain tax positions. The proposed guidance addresses the recognition, measurement, classification, and disclosure issues related to the recording of financial statement benefits for income tax positions that have some degree of uncertainty.

76

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The FASB comment period ended in September 2005. In early January 2006, the FASB resumed discussions of the pending Interpretation. The release of a final pronouncement is expected in March or April 2006. The new proposed effective date is for the first fiscal year beginning after December 15, 2006. We are unable to predict the final action by FASB, or the impact of such interpretation on our financial statements.

Note 2—Hurricane Matters

Hurricane Katrina    On August 29, Hurricane Katrina struck the Gulf Coast near Biloxi, Mississippi, causing extensive damage to the Casino Magic Biloxi facility and minor damage to the Boomtown New Orleans facility. Both locations were closed on August 28 in anticipation of the hurricane. On September 30, Boomtown New Orleans reopened its facility. Casino Magic Biloxi remains closed.

Hurricane Rita    On September 23, Hurricane Rita passed directly over Lake Charles, Louisiana, causing damage to L’Auberge du Lac, which facility closed on September 22. On October 8, L’Auberge du Lac reopened its casino facility, with all amenities, including the golf course, reopened by the end of October.

Casino Magic Biloxi    As a result of Hurricane Katrina, the casino barge at Casino Magic Biloxi was destroyed. We continue to assess the substantial damage to the hotel structure and its contents. We intend to file both a property damage and business interruption claim in relation to our Casino Magic Biloxi property.

We maintain an aggregate of $400 million of property insurance on a per occurrence basis, including business interruption coverage. This insurance is comprised of multiple layers of coverage underwritten by 11 separate carriers or syndicates, all of which are currently rated A- or better by a major rating agency. The insurance provides $400 million of coverage per occurrence for a “Weather Catastrophe Occurrence” and at least $100 million on an annual basis for flood coverage. Several of our insurers have recently reserved their rights under the policies to assert, among other things, a flood exclusion and deductibles and other limiting provisions related to floods. We have reserved all rights to sue any carrier for “bad faith” or any other reason in asserting its full rights under law and under its insurance policies. We intend to vigorously oppose any effort by any of its insurance carriers to limit their obligations under the policies by improperly characterizing the losses we sustained. There remain unresolved issues with other insurers regarding the amount of or methodologies for computing insurance. Through mid-March 2006, we have received an additional $25 million in advances from other insurers towards our insurance claim.

To properly reflect the damage at the property, we wrote down by $57,813,000 the net book value of property and equipment impaired by the storm and a corresponding insurance receivable was recorded. Such amount has no relevance to the actual insurance claims, which are based on the cost in future periods of rebuilding a new property of like kind and quality to the property that was damaged. We also recorded a receivable for inventory write-downs and expenses incurred at Biloxi during and since the storm-affected period of $16,734,000, but not for the lost profits at the property. We are insured for both ongoing expenses and the lost profits, but accounting principles do not permit recognition of lost profits until the ultimate resolution of such claims with the insurance carriers. We anticipate incurring additional impairment charges in upcoming periods as a more detailed assessment of the remaining assets is completed, including the hotel and its contents, which charge is expected to be offset by an insurance receivable to the extent applicable. In addition, we anticipate recording additional insurance receivables for other insured expenses as we evaluate our business interruption claim. We expect our ultimate insurance claim and recovery will be significantly greater than the insurance receivables currently shown on our balance sheet.

As noted above, we received $25 million from an insurer in 2005, and another $25 million through February 28, 2006. At this time, the insurers have not designated such payments for other than advances against

77

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

our insurance claim. Accordingly, we applied the $25 million received in 2005 against the long-term insurance receivable at December 31 and reflected the proceeds as cash provided from investing activities on the 2005 consolidated statement of cash flows. Until such time as the insurers designate the payments, or the long-term insurance receivable is fully paid, we will continue to apply funds received against the long-term insurance receivable.

As noted, we believe we have insurance sufficient to cover the reconstruction or replacement of the Biloxi facility subject to any applicable deductible or other policy limitations. However, our insurance policies permit the “replacement facility” to be built anywhere in the United States. If the replacement facility is not in Biloxi, our insurance policies call for payment of the lesser of the cost to build such replacement facility or the then-theoretical cost to rebuild the Biloxi facility. We believe that each of our facilities in St. Louis, where in each case we have begun construction, would qualify as a replacement facility. Each facility in St. Louis is significantly larger than the Biloxi facility that was damaged. Hence, we believe that we could designate either of the St. Louis facilities as the replacement facility and receive approximately the same insurance proceeds as if we were to actually rebuild the Biloxi facility. Therefore, we expect to determine whether or not to rebuild the Biloxi facility independent of insurance issues and based on our forecasted profitability of a new facility, taking into consideration the competitive market and regulatory environment, among other factors. Among such other factors will be our availability of capital and management resources and the expected returns of other investment opportunities. Many of these factors are still highly uncertain in Biloxi. We estimate that it will be months, and perhaps much longer, before it makes the final decision to build or not build a new Biloxi facility. In the meantime, we have begun design work for reconstruction of a replacement facility, so that if conditions are deemed favorable at some future date, reconstruction can begin without undue delay.

Boomtown New Orleans and L’Auberge du Lac    We are continuing to evaluate the full effects of both hurricanes and the financial impact on our Boomtown New Orleans and L’Auberge du Lac properties in relation to the relevant insurance deductibles. It is not yet clear whether our losses in each case exceed the insurance deductibles. Consequently, the financial results for each location do not reflect any insurance recovery of any type for the fiscal year ended 2005.

The results at each of these properties were, however, adversely affected by the asset write-off charges, repair and maintenance costs related to the storms and the payroll costs at each property during their closure periods (approximately $2 million at Boomtown New Orleans and $4.5 million at L’Auberge du Lac). Such costs may be covered by insurance to the extent the losses exceed the insurance deductibles in each case.

Note 3—Property and Equipment

Property and equipment held at December 31, 2005 and 2004 consisted of the following:

	December 31,
	2005			2004
	(in thousands)
Land and land improvements	$	175,176		$	124,424
Buildings		513,867			382,975
Equipment		293,450			256,391
Vessels and barges		137,905			117,637
Construction in progress		25,880			228,054
		1,146,278			1,109,481
Less accumulated depreciation		(255,960	)		(295,494	)
	$	890,318		$	813,987

78

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The significant increase in the various asset categories above for 2005 is primarily due to the opening of L’Auberge du Lac in May 2005, and therefore placing such assets into service. Construction in progress at December 31, 2005 related primarily to our St. Louis Projects, and at December 31, 2004 primarily to L’Auberge du Lac.

Depreciation expense for the years ended December 31, 2005, 2004, and 2003 was $60,584,000, $45,726,000 and $43,999,000, respectively.

In December 2005, we entered into an agreement with Cabela’s Retail, Inc. (“Cabela’s”) to sell to Cabela’s approximately 28 acres of land adjacent to our Boomtown Reno Hotel and Casino. We also entered into a separate agreement with Cabela’s to sell an additional approximately 2 acres of land following the receipt of certain environmental clearances. These agreements are similar to and renew agreements that expired on September 30, 2005. Cabela’s has announced its intention to build a large retail store featuring outdoor sporting goods. A portion of the cost needed to improve access to the site is expected to be financed through the issuance of industrial revenue bonds through local or state governmental authorities. The bonds are expected to be serviced by a portion of the sales taxes generated by the new retail facilities. We have agreed to purchase, if necessary, some of such bonds. We estimate that we may be required to purchase between $4 million and $10 million of these bonds and believe such bonds could be resold to other investors, particularly after the new retail facilities have opened. A portion of the land is currently utilized by our existing truck stop and satellite casino operations. We intend to build a new truck stop and satellite casino at another location on the Boomtown Reno property for approximately $15 million. Cabela’s has agreed to pay us approximately $5.2 million. The net book value of the land to be sold is $1,103,000 at December 31, 2005. We intend to continue to operate the existing truck stop during the construction period until the new truck stop is completed.

Note 4—Expansion and Development

L’Auberge du Lac:    On May 26, 2005, we opened L’Auberge du Lac, our hotel casino resort. We believe L’Auberge du Lac is the premier casino in the Lake Charles, Louisiana area. Located on 242 acres of leased land, L’Auberge du Lac offers 743 guestrooms and suites, several restaurants, approximately 28,000 square feet of meeting space, a championship golf course designed by Tom Fazio, retail shops and a full-service spa. Unlike most other riverboat casinos, most of the public areas at L’Auberge du Lac, and in particular the casino, are situated entirely on one level. The casino is surrounded on three sides by the hotel facility and other guest amenities, providing convenient access to the 1,601 slot machines and 60 table games.

As noted above, we lease the 242 acres upon which the hotel resort casino reside. Rent obligations commenced with the opening of the facility in May 2005. The lease calls for annual payments of $842,000, subject to increases for inflation. The lease term is 10 years, with six renewal options of 10 years each. We also have an option to lease an additional 60 acres of unimproved land adjacent to the 242 acres. The lease option expires on August 19, 2006. The terms of the lease, if the option is exercised, would be substantially similar on a per-acre basis to the terms of the lease for the 242 acres.

In early 2006, we announced plans to add an additional 250-guestroom tower for approximately $45 million, which when completed will bring the total to nearly 1,000 guestrooms. We anticipate construction will begin in 2006, with completion planned for 2007.

St. Louis Projects:    In September 2005, we broke ground on our $350 million St. Louis City Project (the “St. Louis City Project”), which is located adjacent to the St. Louis convention district just north of the famed Gateway Arch. The facility is planned to include a casino with approximately 2,000 slot machines, a 200-guestroom luxury hotel, spa, several restaurants and 12,000 square feet of meeting and convention space. We

79

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

anticipate opening the facility in the third quarter of 2007. We have also committed to arrange or provide $50 million of investment in other nearby development within five years of the opening of the casino and hotel, $25 million of which may be satisfied by the condominium joint venture project discussed below. See Note 11 for a detailed discussion of the St. Louis City redevelopment agreement.

Also in September 2005, we completed the purchase of the Embassy Suites Hotel, a 297-suite hotel that adjoins the St. Louis City Project, at a cost of approximately $38 million. In connection with the acquisition, we have preliminarily assigned approximately $5 million to the land and land improvements, approximately $4 million to equipment and approximately $29 million to the building and building improvements. The allocation is not complete as we are still in the process of determining if any intangible assets were acquired. We will finalize the purchase price allocation within a year of the acquisition.

In September, we also purchased approximately three acres of land adjoining the Embassy Suites Hotel for approximately $6,165,000. In March 2005, we acquired an approximately five-acre parcel immediately adjacent to the proposed casino site and Embassy Suites Hotel for approximately $7,500,000. Cumulatively, we own, or have an option to purchase approximately 18 acres of contiguous land for the St. Louis City Project.

In late 2005, we entered into an agreement with a joint venture partner to develop a $25 million, 10-story luxury condominium project near our city project site and overlooking the Mississippi River.

Also in early 2006, we entered into an agreement with President Casinos, Inc. to potentially purchase the President Casino—St. Louis for $31.5 million (see Note 11 for a discussion of the auction process). Such riverboat casino is located within walking distance of the city project site. The agreement is also subject to approval by the Missouri Gaming Commission (“MGC”) and further bankruptcy proceedings. We would expect the transaction to close in the second half of 2006 if we are the winning bidder and the purchase is approved.

In November 2005, we commenced site preparation work for our $375 million St. Louis County Project (the “St. Louis County Project”). Located in the community of Lemay in St. Louis County, the project is planned to include a casino with approximately 3,000 slot machines, a 100-guestroom hotel, and substantial retail and entertainment space. It will be located on 56 acres of land leased from St. Louis County pursuant to a lease and development agreement executed in August 2004 (see Note 11 for a detailed discussion of such agreement). We anticipate opening the facility in 2008 approximately one year after the opening of the city project.

Initially, and pursuant to the St. Louis City Project redevelopment agreement and St. Louis County Project lease and development agreement (see Note 11), our commitments were $208 million and $300 million for the city and county projects, respectively. In August 2005, our board of directors approved the increased level of investment. In making these decisions, we studied the evolving competitive environment, the regulatory and legislative conditions, our availability and cost of capital (and alternative investments of such capital) and other factors.

In September 2004, we were selected by the MGC for both St. Louis Projects for “priority investigation,” a term used by the MGC as an indication that it has accepted our application for licensure of the project and that it will investigate the application on a priority basis in order to reach a final determination on licensure. Such process continues. We will not open either facility until we have MGC approval.

Guestroom Expansion    In early 2006, in addition to the L’Auberge du Lac hotel expansion noted above, we announced plans to add 250 guestrooms to Belterra Casino Resort for approximately $45 million, which when complete will bring the total to approximately 850 guestrooms. In addition, we announced plans for an

80

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

approximately $30 million 200-guestroom hotel at Boomtown New Orleans, the first guestrooms at the property. We anticipate beginning construction in 2006, with completion of the projects planned for 2007. We have not executed any definitive contracts at this time.

Philadelphia, Pennsylvania    In December 2005, we filed an application seeking one of two available gaming licenses in Philadelphia, Pennsylvania. We were one of five applicants. If selected, we intend to build a casino that would include approximately 3,000 slot machines, multiple bars and restaurants, and a multiplex movie theater. We estimate this initial phase, including land and Pennsylvania’s $50 million initial gaming license fee, will cost between $250 million and $400 million. In connection with filing the application, we posted a $50 million irrevocable letter of credit for the benefit of the Pennsylvania Gaming Control Board.

Casino Magic Argentina:    In July 2005, we opened our $15 million replacement casino in Neuquen, which facility is the principal Casino Magic Argentina property. The new facility is approximately one mile from the former leased facility and includes a larger and more lavish casino, a restaurant, several bars and an entertainment venue on land we own. We have an exclusive license to operate casinos in Neuquen and construction of the new facility extended the term of such license from December 2006 to December 2016.

Great Exuma, Bahamas:    In early 2006, we entered into a sublease to operate the premises and began construction of our casino adjacent to the Four Seasons Resort Great Exuma at Emerald Bay in the Bahamas. The facility will be approximately 5,000 square feet in size, is expected to require an investment of approximately $5 million and is expected to be completed in mid-2006.

Chile:    In August 2005, we submitted bids for two of the 17 licenses the Chilean government declared available earlier in the year—one in Antofagasta and one in Rancagua. Each license will permit the exclusive operation of a gaming facility within approximately a 40-mile radius.

For the Antofagasta site, our proposed investment is approximately $24 million and is planned to include a casino with approximately 400 slot machines, a 70-guestroom hotel, spa, two restaurants and meeting and convention space. The population of Antofagasta is approximately 300,000 and it is an important regional center. Our proposal is in conjunction with a large retail complex being planned in downtown Antofagasta by a major Chilean developer. For Rancagua (an approximately 45-minute drive from Santiago, a city of more than 6 million people), our proposed investment is approximately $17 million and is planned to include a casino with approximately 400 slot machines, a boutique hotel with 36 guestrooms, spa, three restaurants and meeting and convention space. We are competing with three other applicants for the Antofagasta site and two other applicants for the Rancagua site. We expect that the Chilean gaming authorities will select preferred developers in mid-2006.

In connection with the filing of the applications in August, we posted two letters of credit totaling approximately $2 million. Such letters of credit are for the benefit of the Chilean Superintendent of Gaming in support of our proposed projects. A letter of credit will only be drawn in the event we are awarded a gaming license and do not fulfill our construction obligations for the particular project.

Note 5—Assets Held for Sale

In December 2005, we elected to pursue the sale of our two card clubs in southern California (which entities represented our card club segment). In December 2005, we entered an agreement to sell the Crystal Park card club, including the 20 acres upon which the facility is built, to an investor group for gross proceeds of $17 million in cash. The net book value of the assets held for sale, comprised entirely of property and equipment at December 31, 2005, was approximately $5.8 million. The liabilities associated with these assets held for sale is comprised of nominal payables of $149,000.

81

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In early 2006 we reached a non-binding agreement in principle to sell our Hollywood Park Casino lease interest and assign certain related receivables to the owner of the Hollywood Park Racetrack for gross proceeds of approximately $23.7 million in cash plus cancellation of all lease obligations. The net book value of the assets held for sale is approximately $16.7 million, comprised of the leasehold interest of approximately $14.2 million and related receivable of approximately $2.5 million. The liabilities associated with these assets held for sale is approximately $10.4 million, comprised of the capital lease obligation of approximately $10.2 million and certain payables of $239,000.

Pursuant to SFAS No. 144, the assets and liabilities associated with the assets were reclassified to held for sale as of December 31, 2005, and the results of operations for the card clubs have been presented as discontinued operations for all periods. Revenue, expense and net income for such operations are summarized as follows:

	For the years ended December 31,
	2005			2004			2003
	(in thousands)
Revenues	$	7,240		$	6,240		$	6,240
Operating Income	$	4,905		$	4,092		$	3,617
Interest expense		(633	)		(760	)		(880	)
Income before income taxes		4,272			3,332			2,737
Income tax expense		(1,736	)		(1,351	)		(1,108	)
Income from discontinued operations	$	2,536		$	1,981		$	1,629

During 2004, we completed the sale of 97 acres of surplus land in Inglewood, California for approximately $57 million in net cash proceeds and recorded a gain of $43,976,000, net of transactional and other costs. In addition, we recorded a charge of $1,566,000 for the expensing of an agreement for a consultant that assisted with the disposition of the surplus land.

Note 6—Long-Term Debt

Long-term debt at December 31, 2005 and 2004 consisted of the following:

	December 31,
	2005			2004
	(in thousands)
Secured Credit Facility	$	220,000		$	125,000
Unsecured 8.25% Notes due 2012		303,227			303,621
Unsecured 8.75% Notes due 2013		133,144			132,982
Unsecured 9.25% Notes due 2007		0			65,000
Other secured and unsecured notes payable		1,302			1,379
Hollywood Park-Casino capital lease (liability held for sale at year end 2005)		0			12,506
		657,673			640,488
Less current maturities		(139	)		(2,517	)
	$	657,534		$	637,971

82

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Secured Credit Facility:    On December 14, 2005, we executed a $750 million amended and restated senior secured credit facility (the “Credit Facility”), replacing our prior $380 million senior secured credit facility (the “Prior Credit Facility”). The Credit Facility consists of a $450 million five-year revolving credit facility and a $300 million six-year term loan facility, of which $200 million was drawn immediately and $100 million of which can be drawn on a delayed basis through July 2, 2007. The Credit Facility provides for up to an aggregate amount of $250 million in incremental loans, subject to the agreement of existing and/or new lenders to provide the same. On December 22, we amended the revolver credit facility to increase the permitted letters of credit sub-limit to $75 million.

The term loans are repayable in quarterly installments of 0.25% of the principal amount of the term loans outstanding on July 2, 2007, commencing in December 2007. We are obligated to make mandatory prepayments of indebtedness under the Credit Facility from the net proceeds of certain debt offerings and certain asset sales and dispositions. In addition, we will be required to prepay borrowings under the Credit Facility with a percentage of our “excess cash flow” (as defined in the Credit Facility) beginning with the fiscal year 2006. Management does not believe such payments will be required in the foreseeable future, as the definition of excess cash flow adjusts for capital spending activities in a given year. We have the option to prepay all or any portion of the indebtedness under the Credit Facility at any time without premium or penalty.

Interest on the Credit Facility is subject to change based on the floating rate index selected. For the revolving loan facility, the interest rate margin is based on our “leverage ratio,” and the total interest rate was 6.87% per annum (2.50% over LIBOR) as of December 31, 2005. The term loan bore an interest rate of 6.37% per annum (2.00% over LIBOR) as of December 31, 2005. The undrawn revolver facility bore a facility fee for unborrowed amounts of 0.50% per annum, which rate is also based on our leverage ratio. The delayed draw term loan bore a commitment fee of 0.75% per annum at December 31, 2005, which fee will increase to 1.00% per annum in December 2006 for the duration of the delayed draw period. We may also, at our option, borrow at a base rate, as defined in the agreement. Under the Credit Facility, at least 40% of our debt obligations must be subject to fixed interest rates or hedge agreements or other interest rate protection agreements. As of December 31, 2005, approximately 66% of our debt was at fixed versus floating interest rates.

The Credit Facility has, among other things, restrictive financial covenants and capital spending limits and other affirmative and negative covenants. The obligations under the Credit Facility are secured by substantially all of our assets and our domestic restricted subsidiaries, including a pledge of the equity interests in our domestic subsidiaries. Our obligations under the Credit Facility are also guaranteed by our domestic restricted subsidiaries. We believe we are in compliance with our bank debt covenants as of December 31, 2005.

Under our most restrictive indenture, we are permitted to incur up to $350 million in senior indebtedness, of which approximately $216 million was outstanding at December 31, 2005. Additional borrowings under the Credit Facility may account for most or all of such permitted indebtedness. Our indenture also permits the incurrence of additional indebtedness (senior or otherwise) in excess of $350 million for debt refinancing, such as the $69 million of borrowings used to refinance our 9.25% Notes in February 2005 (defined below); or under a provision that permits additional incurrence if at the time the indebtedness is proposed to be incurred, our consolidated coverage ratio on a pro forma basis (as defined in the indenture) would be at least 2.0 to 1.0. Our consolidated coverage ratio at December 31, 2005 was under 2.0 to 1.0.

The Credit facility provides for permitted capital expenditures for our St. Louis Projects (including the condominium component), the rebuilding, if we elect, of our Biloxi facility and maintaining existing facilities. In addition, the credit facility permits us to expend funds on various new capital projects (such as the $120 million of hotel expansion plans discussed above) in an amount up to $379 million (inclusive of the $179 million of proceeds generated from our early 2006 common stock offering discussed below), which amount can be increased from certain asset sales or additional equity transactions.

83

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On December 28, 2005, we issued a $50 million irrevocable letter of credit for the benefit of the Pennsylvania Gaming Control Board in connection with the filing our Philadelphia, Pennsylvania casino proposal and filing. In 2005, we issued irrevocable letters of credit totaling approximately $2 million in connection with our Chilean gaming applications and $2.4 million in connection with our self-insured workers compensation programs. In September 2004, we issued a $10 million irrevocable letter of credit for the benefit of an affiliate of the City of St. Louis, which amount remains outstanding at December 31, 2005. The letters of credit bear a facility fee of 2.50% per annum as of December 31, 2005. In addition, we maintained an additional letter of credit for workers compensation collateralized by cash of approximately $3.3 million.

In August 2004, we entered into the Prior Credit Facility, which facility provided for a $255 million six-year term loan facility, of which $125 million was drawn immediately and $130 million was available on a delayed basis and fully drawn as of September 2005, and a $125 million revolving credit facility which would have matured in December 2008.

In February 2005, we repaid the remaining portion of our 9.25% senior subordinated notes (see 9.25% Notes below) with borrowings of $69 million from the revolver facility of the Prior Credit Facility. In August 2005, we repaid the revolver facility with a portion of a $100 million delayed draw term loan borrowing. In September, we borrowed the remaining approximate $30 million of delayed draw term loan from the Prior Credit Facility.

On October 11, 2005, we entered into an amendment of the Prior Credit Facility. The amendment, among other things, modified certain covenants in the Prior Credit Facility to contemplate developments arising out of Hurricanes Katrina and Rita. The amendment waived any default or event of default that arose or may have arisen as a result of our failure to comply with certain financial ratio covenants in the Prior Credit Facility beginning September 30, 2005. In addition, the amendment waived any defaults or events of default (including any notification requirements attendant thereto) that might have arisen as a result of application of proceeds of a $100 million delayed draw term loan made on August 31, 2005. We expensed the fee paid to the lenders of approximately $357,000 in the September 2005 quarter.

Unsecured 8.25% and 8.75% Notes:    In March 2004, we issued $200 million in aggregate principal amount of 8.25% Senior Subordinated Notes due 2012 (the “8.25% Notes”), which were issued at a price of 99.282% of par, thereby yielding 8.375% to maturity. Net proceeds of the offering plus cash on hand were used to repurchase $188 million in aggregate principal amount of our 9.25% Senior Subordinated Notes due 2007 (see below). Interest is payable on such notes on each March 15 and September 15.

In December 2004, we issued $100 million in aggregate principal amount of additional 8.25% Notes, which were issued at a price of 105.00% of par, thereby yielding 7.10% to the first call date and 7.35% to maturity. We issued the additional notes under the March 2004 8.25% Notes indenture. Net proceeds of the offering plus cash on hand were used to repurchase $97 million in aggregate principal amount of our 9.25% Senior Subordinated Notes due 2007.

In September 2003, we issued $135 million in aggregate principal amount of 8.75% Senior Subordinated Notes due 2013 (the “8.75% Notes”), which notes were issued at 98.369% of par, thereby yielding 9.00% to maturity. The net proceeds of the offering were used to retire our then existing 9.50% Senior Subordinated Notes through a cash tender offer and exercise of our right to call the bonds for redemption.

84

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The 8.25% and 8.75% Notes are redeemable, at our option, in whole or in part, on the following dates, at the following premium-to-face values:

8.25% Notes redeemable:		8.75% Notes redeemable:
On and after March 15,	At a premium of	On and after October 1,	at a premium of
2008	104.125%	2008	104.375%
2009	102.063%	2009	102.917%
2010 and thereafter	100.000%	2010	101.458%
		2011 and thereafter	100.000%

Both of our 8.25% and the 8.75% Notes are unsecured obligations, guaranteed by all of our domestic material restricted subsidiaries, as defined in the indentures. The indentures governing the 8.25% and 8.75% Notes contain certain covenants limiting our ability and our restricted subsidiaries to incur additional indebtedness, issue preferred stock, pay dividends or make certain distributions, repurchase equity interests or subordinated indebtedness, create certain liens, enter into certain transactions with affiliates, sell assets, issue or sell equity interests in our subsidiaries, or enter into certain mergers and consolidations. Among other things, we are permitted under the 8.25% Notes indenture to have outstanding up to a maximum of $475 million, which amount is limited to $350 million under the 8.75% Notes indenture, of senior indebtedness (excluding certain refinancing indebtedness and coverage ratio indebtedness). We are also permitted, under both indentures, to put a substantial portion of our undeveloped real estate into an unrestricted subsidiary. We believe we are in compliance with the covenants as of December 31, 2005.

Original issue premium and discount incurred in connection with debt financings are capitalized to the related long term debt issued, and amortized to interest expense over the expected term of the related debt agreement using the effective interest method.

Transactional costs of $8,227,000 and $13,609,000 were capitalized to “Debt Issuance Costs” in 2005 and 2004, respectively, in connection with the issuance of the credit facilities, the 8.25% Notes and 8.75% Notes. Losses on the early extinguishment of debt of $3,752,000, $14,921,000 and $19,908,000 were recorded in 2005, 2004 and 2003, respectively, in connection with the repurchase of the 9.25% Notes and 9.50% Notes, and the refinancing of credit facilities.

Unsecured 9.25% Notes:    In 1999, we issued the 9.25% senior subordinated notes due 2007 (the “9.25% Notes”), of which $65 million in aggregate principal amounts remained outstanding as of December 31, 2004. In February 2005, we retired the remaining portion of its 9.25% Notes using borrowings from the Prior Credit Facility.

Hollywood Park-Casino Capital Lease:    In connection with the classification of the Hollywood Park- Casino assets held for sale at December 31, 2005 (see Note 5), the capital lease obligation has been reclassified as a liability associated with assets held for sale on the consolidated balance sheet at December 31, 2005.

In connection with the sale/leaseback of the Hollywood Park-Casino real estate and subsequent sublease of the card club operations to a third-party operator in September 1999, we recorded a long-term capital lease obligation of $23 million. The debt obligation is being amortized at $3 million per year, based on the effective interest method, over the 10 years ending September 2009. The gross book value of the Hollywood Park-Casino is $23 million and the accumulated depreciation is $9,583,000 and $8,050,000 as of December 31, 2005 and 2004, respectively, and is included in property and equipment on the consolidated balance sheet at December 31, 2004. Pursuant to SFAS No. 144, depreciation expense was suspended as of December 31, 2005 in connection with the classification of the assets as held for sale.

85

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The estimated fair value based on quoted market prices when available of our long-term debt at December 31, 2005 and 2004 was $675,071,000 and $672,986,000, versus the book values of $657,673,000 and $640,488,000, respectively.

Annual Maturities:    As of December 31, 2005, annual maturities of secured and unsecured notes payable, and capital lease obligations are as follows:

	(in thousands)
Year ending December 31:
2006	$	139
2007		649
2008		2,081
2009		2,076
2010 (a)		22,083
Thereafter		629,273
		656,301
Plus difference between principal at maturity and unamortized net debt issuance premium		1,372
Notes payable, including capital lease obligations	$	657,673

(a) Includes the $20 million of revolver facility borrowings due in 2010 that we repaid in February 2006.

Note 7—Income Taxes

The composition of our income tax expense (benefit) for the years ended December 31, 2005, 2004 and 2003 was as follows:

	Current			Deferred			Total
	(in thousands)
Year ended December 31, 2005:
U.S. Federal	$	(120	)	$	(5,893	)	$	(6,013	)
State		(84	)		(11,024	)		(11,108	)
Foreign		2,276			(1,130	)		1,146
	$	2,072		$	(18,047	)	$	(15,975	)
Year ended December 31, 2004:
U.S. Federal	$	715		$	4,271		$	4,986
State		(246	)		824			578
Foreign		1,680			0			1,680
	$	2,149		$	5,095		$	7,244
Year ended December 31, 2003:
U.S. Federal	$	157		$	(7,195	)	$	(7,038	)
State		0			(827	)		(827	)
Foreign		363			0			363
	$	520		$	(8,022	)	$	(7,502	)

86

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table reconciles our effective income tax rate from continuing operations to the federal statutory tax rate of 35%:

	For the years ended December 31,
	2005		2004		2003
	(in thousands)
Federal income tax (benefit) expense at the statutory rate	(35.0	)%	35.0	%	(35.0	)%
State income taxes, net of federal tax benefits	(6.0	)%	5.2	%	(4.6	)%
Non-deductible expenses and other	9.0	%	4.7	%	4.2	%
Goodwill impairment	0.0	%	0.0	%	7.3	%
Gaming initiative	0.0	%	8.7	%	0.0	%
Credits	(14.0	)%	0.0	%	0.0	%
Foreign taxes	(3.0	)%	0.0	%	0.0	%
Change in valuation allowance/reserve of deferred tax assets	(80.0	)%	(3.4	)%	8.0	%
Income tax (benefit) expense before change in accounting principle	(129.0	)%	50.2	%	(20.1	)%

At December 31, 2005 and 2004, the tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were:

	For the years ended December 31,
	2005			2004
	(in thousands)
Deferred tax assets—current:
Workers’ compensation insurance reserve	$	969		$	412
General liability insurance reserve		287			259
Vacation and sick pay accrual		1,181			1,086
Legal and merger costs		1,731			1,824
Other		2,638			1,034
Less valuation allowance		(987	)		(1,592	)
Net current deferred tax assets	$	5,819		$	3,023
Deferred tax assets—non-current:
Net operating loss carry-forwards	$	39,520		$	34,837
Los Angeles revitalization zone tax credits		9,996			9,967
Other		7,530			4,400
Less valuation allowance		(10,577	)		(19,844	)
Deferred tax assets—non-current		46,469			29,360
Deferred tax liabilities—non-current:
Depreciation, amortization, pre-opening expenses and other		(50,966	)		(50,128	)
Net non-current deferred tax liabilities	$	(4,497	)	$	(20,768	)

87

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the total deferred tax assets and total deferred tax liabilities provided in the previous table:

	For the years ended December 31,
	2005			2004
	(in thousands)
Total deferred tax assets	$	63,852		$	53,819
Less valuation allowances		(11,564	)		(21,436	)
Less total deferred tax liabilities		(50,966	)		(50,128	)
Net deferred tax liabilities	$	1,322		$	(17,745	)

During the 2005 third quarter, we recorded a decrease in valuation allowance of $9,807,000 associated with our Belterra operations as management determined that the deferred tax assets related to Indiana State net operating loss carry-forward will more likely than not be utilized.

As of December 31, 2005, we have available AMT, general business and foreign tax credit carry-forwards in the amount of $7,530,000. Included in the credit carry-forward is a one time federal retention credit of $2,500,000 relating to wage continuation payments as a result of the hurricanes. The foreign tax and general business credit carry-forwards will expire between 2011 to 2024, while the AMT credit carry-forward is available indefinitely to reduce future regular tax liabilities. Based on projections for future taxable income, management believes it is more likely than not we will realize the benefits of these deferred tax assets. Accordingly, no valuation allowances are recorded for these tax credit carry-forwards.

During 2005, we generated approximately $10,000,000 in federal net operating losses (“NOL”). At December 31, 2005, we had approximately $63,000,000 in federal net operating losses, of which $2,078,000 is subject to restrictions imposed by Section 382 of the Internal Revenue Code. We will carry-forward the federal NOL to offset expected future taxable income. In addition, as of December 31, 2005, we had state tax loss carry-forwards of $14,901,000, which amount is tax affected and net of an associated valuation allowance. Both the federal and state tax loss carry-forwards expire on various dates beginning in 2012.

As of December 31, 2005, we had approximately $9,995,000 of LARZ tax credits. The LARZ tax credits can only be used to reduce certain California tax liabilities. A valuation allowance has been recorded with respect to the LARZ tax credits as we may not generate enough income subject to California tax to utilize the credits before they expire. The amount subject to carry-forward of these unused California tax credits (net of valuation allowance) was approximately $995,000. The LARZ credits will expire between 2007 to 2012. In the event the pending California card club sales are consummated, any potential utilization of the unused LARZ credits will be subject to further evaluation.

We are subject to examination by various taxing authorities. We recognize potential liabilities for anticipated tax audit issues based on its estimates. The estimate of the potential outcome for any uncertain tax issue is highly judgmental. At December 31, 2005, we believe that, in accordance with SFAS No. 5, adequate tax reserves related to uncertain tax matters that are probable and can be reasonably estimated have been provided.

Income before taxes for Casino Magic Argentina was $5,058,000, $6,004,000 and $4,483,000 for 2005, 2004 and 2003, respectively. Pursuant to APB No. 23, “Accounting for Income Taxes—Special Areas,” (“APB No. 23”), we do not provide for federal income taxes or tax benefits on the undistributed earnings (which approximated $7.6 million at December 31, 2005) associated with Casino Magic Argentina. In the event some or all of the earnings were distributed to the company, some portion of the distribution would be subject to both

88

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. income taxes and foreign withholding taxes. However, foreign tax credits may become available to reduce or eliminate the U.S. income tax liability. A tax liability associated with the undistributed earnings has not been established as the determination of such liability is not practicable.

In October, the American Jobs Creation Act of 2004 was signed into law, which, among other things, provides for a one-time dividends received deduction for certain foreign earnings that are repatriated under a plan for reinvestment in the U.S. As we are committed to reinvesting Casino Magic Argentina’s earnings into the expansion of the Neuquen facility through at least 2006, Management opted not to repatriate any foreign earnings under this Act.

Note 8—Stockholders’ Equity

Preferred Stock:    We have authorized 250,000 shares of $1.00 par value preferred stock, none of which was issued or outstanding in 2005, 2004 or 2003.

Common Stock:    At the 2005 annual meeting, our shareholders approved an increase in authorized shares of common stock to 100 million from 80 million. At December 31, 2005 and 2004, we had 42,984,574 and 42,510,591 shares, respectively, of common stock issued.

In early 2006, we consummated the public offering of 6.9 million newly issued common shares (including over-allotment shares) at $27.35 per share, resulting in net proceeds to us of approximately $179 million after underwriters’ fees and expenses, which funds will be used for general corporate purposes.

In December 2004, we consummated the public offering of 4.6 million newly issued common shares (including over-allotment shares) at $18.25 per share and received approximately $79.7 million of net cash proceeds. In February 2004, we consummated the public offering of 11.5 million newly issued common shares (including over-allotment shares) at $11.15 per share and received approximately $120.4 million of net cash proceeds. Under terms of the Prior Credit Facility, we deposited 25% of the net cash proceeds into an account that was used primarily for construction of L’Auberge du Lac. The remaining proceeds were used for general corporate purposes.

Treasury Stock:    In December 2003, we exercised our right to repurchase 1,758,996 shares of our common stock owned by our former Chairman at a purchase price of $10.00 per share. We also repurchased an additional 249,990 shares of our common stock at a purchase price of $10.00 per share from a charitable foundation created by our former Chairman. We recorded the total purchase price of $20,090,000 as a reduction of stockholders’ equity as of December 31, 2003.

Shelf Registration:    In early 2006, we filed an automatic shelf registration statement with the SEC, which registration statement was used to issue the 6.9 million shares of common stock discussed above. Such registration statement permits the issuance of debt, equity or other securities, and is not limited in the cumulative amount of securities to be issued over a 3-year period. There can be no assurance, however, that we will be able to issue any additional securities on terms acceptable to us in future periods.

89

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 9—Lease Obligations

We have certain long-term operating lease obligations, including corporate office space, land at Belterra Casino Resort, L’Auberge du Lac, St. Louis County and Biloxi, Mississippi, office equipment and gaming equipment. Minimum lease payments required under operating leases that have initial terms in excess of one year as of December 31, 2005 are as follows:

	(in thousands)
Period:
2006	$	5,849
2007		5,146
2008		3,150
2009		6,551
2010		6,520
Thereafter		535,593
	$	562,809

Total rent expense for these long-term lease obligations for the years 2005, 2004 and 2003 was $6,910,607, $5,664,000 and $5,059,000, respectively.

We lease 148 of the 315 acres our Belterra Casino Resort occupies in southern Indiana. The lease is for a total of 50 years, including an initial five-year lease term with nine consecutive five-year automatic renewal periods. The lease currently provides for minimum annual rental payments of approximately $1.2 million, plus 1.5% of the gross gaming win in excess of $100 million (as defined in the lease agreement). The lease obligation included in rent expense was $2,039,000, $1,832,000 and $1,577,000 for 2005, 2004 and 2003, respectively. We also have the option to purchase the property on or after the 20^th anniversary for $30 million, subject to adjustments as defined in the lease agreement.

We lease the 242 acres for our L’Auberge du Lac Hotel Casino (see Note 4). Pursuant to the agreement, the initial lease term commenced upon opening of the facility. The table above reflects lease payments for the initial lease term and each of the six 10-year renewal periods, based upon the May 2005 opening.

We are a party to a number of leases at our Casino Magic Biloxi property which was destroyed by Hurricane Rita, including a submerged tidelands lease from the State of Mississippi schedule to expire in May 2008. We have the right of first refusal to re-lease the submerged tidelands at the expiration of the lease. We expect that rent for a new lease will be based on an appraisal methodology approved by the Mississippi Secretary of State. We incurred rental adjustments under the current lease based on such appraisals in 1998 and again in 2003, and anticipate entering into a new lease on or before the expiration of the current lease. The lease payment for 2005, 2004 and 2003 was approximately $1,976,000, $1,949,000 and $1,835,000, respectively. We continue to pay the lease obligations as we continue to evaluate our long-term strategy for the Biloxi site.

In 2004, we entered into the lease and development agreement for the 80-acre site in St. Louis County (see Note 11).

We are a party to a number of cancelable slot participation (and some table game participation) arrangements at our various casinos which are customary for casino operations. The slot arrangements generally consist of either a fixed rent agreement on a per-day basis or a percentage of each slot machine’s gaming revenue, generally payable at month-end. Slot and table game participation expense was $12,894,000, $11,449,000 and $9,597,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

90

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 10—Employee Benefit Plans

Stock Option Plans:    At the 2005 annual meeting, our shareholders approved the adoption of the 2005 Equity and Performance Incentive Plan (the “2005 Plan”), which plan provides for the granting of stock options, stock appreciation rights, restricted stock and other performance awards to officers, key employees and consultants. The objectives of the plan include, among other things, attracting and retaining the most capable personnel, providing for additional performance incentives and promoting our success. Such plan permits the issuance of up to an aggregate of 3,000,000 shares of the Company’s common stock, plus any shares subject to awards granted under the Prior Plans and Individual Arrangements (both defined below) which are forfeited, expire or are cancelled after the effective date of the 2005 Plan (collectively, the “Stock Option Plans”). Shares that are subject to awards of options or stock appreciation rights shall be counted against the 3 million share limit as one share for every one share granted. Shares that are subject to awards other than stock options or stock appreciation rights shall be counted against such limit as 1.4 shares for every one share granted.

In addition to the 2005 Plan, we have four stock option plans (the “Prior Plans”) which provided for the issuance of up to 4,425,000 shares of the Company’s common stock. In addition, in 2002 and 2003, in order to recruit our Chief Executive Officer and Chief Financial Officer, we granted options outside of the Prior Plans for the purchase of 852,540 commons shares, all of which remained outstanding as of December 31, 2005 (the “Individual Arrangements”).

The Stock Options Plans are administered and terms of option grants are established by the Board of Directors’ Compensation Committee. Options become exercisable ratably over a vesting period as determined by the Compensation Committee and expire over terms not exceeding 10 years from the date of grant, and generally one to three months after termination of employment, or one year after the death or permanent disability of the optionee. The purchase price for all shares granted under the Stock Option Plans shall be determined by the Compensation Committee, but in the case of incentive stock options, the price will not be less than the fair market value of the common stock at the date of grant. Substantially all options issued over the past three years have been exercisable at the then-current market price.

As of December 31, 2005, there were approximately 1,595,715 options or other awards remaining available for grant under the 2005 Plan.

91

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes information related to all shares under option:

	Number of Shares			Weighted Average Exercise Price
Options outstanding at January 1, 2003		3,978,453		$	9.12
Granted		742,739		$	6.47
Exercised		(1,667	)	$	5.95
Cancelled		(538,786	)	$	9.40
Options outstanding at December 31, 2003		4,180,739		$	9.04
Granted		497,000		$	13.35
Exercised		(474,663	)	$	9.86
Cancelled		(81,342	)	$	25.44
Options outstanding at December 31, 2004		4,121,734		$	9.14
Granted		1,997,500		$	16.18
Exercised		(473,983	)	$	10.01
Cancelled		(141,024	)	$	14.56
Options outstanding at December 31, 2005		5,504,227		$	11.48
Options exercisable at:
December 31, 2005		2,333,632		$	8.84
December 31, 2004		2,075,211		$	9.28
December 31, 2003		1,789,632		$	10.72
Weighted-average fair value per share of options granted during the year (a):
December 31, 2005	$	8.28
December 31, 2004	$	7.30
December 31, 2003	$	3.27

(a) Weighted average fair value was calculated using the Black-Scholes option-pricing model. Such model requires the use of subjective assumptions, including the expected life of the option, the expected volatility of the underlying stock, the expected dividend on the stock, and the risk-free interest rate (U.S. Treasury Strip Rates) for the expected life of the option.

The following table summarizes information about stock options:

	Outstanding				Exercisable
	Number of Shares at Exercise	Weighted Average Remaining Life	Weighted Average Exercise Price		Number of Shares at Exercise	Weighted Average Range of 12/31/05 Price
		(in years)
$5.01–$7.19	1,097,843	6.8	$	6.37	651,699	$	6.35
$8.08–$8.79	1,006,301	6.3	$	8.40	766,150	$	8.40
$9.10-$12.35	1,111,675	5.8	$	10.19	726,075	$	10.03
$13.06–$14.86	1,056,110	8.3	$	14.53	167,100	$	14.22
$15.18–$19.53	1,232,298	9.3	$	17.11	22,608	$	17.65
	5,504,227	7.3	$	11.48	2,333,632	$	8.84

Executive Compensation:    Non-cash compensation charges of $156,000, $154,000 and $151,000 for 2005, 2004 and 2003, respectively, were primarily incurred in connection with the granting of stock options to certain executives outside the Prior Plans in 2002. As the options granted outside the plans were subject to shareholder

92

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

approval, and the stock price rose between the date of employment and the date of shareholder approval, a compensation charge equal to the difference between the stock option exercise price and the share price on date of shareholder approval is calculated and expensed ratably over the life of the employee’s service agreement. Such charges will continue through the final vesting of the options in 2006.

Other Benefit Plans:    We maintain the Pinnacle Entertainment, Inc. 401(k) Investment Plan (the “401(k) Plan”). The 401(k) Plan is an employee benefit plan subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), and is intended to be a qualified plan under Section 401(a) of the Internal Revenue Code of 1986 (the “Code”). Participants of the 401(k) Plan may contribute up to 100% of pretax income, subject to the legal limitation of $14,000 for 2005. In addition, effective January 1, 2003, participants who are age 50 or older may make an additional contribution to the 401(k) Plan, commonly referred to as a catch-up contribution, equal to $4,000 for 2005. We offer discretionary matching contributions under the 401(k) Plan, which vest ratably over five years. For the years ended December 31, 2005, 2004 and 2003, matching contributions to the 401(k) Plan totaled $1,309,000, $1,081,000 and $1,084,000, respectively.

We maintain an Executive Deferred Compensation Plan (the “Executive Plan”), which allows certain highly compensated employees to defer, on a pre-tax basis, among other things, a portion of their base annual salary and bonus. Participation in the plan is limited. A participant is at all times fully vested in his or her contributions, as well as any appreciation or depreciation attributed thereto. We do not make contributions to the Executive Plan for the benefit of such employees and the payment of benefits under the plan is an unsecured obligation. In December 2005, the Executive Plan was amended to comply with the provisions of the American Jobs Creation Act of 2004, and to make certain other changes in the Executive Plan.

Note 11—Commitments and Contingencies

St. Louis Construction Commitments:    We have selected various contractors and subcontractors for the two St. Louis development opportunities and have begun construction of the St. Louis City site and site development activities at the St. Louis County site. As of December 31, 2005, design, development and construction contracts for these projects approximated $11.3 million, of which $4.3 million had been incurred.

Redevelopment Agreement:    As described in Note 4, we entered into a redevelopment agreement for the St. Louis City Project. Among other things, the agreement commits us to: (a) invest at least $208 million to construct a gaming and multi-use facility; (b) invest, potentially with one or more development partners, a minimum of $50 million in residential housing, retail, or mixed-use developments in the City of St. Louis within five years of the opening of the casino and hotel; (c) pay, beginning after the facility opens, the City of St. Louis annual and other services fees; and, (d) pay penalties to the City of St. Louis if the project fails to open before certain future dates.

Lease and Development Agreement:    As described in Note 4, we entered into a lease and development agreement for the St. Louis County Project. Among other things, the agreement commits us to: (a) lease a parcel of land for 99 years (not including certain termination provisions) for annual rent of $4 million or 2.5% of adjusted gross receipts (whichever is greater, as defined in the lease agreement) commencing on the date the project opens; (b) invest a minimum of $300 million to construct a gaming and multi-use facility; (c) construct a combination retail, commercial and/or entertainment facility within three years of the casino opening; (d) construct additional community and recreational facilities; (e) construct a roadway into the facility; (f) remediate the 80-acre site, with lease termination provisions for our benefit if the cost exceeds a certain amount; and (g) pay penalties if the project fails to open prior to certain future dates.

In May 2005, we deposited $2,500,000 into escrow pursuant to the lease and development agreement. Upon the satisfaction of conditions more fully described in the lease and development agreement, these funds will be deemed fully earned by the landlord and credited towards future rent obligations.

93

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

President Riverboat Casino:    As noted above, in early 2006 we entered into an agreement to potentially acquire the President Casino—St. Louis. The proposed purchase price is $31.5 million. This price will serve as the opening bid in a bankruptcy auction that is scheduled to occur on May 16, 2006 and is subject to overbids by third parties and approval by the bankruptcy court. In return for providing the minimum bid, we received the right to purchase President Casino—St. Louis at our then last bid made at the auction (which bid may be $31.5 million) if the bidder with the highest bid at the auction fails to close the acquisition. In addition, the proposed purchase agreement provides that if the bankruptcy court approves a bankruptcy plan for the President Casino—St. Louis which includes a sale of the facility to a competing bidder at the auction, then we will receive a break-up fee of $650,000. The proposed purchase price and the break-up fee are subject to approval by the bankruptcy court at a hearing scheduled for March 27, 2006. The agreement is also subject to approval by the Missouri Gaming Commission and further bankruptcy proceedings. We would expect the transaction to close in the second half of 2006 if we are the winning bidder.

Pennsylvania Gaming Application:    As noted above, we submitted a bid for the development of a slots-only casino in Philadelphia, Pennsylvania, and posted a $50 million irrevocable letter of credit for the benefit of the Pennsylvania Gaming Control Board. The letter of credit posted will be drawn upon by the Pennsylvania Gaming Control Board only in the event we are awarded a gaming license and we do not pay the $50 million licensing fee within approximately 10 days of the award.

Chilean Gaming Applications:    As noted above, we submitted bids for the development of two gaming sites in Chile. The letters of credit posted for those particular projects will be drawn upon by the Chilean government only in the event we are awarded a gaming license for either of the proposed locations and do not fulfill its construction obligations for that particular project.

Employment and Severance Agreements:    We have entered into employment agreements with key employees, including our Chief Executive Officer (“CEO”), President, Chief Operating Officer (“COO”), Chief Financial Officer (“CFO”) and General Counsel. These agreements (excluding the CEO) generally grant the employee the right to receive his or her annual salary for up to the balance of the employment agreement, plus extension of certain benefits and the immediate vesting of stock options, if the employee terminates his or her employment for good reason or we terminate the employee without cause (both as defined in the respective agreements). Upon certain events (including the employee’s termination of his or her employment after a diminution of his or her responsibilities or after our failure to pay a minimum bonus, or our termination of the employee) (each a “Severance Trigger”) following a change in control (as defined in the various agreements), the employee (excluding the CEO) is entitled to (i) a lump-sum payment equal to two times the largest annual salary and incentive compensation that was paid to the employee during the two years preceding the change in control (or in the case of the CFO and General Counsel, a lump-sum payment equal to their annual salary through the end of the term, or if the balance of the contract is less than one year, for one year), (ii) the extension of certain benefits for at least one year after termination, and (iii) the immediate vesting of the employee’s stock options. In the case of the CEO, the amount of a lump-sum payment and term of extended benefits is dependant on various termination scenarios more fully described in the agreement filed by us on September 10, 2005. As of December 31, 2005, the maximum aggregate amount that would be paid to this group of 24 employees if a triggering event occurs in every case following a change in control where applicable is approximately $20,283,000.

Deferred Bonus Plan:    In 2004, we established a deferred bonus plan in which a portion of an employee’s bonus is deferred and paid in three equal annual installments contingent on the individual remaining employed by the company. Payments are accelerated under certain circumstances, including death, disability and a change in control. We are expensing the deferred portion over the period of time leading up to the vesting date. As of

94

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, the deferred bonus commitment (inclusive of bonus’ awarded and deferred for 2004 and 2005), which for example would have to be paid commensurate with a change in control, was approximately $2,640,000.

Self Insurance:    We self-insure various levels of general liability, property, workers’ compensation and medical coverage. Insurance reserves include accruals for estimated settlements for known claims, as well as accruals for estimates of claims not yet made, which are included in accrued compensation and other accrued liabilities on the consolidated balance sheet.

Legal

Indiana State Sales Tax Dispute:    The State of Indiana conducted a sales and use tax audit at our Belterra entity in 2001. In October 2002we received a proposed assessment in the amount of $3,070,000 with respect to the Miss Belterra casino riverboat, including interest and a penalty. A protest was filed by us in December of 2002. On June 16, 2003, the Indiana Tax Court issued two favorable rulings for other taxpayers with situations similar to ours. On September 21, 2004, the Indiana Supreme Court reversed the Tax Court’s ruling with respect to one of those taxpayers. The other taxpayer settled its assessment with the State. We believe that these recent cases do not apply to its case because of the different facts involved. A hearing date of March 24, 2006 has been scheduled with the Indiana Department of Revenue and a determination should be made shortly thereafter.

Louisiana Use Tax Matter:    The Department of Revenue (the “Department”) for the State of Louisiana filed suit against several licensees in that state, asserting that payments made to third parties on participating progressive slot machines are lease obligations and subject to a use tax. Our Bossier City property was served such suit in December 2002, and the case has been stayed pending resolution of a similar case. In 2003, a federal bankruptcy court in a similar case involving a third-party casino ruled the vendor relationship represents a service arrangement and therefore not a taxable lease arrangement. The U.S. District Court affirmed the bankruptcy court decision. The Department appealed the U.S. District Court decision and the 5th Circuit Court of Appeals ruled in favor of the taxpayer, holding that the payments under the agreements in that case are not taxable. In a decision rendered on August 25, 2005, and by judgment entered on September 27, 2005 the 19^th Judicial District Court in the Parish of East Baton Rouge in another similar case reached the same conclusions reached by the bankruptcy court as affirmed by the District Court and the Fifth Circuit Court of Appeals. On August 29, 2005, we were informed by the Department that it will no longer pursue this issue for the current audit cycle. We are in the process of seeking and believe that we are entitled to receive a full dismissal of its pending lawsuit based on the latest development.

Hubbard Litigation:    In connection with the resignation of R.D. Hubbard as our Chairman in 2002 (“former Chairman”), we agreed to extend the exercise period for stock options (“subject options”) covering 322,000 shares held by the former Chairman with a weighted average exercise price of $10.60 per share provided that the Indiana Gaming Commission approved his exercise of these options as so extended. In December 2004, the former Chairman sought to exercise stock options (“specific options”) covering an aggregate of 185,000 of these shares (“requested option shares”). “). On January 21, 2005, the Indiana Gaming Commission advised us that it did not approve the former Chairman’s option exercise. In order to avoid exposure to either the Indiana Gaming Commission or to the former Chairman, on January 25, 2005, we filed an action seeking a declaratory judgment in the U.S. District Court for the Southern District of Indiana (“Indiana Action”), naming the former Chairman and the Indiana Gaming Commission as defendants, and requesting an order from the court determining whether the former Chairman is entitled to exercise the subject options and whether we are obligated to sell the former Chairman the requested option shares. On or about January 26, 2005, our former Chairman commenced litigation against us and our current Chairman and CEO by filing a Complaint in the Superior Court of the County of Riverside, California (“California Action”). The former Chairman, in that action, has asserted

95

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

claims for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud and equitable estoppel. The former Chairman seeks compensatory damages in an amount greater than $5 million and punitive damages based on our allegedly wrongful failure to sell to the former Chairman the requested option shares pursuant to the former Chairman’s attempted exercise of the specific options. In the California Action, we have removed the action from the state court in California to the United States District Court for the Central District of California. At the initial pretrial conference in the Indiana Action held on April 11, 2005, the parties agreed to stay both the Indiana Action and the California Action to help facilitate settlement negotiations and to allow the parties to participate in court-sponsored settlement discussions in the Indiana Action. The stay in the Indiana Action was lifted as of October 7, 2005. On November 16, 2005, we dismissed the Indiana Gaming Commission from the Indiana Action. On November 30, 2005, we dismissed the former Chairman from the Indiana Action. The stay was lifted in the California Action as of November 14, 2005. The parties are engaging in discovery, and trial is currently set for November 13, 2006. While we cannot predict the outcome of this litigation, management intends to defend it vigorously. Due to the uncertainty surrounding the extension of the subject options we continue to include the subject options in the balance of its outstanding options for the presentation of our financial statements.

Columbia Sussex Litigation:    On January 26, 2005, Columbia Sussex Corporation and three other plaintiffs filed a petition against the Missouri Gaming Commission (“MGC”) and Casino One Corporation (“Casino One”), our wholly owned subsidiary, in the Circuit Court of Cole County, Missouri. At that time, Columbia Sussex had an agreement to purchase the President Casino—St. Louis, an existing bankrupt casino in downtown St. Louis that will compete with our casino now under construction. In addition to Columbia Sussex, named plaintiffs are Wimar Tahoe Corporation (a company related to Columbia Sussex), as an owner of property near the proposed Casino One site; President of Columbia Sussex William J. Yung, as a Missouri taxpayer; and Fred Dehner, a resident of Osage Beach, Missouri, as a registered Missouri voter and taxpayer. The City of St. Louis filed a motion to intervene as defendants in the case, which was granted by the Court on April 8, 2005. The plaintiffs sought to undo the MGC’s approval of Casino One’s docking site on the St. Louis riverfront under a claim for judicial review by original writ, declaratory judgment, writ of prohibition and appeal of the decision of the MGC to the Missouri Court of Appeals. The factual allegations for each claim were that the Commission could not grant approval to Casino One because the facility’s planned gaming floor is allegedly not within 1,000 feet of the main channel of the Mississippi River, as required under the Missouri constitution.

On March 7, 2005, the Defendants filed a motion to dismiss this lawsuit on the grounds that the court lacks subject matter jurisdiction over decisions of the MGC. On April 8, 2005, the court granted Defendants’ motion and dismissed the suit. On May 11, 2005, the plaintiffs filed an appeal of the April 8, 2005 decision of the Circuit Court of Cole County, Missouri. On September 28, 2005, the plaintiffs filed a motion for an extension of time until October 18, 2005 to file an appellate brief in the matter.

On April 18, 2005, the plaintiffs filed a petition with the Missouri Court of Appeals Western District, seeking a hearing and de novo review of the MGC’s approval of Casino One’s docking site. On August 8, 2005, plaintiffs filed a motion to consolidate the case with the appeal of the decision of the Circuit Court of Cole County, Missouri. The Court denied plaintiffs’ motion on August 18, 2005. On September 13, 2005, plaintiffs filed a motion to stay or, alternatively, for appointment of a special master pending resolution of the appeal of the decision of the Circuit Court of Cole County, Missouri. On September 27, 2005, the Court of Appeals ruled that the briefing schedule in the April 18, 2005 Petition is to be stayed pending the Court of Appeals’ opinion in the appeal of the decision of the Circuit Court of Cole County, Missouri.

On October 25, 2005, the bankrupt casino indicated publicly that Columbia Sussex had withdrawn its application for licensure in Missouri related to its planned purchase of such facility. We believe that such licensure is required for Columbia Sussex to consummate the planned purchase. The bankrupt casino then

96

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

moved to intervene in both appeals which motion has been denied by the Court of Appeals. The appeal of the decision of the Circuit Court of Cole County dismissing that case for lack of subject matter jurisdiction has been fully briefed by the City of St. Louis, the Missouri Gaming Commission and by us. The direct appeal from the decision of the Missouri Gaming Commission remains stayed pending a resolution of the appeal of the Cole County decision. The appeal of the Cole County decision was argued before a three judge panel of the Court of Appeals on February 9, 2006. We are currently awaiting a decision.

President Casinos, Inc., owner of the President Casino – St. Louis, is conducting a new auction to sell the facility. As discussed above, we have entered a purchase agreement to acquire the facility. The agreement will serve as the opening bid in the auction, and is subject to potential overbids by third parties.

While we cannot predict the outcome of this litigation, management intends to defend it vigorously.

Action by Greek Authorities:    Prior to our acquisition of Casino Magic Corp., in 1998, Casino Magic had a Greek subsidiary that conducted gaming-related operations in Greece in 1995 and 1996. By the time of our acquisition of Casino Magic, that Greek subsidiary had become inactive. The Greek taxing authorities assessed penalties against the subsidiary and against certain former representatives of the Greek subsidiary arising out of its pre-acquisition activities and such representatives were also prosecuted and convicted in absentia. We defended those former representatives, one of whom was then a director of our company and one of whom, was then an employee of our company. Their criminal convictions were overturned by a Greek court in 2003. In October 2005, we learned that the Greek taxing authorities had commenced a new proceeding against the former employee and another former representative of the Greek subsidiary seeking to collect fines and assessments of approximately $6.7 million from these individuals stemming from their status as representatives of the Greek subsidiary. Some or all of the fines and assessments involved in this new action relate to the penalties originally assessed against the Greek subsidiary. We are obligated to indemnify the former employee and are defending him in this current action. The other former representative is now deceased.

Other:    We are party to a number of other pending legal proceedings, though management does not expect that the outcome of such proceedings, either individually or in the aggregate, will have a material effect on our financial position, cash flows or results of operations.

Note 12—Related Party Transactions

In November 2005, our Chairman and Chief Executive Officer purchased $500,000 in aggregate principal amount of our 8.25% Notes in the open market. Such securities are in addition to the $500,000 purchased in aggregate principle amount of the 8.25% Notes acquired in 2004. The 2004 purchase was acquired in connection with the March 2004 issuance of the 8.25% Notes and was purchased at the same price offered to other purchasers of the privately placed notes. After deducting initial purchasers’ discounts and commissions, we received approximately $491,000 in net proceeds from the 2004 purchase.

97

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 13—Consolidating Condensed Financial Information

Our subsidiaries (excluding Casino Magic Argentina and certain non-material subsidiaries) have fully and unconditionally and jointly and severally guaranteed the payment of all obligations under the 8.25% Notes and 8.75% Notes. Separate financial statements and other disclosures regarding the subsidiary guarantors are not included herein because management has determined that such information is not material to investors. In lieu thereof we include the following:

	Pinnacle Entertainment, Inc.			Wholly Owned Guarantor Subsidiaries(a)			Wholly Owned Non- Guarantor Subsidiaries(b)			Consolidating and Eliminating Entries			Pinnacle Entertainment, Inc. Consolidated
As of and for the year ended December 31, 2005
Balance Sheet
Current assets	$	65,092		$	144,203		$	4,685		$	0		$	213,980
Property and equipment, net		33,758			838,942			17,618			0			890,318
Other non-current assets		56,590			71,922			1,216			10,851			140,579
Investment in subsidiaries		522,001			10,912			0			(532,913	)		0
Inter-company		489,100			2,685			0			(491,785	)		0
	$	1,166,541		$	1,068,664		$	23,519		$	(1,013,847	)	$	1,244,877
Current liabilities	$	51,117		$	87,035		$	4,880		$	0		$	143,032
Notes payable, long term		656,372			1,162			0			0			657,534
Other non-current liabilities		28,553			150			0			(12,206	)		16,497
Inter-company		2,685			481,373			7,727			(491,785	)		0
Equity		427,814			498,944			10,912			(509,856	)		427,814
	$	1,166,541		$	1,068,664		$	23,519		$	(1,013,847	)	$	1,244,877
Statement of Operations
Revenues:
Gaming	$	0		$	597,895		$	18,666		$	0		$	616,561
Food and beverage		0			38,316			1,800			0			40,116
Equity in subsidiaries		42,295			3,765			0			(46,060	)		0
Other		94			69,129			0			0			69,223
		42,389			709,105			20,466			(46,060	)		725,900
Expenses:
Gaming		0			363,010			5,465			0			368,475
Food and beverage		0			37,097			2,532			0			39,629
Administrative and other		30,513			183,485			5,394			0			219,392
Depreciation and amortization		782			58,740			1,649			0			61,171
		31,295			642,332			15,040			0			688,667
Operating income (loss)		11,094			66,773			5,426			(46,060	)		37,233
Loss on early extinguishment of debt		(3,752	)		0			0			0			(3,752	)
Interest income (expense), net		(53,199	)		7,448			(116	)		0			(45,867	)
Income (loss) before inter-company activity, taxes and change in accounting principle		(45,857	)		74,221			5,310			(46,060	)		(12,386	)
Management fee & inter-company interest income (expense)		32,133			(31,881	)		(252	)		0			0
Income tax (expense) benefit		17,121			147			(1,293	)		0			15,975
Income (loss) from continuing operations		3,397			42,487			3,765			(46,060	)		3,589
Income (loss) from discontinued operations, net of taxes		2,728			(192	)		0			0			2,536
Net income	$	6,125		$	42,295		$	3,765		$	(46,060	)	$	6,125
Statement of Cash Flows
Net cash provided by (used in) operating activities	$	(163,777	)	$	216,667		$	8,856		$	0		$	61,746
Net cash provided by (used in) investing activities		46,441			(173,554	)		(11,489	)		0			(138,602	)
Net cash provided by financing activities		23,281			(55	)		0			0			23,226
Effect of exchange rate changes on cash		0			(13	)		(1,399	)		0			(1,412	)

98

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Pinnacle Entertainment, Inc.			Wholly Owned Guarantor Subsidiaries(a)			Wholly Owned Non- Guarantor Subsidiaries(b)			Consolidating and Eliminating Entries			Pinnacle Entertainment, Inc. Consolidated
As of and for the year ended December 31, 2004
Balance Sheet
Current assets	$	159,267		$	75,877		$	6,166		$	0		$	241,310
Property and equipment, net		22,231			783,689			8,067			0			813,987
Other non-current assets		111,379			29,624			1,617			10,851			153,471
Investment in subsidiaries		504,822			7,906			0			(512,728	)		0
Inter-company		332,774			4,072			0			(336,846	)		0
	$	1,130,473		$	901,168		$	15,850		$	(838,723	)	$	1,208,768
Current liabilities	$	45,568		$	85,396		$	3,875		$	0		$	134,839
Notes payable, long term		636,741			1,230			0			0			637,971
Other non-current liabilities		32,974			0			0			(12,206	)		20,768
Inter-company		0			332,777			4,069			(336,846	)		0
Equity		415,190			481,765			7,906			(489,671	)		415,190
	$	1,130,473		$	901,168		$	15,850		$	(838,723	)	$	1,208,768
Statement of Operations
Revenues:
Gaming	$	0		$	448,171		$	14,447		$	0		$	462,618
Food and beverage		0			29,755			1,106			0			30,861
Equity in subsidiaries		52,764			4,323			0			(57,087	)		0
Other		0			53,592			0			0			53,592
		52,764			535,841			15,553			(57,087	)		547,071
Expenses:
Gaming		0			265,026			4,140			0			269,166
Food and beverage		0			27,973			1,284			0			29,257
Administrative and other		(12,733	)		134,498			3,238			0			125,003
Depreciation and amortization		385			44,793			928			0			46,106
		(12,348	)		472,290			9,590			0			469,532
Operating income		65,112			63,551			5,963			(57,087	)		77,539
Loss on early extinguishment of debt		(14,921	)		0			0			0			(14,921	)
Interest expense (income), net		(53,648	)		5,413			41			0			(48,194	)
Income (loss) before inter-company activity, taxes and change in accounting principle		(3,457	)		68,964			6,004			(57,087	)		14,424
Management fee & inter-company interest expense (income)		16,249			(16,249	)		0			0			0
Income tax expense		(5,563	)		0			(1,681	)		0			(7,244	)
Income (loss) from continuing operations		7,229			52,715			4,323			(57,087	)		7,180
Income from discontinued operations, net of taxes		1,932			49			0			0			1,981
Net income	$	9,161		$	52,764		$	4,323		$	(57,087	)	$	9,161
Statement of Cash Flows
Net cash provided by (used in) operating activities	$	(176,527	)	$	204, 201		$	2,700		$	0		$	30,374
Net cash provided by (used in) investing activities		92,204			(197,123	)		(4,175	)		0			(109,094	)
Net cash provided by financing activities		181,290			97			0			0			181,387
Effect of exchange rate changes on cash		0			0			(400	)		0			(400	)

99

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Pinnacle Entertainment, Inc.			Wholly Owned Guarantor Subsidiaries(a)			Wholly Owned Non- Guarantor Subsidiaries(b)			Consolidating and Eliminating Entries			Pinnacle Entertainment, Inc. Consolidated
	(in thousands)
As of and for the year ended December 31, 2003
Statement of Operations
Revenues:
Gaming	$	0		$	436,599		$	11,638		$	0		$	448,237
Food and beverage		0			28,127			828			0			28,955
Equity in subsidiaries		44,797			4,119			0			(48,916	)		0
Other		0			46,919			51			0			46,970
		44,797			515,764			12,517			(48,916	)		524,162
Expenses:
Gaming		0			261,782			3,116			0			264,898
Food and beverage		0			27,907			838			0			28,745
Administrative and other		25,151			123,182			3,385			0			151,718
Depreciation and amortization		198			43,455			723			0			44,376
		25,349			456,326			8,062			0			489,737
Operating income		19,448			59,438			4,455			(48,916	)		34,425
Loss on early extinguishment of debt		(19,908	)		0			0			0			(19,908	)
Interest expense (income), net		(53,526	)		1,608			28			0			(51,890	)
Income (loss) before inter-company activity, taxes and change in accounting principle		(53,986	)		61,046			4,483			(48,916	)		(37,373	)
Management fee & inter-company interest expense (income)		16,198			(16,198	)		0			0			0
Income tax benefit (expense)		7,866			0			(364	)		0			7,502
Income (loss) from continuing operations		(29,922	)		44,848			4,119			(48,916	)		(29,871	)
Income (loss) from discontinued operations, net of taxes		1,680			(51	)		0			0			1,629
Net income (loss)	$	(28,242	)	$	44,797		$	4,119		$	(48,916	)	$	(28,242	)
Statement of Cash Flows
Net cash provided by (used in) operating activities	$	(25,930	)	$	77,586		$	3,730		$	0		$	55,386
Net cash used in investing activities		(105,218	)		(75,102	)		(1,255	)		0			(181,575	)
Net cash provided by (used in) financing activities		109,346			(249	)		0			0			109,097
Effect of exchange rate changes on cash		0			0			(242	)		0			(242	)

(a) The following material subsidiaries are treated as guarantors of the 8.25% Notes, 8.75% Notes and 9.25% Notes: Belterra Resort Indiana LLC, Boomtown, LLC, PNK (Reno), LLC, Louisiana—I Gaming, PNK (Lake Charles), LLC, Casino Magic Corp., Biloxi Casino Corp., PNK (Bossier City), Inc., Casino One Corporation, HP/Compton, Inc. and Crystal Park Hotel and Casino Development Company, LLC.

(b) Our only material non-guarantors of the 8.25% Notes, 8.75% Notes and 9.25% Notes are Casino Magic Neuquen S.A. and its subsidiary Casino Magic Support Services.

100

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 14—Segment Information

The following table reconciles our segment activity to our consolidated results of operations and financial position as of and for the years ended December 31, 2005, 2004 and 2003.

	For years ended December 31,
	2005			2004			2003
	(in thousands)
Revenues and expenses
Boomtown New Orleans
Revenues	$	143,122		$	111,129		$	106,398
Expenses, excluding depreciation, amortization		(91,680	)		(78,915	)		(77,059	)
Depreciation and amortization		(7,065	)		(6,763	)		(6,525	)
Net operating income—Boomtown New Orleans	$	44,377		$	25,451		$	22,814
Belterra Casino Resort
Revenues	$	168,847		$	155,534		$	133,704
Expenses, excluding depreciation and amortization		(129,273	)		(123,773	)		(110,462	)
Depreciation and amortization		(17,613	)		(16,265	)		(13,768	)
Net operating income—Belterra Casino Resort	$	21,961		$	15,496		$	9,474
L’Auberge du Lac
Revenues	$	148,437		$	0		$	0
Expenses, excluding pre-opening costs and depreciation and amortization		(137,106	)		0			0
Pre-opening costs		(21,096	)		(7,081	)		(559	)
Depreciation and amortization		(14,345	)		0			0
Net operating income—L’Auberge du Lac	$	(24,110	)	$	(7,081	)	$	(559	)
Boomtown Bossier City
Revenues	$	95,369		$	99,821		$	104,295
Expenses, excluding depreciation, amortization		(75,733	)		(79,144	)		(87,798	)
Depreciation and amortization		(7,283	)		(6,757	)		(8,131	)
Net operating income—Boomtown Bossier City	$	12,353		$	13,920		$	8,366
Boomtown Reno
Revenues	$	88,167		$	84,506		$	83,645
Expenses, excluding depreciation, and amortization		(77,811	)		(74,285	)		(69,978	)
Depreciation and amortization		(6,344	)		(6,964	)		(7,129	)
Net operating income—Boomtown Reno	$	4,012		$	3,257		$	6,538

101

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	For years ended December 31
	2005			2004			2003
	(in thousands)
Casino Magic Argentina
Revenues	$	20,466		$	15,553		$	12,517
Expenses, excluding pre-opening costs and depreciation and amortization		(12,689	)		(8,662	)		(7,339	)
Pre-opening costs		(702	)		0			0
Depreciation and amortization		(1,649	)		(928	)		(723	)
Net operating income—Casino Magic Argentina	$	5,426		$	5,963		$	4,455
Embassy Suites and other
Revenues	$	3,961		$	0		$	0
Expenses, excluding depreciation, and amortization		(3,042	)		0			0
Depreciation and amortization		(604	)		0			0
Net operating income—Embassy Suites and other	$	315		$	0		$	0
Casino Magic Biloxi
Revenues	$	57,437		$	80,528		$	83,603
Expenses, excluding depreciation and amortization		(46,987	)		(64,299	)		(67,574	)
Depreciation and amortization		(5,486	)		(7,884	)		(7,902	)
Net operating income—Casino Magic Biloxi	$	4,964		$	8,345		$	8,127
Total Reportable Segments
Revenues	$	725,806		$	547,071		$	524,162
Expenses, excluding pre-opening costs and depreciation and amortization		(574,321	)		(429,078	)		(420,210	)
Segment pre-opening costs		(21,798	)		(7,081	)		(559	)
Depreciation and amortization		(60,389	)		(45,561	)		(44,178	)
Net operating income—Total Reportable Segments	$	69,298		$	65,351		$	59,215
Reconciliation to Consolidated Net Income(Loss)
Total net operating income for reportable segments	$	69,298		$	65,351		$	59,215
Unallocated income and expenses
Corporate expense		(24,255	)		(23,098	)		(18,511	)
Other pre-opening and development costs (a)		(7,810	)		(7,318	)		(702	)
Indiana regulatory and related costs and other		0			194			2,255
Gain on sale of assets, net of other items		0			42,410			0
Goodwill and other asset impairment charges		0			0			(7,832	)
Loss on early extinguishment of debt		(3,752	)		(14,921	)		(19,908	)
Interest income		3,668			3,584			2,111
Interest expense, net of capitalized interest		(49,535	)		(51,778	)		(54,001	)
Income (loss) from continuing operations before income taxes	$	(12,386	)	$	14,424		$	(37,373	)

(a) Includes St. Louis project pre-opening and development costs of approximately $6.1 million and $4.3 million in 2005 and 2004, respectively.

102

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	For years ended December 31,
	2005			2004			2003
	(in thousands)
EBITDA(a)
Boomtown New Orleans	$	51,442		$	32,214		$	29,339
Belterra Casino Resort		39,574			31,761			23,242
L’Auberge du Lac (b)		(9,765	)		(7,081	)		(559	)
Boomtown Bossier City		19,636			20,677			16,497
Boomtown Reno		10,356			10,221			13,667
Casino Magic Argentina (c)		7,075			6,891			5,178
Embassy Suites and other		919			0			0
Casino Magic Biloxi		10,450			16,229			16,029
Corporate		(23,473	)		(22,553	)		(18,313	)
Other pre-opening and development costs (d)		(7,810	)		(7,318	)		(702	)
Indiana regulatory and related costs and other		0			194			2,255
Gain on sale of assets, net of other items		0			42,410			0
Goodwill impairment charge		0			0			(7,832	)
	$	98,404		$	123,645		$	78,801

(a) We define EBITDA as earnings before interest expense and interest income, income taxes, depreciation, amortization, discontinued operations and loss on early extinguishment of debt. We use EBITDA as a relevant and useful measure to compare operating results among its properties and between accounting periods. The presentation of EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business segments. EBITDA is specifically relevant in evaluating large, long-lived hotel casino projects because it provides a perspective on the current effects of operating decisions separated from the substantial, non-operational depreciation charges and financing costs of such projects. Management eliminates the results from discontinued operations as they are discontinued. Additionally, management believes some investors consider EBITDA to be a useful measure in determining a company’s ability to service or incur indebtedness and for estimating a company’s underlying cash flow from operations before capital costs, taxes and capital expenditures. EBITDA, subject to certain adjustments, is also a measure used in debt covenants in our debt agreements. Unlike net income, EBITDA does not include depreciation or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. We compensate for these limitations by using EBITDA as only one of several comparative tools, together with the common GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include operating income (loss), net income (loss), cash flows from operations and cash flow data. EBITDA is not calculated in the same manner by all companies and accordingly, may not be an appropriate measure of comparing performance among different companies. The following table is a reconciliation of net income to EBITDA:

	For the year ended December 31,
	2005			2004			2003
	(in thousands)
Net income (loss)	$	6,125		$	9,161		$	(28,242	)
Income from discontinued operations, net of tax		(2,536	)		(1,981	)		(1,629	)
Income (loss) from continuing operations		3,589			7,180			(29,871	)
Income tax (benefit) expense		(15,975	)		7,244			(7,502	)
Income (loss) from continuing operations before income taxes		(12,386	)		14,424			(37,373	)
Loss on early extinguishment of debt		3,752			14,921			19,908
Interest expense, net of capitalized interest and interest income		45,868			48,194			51,890
Operating income		37,233			77,539			34,425
Depreciation and amortization		61,171			46,106			44,376
EBITDA	$	98,404		$	123,645		$	78,801

103

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(b) L’Auberge du Lac opened in May 2005. Results for 2005, 2004 and 2003 include pre-opening costs of $21.1 million, $7.1 million and $0.6 million, respectively.

(c) Casino Magic Argentina opened its replacement casino for the Neuquen location in July 2005. Results for 2005 include pre-opening costs of $702,000.

(d) Other pre-opening and development costs include: St. Louis projects of $6.1 million and $4.3 million in 2005 and 2004, respectively; expenses associated with a California gaming initiative of $3 million in 2004; and, other activities in 2005 of $1.7 million. Excludes pre-opening and development activities for L’Auberge du Lac and Casino Magic Argentina.

	For years ended December 31,
	2005		2004		2003
	(in thousands)
Capital Expenditures
Boomtown New Orleans	$	4,787	$	6,040	$	3,194
Belterra Casino Resort		5,302		19,724		25,305
Boomtown Bossier City		2,924		4,501		4,946
Casino Magic Biloxi		6,419		7,521		6,754
Boomtown Reno		3,724		4,813		3,549
Casino Magic Argentina		11,489		6,085		1,255
L’Auberge		138,245		155,108		31,539
Embassy Suites and other		45,577		0		0
Corporate (a)		21,004		5,805		6,389
Capital Expenditures	$	239,471	$	209,597	$	82,931

(a) Includes St. Louis.

	December 31,
	2005		2004
	(in thousands)
Total Assets
Boomtown New Orleans	$	95,978	$	78,802
Belterra Casino Resort		227,236		236,286
Boomtown Bossier City		122,678		127,706
Casino Magic Biloxi		84,805		101,325
Boomtown Reno		83,318		82,415
Casino Magic Argentina		23,519		15,850
L’Auberge du Lac		363,910		224,494
Embassy Suites and other		46,025		0
Corporate (a)		197,408		341,890
Total Assets	$	1,244,877	$	1,208,768

(a) Includes St. Louis and assets held for sale.

104

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 15—Quarterly Financial Information (Unaudited)

The following is a summary of unaudited quarterly financial data for the years ended December 31, 2005 and 2004:

	2005
	Dec. 31,			Sept. 30,			June 30,			Mar. 31,
	(in thousands, except per share data)
Revenues	$	226,985		$	187,724		$	173,190		$	138,001
Operating income		24,311			3,341			3,095			6,486
Income (loss) from continuing operations		6,826			4,489			(4,848	)		(2,878	)
Income from discontinued operations, net of taxes		666			553			670			647
Net income (loss)		7,492			5,042			(4,178	)		(2,231	)
Per Share Data—Basic (a)
Income (loss) from continuing operations	$	0.17		$	0.11		$	(0.12	)	$	(0.07	)
Income from discontinued operations, net of taxes		0.01			0.01			0.02			0.01
Net income (loss)—basic	$	0.18		$	0.12		$	(0.10	)	$	(0.06	)
Per Share Data—Diluted (a)
Income (loss) from continuing operations	$	0.16		$	0.11		$	(0.12	)	$	(0.07	)
Income from discontinued operations, net of taxes		0.01			0.01			0.02			0.01
Net income (loss)—diluted (a)	$	0.17		$	0.12		$	(0.10	)	$	(0.06	)
	2004
	Dec. 31,			Sept. 30,			June 30,			Mar. 31,
	(in thousands, except per share data)
Revenues	$	131,028		$	144,948		$	138,298		$	132,797
Operating income		1,381			13,082			40,713			22,363
Income (loss) from continuing operations		(5,323	)		(3,745	)		15,147			1,101
Income from discontinued operations, net of taxes		549			504			596			332
Net income (loss)		(4,774	)		(3,241	)		15,743			1,433
Per Share Data—Basic (a)
Income (loss) from continuing operations	$	(0.15	)	$	(0.10	)	$	0.42		$	0.04
Income from discontinued operations, net of taxes		0.02			0.01			0.02			0.01
Net income (loss)—basic	$	(0.13	)	$	(0.09	)	$	0.44		$	0.05
Per Share Data—Diluted (a)
Income (loss) from continuing operations	$	(0.15	)	$	(0.10	)	$	0.41		$	0.04
Income from discontinued operations, net of taxes		0.02			0.01			0.02			0.01
Net income (loss) per share—diluted (a)	$	(0.13	)	$	(0.09	)	$	0.43		$	0.05

(a) Net income (loss) per share calculations for each quarter are based on the weighted average number of shares outstanding during the respective periods; accordingly, the sum of the quarters may not equal the full year income (loss) per share.

The 2005 results reflect the opening of L’Auberge du Lac in May 2005, the effects of Hurricanes Katrina and Rita in the third quarter and fourth quarters, the closure of Casino Magic Biloxi since August 28, 2005 and the record results of Boomtown New Orleans in the fourth quarter. The results also include pre-opening and

105

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

development costs in each of the quarterly periods (including $6,600,000 and $17,367,000 in the first and second quarters, respectively), and losses on early extinguishment of debt in the first and fourth quarter of $1,447,000 and $2,400,000, respectively.

The 2004 results include asset sale gains in the first and second quarter of $13,181,000 and $30,699,000, respectively, pre-opening and development costs each of the quarterly periods of 2004 (including $5,702,000 and $4,030,000 in the third and fourth quarters, respectively) and losses on the early extinguishment of debt of $8,254,000, $3,164,000 and $3,503,000 in the first, third and fourth quarters, respectively.

Note 16—Subsequent Event—Pending Acquisition of Aztar Corporation

On March 13, 2006, we entered into a definitive merger agreement with Aztar Corporation to acquire all outstanding shares of Aztar at a purchase price of $38.00 in cash per share of Aztar common stock. The aggregate transaction value, including the payment to Aztar stockholders of approximately $1.45 billion in cash and refinancing of approximately $723 million of Aztar debt, is approximately $2.1 billion. Aztar operates the Tropicana Casino and Resort in Atlantic City, New Jersey, the Tropicana Resort and Casino on the “Strip” in Las Vegas, Nevada, as well as other casino facilities in Laughlin, Nevada, Caruthersville, Missouri, and Evansville, Indiana. Completion of the acquisition is contingent upon, among other things, the approval of the transaction by the stockholders of Aztar and receipt of certain required gaming and other regulatory approvals, however, Pinnacle’s obligation to close is not subject to a financing condition. The merger agreement provides for the payment by Aztar to us, in certain circumstances, of a termination fee of $42 million and up to $13 million for expense reimbursement. We expect the transaction to close by the end of 2006.

106

PINNACLE ENTERTAINMENT, INC.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

For the years ended December 31, 2003, 2004 and 2005

(in thousands)

Reserve Description	As of 1/1/03		2003					As of 12/31/03		2004					As of 12/31/04		2005					As of 12/31/05
			Additions		Deductions					Additions		Deductions					Additions		Deductions
Allowance for doubtful accounts	$	2,364	$	1,636	$	(1,263	)	$	2,737	$	869	$	(2,049	)	$	1,557	$	3,121	$	(1,329	)	$	3,349
Self-insurance reserves		4,398		25,426		(21,873	)		7,951		26,594		(26,847	)		7,698		22,892		(20,846	)		9,744
Legal and other		6,721		3,770		(5,896	)		4,595		8,617		(8,747	)		4,465		11,435		(9,901	)		5,999
Asset sale reserves		4,049		—		(1,644	)		2,405		—		(810	)		1,595		1,272		(1,204	)		1,663

107

PINNACLE ENTERTAINMENT, INC.

EXHIBIT INDEX

Exhibit Number	Description of Exhibit
2.1*	Agreement and Plan of Merger by and Among Pinnacle Entertainment, Inc., PNK Development 1, Inc. and Aztar Corporation dated March 13, 2006.
3.1	Restated Certificate of Incorporation of Pinnacle Entertainment, Inc., as amended, is hereby incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on May 9, 2005. (SEC File No. 001-13641).
3.2	Restated By-laws of Pinnacle Entertainment, Inc., as amended, are hereby incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 9, 2005. (SEC File No. 001-13641).
3.3	Articles of Incorporation of HP/Compton, Inc., are hereby incorporated by reference to Exhibit 3.9 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on October 30, 1997. (SEC File No. 333-34471).
3.4	By-laws of HP/Compton, Inc., are hereby incorporated by reference to Exhibit 3.10 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on October 30, 1997. (SEC File No. 333-34471).
3.5	Articles of Organization of Crystal Park Hotel and Casino Development Company, LLC, are hereby incorporated by reference to Exhibit 3.11 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on October 30, 1997. (SEC File No. 333-34471).
3.6	Operating Agreement of Crystal Park Hotel and Casino Development Company, LLC, is hereby incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. (SEC File No. 001-13641).
3.7	Certificate of Formation of Boomtown, LLC, is hereby incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on January 30, 2004. (SEC File No. 001-13641).
3.8	Operating Agreement of Boomtown, LLC, is hereby incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on January 30, 2004. (SEC File No. 001-13641).
3.9	Articles of Organization of PNK (Reno), LLC, are hereby incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 19, 2003. (SEC File No. 001-13641).
3.10	Operating Agreement of PNK (Reno), LLC, is hereby incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on September 19, 2003. (SEC File No. 001-13641).
3.11	Second Amended and Restated Partnership Agreement of Louisiana-I Gaming, a Louisiana Partnership in Commendam, is hereby incorporated by reference to Exhibit 3.26 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).
3.12	Amendment to Second Amended and Restated Partnership Agreement of Louisiana-I Gaming, a Louisiana Partnership in Commendam, is hereby incorporated by reference to Exhibit 3.12 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. (SEC File No. 001-13641).
3.13	Articles of Incorporation of Casino Magic Corp., are hereby incorporated by reference to Exhibit 3.29 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).
3.14	Amended By-laws of Casino Magic Corp., are hereby incorporated by reference to Exhibit 3.30 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).

Exhibit Number	Description of Exhibit
3.15	Articles of Incorporation of Biloxi Casino Corp., are hereby incorporated by reference to Exhibit 3.33 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).
3.16	By-laws of Biloxi Casino Corp., are hereby incorporated by reference to Exhibit 3.34 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).
3.17	Articles of Incorporation of Casino One Corporation, are hereby incorporated by reference to Exhibit 3.37 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).
3.18	By-laws of Casino One Corporation, are hereby incorporated by reference to Exhibit 3.38 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).
3.19	Amended and Restated Articles of Organization of Belterra Resort Indiana, LLC, are hereby incorporated by reference to Exhibit 4.1 to the Company’s Post-Effective Amendment No. 1 to Registration Statement on Form S-3 filed on November 16, 2004. (SEC File No. 333-90426).
3.20	Amended and Restated Operating Agreement of Belterra Resort Indiana, LLC, is hereby incorporated by reference to Exhibit 4.2 to the Company’s Post-Effective Amendment No. 1 to Registration Statement on Form S-3 filed on November 16, 2004. (SEC File No. 333-90426).
3.21	Articles of Incorporation of Casino Magic of Louisiana, Corp. (subsequently renamed PNK (Bossier City), Inc.), are hereby incorporated by reference to Exhibit 3.44 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000. (SEC File No. 001-13641).
3.22	By-Laws of Casino Magic of Louisiana, Corp. (subsequently renamed PNK (Bossier City), Inc.), are hereby incorporated by reference to Exhibit 3.45 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000. (SEC File No. 001-13641).
3.23	Articles of Organization of PNK (LAKE CHARLES), L.L.C. (formerly HPK (Lake Charles), L.L.C.), are hereby incorporated by reference to Exhibit 4.24 to the Company’s Amendment No. 2 to Registration Statement on Form S-3 filed on August 6, 2002. (SEC File No. 333-90426).
3.24	Operating Agreement of PNK (LAKE CHARLES), L.L.C. (formerly HPK (Lake Charles), L.L.C.), are hereby incorporated by reference to Exhibit 4.25 to the Company’s Amendment No. 2 to Registration Statement on Form S-3 filed on August 6, 2002. (SEC File No. 333-90426).
3.25	Certificate of Incorporation of PNK Development 1, Inc., is hereby incorporated by reference to Exhibit 4.26 to the Company’s Registration Statement on Form S-3 filed on June 13, 2002. (SEC File No. 333-90426).
3.26	By-laws of PNK Development 1, Inc., are hereby incorporated by reference to Exhibit 4.27 to the Company’s Registration Statement on Form S-3 filed on June 13, 2002. (SEC File No. 333-90426).
3.27	Certificate of Incorporation of PNK Development 2, Inc., is hereby incorporated by reference to Exhibit 4.28 to the Company’s Registration Statement on Form S-3 filed on June 13, 2002. (SEC File No. 333-90426).
3.28	By-laws of PNK Development 2, Inc., are hereby incorporated by reference to Exhibit 4.29 to the Company’s Registration Statement on Form S-3 filed on June 13, 2002. (SEC File No. 333-90426).
3.29	Certificate of Incorporation of PNK Development 3, Inc., is hereby incorporated by reference to Exhibit 4.30 to the Company’s Registration Statement on Form S-3 filed on June 13, 2002. (SEC File No. 333-90426).
3.30	By-laws of PNK Development 3, Inc., are hereby incorporated by reference to Exhibit 4.31 to the Company’s Registration Statement on Form S-3 filed on June 13, 2002. (SEC File No. 333-90426).

Exhibit Number	Description of Exhibit
3.31	Amended and Restated Articles of Organization of OGLE HAUS, LLC, are hereby incorporated by reference to Exhibit 4.37 to the Company’s Amendment No. 2 to Registration Statement on Form S-3 filed on August 6, 2002. (SEC File No. 333-90426).
3.32	Operating Agreement of OGLE HAUS, LLC (f/k/a OHIRC, LLC), is hereby incorporated by reference to Exhibit 4.38 to the Company’s Amendment No. 2 to Registration Statement on Form S-3 filed on August 6, 2002. (SEC File No. 333-90426).
3.33	Articles of Incorporation of St. Louis Casino Corp., are hereby incorporated by reference to Exhibit 4.39 to the Company’s Amendment No. 2 to Registration Statement on Form S-3 filed on August 6, 2002. (SEC File No. 333-90426).
3.34	By-Laws of St. Louis Casino Corp., are hereby incorporated by reference to Exhibit 4.40 to the Company’s Amendment No. 2 to Registration Statement on Form S-3 filed on August 6, 2002. (SEC File No. 333-90426).
4.1†	Hollywood Park, Inc. 1996 Stock Option Plan, is hereby incorporated by reference to Exhibit 10.24 to the Company’s Registration Statement on Form S-4 filed on September 18, 1996. (SEC File No. 333-12253).
4.2†	Form of Non-Qualified Stock Option Agreement for Hollywood Park, Inc. 1996 Stock Option Plan is hereby incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. (SEC File No. 001-13641).
4.3†	Hollywood Park, Inc. 1993 Stock Option Plan, is hereby incorporated by reference to Exhibit 4.2 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on March 26, 1999. (SEC File No. 333-73235).
4.4†	Pinnacle Entertainment, Inc. 2001 Stock Option Plan, is hereby incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8 filed on June 6, 2001. (SEC File No. 333-62378).
4.5†	Form of Stock Option Agreement for Pinnacle Entertainment, Inc. 2001 Stock Option Plan is hereby incorporated by reference to Exhibit 4.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. (SEC File No. 001-13641).
4.6†	Form of First Amendment to Pinnacle Entertainment, Inc. 2001 Stock Option Plan, is hereby incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on January 30, 2004. (SEC File No. 001-13641).
4.7†	Pinnacle Entertainment, Inc. 2002 Stock Option Plan, is hereby incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-8 filed on July 16, 2003. (SEC File No. 333-107081).
4.8†	First Amendment to Pinnacle Entertainment, Inc. 2002 Stock Option Plan, is hereby incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-8 filed on July 16, 2003. (SEC File No. 333-107081).
4.9†	Second Amendment to Pinnacle Entertainment, Inc. 2002 Stock Option Plan, is hereby incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form S-8 filed on July 16, 2003. (SEC File No. 333-107081).
4.10†	Form of Stock Option Agreement for Pinnacle Entertainment, Inc. 2002 Stock Option Plan is hereby incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. (SEC File No. 001-13641).
4.11†	2005 Equity and Performance Incentive Plan of Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 9, 2005. (SEC File No. 001-13641).

Exhibit Number	Description of Exhibit
4.12†	Form of Stock Option Grant Notice and Form of Stock Option Agreement for 2005 Equity and Performance Incentive Plan of Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 20, 2005. (SEC File No. 001-13641).
4.13†	Nonqualified Stock Option Agreement dated as of January 11, 2003 by and between the Company and Stephen H. Capp, is hereby incorporated by reference to Exhibit 4.7 to the Company’s Registration Statement on Form S-8 filed on July 16, 2003. (SEC File No. 333-107081).
4.14†	Nonqualified Stock Option Agreement dated as of April 10, 2002 by and between the Company and Daniel R. Lee, is hereby incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. (SEC File No. 001-13641).
4.15†	Nonqualified Stock Option Agreement dated as of April 10, 2002 by and between the Company and Daniel R. Lee, is hereby incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. (SEC File No. 001-13641).
4.16	Indenture dated as of September 25, 2003 by and among the Company, the guarantors named therein and The Bank of New York Trust Company, as successor trustee to The Bank of New York, is hereby incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on October 7, 2003. (SEC File No. 001-13641).
4.17	First Supplemental Indenture dated as of September 25, 2003, governing the 8.75% Senior Subordinated Notes due 2013, by and among the Company, the guarantors named therein and The Bank of New York Trust Company, as successor trustee to The Bank of New York, is hereby incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on October 7, 2003. (SEC File No. 001-13641).
4.18	Form of 8.75% Senior Subordinated Note due 2013 (included in Exhibit 4.12), is hereby incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on October 7, 2003. (SEC File No. 001-13641).
4.19	Indenture dated as of March 15, 2004, governing the 8.25% Senior Subordinated Notes due 2012, by and among the Company, the guarantors identified therein and The Bank of New York Trust Company, as successor trustee to The Bank of New York, is hereby incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 30, 2004. (SEC File No. 001-13641).
4.20	Form of 8.25% Senior Subordinated Note due 2012 (included in Exhibit 4.12), is hereby incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 30, 2004. (SEC File No. 001-13641).
4.21	First Supplemental Indenture dated as of December 3, 2004, governing the 8.25% Senior Subordinated Notes due 2012, by and among the Company, the guarantors identified therein and The Bank of New York Trust Company, as successor trustee to The Bank of New York, is hereby incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 7, 2004. (SEC File No. 001-13641).
10.1	Credit Agreement dated as of December 17, 2003 by and among the Company, the Lenders referred to therein, Lehman Brothers Inc. and Bear, Stearns & Co. Inc., as Joint Lead Arrangers, and Joint Book Runners, Société Générale, as Documentation Agent, Bear Stearns Corporate Lending Inc., as Syndication Agent, and Lehman Commercial Paper Inc., as Administrative Agent, is hereby incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on December 30, 2003. (SEC File No. 001-13641).
10.2	Amended and Restated Credit Agreement, dated as of August 27, 2004, by and among the Company, the Lenders referred to therein, Lehman Brothers Inc., and Bear, Stearns & Co. Inc., as Joint Advisors, Joint Lead Arrangers and Joint Book Runners, Société Générale and Wells Fargo Bank, N.A., as Joint Documentation Agents, Bear Stearns Corporate Lending Inc., as Syndication Agent, and Lehman Commercial Paper Inc., as Administrative Agent, is hereby incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on September 2, 2004. (SEC File No. 001-13641).

Exhibit Number	Description of Exhibit
10.3	First Amendment dated as of October 11, 2005, to the Amended and Restated Credit Agreement dated as of August 27, 2004, by and among the Company, Lehman Commercial Paper Inc., as Administrative Agent, and other parties identified therein is hereby incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. (SEC File No. 001-13641.)
10.4	Second Amended and Restated Credit Agreement, dated as of December 14, 2005, among the Company, the Lenders referred to therein, Lehman Brothers Inc., and Bear, Stearns & Co. Inc., as Joint Advisors, Joint Lead Arrangers and Joint Book Runners, Wells Fargo, N.A., as Lead Arranger, Societe Generale, Deutsche Bank Securities Inc., and Wells Fargo Bank, N.A., as Joint Documentation Agents, Bear Stearns Corporate Lending Inc., as Syndication Agent, and Lehman Commercial Paper Inc., as Administrative Agent, is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 20, 2005. (SEC File No. 001-12641).
10.5	First Amendment dated as of December 22, 2005, to the Second Amended and Restated Credit Agreement, dated as of December 14, 2005, among the Company, the Lenders referred to therein, Lehman Brothers Inc., and Bear, Stearns & Co. Inc., as Joint Advisors, Joint Lead Arrangers and Joint Book Runners, Wells Fargo, N.A., as Lead Arranger, Societe Generale, Deutsche Bank Securities Inc., and Wells Fargo Bank, N.A., as Joint Documentation Agents, Bear Stearns Corporate Lending Inc., as Syndication Agent, and Lehman Commercial Paper Inc., as Administrative Agent, is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 23, 2005. (SEC File No. 001-12641).
10.6†	Amended and Restated Hollywood Park, Inc. Directors Deferred Compensation Plan, is hereby incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8 filed on August 31, 1999. (SEC File No. 333-86223).
10.7†	Pinnacle Entertainment, Inc. (formerly Hollywood Park, Inc.) Executive Deferred Compensation Plan effective January 1, 2000, is hereby incorporated by reference to Exhibit 10.48 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999. (SEC File No. 001-13641).
10.8†	First Amendment to the Pinnacle Entertainment, Inc. (formerly Hollywood Park, Inc.) Executive Deferred Compensation Plan, is hereby incorporated by reference to Exhibit 10.55 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. (SEC File No. 001-13641).
10.9†	Second Amendment to the Pinnacle Entertainment, Inc. Executive Deferred Compensation Plan, is hereby incorporated by reference to Exhibit 10.56 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. (SEC File No. 001-13641).
10.10†	Summary of 2004 Provisions of Pinnacle Entertainment, Inc. Executive Deferred Compensation Plan, is hereby incorporated by reference to Exhibit 10.29 to the Company’s Current Report on Form 8-K filed on December 30, 2004. (SEC File No. 001-13641).
10.11†	Employment Agreement, effective as of May 1, 2005, by and between the Company and Daniel R. Lee, is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 13, 2005. (SEC File No. 001-13641).
10.12†	Employment Agreement dated as of August 13, 2002 by and between the Company and John A. Godfrey, is hereby incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. (SEC File No. 001-13641).
10.13†	Employment Agreement dated as of January 11, 2003 by and between the Company and Stephen H. Capp, is hereby incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003. (SEC File No. 001-13641).
10.14†	Employment Agreement dated as of March 14, 2003 by and between the Company and Wade W. Hundley, is hereby incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003. (SEC File No. 001-13641).

Exhibit Number	Description of Exhibit
10.15†	Amended and Restated Employment Agreement dated May 5, 2003 by and between the Company and Alain Uboldi is hereby incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005. (SEC File No. 001-13641).
10.16	Purchase Agreement dated June 14, 2002 by and between Rothbart Development Corporation and the Company, is hereby incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. (SEC File No. 001-13641).
10.17	Amendment to the Purchase Agreement dated November 14, 2002 by and between Rothbart Development Corporation and the Company, is hereby incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003. (SEC File No. 001-13641).
10.18	Amendment to the Purchase Agreement dated January 16, 2003 by and between Rothbart Development Corporation and the Company, is hereby incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003. (SEC File No. 001-13641).
10.19	Second Amendment to Purchase Agreement dated as of February 11, 2004 by and between the Company and Rothbart Development Corporation, is hereby incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. (SEC File No. 001-13641).
10.20	Lease and Agreement dated September 10, 1999 by and between the Company and Century Gaming Management, Inc., is hereby incorporated by reference to Exhibit 10.38 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 1999, filed on September 8, 2000. (SEC File No. 001-13641).
10.21	First Amendment to Lease and Agreement dated September 6, 2000 by and between the Company and Century Gaming Management, Inc., is hereby incorporated by reference to Exhibit 2.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000. (SEC File No. 001-13641).
10.22	Second Amendment to Lease and Agreement dated as of October 1, 2001 by and between the Company and Century Gaming Management, Inc., is hereby incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K the year ended December 31, 2002. (SEC File No. 001-13641).
10.23	Third Amendment to Lease and Agreement dated as of December 4, 2002 by and between the Company and Century Gaming Management, Inc., is hereby incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K the year ended December 31, 2002. (SEC File No. 001-13641).
10.24	Fourth Amendment to Lease and Agreement dated as of October 13, 2003 by and between the Company and Century Gaming Management, Inc., is hereby incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K the year ended December 31, 2002. (SEC File No. 001-13641).
10.25	Fifth Amendment to Lease and Agreement dated as of October 29, 2004 by and between the Company and Century Gaming Management, Inc. is hereby incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. (SEC File No 001-13641).
10.26	Lease Agreement dated April 4, 1992 by and between G&W Enterprises, Inc. and Biloxi Casino Corp., is hereby incorporated by reference to Exhibit 10.7 to Casino Magic Corp.’s Registration Statement on Form S-1 filed on August 28, 1992. (SEC File No. 033-51438).
10.27	Amendment to Lease Agreement dated February 26, 1999 by and between G&W Enterprises, Inc. and Biloxi Casino Corp., is hereby incorporated by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. (SEC File No. 001-13641).

Exhibit Number	Description of Exhibit
10.28	Lease Agreement dated November 23, 1992 by and between Gary Gollott, Tommy Gollot, and Tyrone Gollott, and Biloxi Casino Corp., is hereby incorporated by reference to Casino Magic Corp.’s Registration Statement on Form S-4 filed on November 12, 1993. (SEC File No. 033-71572).
10.29	Amendment to Lease Agreement dated February 26, 1999 by and between Gary Gollott, Tommy Gollott and Tyrone Gollott, and Biloxi Casino Corp., is hereby incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. (SEC File No. 001-13641).
10.30	Public Trust Tidelands Lease dated May 27, 1993 by and between Biloxi Casino Corp. and the State of Mississippi, is hereby incorporated by reference to Exhibit 10.10 to Casino Magic Corp.’s Registration Statement on Form S-4 filed on November 12, 1993. (SEC File No. 033-71572).
10.31	Public Trust Tidelands Lease Amendment dated October 28, 2004 by and between Biloxi Casino Corp. and the State of Mississippi is hereby incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. (SEC File No. 001-13641).
10.32	Form of Lease by and between the Webster Family Limited Partnership and the Diuguid Family Limited Partnership and Pinnacle Gaming Development Corp. (executed by the parties on December 11, 1998 and subsequently assigned by Pinnacle Gaming Development Corp. to Belterra Resort Indiana, LLC), is hereby incorporated by reference to Exhibit B contained in Exhibit 10.47 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998. (SEC File No. 001-13641).
10.33	Form of Lease by and between Daniel Webster, Marsha S. Webster, William G. Diuguid, Sara T. Diuguid, J.R. Showers, III and Carol A. Showers, and Pinnacle Gaming Development Corp. (executed by the parties on December 11, 1998 and subsequently assigned by Pinnacle Gaming Corp. to Belterra Resort Indiana, LLC), is hereby incorporated by reference to Exhibit B contained in Exhibit 10.51 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998. (SEC File No. 001-13641).
10.34	Lease Agreement dated September 29, 1995 by and between the State of Mississippi and Casino One Corporation, is hereby incorporated by reference to Exhibit 10.2 to Casino Magic Corp.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1995. (SEC File No. 000-20712).
10.35	Lease dated September 10, 1999 by and between Churchill Downs California Company and the Company, is hereby incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003. (SEC File No. 001-13641).
10.36	Commercial Lease dated September 9, 1996 by and between State of Louisiana, State Land Office and PNK (Bossier City), Inc. (f/k/a Casino Magic of Louisiana, Corp.), is hereby incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003. (SEC File No. 001-13641).
10.37	Ground Lease Agreement dated as of August 21, 2003 by and between PNK (LAKE CHARLES), L.L.C., and Lake Charles Harbor & Terminal District, is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 19, 2003. (SEC File No. 001-13641).
10.38	Addendum Number One dated as of July 5, 2005 to Memorandum of Lease dated August 21, 2003, by and between PNK (LAKE CHARLES) L.L.C. and Lake Charles Harbor and Terminal District is hereby incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. (SEC File No. 001-013641).
10.39	Statement of Conditions to Riverboat Gaming License of PNK (LAKE CHARLES), L.L.C., is hereby incorporated by reference to Exhibit 10.57 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. (SEC File No. 001-13641).

Exhibit Number	Description of Exhibit
10.40	Standard Form of Agreement between Owner and Contractor by and between PNK (LAKE CHARLES), L.L.C. and Manhattan Construction Company, is hereby incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 19, 2003. (SEC File No. 001-13641).
10.41	First Amendment to Standard Form of Agreement by and between Owner and Contractor dated as of September 18, 2003 by and between PNK (LAKE CHARLES), L.L.C. and Manhattan Construction Company, is hereby incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on September 19, 2003. (SEC File No. 001-13641).
10.42	Vessel Construction Agreement dated as of August 27, 2003 by and between Leevac Industries, LLC and PNK (LAKE CHARLES), L.L.C., is hereby incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on September 19, 2003. (SEC File No. 001-13641).
10.43	Redevelopment Agreement dated as of April 22, 2004 by and between the Land Clearance for Redevelopment Authority of the City of St. Louis and the Company, is hereby incorporated by reference to Exhibit 10.43 to the Company’s Amendment No. 1 to Registration Statement on Form S-4 filed on June 7, 2004. (SEC File No. 333-115557).
10.44	Lease and Development Agreement, dated as of August 12, 2004, by and between the St. Louis County Port Authority and the Company, is hereby incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004. (SEC File No. 001-13641).
10.45	Stock Agreement dated as of July 1, 2003 by and between the Company and R.D. Hubbard, is hereby incorporated by reference to Exhibit 10.1 to Amendment No. 25 to the Schedule 13D filed by R.D. Hubbard on August 4, 2003. (SEC File No. 005-33517).
10.46	Underwriting Agreement dated as of September 19, 2003 by and among the Company, the guarantors identified therein and Bear, Stearns & Co. Inc., as representative for itself and Banc of America Securities LLC, Lehman Brothers Inc., SG Cowen Securities Corporation, CIBC World Markets Corp. and UBS Securities LLC, is hereby incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on September 25, 2003. (SEC File No. 001-13641).
10.47	Equity Underwriting Agreement dated January 27, 2004 by and between the Company and Deutsche Bank Securities Inc., as representative for itself and Bear, Stearns & Co. Inc., Lehman Brothers Inc., SG Cowen Securities Corporation, B. Riley & Co., Crowell Weedon & Co., Hibernia Southcoast Capital, Sterne, Agee & Leach, Inc., UBS Securities LLC, The Seidler Companies Incorporated, Thomas Weisel Partners LLC and CIBC World Markets Corp., is hereby incorporated by reference to Exhibit 1.1 to the Company Current Report on Form 8-K filed on January 30, 2004. (SEC File No. 001-13641).
10.48	Registration Rights Agreement dated as of March 15, 2004 by and among the Company, the guarantors identified therein and Lehman Brothers Inc., as representative for itself and Bear, Stearns & Co. Inc., Deutsche Bank Securities Inc., SG Cowen Securities Corporation, UBS Securities LLC and Hibernia Southcoast Capital, Inc., is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 30, 2004. (SEC File No. 001-13641).
10.49	Purchase Agreement dated as of February 27, 2004 by and among the Company, the guarantors identified therein and Lehman Brothers, Inc., as representative for itself and Bear, Stearns & Co. Inc., Deutsche Bank Securities Inc., SG Cowen Securities Corporation, UBS Securities LLC and Hibernia Southcoast Capital, Inc., is hereby incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 30, 2004. (SEC File No. 001-13641).

Exhibit Number	Description of Exhibit
10.50	Underwriting Agreement dated as of November 18, 2004 by and among the Company, the guarantors named therein and Lehman Brothers Inc., as representative for itself and Bear, Stearns & Co. Inc., Deutsche Bank Securities Inc, Wells Fargo Securities, LLC, SG Cowen Securities Corporation, CIBC World Markets Corp, Hibernia Southcoast Capital, Inc., CommerzBank Securities, Crowell, Weedon & Co and Merrill Lynch, Pierce, Fenner & Smith Incorporated, is hereby incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on November 24, 2004. (SEC File No. 001-13641).
10.51*	First Amendment to Redevelopment Agreement and First Amendment to Option Agreement dated as of December 23, 2004 by and between the Land Clearance Redevelopment Authority of the City of St. Louis and the Company.
10.52*	Second Amendment to Redevelopment Agreement dated as of July 21, 2005 by and between the Land Clearance Redevelopment Authority and the Company.
10.53	Equity Underwriting Agreement dated as of December 16, 2004 by and among the Company and Lehman Brothers Inc. and Deutsche Bank Securities Inc., as representatives for themselves and Bear, Stearns & Co. Inc., Crowell, Weedon & Co., B. Riley & Co., Inc. and Sterne, Agee & Leach, Inc., is hereby incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on December 20, 2004. (SEC File No. 001-13641).
10.54*	Letter Agreement dated as of August 12, 2004 by and between the St. Louis County Port Authority and the Company.
10.55*	Second Amendment to Lease and Development Agreement dated as of October 28, 2005 by and between St. Louis County Port Authority and the Company.
10.56	Equity Underwriting Agreement dated as of January 12, 2006 by and between the Company and Lehman Brothers Inc. and Deutsche Bank Securities Inc., as representatives of several underwriters named therein is hereby incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on January 13, 2006. (SEC File No. 001-12641).
10.57	Indemnification Trust Agreement dated as of August 16, 2005, by and between the Company and Wilmington Trust Company and, as an additional party, Bruce Leslie, as Beneficiaries’ Representative, is hereby incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. (SEC File No. 001-13641).
10.58	Summary of the Deferred Bonus Plan is hereby incorporated by reference to Exhibit 10.56 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2004, filed on May 9, 2005.
10.59	Summary of 2004 Award Schedule Under the Deferred Bonus Plan is hereby incorporated by reference to Exhibit 10.55 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2004, filed on May 9, 2005.
10.60	Summary of 2005 Bonus Award Schedule is hereby incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 10, 2006. (SEC File No. 001-13641).
10.61*	Purchase Agreement dated February 24, 2006 by and between the Company and President Casinos, Inc. and its wholly owned subsidiary, President Casino-Missouri.
10.62*	Side Letter dated February 24, 2006 by and between President Casino, Inc.
10.63*	Commitment Letter by and among Lehman Brothers Inc., Bear, Stearns & Co. Inc. and Bear Stearns Corporate Lending Inc. and Pinnacle Entertainment, Inc., dated March 13, 2006.
11.1*	Statement re: Computation of Per Share Earnings.
12.1*	Computation of Ratio of Earnings to Fixed Charges
21.1*	Subsidiaries of Pinnacle Entertainment, Inc.

Exhibit Number	Description of Exhibit
23.1*	Consent of Deloitte & Touche LLP.
31.1*	Chief Executive Officer Certification Pursuant to Section 13a-14 of the Securities Exchange Act.
31.2*	Chief Financial Officer Certification Pursuant to Section 13 a-14 of the Securities Exchange Act.
32.1**	Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1*	Government Regulation and Gaming Issues.

* Filed herewith.

** Furnished herewith.

† Management contract or compensatory plan or arrangement.

EX-2.1

Exhibit 2.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

by and among

PINNACLE ENTERTAINMENT, INC.,

PNK DEVELOPMENT 1, INC.,

and

AZTAR CORPORATION

Dated as of March 13, 2006

TABLE OF CONTENTS

ARTICLE I
The Merger
Section 1.01	The Merger	1
Section 1.02	Closing	1
Section 1.03	Effective Time of the Merger	2
Section 1.04	Effects of the Merger	2
Section 1.05	Organizational Documents	2
Section 1.06	Directors and Officers of Surviving Corporation	2
ARTICLE II
Effects of the Merger on the Capital Stock of the Constituent Corporations; Exchange of Certificates
Section 2.01	Effect on Capital Stock	2
Section 2.02	Exchange of Certificates	3
Section 2.03	Dissenting Shares	5
ARTICLE III
Representations and Warranties
Section 3.01	Representations and Warranties of Aztar.	6
Section 3.02	Representations and Warranties of Pinnacle	23
ARTICLE IV
Covenants
Section 4.01	Covenants of Aztar Interim Operations	28
Section 4.02	Covenants of Pinnacle Interim Operations	33
Section 4.03	No Solicitation by Aztar	33
Section 4.04	Other Actions	36
Section 4.05.	Control of the Aztar’s Operations	36

i

ARTICLE V
Additional Agreements
Section 5.01	Preparation of the Proxy Statement; Stockholders Meeting	36
Section 5.02	Access to Information; Effect of Review	37
Section 5.03	Regulatory Matters; Reasonable Best Efforts	38
Section 5.04	Stock Options; Restricted Stock and Equity Awards; Stock Plans	41
Section 5.05	Employee Matters	41
Section 5.06	Indemnification, Exculpation and Insurance	42
Section 5.07	Fees and Expenses	44
Section 5.08	Public Announcements	45
Section 5.09	Aztar Headquarters	45
ARTICLE VI
Conditions Precedent
Section 6.01	Conditions to Each Party’s Obligation to Effect the Merger	45
Section 6.02	Conditions to Obligations of Aztar	46
Section 6.03	Conditions to Obligations of Pinnacle	46
Section 6.04	Frustration of Closing Conditions	47
ARTICLE VII
Termination, Amendment and Waiver
Section 7.01	Termination	47
Section 7.02	Effect of Termination	48
Section 7.03	Amendment	49
Section 7.04	Extension; Waiver	49
ARTICLE VIII
General Provisions
Section 8.01	Nonsurvival of Representations and Warranties	49
Section 8.02	Notices	49
Section 8.03	Definitions	51
Section 8.04	Interpretation and Other Matters	54
Section 8.05	Counterparts	55
Section 8.06	Entire Agreement; No Third-Party Beneficiaries	55

ii

Section 8.07	Governing Law	55
Section 8.08	Assignment	55
Section 8.09	Enforcement	55
Section 8.10	Severability	56
Section 8.11	WAIVER OF JURY TRIAL	56
Section 8.12	Alternative Structure	56

iii

AGREEMENT AND PLAN OF MERGER, dated as of March 13, 2006 (this “Agreement”), by and among Pinnacle Entertainment, Inc., a Delaware corporation (“Pinnacle”), Aztar Corporation, a Delaware corporation (“Aztar”), and PNK Development 1, Inc., a Delaware corporation and a wholly owned subsidiary of Pinnacle (“Merger Sub”).

WHEREAS, the respective Boards of Directors of Pinnacle, Aztar and Merger Sub have approved the consummation of the business combination provided for in this Agreement, pursuant to which Merger Sub will merge with and into Aztar, with Aztar surviving that merger (the “Surviving Corporation”) (the “Merger”);

WHEREAS, in the Merger, subject to the terms of Article II, each share of common stock, $.01 par value per share, of Aztar (the “Aztar Common Stock”) will be converted into the right to receive $38.00 per share in cash;

WHEREAS, in the Merger, subject to the terms of Article II, each share of Series B ESOP Convertible Preferred Stock, $.01 par value per share (the “Aztar Preferred Stock”) will be converted into the right to receive $401.90 per share in cash; and

WHEREAS, Pinnacle and Aztar desire to make certain representations, warranties, covenants and agreements in connection with the Merger and the transactions contemplated by this Agreement and also to prescribe various conditions to the Merger;

NOW, THEREFORE, in consideration of the foregoing and of the representations, warranties, covenants and agreements contained in this Agreement, the parties agree as follows:

ARTICLE I

The Merger

Section 1.01 The Merger . Upon the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.03), Merger Sub shall be merged with and into Aztar in accordance with the Delaware General Business Corporation Law (the “DGCL”). Aztar shall be the Surviving Corporation in the Merger and shall continue its corporate existence under the laws of the State of Delaware and shall succeed to and assume all of the rights and obligations of Aztar and Merger Sub in accordance with the DGCL.

Section 1.02 Closing . The closing of the Merger (the “Closing”) will take place at 10:00 a.m., local time, on a date selected by Pinnacle, but not later than the fifth business day, following the satisfaction or waiver of the conditions set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at such time) unless another time or date is agreed to by the parties hereto. The date on which the Closing occurs is referred to in this Agreement as the “Closing Date.” The Closing shall be held at such location in The City of New York as is agreed to by the parties hereto.

Section 1.03 Effective Time of the Merger . Subject to the provisions of this Agreement, with respect to the Merger, as soon as practicable after 10:00 a.m., New York City time, on the Closing Date, the parties thereto shall file a certificate of merger (the “Certificate of Merger”) executed in accordance with, and containing such information as is required by, the relevant provisions of Section 251 of the DGCL with the Secretary of State of the State of Delaware. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware (the “Effective Time”).

Section 1.04 Effects of the Merger . The Merger shall generally have the effects set forth in this Agreement and the applicable provisions of the DGCL.

Section 1.05 Organizational Documents . At the Effective Time, (A) the certificate of incorporation of Merger Sub, shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law and (B) the by-laws of Merger Sub shall be the by-laws of the Surviving Corporation, until thereafter changed or amended as provided therein, in the certificate of incorporation of the Surviving Corporation or by applicable law.

Section 1.06 Directors and Officers of Surviving Corporation . The directors and officers of Merger Sub at the Effective Time shall, from and after the Effective Time, be the initial directors and officers, respectively, of the Surviving Corporation until their successors have been duly elected or appointed and qualified.

ARTICLE II

Effects of the Merger on the Capital Stock of the Constituent Corporations; Exchange of Certificates

Section 2.01 Effect on Capital Stock.

At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Aztar Common Stock or Aztar Preferred Stock (together, the “Aztar Capital Stock”) or any capital stock of Merger Sub:

(a) Cancellation of Certain Aztar Common Stock and Aztar Preferred Stock. Each share of Aztar Common Stock or Aztar Preferred Stock that is owned by Aztar shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.

(b) Conversion of Aztar Common Stock. Subject to Section 2.02(e), each

2

issued and outstanding share of Aztar Common Stock (other than shares to be canceled in accordance with Section 2.01(a) and other than Aztar Dissenting Shares (as defined in Section 2.03(a)) shall be converted into the right to receive $38.00 per share in cash (the “Common Stock Merger Consideration”). As of the Effective Time, all such shares of Aztar Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares of Aztar Common Stock shall cease to have any rights with respect thereto, except the right to receive the Common Stock Merger Consideration to be paid therefor upon the surrender of such certificate in accordance with Section 2.02, without interest.

(c) Conversion of Aztar Preferred Stock. Subject to Section 2.02(e), each issued and outstanding share of Aztar Preferred Stock (other than shares to be canceled in accordance with Section 2.01(a) and other than Aztar Dissenting Shares) shall be converted into the right to receive $401.90 per share in cash, provided that with respect to any share of Aztar Preferred Stock that has elected to receive the liquidation preference plus accrued and unpaid dividends in accordance with the certification of designations, preferences and rights of the Aztar Preferred Stock, each such share shall be converted into the liquidation preference thereof plus accrued and unpaid dividends as of the Effective Time (the “Preferred Stock Merger Consideration” and together with the Common Stock Merger Consideration, the “Merger Consideration”). The liquidation preference of a share of Aztar Preferred Stock is $100. As of the date hereof, the accrued and unpaid dividends thereon were less than $180,000 in the aggregate. As of the Effective Time, all such shares of Aztar Preferred Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares of Aztar Preferred Stock shall cease to have any rights with respect thereto, except the right to receive the Preferred Stock Merger Consideration upon the surrender of such certificate in accordance with Section 2.02, without interest.

(d) Conversion of Merger Sub Common Stock. The aggregate of all shares of the capital stock of Merger Sub issued and outstanding immediately prior to the Effective Time (of which, as of the date of this Agreement, 1000 shares of common stock, par value $.01 per share, are issued and outstanding) shall be canceled.

Section 2.02 Exchange of Certificates .

(a) Paying Agent. Prior to the Effective Time, Pinnacle shall enter into an agreement with such bank or trust company as may be mutually agreed by Pinnacle and Aztar (the “Paying Agent”), pursuant to which Pinnacle shall deposit with the Paying Agent at the Effective Time, for the benefit of the holders of shares of Aztar Common Stock and Aztar Preferred Stock, for exchange in accordance with this Article II, through the Paying Agent, cash representing the Common Stock Merger Consideration payable to holders of shares of Aztar Common Stock and cash representing the Preferred Stock Merger Consideration payable to holders of shares of Aztar Preferred Stock (the “Payment Fund”).

(b) Payment Procedures. As soon as reasonably practicable after the Effective Time, the Paying Agent shall mail to each holder of record of a certificate or certificates that

3

immediately prior to the Effective Time represented outstanding shares of Aztar Common Stock or Aztar Preferred Stock (the “Certificates”) whose shares were converted into the right to receive cash pursuant to Section 2.01, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as Pinnacle may reasonably specify) and (ii) instructions for use in surrendering the Certificates in exchange for the applicable Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor, in the case of Certificates formerly representing shares of Aztar Common Stock, the Common Stock Merger Consideration, without interest, and in the case of Certificates formerly representing shares of Aztar Preferred Stock, the Preferred Stock Merger Consideration, without interest, in each case that such holder has the right to receive pursuant to the provisions of this Article II, and, in each case, the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Aztar Common Stock or Aztar Preferred Stock that is not registered in the transfer records of Aztar, the applicable Merger Consideration may be issued to a person other than the person in whose name the Certificate so surrendered is registered only if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such issuance shall pay any transfer or other taxes required by reason of the payment of the applicable Merger Consideration to a person other than the registered holder of such Certificate or establish to the satisfaction of Pinnacle that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 2.02, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the applicable Merger Consideration, which the holder thereof has the right to receive in respect of such Certificate pursuant to the provisions of this Article II. No interest shall be paid or will accrue on the Merger Consideration or any cash payable to holders of Certificates pursuant to the provisions of this Article II.

(c) No Further Ownership Rights in Aztar Capital Stock. All cash payments of Merger Consideration upon the surrender for exchange of Certificates in accordance with the terms of this Article II shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Aztar Common Stock or Aztar Preferred Stock, as the case may be, theretofore represented by such Certificates, and there shall be no further registration of transfers on the stock transfer books of Aztar of the shares of Aztar Common Stock or Aztar Preferred Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to Pinnacle, Aztar or the Paying Agent for any reason, they shall be canceled and exchanged as provided in this Article II, except as otherwise provided by law.

(d) Termination of Payment Fund. Any portion of the Payment Fund that remains undistributed to the holders of the Certificates for six months after the Effective Time shall be delivered to Pinnacle, upon demand, and any holders of the Certificates who have not theretofore complied with this Article II shall thereafter look only to Pinnacle for payment of their claims for Merger Consideration.

(e) No Liability. None of Pinnacle, Aztar or the Paying Agent or any of their respective directors, officers, employees and agents shall be liable to any person in respect of any cash representing the Merger Consideration or any cash from the Payment Fund, in each case

4

delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificate shall not have been surrendered prior to two years after the Effective Time (or immediately prior to such earlier date on which any Merger Consideration would otherwise escheat to or become the property of any Governmental Authority (as defined in Section 3.01(d)), any such Merger Consideration shall, to the extent permitted by applicable law, become the property of Pinnacle, free and clear of all claims or interest of any person previously entitled thereto.

(f) Investment of Payment Fund. The Paying Agent shall invest any cash included in the Payment Fund, as directed by Pinnacle, on a daily basis, in Permitted Investments (as defined in Section 8.03) or as otherwise consented to by Aztar prior to the Effective Time (which consent shall not be unreasonably withheld or delayed). Any interest and other income resulting from such investments shall be paid to Pinnacle.

(g) Withholding Rights. Pinnacle and the Paying Agent shall be entitled to deduct and withhold from any consideration payable pursuant to this Agreement to any person who was a holder of Aztar Common Stock or Aztar Preferred Stock, as the case may be, immediately prior to the Effective Time such amounts as Pinnacle and the Paying Agent may be required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “Code”) or any other provision of applicable federal, state, local or foreign tax law. To the extent that amounts are so withheld by Pinnacle or the Paying Agent and duly paid over to the applicable taxing authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the person to whom such consideration would otherwise have been paid.

(h) Lost, Stolen or Destroyed Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Pinnacle, the posting by such person of a bond in such reasonable amount as Pinnacle may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall issue in exchange for such lost, stolen or destroyed Certificate, the applicable Merger Consideration pursuant to this Agreement.

(i) Adjustments to Prevent Dilution. In the event that Aztar changes the number of shares of Aztar Common Stock or securities convertible or exchangeable into or exercisable for shares of Aztar Common Stock, or shares of Aztar Preferred Stock or securities convertible or exchangeable into or exercisable for shares of Aztar Preferred Stock, issued and outstanding prior to the Effective Time, in each case as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger, subdivision, issuer tender or exchange offer, or other transaction, the applicable Merger Consideration shall be equitably adjusted.

Section 2.03 Dissenting Shares . Any holder of shares of Aztar Common Stock or Aztar Preferred Stock who shall have exercised rights to dissent with respect to the Merger in accordance with the DGCL and who has properly exercised such holder’s rights to demand payment of the “fair value” of the holder’s shares of Aztar Common Stock or Aztar Preferred

5

Stock, as the case may be (the “Aztar Dissenting Shares”) as provided in the DGCL (the “Aztar Dissenting Stockholder”) shall thereafter have only such rights, if any, as are provided a dissenting stockholder in accordance with the DGCL and shall have no rights to receive the Merger Consideration pursuant to Section 2.01; provided, however, that if a Aztar Dissenting Stockholder shall fail to properly demand payment (in accordance with the DGCL) or shall have effectively withdrawn or lost such rights to relief as a Aztar Dissenting Stockholder under the DGCL, then such Aztar Dissenting Stockholder’s Aztar Dissenting Shares automatically shall cease to be Aztar Dissenting Shares and shall be converted into and represent only the right to receive, upon surrender of the Certificate representing the Aztar Dissenting Shares, the applicable Merger Consideration pursuant to Section 2.01, without interest.

ARTICLE III

Representations and Warranties

Section 3.01 Representations and Warranties of Aztar. Except as and to the extent set forth in the letter dated the date of this Agreement and delivered to Pinnacle by Aztar concurrently with the execution and delivery of this Agreement (the “Aztar Disclosure Letter”) and, to the extent the qualifying nature of such disclosure is readily apparent therefrom, except as and to the extent set forth in the Aztar Reports (as defined in Section 3.01(e)) filed on or after January 1, 2006 and prior to the date hereof or in Aztar’s definitive proxy statement for its 2005 Annual Meeting of Stockholders (excluding, in each case, any disclosures set forth in any risk factor section, in any section relating to forward looking statements and any other disclosures included therein to the extent that they are cautionary, predictive or forward-looking in nature), Aztar represents and warrants to Pinnacle and Merger Sub as follows:

(a) Organization and Qualification. Each of Aztar and its subsidiaries is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has full power and authority to conduct its business as and to the extent now conducted and to own, use and lease its assets and properties, except for such failures to be so organized, existing and in good standing or to have such power and authority that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect (as defined in Section 8.03) on Aztar. Each of Aztar and its subsidiaries is duly qualified, licensed or admitted to do business and is in good standing in each jurisdiction in which the ownership, use or leasing of its assets and properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so qualified, licensed or admitted and in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Aztar. Except as set forth in Section 3.01(a) of the Aztar Disclosure Letter, none of Aztar or any of its subsidiaries is a party to any agreement, arrangement or understanding relating to the securities of Aztar or any of its subsidiaries, including with respect to the voting, holding, issuance, purchase, sale or registration thereof or entitling any party to any put or call rights, rights of first offer, rights of first refusal, tag-along or drag-along rights or any similar rights or obligations, or to any agreement, arrangement or understanding providing for any governance, veto or similar rights with respect to Aztar or any of its subsidiaries.

6

(b) Capital Stock.

(i) The authorized capital stock of Aztar consists of:

(A) 100,000,000 shares of Aztar Common Stock, of which 35,899,464 shares were issued and outstanding as of the date of this Agreement; and

(B) 100,000 shares of preferred stock, par value $.01 per share, of which 44,736.662 shares of Aztar Preferred Stock were issued or outstanding as of the date of this Agreement.

As of March 10, 2006, 18,824,868 shares of Aztar Common Stock and no shares of preferred stock were held in the treasury of Aztar.

(ii) A true and correct copy of each of the 1989 Stock Option and Incentive Plan, 1999 Employee Stock Option and Incentive Plan, 2004 Employee Stock Option and Incentive Plan, 1990 Nonemployee Directors Stock Option Plan and 2000 Nonemployee Directors Stock Option Plan, in each case as currently in effect and reflecting all amendments thereto (collectively, the “Aztar Employee Stock Plans”) has been delivered to Pinnacle prior to the date hereof. As of the date of this Agreement, (x) 3,592,996 shares of Aztar Common Stock were subject to outstanding Aztar Employee Stock Options (as defined in Section 5.04(a)) and (y) no shares of Aztar Common Stock were the subject of other rights (whether contingent, accrued or otherwise), to acquire or receive shares of Aztar Common Stock or benefits measured by the value of shares of Aztar Common Stock or otherwise representing an award of any kind consisting of shares of Aztar Common Stock under the Aztar Employee Stock Plans (the items in this clause (y), the “Aztar Awards”). The Aztar Employee Stock Plans are the only plans or other obligations of Aztar or any of its subsidiaries with respect to Aztar Awards or Aztar Employee Stock Options. Aztar has no shares of capital stock reserved for issuance, except that, as of March 10, 2006, there were an aggregate of 3,566,647 shares of Aztar Common Stock reserved for issuance pursuant to the Aztar Employee Stock Plans, including 3,043,494 shares in respect of Aztar Employee Stock Options and no shares in respect of Aztar Awards, an aggregate of 473,153 shares of Aztar Common Stock reserved for issuance upon conversion of the Aztar Preferred Stock and an aggregate of 50,000 shares of preferred stock reserved for issuance in connection with the Rights Agreement (as defined in Section 3.01(p)). Section 3.01(b)(ii) of the Aztar Disclosure Letter contains a correct and complete list as of March 10, 2006 of (i) the number of outstanding Aztar Employee Stock Options under each of the Aztar Employee Stock Plans, the holders of such Aztar Employee Stock Options (if such holder is or was an executive officer of Aztar), the exercise price of all Aztar Employee Stock Options and the number of shares of Aztar Common Stock issuable at each such exercise price, and (ii) the number of outstanding Aztar Awards under each of the Aztar Employee Stock Plans and the holders of such Aztar Awards. From March 10, 2006 to the date hereof, Aztar has not issued any shares of Aztar Common Stock except pursuant to the exercise of Aztar Employee Stock Options and the settlement of Aztar Awards, in each case outstanding on March 10, 2006, in accordance with their respective terms. From March 10, 2006 through the date hereof, neither Aztar nor any of its subsidiaries has granted or

7

issued any Aztar Employee Stock Options or Aztar Awards. All Aztar Employee Stock Options vest at the Effective Time pursuant to the terms of the Aztar Employee Stock Plans as in effect on the date hereof.

(iii) All of the issued and outstanding shares of Aztar Common Stock are, and all shares reserved for issuance will be, upon issuance in accordance with the terms specified in the instruments or agreements pursuant to which they are issuable, duly authorized, validly issued, fully paid and nonassessable. All of the issued and outstanding shares of Aztar Preferred Stock are duly authorized, validly issued, fully paid and nonassessable.

(iv) Except as disclosed in this Section 3.01(b) and except for this Agreement, as of the date of this Agreement, there are no outstanding subscriptions, options, warrants, rights (including stock appreciation rights), preemptive rights, redemption rights, repurchase rights or other contracts, commitments, understandings or arrangements, including any put or call right or right of conversion or exchange under any outstanding security, instrument or agreement (collectively, “Options”), obligating Aztar or any of its subsidiaries to acquire or purchase or to issue or sell any shares of capital stock (or to make payments measured by the value of shares of capital stock) or other securities of Aztar or any of its subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any person a right to subscribe for or acquire, any capital stock (or to make payments measured by the value of shares of capital stock) or other securities of Aztar or any of its subsidiaries, or to grant, extend or enter into any Option with respect thereto, and no securities or obligations evidencing such rights or Options are authorized, issued or outstanding. No Aztar subsidiary owns any shares of Aztar Common Stock or Aztar Preferred Stock.

(v) Except as disclosed in Section 3.01(b)(v) of the Aztar Disclosure Letter, all of the outstanding shares of capital stock and other securities of each subsidiary of Aztar are duly authorized, validly issued, fully paid and nonassessable and are owned, beneficially and of record, by Aztar or a wholly owned subsidiary, free and clear of any liens, claims, mortgages, encumbrances, pledges, security interests, equities and charges of any kind (each, a “Lien”), except for any of the foregoing that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Aztar. Except as disclosed in Section 3.01(b)(v) of the Aztar Disclosure Letter, there are no (A) outstanding Options obligating Aztar or any of its subsidiaries to issue or sell any shares of capital stock of any subsidiary of Aztar or to grant, extend or enter into any such Option or (B) voting trusts, proxies or other commitments, understandings, restrictions or arrangements in favor of any person other than Aztar or a wholly owned subsidiary of Aztar with respect to the voting of or the right to participate in dividends or other earnings on any capital stock of any subsidiary of Aztar.

(vi) No bonds, debentures, notes or other indebtedness or obligations of Aztar or any of its subsidiaries having the right to vote (or which are convertible into or exercisable for securities having the right to vote) (collectively, “Aztar Voting Debt”) on any matters on which Aztar stockholders may vote are issued or outstanding nor are there

8

any outstanding Options obligating Aztar or any of its subsidiaries to issue or sell any Aztar Voting Debt or to grant, extend or enter into any Option with respect thereto. There are no securities convertible into or exercisable for any such securities and no commitments or obligations to issue any of the foregoing.

(c) Authority. The Aztar Board of Directors has unanimously (A) declared that the Merger and the other transactions contemplated hereby are advisable and has adopted this Agreement; (B) resolved to recommend adoption of this Agreement to the holders of shares of Aztar Common Stock and Aztar Preferred Stock; and (C) directed that this Agreement be submitted to the holders of shares of Aztar Common Stock and Aztar Preferred Stock for their adoption. Aztar has full corporate power and authority to enter into this Agreement, to perform its obligations hereunder, and, subject to obtaining Stockholder Approval (as defined in Section 3.01(p)), to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Aztar and the consummation by Aztar of the transactions contemplated hereby have been duly and validly adopted and approved by the Board of Directors of Aztar. No other corporate proceedings on the part of Aztar or its stockholders are necessary to authorize the execution, delivery and performance of this Agreement by Aztar and the consummation by Aztar of the Merger and the other transactions contemplated hereby, other than obtaining Stockholder Approval. This Agreement has been duly and validly executed and delivered by Aztar and constitutes a legal, valid and binding obligation of Aztar enforceable against Aztar in accordance with its terms. Aztar has received the opinion of Goldman, Sachs & Co., Inc., dated the date of this Agreement, to the effect that, as of the date of this Agreement, the Common Stock Merger Consideration is fair from a financial point of view to the holders of Aztar Common Stock.

(d) No Conflicts; Approvals and Consents.

(i) Other than the notices, reports, filings, consents, registrations, declarations, approvals, permits or authorizations (A) required by the Secretary of the State of Delaware as contemplated hereby; (B) required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and (C) by, with, to or from the Gaming Authorities (as defined in Section 8.03) in New Jersey, Nevada, Missouri and Indiana with jurisdiction over Aztar’s gaming operations under any Gaming Laws (as defined in Section 8.03) applicable to Aztar (collectively, the “Aztar Required Gaming Approvals”), except as set forth in Section 3.01(d)(i) of the Aztar Disclosure Letter, no notices, declarations, reports or other filings are required to be made by Aztar with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Aztar or any of its subsidiaries from, any domestic or foreign governmental or regulatory authority, agency, commission, body, court or other legislative, executive or judicial governmental authority (each, a “Governmental Authority”), in connection with the execution, delivery and performance of this Agreement by Aztar and the consummation by Aztar of the Merger and the compliance by Aztar with the provisions of this Agreement, or in connection with the continuing operation of the business of Aztar and its subsidiaries following the Effective Time, except those that the failure to make or obtain, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Aztar.

9

(ii) The execution, delivery and performance of this Agreement by Aztar do not, and the consummation by Aztar of the Merger and the compliance by Aztar with the provisions of this Agreement will not, constitute or result in (A) a breach or violation of, or a default under, the certificate of incorporation or by-laws of Aztar or the comparable governing documents of any of its subsidiaries; (B) except as set forth in Section 3.01(d)(ii)(B) of the Aztar Disclosure Letter, with or without notice, lapse of time or both, a breach or violation of, a termination (or right of termination) or default under, the creation or acceleration of any obligations under or the creation of a Lien on any of the assets of Aztar or any of its subsidiaries pursuant to any agreement, lease, license, contract, note, mortgage, indenture or other obligation, whether or not in writing (a “Contract”), binding upon Aztar or any of its subsidiaries or, assuming (solely with respect to performance of this Agreement by Aztar and consummation by Aztar of the Merger) compliance with the matters referred to in Section 3.01(d)(i), any Law (as defined in Section 3.01(j)) or governmental or non-governmental permit or license to which Aztar or any of its subsidiaries is subject; or (C) any change in the rights or obligations of any party under any Contract binding upon Aztar or any of its subsidiaries (including, without limitation, any change in pricing, term, put or call rights, rights of first offer, rights of first refusal, tag-along or drag-along rights or any similar rights or obligations which may be exercised in connection with the Merger and the other transactions contemplated hereby), except in the case of clause (B) and (C) as individually or in the aggregate have not had and would not reasonably be expected to have a material adverse effect on Aztar.

(iii) Section 3.01(d)(iii) of the Aztar Disclosure Letter sets forth a correct and complete list of Material Contracts (as defined in Section 3.01(m)) of Aztar or any of its subsidiaries pursuant to which consents or waivers are required in connection with the performance by Aztar of its obligations hereunder.

(e) Aztar SEC Reports; Financial Statements.

(i) Aztar has made available to Pinnacle each registration statement, report, proxy statement or information statement prepared by it since December 31, 2002 and filed with the SEC, including Aztar’s Annual Report on Form 10-K for the year ended December 31, 2005, each in the form (including exhibits, annexes and any amendments thereto) filed with the Securities and Exchange Commission (the “SEC”). Aztar has filed or furnished all forms, statements, reports and documents required to be filed or furnished by it with the SEC pursuant to applicable securities statutes, regulations, policies and rules since December 31, 2002 (the forms, statements, reports and documents filed or furnished with the SEC since December 31, 2002 and those filed or furnished with the SEC subsequent to the date of this Agreement, if any, including any amendments thereto, the “Aztar Reports”). Each of the Aztar Reports filed or furnished on or prior to the date hereof, at the time of its filing (except and as to the extent such Aztar Report has been modified or superseded in any subsequent Aztar Report filed and publicly available prior to the date of this Agreement), complied, and each of the Aztar Reports filed or furnished after the date hereof will comply, in all material respects with

10

the applicable requirements of each of the Exchange Act and the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations thereunder and complied or will comply, as applicable, in all material respects with the then applicable accounting standards. As of their respective dates, except as and to the extent modified or superseded in any subsequent Aztar Report filed and publicly available prior to the date of this Agreement, the Aztar Reports did not, and any Aztar Reports filed or furnished with the SEC subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. The Aztar Reports filed or furnished on or prior to the date hereof included, and if filed or furnished after the date hereof, will include all certificates required to be included therein pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended (the “SOX Act”), and the internal control report and attestation of Aztar’s outside auditors required by Section 404 of the SOX Act.

(ii) Each of the consolidated balance sheets included in or incorporated by reference into the Aztar Reports (including the related notes and schedules) fairly presents, or, in the case of the Aztar Reports filed or furnished after the date hereof, will fairly present in all material respects the consolidated financial position of Aztar and its subsidiaries as of its date, and each of the consolidated statements of income, changes in shareholders’ equity and cash flows included in or incorporated by reference into the Aztar Reports (including any related notes and schedules) fairly presents, or in the case of the Aztar Reports filed or furnished after the date hereof, will fairly present in all material respects the net income, total shareholders’ equity and net increase (decrease) in cash and cash equivalents, as the case may be, of Aztar and its subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to the absence of notes and normal year-end audit adjustments that will not be material in amount or effect), in each case in accordance with U.S. generally accepted accounting principles (“GAAP”) consistently applied during the periods involved, except as may be noted therein.

(iii) The management of Aztar has (x) implemented disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) that are reasonably designed to ensure that material information relating to Aztar, including its consolidated subsidiaries, is made known to the chief executive officer and chief financial officer of Aztar by others within those entities, and (y) disclosed, based on its most recent evaluation, to Aztar’s outside auditors and the audit committee of the Board of Directors of Aztar (A) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect in any material respect Aztar’s ability to record, process, summarize and report financial data and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Aztar’s internal controls over financial reporting. Since December 31, 2002, any material change in internal control over financial reporting required to be disclosed in any Aztar Report has been so disclosed.

(iv) Since December 31, 2003, to Aztar’s knowledge, (x) none of Aztar or any of its subsidiaries, or any director, officer, employee, auditor, accountant or

11

representative of Aztar or any of its subsidiaries, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of Aztar or any of its subsidiaries or their respective internal accounting controls relating to periods after December 31, 2003, including any material complaint, allegation, assertion or claim that Aztar or any of its subsidiaries has engaged in questionable accounting or auditing practices (except for any of the foregoing that have been resolved without any material impact and except for any of the foregoing after the date hereof which have no reasonable basis), and (y) no attorney representing Aztar or any of its subsidiaries, whether or not employed by Aztar or any of its subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation, relating to periods after December 31, 2003, by Aztar or any of its officers, directors, employees or agents to the Board of Directors of Aztar or any committee thereof or, to the knowledge of the officers of Aztar, to any director or officer of Aztar.

(v) All filings (other than immaterial filings) required to be made by Aztar or any of its subsidiaries since December 31, 2002 under any applicable state laws and regulations relating to gaming or similar matters, have been filed with the applicable Governmental Authorities, including all forms, statements, reports, agreements (oral or written) and all documents, exhibits, amendments and supplements appertaining thereto so required to be filed, and all such filings complied, as of their respective dates, with all applicable requirements of the applicable statute and the rules and regulations thereunder, except for filings the failure of which to make or the failure of which to make in compliance with all applicable requirements of the applicable statute and the rules and regulations thereunder, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Aztar.

(f) Absence of Certain Changes or Events. Since December 31, 2005 (the “Audit Date”), there has not been any material adverse effect on Aztar or any change, event or development that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on Aztar. Since the Audit Date, Aztar and its subsidiaries have conducted their respective businesses in all material respects only in, and have not engaged in any material transaction other than in accordance with, the ordinary course of such businesses. Since the Audit Date and prior to the date hereof, there has not been any action or event that if taken on or after the date hereof without the consent of Pinnacle would violate the provisions of Section 4.01(a) of this Agreement or any agreement or commitment to do any of the foregoing.

(g) Absence of Undisclosed Liabilities. Except as set forth in Section 3.01(g) of the Aztar Disclosure Letter, there are no liabilities or obligations of Aztar or any of its subsidiaries, whether or not accrued, contingent or otherwise and whether or not required to be disclosed, or any other facts or circumstances that would reasonably be expected to result in any obligations or liabilities of, Aztar or any of its subsidiaries, other than: (a) liabilities or obligations to the extent (I) reflected on the consolidated balance sheet of Aztar included in the most recent audited financial statements included in the Aztar Reports filed prior to the date hereof (the “Audited Financial Statements”), or (II) readily

12

apparent in the notes thereto, (b) liabilities or obligations incurred in the ordinary course of business since December 31, 2005 that individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Aztar, (c) other liabilities or obligations that individually or in the aggregate have not had and would not reasonably be expected to have a material adverse effect on Aztar, (d) performance obligations under Material Contracts required in accordance with their terms, and (e) performance obligations, to the extent required under applicable Law, in the case of each of clause (d) and (e) to the extent arising after the date hereof.

(h) Legal Proceedings; Litigation and Liabilities. Except as set forth in Section 3.01(h) of the Aztar Disclosure Letter, there are no (A) civil, criminal or administrative actions, suits, claims, hearings, arbitrations, investigations or proceedings pending or, to the knowledge of Aztar, threatened against Aztar or any of its subsidiaries or affiliates or (B) litigations, arbitrations, investigations or other proceedings, or injunctions or final judgments relating thereto, pending or, to the knowledge of Aztar, threatened against Aztar or any of its subsidiaries or affiliates before any Governmental Authority, including any Gaming Authority, except in the case of either clause (A) or (B), for those that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Aztar. None of Aztar or any of its subsidiaries or affiliates is a party to or subject to the provisions of any judgment, order, writ, injunction, decree or award of any Governmental Authority, including any Gaming Authority, which, individually or in the aggregate, have had or would reasonably be expected to have a material adverse effect on Aztar.

(i) Information Supplied. None of the information supplied or to be supplied by Aztar for inclusion or incorporation by reference in the proxy statement (the “Proxy Statement”) to be mailed to Aztar’s stockholders in connection with the Stockholders Meeting (as defined in Section 5.01(b)) will, at the date it is first mailed to Aztar’s stockholders or at the time of the Stockholders Meeting contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation is made by Aztar with respect to statements made or incorporated by reference therein based on information supplied by or on behalf of Pinnacle for inclusion or incorporation by reference in the Proxy Statement.

(j) Permits; Compliance with Laws and Orders. The businesses of each of Aztar and its subsidiaries have not been conducted in violation of any federal, state, local or foreign law, statute or ordinance, common law, or any rule, regulation, standard, judgment, order, writ, injunction, decree, arbitration award, agency requirement, license or permit of any Governmental Authority, including any Gaming Authority (collectively, “Laws”), except for such violations that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Aztar. Except as set forth in Section 3.01(j)(1) of the Aztar Disclosure Letter, no investigation, review, proceeding, notice of violation, order of forfeiture or complaint by any Governmental Authority, including any Gaming Authority, with respect to Aztar or any of its

13

subsidiaries is pending or, to the knowledge of Aztar, threatened, nor has any Governmental Authority, including any Gaming Authority, indicated an intention to conduct the same, except for any such investigations or reviews that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Aztar. Except as set forth in Section 3.01(j)(2) of the Aztar Disclosure Letter, each of Aztar and its subsidiaries has obtained and is in compliance with all permits, licenses, certifications, approvals, registrations, consents, authorizations, franchises, variances, exemptions and orders issued or granted by a Governmental Authority, including any Gaming Authority (“Licenses”) necessary to conduct its business as presently conducted, except for any failures to have or to be in compliance with such Licenses which, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Aztar. The actions of the applicable Governmental Authorities, including any Gaming Authority, granting all Licenses have not been reversed, stayed, enjoined, annulled or suspended, and there is not pending or, to the knowledge of Aztar, threatened, any application, petition, objection or other pleading with any Governmental Authority, including any Gaming Authority, which challenges or questions the validity of or any rights of the holder under any License, except for any of the foregoing that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Aztar.

(k) Taxes.

(i) Each of Aztar and its subsidiaries has timely filed, or has caused to be timely filed on its behalf, all material Tax Returns (as defined below) required to be filed by it, and all such Tax Returns are true, complete and accurate in all material respects. All Taxes (as defined below) shown to be due and owing on such Tax Returns have been timely paid, except for such amounts as would not, individually or in the aggregate, be material.

(ii) The most recent financial statements contained in the Aztar Financial Statements delivered to Pinnacle prior to the date of this Agreement reflect, in accordance with GAAP, an adequate reserve for all Taxes payable by Aztar and its subsidiaries for all taxable periods through the date of such financial statements.

(iii) Except as set forth in Section 3.01(k)(iii) of the Aztar Disclosure Letter, there is no audit, examination, deficiency, refund litigation, proposed adjustment or matter in controversy with respect to any material Taxes or material Tax Return of Aztar or its subsidiaries; to the knowledge of Aztar, neither Aztar nor any of its subsidiaries has received written notice of any material claim (not subsequently withdrawn) made by a governmental authority in a jurisdiction where Aztar or any of its subsidiaries, as applicable, does not file a Tax Return, that Aztar or such subsidiary is or may be subject to income taxation by that jurisdiction; no material deficiency with respect to any Taxes has been proposed, asserted or assessed against Aztar or any of its subsidiaries; and no requests for waivers of the time to assess any material amount Taxes are pending.

14

(iv) The federal income Tax Returns of Aztar and its subsidiaries have been examined by and settled with the Internal Revenue Service (“IRS”) (or the applicable statutes of limitation have lapsed) for all years through 2003. All material assessments for Taxes due with respect to such completed and settled examinations or any concluded litigation have been fully paid.

(v) Except as set forth in Section 3.01(k)(v) of the Aztar Disclosure Letter, there are no outstanding written agreements, consents or waivers to extend the statutory period of limitations applicable to the assessment of any material Taxes or deficiencies against Aztar or any of its subsidiaries, and no power of attorney granted by either Aztar or any of its subsidiaries with respect to any material Taxes is currently in force.

(vi) Except as set forth in Section 3.01(k)(vi) of the Aztar Disclosure Letter, neither Aztar nor any of its subsidiaries is a party to any agreement providing for the allocation or sharing of any material amount of Taxes imposed on or with respect to any individual or other person (other than (I) such agreements with customers, vendors, lessors or the like entered into in the ordinary course of business and (II) agreements with or among Aztar or any of its subsidiaries), and neither Aztar nor any of its subsidiaries (A) has been a member of an affiliated group (or similar state, local or foreign filing group) filing a consolidated U.S. federal income Tax Return (other than the group the common parent of which is Aztar) or (B) has any liability for the Taxes of any person (other than Aztar or any of its subsidiaries) (I) under Treasury Regulation § 1.1502-6 (or any similar provision of state, local or foreign law), or (II) as a transferee or successor.

(vii) There are no material Liens for Taxes (other than for current Taxes not yet due and payable) on the assets of Aztar and its subsidiaries.

(viii) Neither Aztar nor any subsidiary has distributed stock of another person, or has had its stock distributed by another person, in a transaction that was purported or intended to be governed in whole or in part by Code Section 355.

For purposes of this Agreement:

“Taxes” means any and all federal, state, local, foreign or other taxes of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any governmental authority, including, without limitation, taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, unemployment, social security, workers’ compensation, or net worth, and taxes or other charges in the nature of excise, withholding, ad valorem or value added.

“Tax Return” means any return, report or similar statement (including the schedules attached thereto) required to be filed with respect to Taxes, including, without limitation, any information return, claim for refund, amended return, or declaration of estimated Taxes.

15

(l) Employee Benefit Plans; ERISA.

(i) For purposes of this Agreement, (x) “Aztar Employee Benefit Plans” means any material employee compensation and benefit policies, arrangements or payroll practices including bonus (including any retention bonus plan), incentive compensation, deferred compensation, long term incentive, pension, profit sharing, retirement, supplemental retirement, stock purchase, stock option, stock ownership, restricted stock, stock appreciation rights, phantom stock, sick leave, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, medical, accident, disability, workmen’s compensation or other insurance, salary continuation for disability, hospitalization, scholarship programs, retiree medical, or other material benefit plan, agreement, practice, policy, program, scheme or arrangement of any kind, whether written or oral, including any “employee benefit plan” within the meaning of Section 3(3) of ERISA or other material benefit arrangements that are maintained, contributed to or sponsored by Aztar or any of its subsidiaries for the benefit of any current or former employee, officer or director of Aztar or any of its subsidiaries and all “employee pension benefit plans,” as defined in Section 3(2) of ERISA, maintained or contributed to by Aztar or any ERISA Affiliate or to which Aztar or any of its subsidiaries or any ERISA Affiliate contributed or is obligated to contribute thereunder within six years prior to the Closing; and (y) “Aztar Employment Agreements” means all individual employment, consulting, termination, separation, severance, change in control, retention, post-employment and other compensation agreements existing as of the date of this Agreement, which are between Aztar or any of its subsidiaries and any current or former director, officer or employee thereof, including the name of such current or former director, officer or employee.

(ii) (A) All Aztar Employee Benefit Plans are in compliance in all material respects with all applicable requirements of law, including ERISA (as defined below) and the Code, (B) each of Aztar and its subsidiaries has performed all material obligations required to be performed by it under any Aztar Employee Benefit Plan and is not in any material respect in default under or in violation of any Aztar Employee Benefit Plan, (C) no material action, dispute, suit, claim, arbitration or legal, administrative or other proceeding or governmental action (other than claims for benefits in the ordinary course) is pending or, to the knowledge of Aztar, threatened (x) with respect to any Aztar Employee Benefit Plan by any current or former employee, officer or director of Aztar or any of its subsidiaries, (y) alleging any breach of the material terms of any Aztar Employee Benefit Plan or any fiduciary duties or (z) with respect to any violation of any applicable law with respect to any such Aztar Employee Benefit Plan, and (D) there does not now exist any circumstance that would reasonably be expected to result in any Controlled Group Liability that would be a material liability of Aztar or any of its subsidiaries following the Closing.

(iii) As used herein:

(A) “Controlled Group Liability” means any and all liabilities (i) under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections 412 and 4971 of the Code, and (iv) as a result of a failure to comply with the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code.

16

(B) “ERISA” means the Employee Retirement and Income Security Act of 1974, as amended, and the rules and regulations thereunder;

(C) “ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with a person or any of its subsidiaries and which, together with such person or any of its subsidiaries, is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code.

(iv) Each Aztar Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code or Section 401(k) of the Code has received a favorable determination letter from the IRS that it is so qualified and each related trust that is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination letter from the IRS that it is so exempt and, to the knowledge of Aztar, no fact or event has occurred since the date of such determination letter or letters from the Internal Revenue Service that would reasonably be expected to affect adversely the qualified status of any such Aztar Employee Benefit Plan or the exempt status of any such trust.

(v) Neither Aztar nor any of its ERISA Affiliates has withdrawn in a complete or partial withdrawal from any Aztar Employee Benefit Plan that is a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA) (“Aztar Multiemployer Plan”) or has any unsatisfied material liability arising from a complete or partial withdrawal, nor has any of them incurred any present or contingent liability due to the termination or reorganization of any Aztar Multiemployer Plan, nor are any of them reasonably expected to incur liability under Section 4063 or 4064 of ERISA with respect to any such Aztar Multiemployer Plan.

(vi) Neither Aztar nor any ERISA Affiliate has any present or contingent material liability under Title IV of ERISA to the Pension Benefit Guaranty Corporation or to a trustee appointed under Section 4042 of ERISA, and no events have occurred and no circumstances exist that would reasonably be expected to result in any such material liability to Aztar or any ERISA Affiliate.

(vii) There does not now exist any circumstance that would reasonably be expected to result in material liability to Aztar or any of its ERISA Affiliates arising from a breach of fiduciary duty in connection with the Aztar Employee Benefit Plans or a non-exempt “prohibited transaction” within the meaning of Section 4975 of the Code or Section 406 of ERISA.

(viii) All contributions, premiums and other payments required by law or any Aztar Employee Benefit Plan or applicable collective bargaining agreement have been made under any such plan to any fund, trust or account established thereunder or in connection therewith by the due date thereof; and any and all contributions, premiums and other payments with respect to compensation or service before and through the

17

Closing Date, or otherwise with respect to periods before and through the Closing Date, due from any of Aztar or its subsidiaries to, under or on account of each Aztar Employee Benefit Plan shall have been paid prior to the Closing Date or shall have been fully reserved and provided for or accrued on Aztar’s financial statements.

(ix) Except as set forth in Section 3.01(l)(ix) of the Aztar Disclosure Letter, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement, whether alone, or in connection with any other event will (A) result in the acceleration of the time of payment of or vesting in, or an increase in the amount of, compensation or benefits due any current or former employee, director or officer of Aztar or its subsidiaries (including any equity compensation), (B) result in any forgiveness of indebtedness or obligation to fund benefits with respect to any such employee, director or officer or (C) result in any payment or any entitlement to payment (including, but not limited to, any retention bonuses, parachute payments or noncompetition payments) becoming due to any employee or former employee or group of employees or former employees or to any director or former director or (D) result in the payment of any “excess parachute payment” within the meaning of Section 280G of the Code with respect to a current or former employee of Aztar or any of its subsidiaries. Section 3.01(l)(ix) of the Aztar Disclosure Letter sets forth a good-faith estimate of the amount of any estimated severance payment (including estimated gross-up payments, if applicable) owed under the Aztar Employment Agreements with the five most highly compensated Company Employees (as defined in Section 5.05(a)) employed at Aztar’s corporate headquarters due to the transactions contemplated by this Agreement and any subsequent termination of employment.

(m) Material Contracts. Except as set forth in Section 3.01(m) of the Aztar Disclosure Letter, neither Aztar nor any of its subsidiaries is a party to or bound by, as of the date hereof, any of the following (whether or not in writing), collectively with all exhibits and schedules to such Contracts:

(i) any agreement or series of related agreement providing for the acquisition or disposition of securities of any person or any assets, in each case involving more than $1,000,000 individually or in the aggregate, other than in the ordinary course of business consistent with past practice or in connection with the capital expenditure budgets included in Section 4.01(a)(xi) of the Aztar Disclosure Letter;

(ii) any Contract that imposes payment, cancellation penalties or other obligations in connection with the redevelopment or future operation (other than ordinary course hotel operations) of all or any portion of Aztar’s property, facility or operations in Las Vegas, Nevada (the “Las Vegas Site”);

(iii) any Contract or commitment relating to indebtedness for borrowed money or the deferred purchase price of property (in either case, whether incurred, assumed, guaranteed or secured by any asset) in excess of $1,000,000; and

18

(iv) any Contract that would be required to be filed as an exhibit to an Annual Report on Form 10-K pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act; (the Contracts described in clauses (i) – (iv), together with all exhibits and schedules to such Contracts, being the “Material Contracts”).

A true and complete copy of each Material Contract has previously been delivered or made available to Pinnacle. Except as individually or in the aggregate has not had and would not reasonably be expected to have a material adverse effect on Aztar, each Contract by which Aztar or its subsidiaries is bound is a valid and binding agreement of Aztar or one of its subsidiaries enforceable against Aztar or one of its subsidiaries, and, to the knowledge of Aztar, the counterparties thereto in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors rights generally and to equitable principles (whether considered in a proceeding at law or in equity). Aztar and its subsidiaries are not (and to the knowledge of Aztar, no counterparty is) in breach or violation of or in default in the performance or observance of any term or provision of, and no event has occurred which, with lapse of time or action by a third party or Aztar, would result in a default under, any Contract to which Aztar or any of its subsidiaries is a party or by which any of them is bound or to which any of their property is subject, other than breaches, violations and defaults which have not had and would not reasonably be expected, individually or in the aggregate, to have a material adverse effect on Aztar.

(n) Title to Assets. Except as set forth in Section 3.01(n) of the Aztar Disclosure Letter, Aztar and each of its subsidiaries has good and valid title in fee simple to all their owned real property, as reflected in the most recent balance sheet included in the Audited Financial Statements included in the Aztar Reports, except for properties and assets that have been disposed of in the ordinary course of business since the date of such balance sheet, free and clear of all mortgages, liens, pledges, charges or encumbrances of any nature whatsoever, except (i) liens for current taxes, payments of which are not yet delinquent or are being disputed in good faith, (ii) such imperfections in title and easements and encumbrances, if any, as are not substantial in character, amount or extent and do not materially detract from the value, or interfere with the present use, or Aztar’s intended use as of the date hereof, of the property subject thereto or affected thereby, or otherwise materially impair Aztar’s business operations (in the manner presently carried on by Aztar or intended, as of the date hereof, to be carried on by Aztar), or (iii) for such matters which have not had and would not reasonably be expected, individually or in the aggregate, to have a material adverse effect on Aztar. Aztar and each of its subsidiaries have good and valid leasehold interests in all real property leased by them. All leases under which Aztar or any of its subsidiaries leases any real or personal property are in good standing, valid and effective against Aztar, and to Aztar’s knowledge the counterparties thereto, in accordance with their respective terms, is not and there is not, under any of such leases, any existing default by Aztar, or to Aztar’s knowledge the counterparties thereto, or event which with notice or lapse of time or both would become a default by Aztar or to Aztar’s knowledge the counterparties thereto other than failures to be in good standing, valid and effective and defaults under such leases which have not had and would not reasonably be expected, individually or in the aggregate, to have a material adverse effect on Aztar.

19

(o) Environmental Matters. Except for matters set forth in Section 3.01(o) of the Aztar Disclosure Letter and such matters as individually or in the aggregate, have not had and would not reasonably be expected to result in a material adverse effect on Aztar: (i) Aztar and its subsidiaries have complied at all times with all applicable Environmental Laws (as defined below); (ii) no property currently owned, leased or operated by Aztar or any of its subsidiaries (including soils, groundwater, surface water, buildings or other structures) is contaminated with any Hazardous Substance (as defined below) in a manner that is or would be required to be Remediated or Removed (as such terms are defined below), that is in violation of any Environmental Law, or that is reasonably likely to give rise to any Environmental Liability; (iii) Aztar and its subsidiaries have no information that any property formerly owned, leased or operated by Aztar or any of its subsidiaries was contaminated with any Hazardous Substance in a manner requiring Remediation or Removal under applicable Environmental Law, during or prior to such period of ownership, leasehold, or operation; (iv) neither Aztar nor any of its subsidiaries nor any prior owner or operator has incurred in the past or is now subject to any Environmental Liabilities (as defined below); (v) neither Aztar nor any of its subsidiaries has received any notice, demand, letter, claim or request for information alleging that Aztar or any of its subsidiaries may be in violation of or subject to liability under any Environmental Law; (vi) neither Aztar nor any of its subsidiaries is subject to any order, decree, injunction or agreement with any Governmental Authority, or any indemnity or other agreement with any third party, concerning liability or obligations relating to any Environmental Law or otherwise relating to any Hazardous Substance or any environmental, health or safety matter; and (vii) to the knowledge of Aztar, there are no other circumstances or conditions involving Aztar or any of its subsidiaries that would reasonably be expected to result in any Environmental Liability.

(A) As used herein, the term “Environmental Laws” means all Laws (including any common law) relating to: (A) the protection, investigation or restoration of the environment, health, safety, or natural resources, (B) the handling, use, presence, disposal, Release or threatened release of any Hazardous Substance or (C) noise, odor, indoor air, employee exposure, electromagnetic fields, wetlands, pollution, contamination or any injury or threat of injury to persons or property relating to any Hazardous Substance.

(B) As used herein, the term “Environmental Liability” means (i) any obligations or liabilities (including any notices, claims, complaints, suits or other assertions of obligations or liabilities) that are: (A) related to environment, health or safety issues (including on-site or off-site contamination by Hazardous Substances of surface or subsurface soil or water, and occupational safety and health); and (B) based upon (I) any provision of Environmental Laws or (II) any order, consent, decree, writ, injunction or judgment issued or otherwise imposed by any Governmental Authority. The term “Environmental Liabilities” includes, without limitation: (A) fines, penalties, judgments, awards, settlements, losses, damages (including consequential damages), costs, fees (including attorneys’ and consultants’ fees), expenses and disbursements relating to environmental, health or safety matters; (B) defense and other responses to any administrative or judicial action (including notices, claims, complaints, suits and other assertions of

20

liability) relating to environmental, health or safety matters; and (C) financial responsibility for (x) cleanup costs and injunctive relief, including any Removal, Remedial or Response actions, and natural resource damages, and (y) other Environmental Laws compliance or remedial measures.

(C) As used herein, the term “Hazardous Substance” means any “hazardous substance” and any “pollutant or contaminant” as those terms are defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”); any “hazardous waste” as that term is defined in the Resource Conservation and Recovery Act (“RCRA”); and any “hazardous material” as that term is defined in the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.), as amended (including as those terms are further defined, construed, or otherwise used in rules, regulations, standards, orders, guidelines, directives, and publications issued pursuant to, or otherwise in implementation of, said Laws); and including, without limitation, any petroleum product or byproduct, solvent, flammable or explosive material, radioactive material, asbestos, lead paint, polychlorinated biphenyls (or PCBs), dioxins, dibenzofurans, heavy metals, radon gas, toxic mold and mycotoxins.

(D) As used herein, the term “Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, placing, discarding, abandonment, or disposing into the environment (including the placing, discarding or abandonment of any barrel, container or other receptacle containing any Hazardous Substance or other material).

(E) As used herein, the term “Removal, Remedial or Response” actions include the types of activities covered by CERCLA, RCRA, and other comparable Environmental Laws, and whether such activities are those which might be taken by a Governmental Authority or those which a Governmental Authority or any other person might seek to require of waste generators, handlers, distributors, processors, users, storers, treaters, owners, operators, transporters, recyclers, reusers, disposers, or other persons under “removal,” “remedial,” or other “response” actions.

(p) Vote Required. The affirmative vote of the holders of record of at least a majority of the outstanding shares of Aztar Common Stock and Aztar Preferred Stock, voting together as a single class, with respect to the adoption of this Agreement (the “Stockholder Approval”), is the only vote of the holders of any class or series of the capital stock of Aztar or its subsidiaries required to approve this Agreement, the Merger and the other transactions contemplated hereby. No “fair price”, “merger moratorium”, “control share acquisition”, or other anti-takeover or similar statute or regulation applies or purports to apply to this Agreement, the Merger or the other transactions contemplated hereby, except for those which have been made not applicable to this Agreement, the Merger and the other transactions contemplated hereby by valid action of the Board of Directors of Aztar prior to the execution and delivery hereof. Prior to the execution and delivery hereof, the Board of Directors of Aztar has taken all action necessary to assure that (x) the Rights Agreement, dated as of December 14, 1999 between Aztar and

21

ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the “Rights Agreement”) exempts Pinnacle and its affiliates and associates (as defined therein) from the operation of the provisions of the Rights Agreement, (y) none of Pinnacle, or its affiliates or associates are or will become an Acquiring Person (as defined in the Rights Agreement) as a result of the execution, delivery and performance of this Agreement and (z) the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby are exempt from the provisions thereof. Aztar has taken such action as is necessary so that this Agreement is not subject to the provisions of Article Ninth of its Restated Certificate of Incorporation, as amended.

(q) Labor and Employment Matters.

(i) Except as set forth on Section 3.01(q)(i) of the Aztar Disclosure Letter, neither Aztar nor any its subsidiaries is a party to any material collective bargaining agreement or other current labor agreement with any labor union or organization nor does Aztar or any of its subsidiaries have any knowledge of any activity or proceeding of any labor organization (or representative thereof) or employee group (or representative thereof) to organize any such employees.

(ii) There is no material unfair labor practice charge or grievance arising out of a collective bargaining agreement or other grievance procedure pending, or, to the knowledge of Aztar, threatened against Aztar or any of its subsidiaries.

(iii) Except as set forth on Section 3.01(q)(iii) of the Aztar Disclosure Letter, there is no material complaint, lawsuit or proceeding in any forum by or on behalf of any present or former employee, any applicant for employment or any classes of the foregoing, alleging breach of any express or implied contract of employment, any law or regulation governing employment or the termination thereof or discriminatory, wrongful or tortious conduct in connection with the employment relationship pending, or, to the knowledge of Aztar, threatened against Aztar or any of its subsidiaries. There is no strike, slowdown, work stoppage or lockout pending, or, to the knowledge of Aztar, threatened, against or involving Aztar or any of its subsidiaries. Aztar and each of its subsidiaries are in compliance in all material respects with all applicable laws in respect of employment and employment practices, terms and conditions of employment, wages, hours of work and occupational safety and health.

(r) Insurance. Except for failures to maintain insurance or self-insurance that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Aztar, since December 31, 2002, each of Aztar and its subsidiaries has been continuously insured with financially responsible insurers or has self-insured, in each case, except as set forth on Section 3.01(r) of the Aztar Disclosure Letter, in such amounts and with respect to such risks and losses as Aztar in its good faith judgment believes are reasonable and adequate for companies conducting the business conducted by Aztar and its subsidiaries. Neither Aztar nor any of its subsidiaries has received any notice of cancellation or termination or denial of coverage with respect to any insurance policy of Aztar or any of its subsidiaries in effect as of the date hereof (or under which Aztar has any pending claims), except as set forth on Section 3.01(q) of the

22

Aztar Disclosure Letter and except with respect to any cancellation or termination that, individually or in the aggregate, has not had and would not reasonably be expected to have a material adverse effect on Aztar.

(s) Brokers and Finders. Neither Aztar nor any of its subsidiaries nor any other person has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders, fees in connection with the Merger or the other transactions contemplated in this Agreement, in each case for which Aztar or any of its subsidiaries will be liable, except that Aztar has employed Goldman, Sachs & Co., and a true and complete copy of the engagement letter with such financial advisor has been provided to Pinnacle prior to the date hereof.

Section 3.02 Representations and Warranties of Pinnacle . Except as and to the extent set forth in the letter dated the date of this Agreement and delivered to Pinnacle by Aztar concurrently with the execution and delivery of this Agreement (the “Pinnacle Disclosure Letter”) and, to the extent the qualifying nature of such disclosure is readily apparent therefrom, except as and to the extent set forth in the Pinnacle Reports (as defined in Section 3.02(f)) filed on or after January 1, 2005 and prior to the date hereof (excluding any disclosures set forth in any risk factor section, in any section relating to forward looking statements and any other disclosures included therein to the extent that they are cautionary, predictive or forward-looking in nature), Pinnacle represents and warrants to Aztar as follows:

(a) Financing Commitments. Pinnacle has obtained written commitments (the “Financing Commitments”) for the financing necessary to consummate the Merger and the other transactions contemplated hereby (including any refinancing of indebtedness of Aztar or Pinnacle or any of their respective subsidiaries which Pinnacle deems it advisable to refinance in connection with the consummation of the Merger and the other transactions contemplated hereby) and to pay all associated fees, costs and expenses (the “Financing”). Pinnacle has provided true, accurate and complete copies of such commitments to Aztar. None of the Financing Commitments has been amended, modified or terminated prior to the date of this Agreement, and the respective commitments contained in the Financing Commitments have not been withdrawn or rescinded in any respect. As of the date hereof, the Financing Commitments are in full force and effect and (based on and assuming the accuracy of the representations and warranties of Aztar in this Agreement and the compliance by Aztar with its obligations hereunder) no event has occurred which, with or without notice, lapse of time (other than the expiration of the term thereof) or both, would constitute a default on the part of Pinnacle under any of the Financing Commitments. There are no conditions precedent or other contingencies related to the funding of the full amount of the Financing, other than as set forth in or contemplated by the Financing Commitments. The aggregate proceeds to be disbursed pursuant to the agreements contemplated by the Financing Commitments, together with Pinnacle’s and Aztar’s cash and cash equivalents, will be sufficient for Pinnacle to pay the aggregate Merger Consideration and to consummate the Consent/Tender Offers, if any (and any other repayment or refinancing of debt contemplated in this Agreement or the Financing Commitments), and to pay all related fees and expenses. Based on and assuming the accuracy of the representations and warranties of Aztar in this Agreement and the compliance by Aztar with its obligations hereunder, Pinnacle has no reason as of the date hereof to believe that any of the conditions to

23

the Financing contemplated by the Financing Commitments will not be satisfied or that the Financing will not be made available to Pinnacle on or prior the Closing Date. Nothing in this Agreement shall prevent Pinnacle from amending or modifying the Financing Commitments or from seeking to raise equity or other alternative sources of funds prior to the Closing, as long as such amendment or modification or other action does not prevent, delay or reduce the likelihood of the consummation of the Merger.

(b) Solvency. As of the Effective Time and after giving effect to all of the transactions contemplated by this Agreement, including the payment of the aggregate Merger Consideration, the Financing, consummation of the Consent/Tender Offers, if any (and any other repayment or refinancing of debt contemplated in this Agreement or the Financing Commitments), and payment of all related fees and expenses, and assuming the accuracy of the representations and warranties of Aztar in this Agreement and the compliance by Aztar with its obligations hereunder, the Surviving Corporation (on a combined basis with its subsidiaries) will be solvent (as defined in Section 8.03).

(c) Organization. Each of Pinnacle and its subsidiaries is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has full power and authority to conduct its business as and to the extent now conducted and to own, use and lease its assets and properties, except for such failures to be so organized, existing and in good standing or to have such power and authority that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect (as defined in Section 8.03) on Pinnacle. Each of Pinnacle and its subsidiaries is duly qualified, licensed or admitted to do business and is in good standing in each jurisdiction in which the ownership, use or leasing of its assets and properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so qualified, licensed or admitted and in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Pinnacle.

(d) Authority. Each of Pinnacle and Merger Sub has full corporate power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Pinnacle and Merger Sub and the consummation by Pinnacle and Merger Sub of the transactions contemplated hereby have been duly and validly unanimously adopted and approved by the Board of Directors of Pinnacle and Merger Sub and by Pinnacle as the sole shareholder of Merger Sub. No other corporate proceedings on the part of Pinnacle, Merger Sub or their stockholders are necessary to authorize the execution, delivery and performance of this Agreement by Pinnacle or Merger Sub and the consummation by Pinnacle and Merger Sub of the Merger and the other transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Pinnacle and Merger Sub and constitutes a legal, valid and binding obligation of Pinnacle and Merger Sub enforceable against Pinnacle and Merger Sub in accordance with its terms.

(e) No Conflicts; Approvals and Consents.

(i) Other than the notices, reports, filings, consents, registrations, declarations, approvals, permits or authorizations (A) required by the Secretary of the

24

State of Delaware as contemplated hereby; (B) required under the HSR Act, the Exchange Act; and (C) by, with, to or from any Gaming Authority with jurisdiction over Aztar’s or Pinnacle’s gaming operations required under any Gaming Law applicable to Pinnacle, including those set forth in Section 3.02(e)(i)(C) of the Pinnacle Disclosure Letter (collectively, the “Pinnacle Required Gaming Approvals” and together with the Aztar Required Gaming Approvals, the “Required Gaming Approvals”), no notices, declarations, reports or other filings are required to be made by Aztar with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Pinnacle or any of its subsidiaries from, any Governmental Authority in connection with the execution, delivery and performance of this Agreement by Pinnacle and the consummation by Pinnacle of the Merger and the other transactions contemplated hereby, including the Financing, or in connection with the continuing operation of the business of Pinnacle and its subsidiaries following the Effective Time, except those that the failure to make or obtain, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Pinnacle.

(ii) The execution, delivery and performance of this Agreement by Pinnacle do not, and the consummation by Pinnacle of the Merger and the other transactions contemplated hereby, including the Financing, will not, constitute or result in (A) a breach or violation of, or a default under, the certificate of incorporation or by-laws of Pinnacle or the comparable governing documents of any of its subsidiaries; (B) with or without notice, lapse of time or both, a breach or violation of, a termination (or right of termination) or default under, the creation or acceleration of any obligations under or the creation of a Lien on any of the assets of Pinnacle or any of its subsidiaries pursuant to any Contract binding upon Pinnacle or any of its subsidiaries or, assuming (solely with respect to performance of this Agreement and consummation by Pinnacle of the Merger and the other transactions contemplated hereby) compliance with the matters referred to in Section 3.02(e)(i), any Law or governmental or non-governmental permit or license to which Pinnacle or any of its subsidiaries is subject; or (C) any change in the rights or obligations of any party under any Contract binding upon Pinnacle or any of its subsidiaries (including, without limitation, any change in pricing, term, put or call rights, rights of first offer, rights of first refusal, tag-along or drag-along rights or any similar rights or obligations which may be exercised in connection with the Merger and the other transactions contemplated hereby), except in the case of clause (B) and (C) as individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Pinnacle.

(f) Pinnacle SEC Reports; Financial Statements.

(i) Pinnacle has made available to Aztar each registration statement, report, proxy statement or information statement prepared by it since December 31, 2002 and filed with the SEC, including Pinnacle’s Annual Report on Form 10-K for the year ended December 31, 2004 and Pinnacle’s Quarterly Reports on Form 10-Q for the quarterly periods ending March 31, June 30 and September 30, 2005, each in the form (including exhibits, annexes and any amendments thereto) filed with the SEC. Pinnacle has filed or furnished all forms, statements, reports and documents required to be filed or furnished by it with the SEC pursuant to applicable securities statutes, regulations,

25

policies and rules since December 31, 2002 (the forms, statements, reports and documents filed or furnished with the SEC since December 31, 2002 and those filed or furnished with the SEC subsequent to the date of this Agreement, if any, including any amendments thereto, the “Pinnacle Reports”). Each of the Pinnacle Reports filed or furnished on or prior to the date hereof, at the time of its filing (except as and to the extent such Pinnacle Report has been modified or superseded in any subsequent Pinnacle Report filed and publicly available prior to the date of this Agreement), complied or, in the case of any Pinnacle Reports filed or furnished after the date hereof, will comply in all material respects with the applicable requirements of each of the Securities Act and the Exchange Act and the rules and regulations thereunder and complied in all material respects with the then applicable accounting standards. As of their respective dates, except as and to the extent modified or superseded in any subsequent Aztar Report filed and publicly available prior to the date of this Agreement, the Pinnacle Reports did not, and any Pinnacle Reports filed or furnished with the SEC subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.

(ii) Each of the consolidated balance sheets included in or incorporated by reference into the Pinnacle Reports (including the related notes and schedules) fairly presents, or, in the case of the Pinnacle Reports filed or furnished after the date hereof, will fairly present in all material respects the consolidated financial position of Pinnacle and its subsidiaries as of its date, and each of the consolidated statements of income, changes in shareholders’ equity and cash flows included in or incorporated by reference into the Pinnacle Reports (including any related notes and schedules) fairly presents or in the case of the Pinnacle Reports filed or furnished after the date hereof, will fairly present in all material respects the net income, total shareholders’ equity and net increase (decrease) in cash and cash equivalents, as the case may be, of Pinnacle and its subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to the absence of notes and normal year-end audit adjustments that will not be material in amount or effect), in each case in accordance with GAAP consistently applied during the periods involved, except as may be noted therein.

(iii) All filings (other than immaterial filings) required to be made by Pinnacle or any of its subsidiaries since December 31, 2002 under any applicable state laws and regulations relating to gaming or similar matters, have been filed with the applicable Governmental Authorities, including all forms, statements, reports, agreements (oral or written) and all documents, exhibits, amendments and supplements appertaining thereto so required to be filed, and all such filings complied, as of their respective dates, with all applicable requirements of the applicable statute and the rules and regulations thereunder, except for filings the failure of which to make or the failure of which to make in compliance with all applicable requirements of the applicable statute and the rules and regulations thereunder, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Pinnacle.

(g) Absence of Certain Changes or Events. Since September 30, 2005 and prior to the date hereof, there has not been any material adverse effect on Pinnacle or any

26

change, event or development that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on Pinnacle. Since September 30, 2005 and prior to the date hereof, Pinnacle and its subsidiaries have conducted their respective businesses in all material respects only in, and have not engaged in any material transaction other than in accordance with, the ordinary course of such businesses.

(h) Permits; Compliance with Laws and Orders. The businesses of each of Pinnacle and its subsidiaries have not been conducted in violation of any Laws, except for such violations that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Pinnacle. No investigation, review, proceeding, notice of violation, order of forfeiture or complaint by any Governmental Authority, including any Gaming Authority, with respect to Pinnacle or any of its subsidiaries is pending or, to the knowledge of Pinnacle, threatened, nor has any Governmental Authority, including any Gaming Authority, indicated an intention to conduct the same, except for any such investigations or reviews that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Pinnacle. Each of Pinnacle and its subsidiaries has obtained and is in compliance with all Licenses necessary to conduct its business as presently conducted, except for any failures to have or to be in compliance with such Licenses which, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Pinnacle. The actions of the applicable Governmental Authorities, including any Gaming Authority, granting all Licenses have not been reversed, stayed, enjoined, annulled or suspended, and there is not pending or, to the knowledge of Pinnacle, threatened in writing, any application, petition, objection or other pleading with any Governmental Authority, including any Gaming Authority, which challenges or questions the validity of or any rights of the holder under any License, except for any of the foregoing that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Pinnacle.

(i) Legal Proceedings; Litigation and Liabilities. There are no (A) civil, criminal or administrative actions, suits, claims, hearings, arbitrations, investigations or proceedings pending or, to the knowledge of Pinnacle, threatened against Pinnacle or any of its subsidiaries or affiliates or (B) litigations, arbitrations, investigations or other proceedings, or injunctions or final judgments relating thereto, pending or, to the knowledge of Pinnacle, threatened against Pinnacle or any of its subsidiaries or affiliates before any Governmental Authority, including any Gaming Authority, except in the case of either clause (A) or (B), for those that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Pinnacle. None of Pinnacle or any of its subsidiaries or affiliates is a party to or subject to the provisions of any judgment, order, writ, injunction, decree or award of any Governmental Authority, including any Gaming Authority, which, individually or in the aggregate, have had or would reasonably be expected to have a material adverse effect on Pinnacle.

(j) Receipt of Licenses. As of the date hereof, to the knowledge of Pinnacle, there is no state of facts that would be reasonably likely to prevent the receipt by Pinnacle of a new gaming license in a jurisdiction in which Pinnacle is not currently licensed which Pinnacle is required to obtain in connection with the consummation of the transactions contemplated hereby.

27

(k) Ownership and Operations of Merger Sub. Pinnacle owns of record and beneficially owns all outstanding shares of capital stock of Merger Sub. Merger Sub has engaged in no other business or other activities or incurred any liabilities, other than in connection with the transactions contemplated hereby.

(l) Brokers and Finders. Neither Pinnacle nor any of its subsidiaries has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders, fees in connection with the Merger or the other transactions contemplated in this Agreement, in each case for which Aztar or any of its subsidiaries will be liable. Pinnacle has employed Bear, Stearns & Co. Inc. and Lehman Brothers Inc. as its financial advisors in connection with the transactions contemplated by this Agreement.

ARTICLE IV

Covenants

Section 4.01 Covenants of Aztar Interim Operations . (a) Aztar covenants and agrees as to itself and its subsidiaries that, after the date hereof and prior to the Effective Time, unless Pinnacle shall otherwise approve in writing and except as otherwise expressly contemplated by this Agreement or as required by applicable Laws, the business of it and its subsidiaries shall be conducted in all material respects in the ordinary and usual course and, to the extent consistent therewith, it and its subsidiaries shall use their respective reasonable best efforts to substantially preserve their business organizations intact and maintain existing relations and goodwill with Governmental Authorities, customers, suppliers, distributors, creditors, lessors, employees and business associates and keep available the services of the present employees and agents of Aztar and its subsidiaries in all material respects. In furtherance of the foregoing, Aztar agrees to resume and continue the taking of reservations at its Las Vegas, Nevada hotel and to pursue ordinary course marketing activities in connection with such facility as promptly as practicable. Without limiting the generality of the foregoing and in furtherance thereof, from the date of this Agreement until the Effective Time, subject to applicable Law, except (A) as otherwise expressly required by this Agreement, (B) as Pinnacle may approve in writing or (C) as set forth in the applicable subsection of Section 4.01(a) of Aztar Disclosure Letter, Aztar will not and will not permit its subsidiaries to:

(i) adopt or propose any change in its certificate of incorporation or by-laws or other applicable governing instruments or amend any term of the shares of Aztar Common Stock or Aztar Preferred Stock;

(ii) merge or consolidate Aztar or any of its subsidiaries with any other person;

(iii) acquire assets outside of the ordinary course of business from any other person with a value or purchase price in excess of $1,000,000 in the aggregate, other than acquisitions set forth in Section 4.01(a)(iii) of Aztar Disclosure Letter, and other than capital expenditures as set forth in Section 4.01(a)(xi) of Aztar Disclosure Letter;

28

(iv) other than in connection with Aztar’s application for a gaming license in Allentown, Pennsylvania, (i) enter into any material line of business in any geographic area other than the current lines of business of Aztar or any of its subsidiaries, and in the geographic areas where they are currently conducted, as of the date hereof or (ii) engage in the conduct of any business in any new jurisdiction which would require the receipt of any additional Governmental Consent (as defined in Section 5.03(f)) in connection with the consummation of the Merger and the transactions contemplated hereby;

(v) other than upon exercise of Aztar Employee Stock Options or conversion of Aztar Preferred Stock, issue, sell, pledge, dispose of, grant, transfer, lease, license, guarantee, encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, lease, license, guarantee or encumbrance of, any shares of capital stock of Aztar or any its subsidiaries, or securities convertible or exchangeable into or exercisable for any shares of such capital stock, or any options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or other rights of any kind to acquire any shares of such capital stock or such convertible or exchangeable securities;

(vi) other than as required in accordance with the terms of Aztar’s credit facility as in effect on the date hereof, create or incur any Lien (other than mechanics’, warehousemen’s or similar Liens incurred in accordance with Law in connection with construction projects in New Jersey and Indiana and routine maintenance, in each case, permitted by this Section 4.01 for amounts not past due) on any assets of Aztar or any of its subsidiaries;

(vii) make any loans, advances or capital contributions to or investments in any person, other than (a) loans, advances, capital contributions or investments not in excess of $750,000 in the aggregate, (b) loans, advances, capital contributions or investments pursuant to commitments set forth on Section 4.01(a)(vii) of the Aztar Disclosure Letter or (c) intercompany loans and advances to wholly-owned subsidiaries in the ordinary course of business consistent with past practice;

(viii) other than for regular cash dividends on the Aztar Preferred Stock at the times and in the amounts required by the terms thereof, declare, set aside or pay any dividend or distribution (whether in cash, stock or property or any combination thereof) on (i) any shares of Aztar Common Stock or (ii) any shares of capital stock of any subsidiary (other than wholly owned subsidiaries and pro rata dividends payable to holders of interests in non wholly owned subsidiaries);

(ix) reclassify, split, combine, subdivide or repurchase, redeem or otherwise acquire, directly or indirectly, any of its capital stock or securities convertible or exchangeable into or exercisable for any shares of its capital stock, except for required redemptions of Aztar Preferred Stock in the ordinary course of business;

29

(x) incur, redeem or repurchase any indebtedness for borrowed money or guarantee such indebtedness of another person, or issue or sell any debt securities or warrants or other rights to acquire any debt security of Aztar or any of its subsidiaries, except for the incurrence of indebtedness for borrowed money incurred under Aztar’s existing revolving credit facility in the ordinary course of business as long as the aggregate amount outstanding under Aztar’s existing revolving credit facility does not exceed $150 million at any time, and except for the incurrence of indebtedness for borrowed money in replacement of existing indebtedness upon maturity thereof for borrowed money on customary commercial terms;

(xi) without the consent of Pinnacle (such consent not to be unreasonably withheld or delayed in connection with maintenance and similar capital expenditures) and except for capital expenditures as set forth in Section 4.01(a)(xi) of the Aztar Disclosure Letter, make or authorize any capital expenditure;

(xii) enter into any commitment or Contract with respect to the redevelopment or future operation of the Las Vegas Site (other than ordinary course hotel operation); provided, however, that Aztar shall be permitted to continue design work that is in progress and substantially complete as of the date of this Agreement in connection with the redevelopment of the Last Vegas Site in the ordinary course of business consistent with past practice, the cost of which design work shall not exceed $2.5 million after the date hereof;

(xiii) except as expressly permitted by Section 4.01(xix), enter into any Covered Contract (as defined in Section 8.03) other than in the ordinary course of business consistent with past practice after consultation with Pinnacle;

(xiv) make any changes with respect to accounting policies or procedures, except as required by changes in GAAP or by applicable Law or except as Aztar, based upon the advice of its independent auditors after prior notice to Pinnacle, determines in good faith is advisable to conform to best accounting practices;

(xv) settle any litigation or other proceedings for an amount to be paid by Aztar or any of its subsidiaries in excess of $2,000,000 or which would be reasonably likely to have any material adverse impact on the operations of Aztar or any of its subsidiaries;

(xvi) (i) except as expressly permitted by Section 4.01(xix), amend or modify in any material respect, or terminate or waive any material right or benefit under, any Covered Contract, other than in the ordinary course of business consistent with past practice after consultation with Pinnacle, or (ii) cancel, modify in any material respect or waive any debts or claims held by it or waive any rights having in each case a value in excess of $1,000,000;

(xvii) except as required by Law, make any material Tax election or take any material position on any Tax Return filed on or after the date of this Agreement or adopt any method therefor that is inconsistent with elections made, positions taken or methods used in preparing or filing similar Tax Returns in prior periods;

30

(xviii) sell, lease, license or otherwise dispose of any assets of Aztar or its subsidiaries except (i) in the ordinary course of business or obsolete assets or (ii) except as set forth on Section 4.01(a)(xviii) of the Aztar Disclosure Letter, sales, leases, licenses or other dispositions of assets with a fair market value not in excess of $1,000,000 in respect of any one asset and not in excess of $10,000,000 in the aggregate;

(xix) except as set forth on Schedule 4.01(a)(xix), required pursuant to existing written, binding agreements in effect prior to the date of this Agreement or as otherwise required by applicable Law, including without limitation as may be required to comply with Section 409A of the Code (provided that any such changes shall be done in a manner as to not increase the present value of any payments), (A) enter into any commitment to provide any severance or termination benefits to (or amend any existing arrangement with) any director, officer, consultant or employee of Aztar or any of its subsidiaries, (B) increase the compensation or benefits payable or to become payable to the directors, officers, consultants or employees of Aztar or any of its subsidiaries other than in the ordinary course of business consistent with past practice with respect to base pay for non-officer employees, (C) establish, adopt, enter into or amend or terminate (except for technical amendments in the ordinary course of business consistent with past practice, provided that such amendments do not increase the cost of such arrangements to Aztar) any collective bargaining agreement, Aztar Employee Stock Plan, Aztar Employee Benefit Plan or Aztar Employment Agreement (or any such agreement, plan or arrangement which would otherwise be considered a Aztar Employee Stock Plan, Aztar Employee Benefit Plan or Aztar Employment Agreement if established, adopted or entered into after the date hereof), (D) grant or accelerate the vesting of any awards under any Aztar Employee Stock Plan, Aztar Employee Benefit Plan or Aztar Employment Agreement, (E) take any action to fund or in any other way secure the payment of compensation or benefits under any Aztar Employee Benefit Plan or Aztar Employment Agreement, (F) materially change any actuarial or other assumptions used to calculate funding obligations with respect to any Aztar Employee Benefit Plan or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP, (G) amend the terms of any outstanding equity-based award, or (H) exercise any discretion to cash out any benefits or awards, (I) make any material determinations not in the ordinary course of business consistent with past practice under any collective bargaining agreement, Aztar Employee Stock Plan, Aztar Employment Agreement or Aztar Employee Benefit Plan, (J) grant or promise any tax offset payment award under any Aztar Employee Stock Plan, or (K) make any loan or cash advance to any current or former director, officer, employee, consultant or independent contractor; or

(xx) agree or commit to do any of the foregoing.

(b) Prior to the Closing, subject to applicable Law, Aztar agrees to provide, and shall cause its subsidiaries to provide, and Aztar and its subsidiaries shall use their reasonable best efforts to cause their respective officers, employees, representatives and advisors,

31

including legal advisors and accountants, to provide, to Pinnacle all cooperation reasonably requested by Pinnacle that is necessary or advisable in connection with the arrangement of the Financing or any equity Financing in lieu thereof in whole or in part, in each case as may reasonably be requested by Pinnacle, including, without limitation, (i) upon reasonable advance notice, participation in meetings, drafting sessions, due diligence sessions, management presentation sessions, road shows and sessions with rating agencies, (ii) providing reasonable assistance with the preparation of materials for rating agency presentations, business projections and financial statements (including those required by the SEC), (iii) providing reasonable assistance to Pinnacle in preparing offering memoranda, private placement memoranda, prospectuses and similar documents, (iv) furnishing Pinnacle and its financing sources with financial and other pertinent information regarding Aztar and its subsidiaries as may reasonably be requested by Pinnacle, including all financial statements and financial data of the type required by Regulation S-X and Regulation S-K under the Securities Act and of the type and form customarily included in private placements under Rule 144A or public offerings under the Securities Act, to consummate the offering of debt securities contemplated by the Commitment Letter (as defined in Section 4.02(b)) or other financing at the time during Aztar’s fiscal year such offerings will be made, (v) using reasonable best efforts to obtain accountants’ comfort letters, legal opinions, officers’ certificates, surveys and title insurance as may be reasonably requested by Pinnacle; provided that Aztar’s officers shall only be required to deliver certificates and opinions to the extent relating to Aztar or its subsidiaries on a stand-alone basis without giving effect to the Merger or Pinnacle’s post-Closing plans or any post-Closing projections, (vi) obtaining any necessary rating agencies’ confirmations or approvals for Pinnacle’s financing as may be reasonably requested by Pinnacle and (vii) reasonably facilitating the pledge of collateral, including taking any actions and executing any documents reasonably requested by Pinnacle in connection, in each case to become effective at the Closing. Aztar will use its reasonable best efforts to provide to Pinnacle and its financing sources as promptly as practicable (but in no event later than the time periods, if any, specified in Exhibit D to the Commitment Letter), with the audited, unaudited and pro forma and other financial information or data that are required as a condition to the Financing, in each case prepared in accordance with the standards set forth in such Exhibit D or that are required in connection with any equity offering and will use its reasonable best efforts to take all other actions required to be taken by Aztar under the Commitment Letters if reasonably required to obtain the Financing. Aztar shall cause its officers, in their capacity as officers, to deliver such customary management representation letters as the accountants may require in connection with any comfort letters or similar documents as may be required in connection with the Financing. Notwithstanding anything to the contrary in this Agreement, Aztar shall not be required to execute and deliver any commitment letters, underwriting or placement agreements, pledge and security documents, or other definitive financing documents in connection with the Financing.

(c) Without limiting the foregoing, at the request of Pinnacle, prior to the Effective Time, Aztar shall use its reasonable best efforts to cooperate with Pinnacle in obtaining any consents or waivers to, and in respect of, any of its indebtedness, provided that Aztar shall not be required to permit any of the foregoing to become effective prior to the Effective Time. At the request of Pinnacle, Aztar shall, and shall cause its subsidiaries to, use its reasonable best efforts to commence consent solicitations or issuer tender or exchange offers with respect to their respective indebtedness as and at the times that Pinnacle shall request (“Consent/Tender Offers”) in each case with the cooperation of Pinnacle. All Consent/Tender Offers shall be in accordance

32

with applicable Law and shall be on the terms and conditions reasonably agreed by Pinnacle and Aztar; provided, that all Consent/Tender Offers (and all obligations to make any payments to holders of all or any portion of any indebtedness in connection therewith or to modify the terms or provisions of any indebtedness) shall be conditioned upon the consummation of the Merger, and shall terminate immediately upon the termination of this Agreement prior to the Effective Time. Aztar agrees not to consummate any Consent/Tender Offer unless Pinnacle consents in writing to such consummation. Aztar agrees to use its reasonable efforts to cooperate with Pinnacle and to use its reasonable best efforts to consummate all Consent/Tender Offers, provided that the effectiveness of any Consent/Tender Offer shall be conditioned on the Closing. Pinnacle shall indemnify Aztar and its directors and officers for any and all liabilities arising out of or in connection with any action taken pursuant to this Section 4.01(c) to the maximum extent permitted by Law.

(d) Nothing in Section 4.01(b) or 4.01(c) shall require Aztar and its subsidiaries to provide any assistance which would interfere unreasonably with the business or operations of Aztar and its subsidiaries. All reasonable out-of-pocket expenses incurred by Aztar or any of its subsidiaries, officers, employees, representatives and advisors in connection with their respective obligations pursuant to Section 4.01(b) and 4.01(c) shall be borne (or reimbursed promptly following demand therefor) by Pinnacle. Nothing in Section 4.01(b) or 4.01(c) shall require Aztar or any of its subsidiaries, officers, employees, representatives or advisors to take any action that might result in any liability in connection with the Financing unless indemnified by Pinnacle to the maximum extent permitted by Law or to take any action other than in their capacity as an officer. Pinnacle hereby agrees and acknowledges that Financing and the Consent/Tender Offers do not constitute conditions to the consummation of the transactions contemplated by this agreement.

Section 4.02 Covenants of Pinnacle Interim Operations . Pinnacle will not take, and will not permit its subsidiaries to take, any action that at the time of taking such action is reasonably likely to prevent or materially delay the consummation of the Merger. Pinnacle agrees to use its reasonable best efforts to obtain the Financing necessary for the consummation of the transactions contemplated hereby at or prior to the Closing Date. Pinnacle shall use its reasonable best efforts to keep Aztar informed of the status of its efforts to obtain the Financing and of any development that Pinnacle believes is reasonably likely to prevent or delay the receipt of the Financing. Pinnacle shall use its reasonable best efforts to comply with the covenants in the Commitment Letter which are within its control.

Section 4.03 No Solicitation by Aztar .

(a) Aztar shall not, nor shall it permit any of its subsidiaries to, nor shall it authorize or permit any of its directors, officers or employees, or any investment banker, financial advisor, attorney, accountant or other representative retained by it or any of its subsidiaries to, directly or indirectly, (i) solicit, initiate or knowingly encourage (including by way of furnishing non-public information), or knowingly take any other action designed to facilitate, any inquiries or the making of any proposal that constitutes a Takeover Proposal (as defined below) or (ii) participate in any negotiations or discussions (other than to state that they

33

are not permitted to have discussions) regarding any Takeover Proposal; provided, however, that if, at any time prior to receipt of the Stockholder Approval (the “Applicable Period”), the Board of Directors of Aztar determines in good faith, after consultation with its legal and financial advisors, that a Takeover Proposal that was not solicited by it after the date hereof and that did not otherwise result from a breach of this Section 4.03(a) is, or is reasonably likely to result in, a Superior Proposal (as defined in Section 4.03(b)), and subject to providing prior written notice of its decision to take such action to Pinnacle and compliance with Section 4.03(c), Aztar may (x) furnish information with respect to Aztar and its subsidiaries to the person making such proposal (and its representatives) pursuant to a customary confidentiality agreement (provided, that such confidentiality agreement shall not in any way restrict Aztar from complying with its disclosure obligations under this Agreement, including with respect to such proposal; provided further, that any such confidentiality agreement need not contain a standstill or similar provision) and (y) participate in discussions or negotiations regarding such proposal. Aztar agrees to provide Pinnacle with any information provided in writing or orally to the person making such Takeover Proposal and its representatives substantially simultaneously with the provision thereof to such other person. Aztar, its subsidiaries and their representatives immediately shall cease and cause to be terminated any activities, discussions or negotiations with any parties existing on the date hereof with respect to any Takeover Proposal. For purposes of this Agreement, “Takeover Proposal” means any bona fide inquiry, proposal or offer from any person relating to (i) any direct or indirect acquisition or purchase of a business (a “Material Business”) that constitutes 20% or more of the net revenues, net income or the assets (including equity securities) of Aztar and its subsidiaries, taken as a whole, (ii) any direct or indirect acquisition or purchase of 20% or more of any class of voting securities of Aztar or 20% or more of the voting power of any class of stock of any subsidiary of Aztar owning, operating or controlling a Material Business, (iii) any tender offer or exchange offer (or other offer to purchase or acquire) that if consummated would result in any person beneficially owning 20% or more of any class of voting securities of Aztar or 20% or more of the voting power of any class of stock of any subsidiary of Aztar owning, operating or controlling a Material Business, (iv) any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving Aztar or any such subsidiary of Aztar owning, operating or controlling a Material Business or (v) any direct or indirect acquisition or purchase of, any joint venture or partnership or similar arrangement involving, or any recapitalization, restructuring or leveraged financing or similar transaction involving all or any portion of the Las Vegas Site (except as expressly specified in Section 4.01(a)(xii), in each case other than the transactions contemplated by this Agreement.

(b) Except as contemplated by this Section 4.03, neither the Board of Directors of Aztar nor any committee thereof shall (i) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Pinnacle, the approval or recommendation by such Board of Directors or such committee of this Agreement or the Merger, (ii) approve or recommend, or propose publicly to approve or recommend, any Takeover Proposal, or (iii) cause Aztar to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (other than a confidentiality agreement of the type and under the circumstances described in Section 4.03(a)) related to any Takeover Proposal (each, a “Aztar Acquisition Agreement”). Notwithstanding the foregoing, in response to a Takeover Proposal that was not solicited by it and that did not otherwise result from a breach of Section 4.03(a), during the Applicable Period, the Board of Directors of Aztar may, if it determines in good faith, after consulting with outside counsel, that taking such action is reasonably required by the Board

34

of Directors’ fiduciary obligations under applicable law, (A) withdraw or modify, or propose publicly to withdraw or modify, the approval or recommendation by such Board of Directors or any committee thereof of this Agreement or the Merger, (B) approve or recommend, or propose to approve or recommend, any Superior Proposal, or (C) terminate this Agreement pursuant to Section 7.01(d) simultaneously with the payment of the Termination Fee and the Termination Expenses, but only after (1) such Board of Directors has determined in good faith that such Takeover Proposal constitutes a Superior Proposal, and (2) (I) Aztar has notified Pinnacle in writing of the determination that such Takeover Proposal constitutes a Superior Proposal and (II) at least three business days following receipt by Pinnacle of such notice, the Board of Directors of Aztar has determined that such Superior Proposal remains a Superior Proposal. Notwithstanding the foregoing, other than in connection with a Takeover Proposal, the Board of Directors of Aztar may, if it determines in good faith, after consulting with outside counsel, that the failure to take such action would result in a breach of the Board of Directors’ fiduciary obligations under applicable Law withdraw or modify the approval or recommendation by such Board of Directors or any committee thereof of this Agreement or the Merger if Aztar has notified Pinnacle in writing of the decision to do so at least three business days prior to the taking of such action, which notice shall specify in writing the reasons therefor.

For purposes of this Agreement, “Superior Proposal” means any written Takeover Proposal that the Board of Directors of Aztar determines in good faith (after consultation with a financial advisor of nationally recognized reputation) to be more favorable (taking into account (i) all financial and strategic considerations, including relevant legal, financial, regulatory and other aspects of such Takeover Proposal and the Merger and the other transactions contemplated by this Agreement deemed relevant by the Board of Directors, (ii) the identity of the third party making such Takeover Proposal, (iii) the anticipated timing, conditions and prospects for completion of such Takeover Proposal, including the prospects for obtaining regulatory approvals and financing, and any third party shareholder approvals and (iv) the other terms and conditions of such Takeover Proposal) to Aztar’s stockholders than the Merger and the other transactions contemplated by this Agreement (taking into account all of the terms of any proposal by Pinnacle to amend or modify the terms of the Merger and the other transactions contemplated by this Agreement), except that (x) the reference to “20%” in clauses (i), (ii) and (iii) of the definition of “Takeover Proposal” in Section 4.03(a) shall be deemed to be a reference to “50%”, (y) the “Takeover Proposal” must refer to a transaction involving Aztar as a whole, and not any of its subsidiaries or Material Businesses or the Las Vegas Site, and (z) the references to any subsidiary of Aztar owning, operating or controlling a Material Business in clauses (ii), (iii) and (iv) shall be deemed to be deleted.

(c) In addition to the obligations of Aztar set forth in paragraphs (a) and (b) of this Section 4.03, Aztar shall as promptly as practicable advise Pinnacle, orally and in writing, of any request for information or of any Takeover Proposal (and in any case within 24 hours of such request or the receipt of such Takeover Proposal), the principal terms and conditions of such request or Takeover Proposal and the identity of the person making such request or Takeover Proposal. Aztar shall keep Pinnacle informed of the status and material details (including amendments or proposed amendments) of any such request or Takeover Proposal as promptly as practicable.

(d) Nothing contained in this Agreement shall prohibit Aztar from issuing a

35

“stop-look-and-listen communication” pursuant to Rule 14d-9(f), taking and disclosing to its stockholders a position as required by Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act or taking any action required by any order or decree of a Governmental Authority, in each case, subject to the provisions of Section 7.01(f).

Section 4.04 Other Actions . Each of Aztar and Pinnacle shall use its reasonable best efforts not to, and shall use its reasonable best efforts not to permit any of their respective subsidiaries to, take any action that would, or that would reasonably be expected to, result in any condition to the Merger set forth in Article VI not being satisfied.

Section 4.05 Control of Aztar’s Operations . Nothing contained in this Agreement shall give to Pinnacle, directly or indirectly, rights to control or direct Aztar’s operations prior to the Effective Time. Prior to the Effective Time, Aztar shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision of its operations.

ARTICLE V

Additional Agreements

Section 5.01 Preparation of the Proxy Statement; Stockholders Meeting .

(a) As soon as reasonably practicable following the date of this Agreement, Aztar shall prepare and file the Proxy Statement with the SEC and Pinnacle shall assist Aztar in such preparation. Aztar shall use its reasonable best efforts to file the Proxy Statement with the SEC as soon as possible and to respond as promptly as possible to any comments of the SEC with respect thereto. Aztar will use its reasonable best efforts to cause the Proxy Statement to be mailed to Aztar’s stockholders as promptly as practicable. Each party will advise the other, promptly after it receives notice thereof, of the receipt of any comments from the SEC with respect to the Proxy Statement or any supplement or amendment, or any request by the SEC for amendment of the Proxy Statement or comments thereon and responses thereto or requests by the SEC for additional information. If prior to the Effective Time any event occurs with respect to Aztar, Pinnacle or any subsidiary of Aztar or Pinnacle, respectively, or any change occurs with respect to information supplied by or on behalf of Aztar or Pinnacle, respectively, for inclusion in the Proxy Statement that, in each case, is required to be described in an amendment of, or a supplement to, the Proxy Statement, Aztar or Pinnacle, as applicable, shall promptly notify the other of such event, and Aztar or Pinnacle, as applicable, shall cooperate with the other in the prompt filing with the SEC of any necessary amendment or supplement to the Proxy Statement and, as required by law, in disseminating the information contained in such amendment or supplement to Aztar’s stockholders. Aztar shall provide Pinnacle with a reasonable opportunity to review and comment on any draft Proxy Statement, any draft amendment thereto, and any correspondence with the SEC concerning the Proxy Statement, and shall file or submit any of the foregoing only once such draft is in a form reasonably acceptable to Pinnacle and Aztar.

36

(b) Aztar shall, as soon as reasonably practicable following the date of this Agreement, duly call, give notice of, convene and hold a meeting of its stockholders (the “Stockholders Meeting”) for the purpose of obtaining the Stockholder Approval. Without limiting the generality of the foregoing, Aztar agrees that its obligations pursuant to the first sentence of this Section 5.01(b) shall not be affected by (i) the commencement, proposal, disclosure or communication to Aztar of any Takeover Proposal, (ii) the withdrawal or modification by the Board of Directors of Aztar of its approval or recommendation of this Agreement, the Merger or the other transactions contemplated hereby, or (iii) the approval or recommendation of any Superior Proposal.

Section 5.02 Access to Information; Effect of Review .

(a) Access. To the extent permitted by applicable Law and confidentiality obligations and upon reasonable advance notice, Aztar shall, and shall cause each of its respective subsidiaries to afford to Pinnacle and to its officers, employees, accountants, counsel, financial advisors and other representatives (and to its potential financing sources and their respective representatives) reasonable access during normal business hours during the period prior to the Effective Time to all its Contracts, properties, books, contracts, commitments, personnel and records and, during such period, to the extent permitted by applicable law and confidentiality provisions, Aztar shall, and shall cause its subsidiaries, to, (i) confer on a regular and frequent basis with one or more representatives of Pinnacle to discuss material operational and regulatory matters and the general status of its ongoing operations, (ii) advise Pinnacle of any change or event that has had or would reasonably be expected to have a material adverse effect on such party, and (iii) furnish to Pinnacle promptly all other information concerning its business, properties and personnel, in each case as Pinnacle may reasonably request. Pinnacle shall schedule and coordinate all inspections with the individual(s) set forth in Section 5.02(a) of the Aztar Disclosure Letter. Aztar shall be entitled to have representatives present at all times during any such inspection. Notwithstanding the foregoing, neither Aztar nor its subsidiaries shall be required to provide access to or to disclose any information (i) where such access or disclosure could jeopardize the attorney-client privilege or work product privilege of Aztar or its subsidiaries or contravene any Law or binding agreement entered into prior to the date of this Agreement, or (ii) to the extent that outside counsel to Aztar advises that such access or disclosure should not be disclosed in order to ensure compliance with any Gaming Law or other applicable Law. Pinnacle agrees to hold confidential all information which it has received or to which it has gained access pursuant to this Section 5.02(a) in accordance with the Confidentiality Agreement, dated as of March 11, 2006 between Aztar and Pinnacle (the “Confidentiality Agreement”).

(b) Effect of Review. No investigation or review pursuant to Section 5.02(a) shall have any effect for the purpose of determining the accuracy of any representation or warranty given by any of the parties hereto to any of the other parties hereto.

37

Section 5.03 Regulatory Matters; Reasonable Best Efforts .

(a) Regulatory Approvals. Each party hereto shall cooperate and promptly prepare and file all necessary documentation, to effect all necessary applications, notices, petitions and filings, and shall use reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things in order to obtain all approvals and authorizations of all Governmental Authorities, necessary or advisable to consummate and make effective, in the most expeditious manner reasonably practicable, the Merger and the other transactions contemplated by this Agreement. Pinnacle shall have the responsibility for the preparation and filing of any required applications, filings or other materials, including in the State of New Jersey, a trust agreement necessary to obtain interim casino authorization; provided however that Aztar shall provide and cause its affiliates to provide Pinnacle with any information required in connection with such filings as promptly as practicable; and Aztar shall have the right to review and approve (which comments Aztar shall provide as promptly as practicable, but in any event within three days of Pinnacle’s request for such approval) in advance all characterizations of the information relating to Aztar that appear in any application, notice, petition or filing made in connection with the Merger or the other transactions contemplated by this Agreement. Aztar and Pinnacle agree that they will consult and cooperate with each other with respect to the obtaining of all such necessary approvals and authorizations of Governmental Authorities.

(b) Filings. Each of Pinnacle and Aztar undertakes and agrees to file as soon as practicable a Notification and Report Form under the HSR Act with the United States Federal Trade Commission (the “FTC”) and the Antitrust Division of the United States Department of Justice (the “Antitrust Division”) and to make such filings and apply for such approvals and consents as are required under the Gaming Laws as soon as practicable after the date hereof (and in any event within 45 days), including the filing of all required applications for Pinnacle and all “key persons” (as defined under applicable Gaming Laws). Each of Pinnacle and Aztar shall use its reasonable best efforts to request as soon as practicable an accelerated review (to the extent available) from any Gaming Authorities in connection with such filings and in the case of Gaming Approvals required in the State of New Jersey, Pinnacle shall seek to obtain interim casino authorization at the earliest practicable date. Each of Pinnacle and Aztar shall respond as promptly as practicable under the circumstances to any inquiries received from the FTC or the Antitrust Division or any authority enforcing applicable Gaming Laws for additional information or documentation and to all inquiries and requests received from any Governmental Authority in connection with any Law. Pinnacle shall have the exclusive right to direct and control the process of obtaining the Governmental Consents (as defined below) required in connection with the Merger and the transactions contemplated hereby and Aztar agrees to reasonably cooperate with Pinnacle with respect thereto. Aztar shall agree if, but solely if, requested by Pinnacle to, in compliance with Gaming Laws, divest, hold separate or otherwise take or commit to take any action that limits or prohibits Aztar’s or Pinnacle’s freedom of action with respect to, or its ability to retain, any of the businesses, services, employees or assets of Aztar or any of its subsidiaries, in each case at or after the Effective Time and only in order to enable Pinnacle to obtain a Governmental Consent, provided that any such action shall be conditioned upon the consummation of the Merger and the transactions contemplated hereby.

(c) Cooperation. In addition, each party shall, subject to applicable law and to the terms and conditions hereof, except as prohibited by any applicable representative of any applicable governmental entity, (i) promptly notify the other party of any material communication to that party relating to the Merger and the transactions contemplated hereby

38

from the FTC, the Antitrust Division, any Governmental Authority, including any Gaming Authorities, and, consult with the other party in advance regarding any material proposed written communication relating to the Merger and the transactions contemplated hereby to any of the foregoing in response thereto; and (ii) furnish the other party or its outside counsel with copies of all material correspondence, filings, and written communications (and memoranda setting forth the substance thereof) between them and its affiliates and their respective representatives on the one hand, and any government or regulatory authority or members of their respective staffs on the other hand, with respect to this Agreement and the Merger, provided, however, that the parties may redact discussions of the value of the Merger or any other acquisition, sale, or divestiture; provided, further, that notwithstanding anything in this Agreement to the contrary, Pinnacle shall not be required to provide Aztar with copies of any individual gaming applications and shall be entitled to redact any corporate gaming applications to the extent reasonable to do so under the circumstances. Aztar will not, and will not permit any of its representatives to participate in any substantive meeting or discussion with any Governmental Authority in respect of any filings, investigation or inquiry concerning this Agreement or the Merger without the consent of Pinnacle, unless requested by such Governmental Authority and upon prior written notice by Aztar to Pinnacle of such request.

(d) Objections. In furtherance and not in limitation of the covenants of the parties contained in Section 5.03(a), (b) and (c), but subject to Section 5.03(g), each of Pinnacle and Aztar shall use its reasonable best efforts to resolve such objections, if any, as may be asserted by a Governmental Authority or other person with respect to the transactions contemplated hereby under any Antitrust Law or Gaming Law or by any Gaming Authority. In connection with the foregoing, if any administrative or judicial action or proceeding, including any proceeding by a private party, is instituted (or threatened to be instituted) challenging any transaction contemplated by this Agreement as violative of any Antitrust Law, Gaming Law or the rules and regulations of any Gaming Authority, subject to Section 5.03(g), each of Pinnacle and Aztar shall cooperate in all material respects with each other and use its respective reasonable best efforts to, as promptly as practicable, contest and resist any such action or proceeding, to limit the scope or effect of any proposed action of, or remedy sought to be obtained or imposed by, any Gaming Authority, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts the consummation of the transactions contemplated by this Agreement.

(e) Further Actions. Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things reasonably necessary or advisable under applicable Laws (including the HSR Act and the Gaming Laws) to consummate and make effective, in the most expeditious manner reasonably practicable, the Merger and the other transactions contemplated by this Agreement, including (i) obtaining any required third party consents and Governmental Consents and (ii) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by this Agreement.

39

(f) Governmental Consents. For purposes of this Agreement, the term “Governmental Consents” shall mean all notices, reports, filings, consents, applications, registrations, approvals, permits or authorizations required to be made prior to the Effective Time by Aztar or Pinnacle or any of their respective subsidiaries with, or obtained prior to the Effective Time by Aztar or Pinnacle or any of their respective subsidiaries from, any Governmental Authority in connection with the execution and delivery of this Agreement and the consummation of the Merger and the other transactions contemplated hereby (and shall include the expiration or termination of the waiting period under the HSR Act).

(g) Specified Material Adverse Effect. Notwithstanding the foregoing (but subject to the last sentence of Section 5.03(b)), as used in this Section 5.03, “reasonable best efforts” shall not include nor require any party to (A) sell, or agree to sell, hold or agree to hold separate, or otherwise dispose, or agree to dispose of, any asset, in each case other than any hotel casino property outside the State of Nevada owned by Aztar that represents less than 20% of Aztar’s revenue for the year ending December 31, 2005 (the “Specified Assets”)or (B) conduct or agree to conduct its business in any particular manner, if such conduct has had or would, individually or in the aggregate, reasonably be expected to (i) have a material adverse effect on Pinnacle (after giving effect to the consummation of the Merger and reflecting the business, assets, results of operations and financial condition of Aztar and its subsidiaries) (clauses (A) or (B), a “Specified Material Adverse Effect”) or (ii) result in either Pinnacle or Aztar or their respective subsidiaries failing to meet the standards for licensing, suitability or character under any Gaming Laws relating to the conduct of Pinnacle’s or Aztar’s business which (after taking into account the anticipated impact of such failure to so meet such standards on other authorities) would reasonably be expected to have a Specified Material Adverse Effect. None of Aztar or any of its subsidiaries may take or agree to take any action, or consent to or agree to consent to any such restriction without the consent of Pinnacle. For purposes of clarification, Pinnacle agrees that if necessary in order to obtain the Required Governmental Consents (as defined in Section 6.01(c)), Pinnacle will (A) sell, or agree to sell, hold or agree to hold separate, or otherwise dispose, or agree to dispose of, the Specified Assets or (B) conduct or agree to conduct its business in a particular manner unless such conduct has had or would reasonably be expected to result in a Specified Material Adverse Effect.

(h) State Anti-Takeover Statutes. Without limiting the generality of Section 5.03(b), Aztar and Pinnacle shall (i) take all reasonable action necessary to ensure that no state anti-takeover statute or similar statute or regulation or charter, bylaw or similar provision becomes applicable to the Merger, this Agreement or any of the other transactions contemplated by this Agreement and (ii) if any state anti-takeover statute or similar statute or regulation, charter, bylaw or similar provision becomes applicable to the Merger, this Agreement or any other transaction contemplated by this Agreement, take all action necessary to ensure that the Merger and the other transactions contemplated by this Agreement may be consummated as promptly as reasonably practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such statute or regulation, charter, bylaw or similar provision on the Merger and the other transactions contemplated by this Agreement.

40

Section 5.04 Stock Options; Stock Plans .

(a) Each stock option to purchase Aztar Common Stock (the “Aztar Employee Stock Options”) granted under the Aztar Employee Stock Plans that is outstanding as of or immediately prior to the Effective Time, shall be converted into the right to receive an amount in cash as soon as practicable following the Effective Time equal to the product of (x) the excess, if any, of the Common Stock Merger Consideration over the exercise price per Aztar Common Stock subject to such Aztar Employee Stock Option and (y) the total number of shares of Aztar Common Stock subject to such Aztar Employee Stock Option immediately before the Effective Time, with the aggregate amount of such payment rounded to the nearest cent, less such amounts as are required to be withheld or deducted under the Code or any provision of U.S. state, U.S. local or foreign Tax Law with respect to the making of such payment;

(b) Prior to the Effective Time, the Board of Directors of Aztar (or, if appropriate, any committee administering the Aztar Employee Stock Plans) shall adopt such resolutions or take all such other actions as may be required to effect the foregoing and shall ensure that following the Effective Time no holder of Aztar Employee Stock Option or any participant in any Aztar Employee Stock Plan or other Aztar Employee Benefit Plan or Aztar Employment Agreement shall have any right thereunder to acquire any capital stock (including any “phantom” stock or stock appreciation rights) of Aztar or the Surviving Corporation.

Section 5.05 Employee Matters .

(a) Pinnacle agrees that, during the period commencing at the Effective Time and ending on the first anniversary of the Effective Time, the employees of Aztar and any of its subsidiaries who are employed as of the Closing Date and continue employment (the “Company Employees”) will continue to be provided with salary and benefits under employee benefit and commission or similar plans that are substantially similar, in the aggregate, to those currently provided by Aztar or any of its subsidiaries to such employees; provided that discretionary benefits shall remain discretionary.

(b) For purposes of all employee benefit plans, programs and agreements maintained by or contributed to by Pinnacle and its subsidiaries (including, after Closing, the Surviving Corporation), Pinnacle shall, or shall cause its subsidiaries to cause each such plan, program or arrangement to treat the prior service with Aztar or any of its subsidiaries immediately prior to the Closing of any Company Employee (to the same extent such service is recognized under analogous plans, programs or arrangements of Aztar or any of its subsidiaries prior to the Effective Time) as service rendered to Pinnacle or any of its subsidiaries, as the case may be, for all purposes; provided, however, that such crediting of service shall not (i) operate to duplicate any benefit or the funding of such benefit under any plan, (ii) require the crediting of past service for benefit accrual purposes under any defined benefit pension plan or (iii) be credited if past service credit has not been or will not be provided to employees of Pinnacle or its subsidiaries participating in such plan. Company Employees shall also be given credit for any deductible or co-payment amounts paid in respect of the plan year in which the Closing occurs, to the extent that, following the Closing, they participate in any other plan for which deductibles or co-payments are required. Pinnacle shall also cause each Pinnacle Plan (as defined below) to waive any preexisting condition or waiting period limitation which would otherwise be applicable to a Company Employee on or after the Effective Time (to the extent such limitation

41

would not apply under the corresponding Aztar Employee Benefit Plan). Pinnacle shall recognize any accrued but unused vacation of the Company Employees as of the Effective Time, and Pinnacle shall cause Aztar and its subsidiaries to provide such paid vacation. For purposes of this Agreement, a “Pinnacle Plan” shall mean such employee benefit plan, as defined in Section 3(3) of ERISA, or a nonqualified employee benefit or deferred compensation plan, stock option, bonus or incentive plan or other employee benefit or fringe benefit program, that may be in effect generally for employees of Pinnacle and its subsidiaries from time to time.

(c) Except as provided specifically in this Section 5.05, nothing in this Agreement shall limit or restrict the rights of Pinnacle or Aztar to modify, amend, terminate or establish employee benefit plans or arrangements, in whole or in part, at any time after the Effective Time.

(d) No provision of this Section 5.05 shall create any third party beneficiary rights in any Company Employee or any current or former director or consultant of Aztar or its subsidiaries in respect of continued employment (or resumed employment) or any other matter.

(e) Notwithstanding anything in this Agreement to the contrary, Pinnacle shall or shall cause its affiliates to honor and perform all obligations under any collective bargaining agreements pertaining to any Company Employees.

(f) Notwithstanding any provision of this Agreement to the contrary, Pinnacle shall not, for at least six months following the Closing cause there to be adopted any amendment to any Aztar Employee Benefit Plan that is a severance or retention plan, program, policy or agreement that would result in a diminution of benefits thereunder.

Section 5.06 Indemnification, Exculpation and Insurance .

(a) Each of Aztar and Pinnacle agrees that, to the fullest extent permitted under applicable law, all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time now existing in favor of the current or former directors, officers, employees or fiduciaries under benefit plans currently indemnified of Aztar and its subsidiaries as provided in their respective certificate or articles of incorporation, by-laws (or comparable organizational documents) or other agreements providing indemnification shall survive the Merger and shall continue in full force and effect in accordance with their terms. The certificate of incorporation and by-laws of the Surviving Corporation shall continue to contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of former or present directors and officers than are presently set forth in the Aztar’s certificate of incorporation and by-laws, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would adversely affect the rights thereunder of any such individuals.

(b) For six years after the Effective Time, the Surviving Corporation shall maintain in effect the directors’ and officers’ liability (and fiduciary) insurance policies covering acts or omissions occurring on or prior to the Effective Time with respect to those persons who

42

are currently covered by Aztar’s respective directors’ and officers’ liability (and fiduciary) insurance policies on terms with respect to such coverage and in amounts at least as favorable as those set forth in the relevant policy in effect on the date of this Agreement, except in no event shall the Surviving Corporation be required to make annual premium payments in connection therewith in excess of the amount set forth on Section 5.06(b) of the Aztar Disclosure Letter (the “Maximum Amount”), and if the Surviving Corporation is unable to obtain the insurance required by this Section 5.06(b), the Surviving Corporation shall maintain the most advantageous policies of directors’ and officers’ insurance otherwise obtainable for an annual premium equal to the Maximum Amount. Notwithstanding the foregoing, either Pinnacle or Aztar may elect in lieu of the foregoing insurance, prior to the Effective Time, to obtain and fully pay for a policy (providing only for the Side A coverage for the Aztar Indemnified Parties (as defined in clause (c) below) with a claims period of at least six years from the Effective Time from an insurance carrier with the same or better credit rating as Aztar’s current insurance carrier with respect to directors’ and officers’ liability insurance in an amount and scope the same as Aztar’s existing policies with respect to matters existing or occurring at or prior to the Effective Time; provided that the cost thereof does not exceed $4,435,000.

(c) From and after the Effective Time, Pinnacle agrees to cause the Surviving Corporation to indemnify and hold harmless each present or former director and officer of Aztar or any of its subsidiaries (in each case, for acts or failures to act in such capacity), determined as of the date hereof, and any person who becomes such a director or officer between the date hereof and the Effective Time (collectively, the “Aztar Indemnified Parties”), against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities (collectively, “Costs”) incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time (including any matters arising in connection with the transactions contemplated by this Agreement), to the fullest extent permitted by applicable law (and the Surviving Corporation shall also advance expenses as incurred to the fullest extent permitted under applicable law, provided that if required by applicable law the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification).

(d) The obligations of the Surviving Corporation under this Section 5.06 shall not be terminated or modified by such parties in a manner so as to adversely affect any Aztar Indemnified Party or any other person entitled to the benefit of Sections 5.06(a) and (b), as the case may be, to whom this Section 5.06 applies without the consent of the affected Aztar Indemnified Party or such other person, as the case may be. If the Surviving Corporation (i) shall consolidate with or merge into any other corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any individual, corporation or other entity, then, and in each such case, proper provisions shall be made so that the successors and assigns of the Surviving Corporation, as the case may be, shall assume all of the obligations set forth in Section 5.06.

(e) The provisions of Section 5.06 are (i) intended to be for the benefit of, and will be enforceable by, each indemnified party, his or her heirs and his or her representatives and (ii) in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise.

43

Section 5.07 Fees and Expenses .

(a) Except as provided in this Section 5.07 or Section 4.01(d), all fees and expenses incurred in connection with the Merger, this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated.

(b) In the event that (i) following the Stockholder Approval, a Takeover Proposal (or the intention of any person to make one), whether or not conditional, shall have been made known to Aztar or shall have been publicly disclosed and thereafter (x) this Agreement is terminated by Aztar or Pinnacle pursuant to Section 7.01(b)(i) and (y) within 6 months of such termination Aztar or any of its subsidiaries enters into any Aztar Acquisition Agreement or any person consummates any Takeover Proposal, (ii) prior to or during the Stockholders Meeting (or any subsequent meeting of Aztar stockholders at which it is proposed that the Merger be approved), a Takeover Proposal (or the intention of any person to make one), whether or not conditional, shall have been publicly disclosed, and thereafter (x) this Agreement is terminated by either Aztar or Pinnacle pursuant to Section 7.01(b)(ii) and (y) within 9 months of such termination Aztar or any of its subsidiaries enters into any Aztar Acquisition Agreement or any person consummates any Takeover Proposal, (iii) this Agreement is terminated by Aztar pursuant to Section 7.01(d), (iv) this Agreement is terminated by Pinnacle pursuant to Section 7.01(f)(i) and within 9 months of such termination Aztar or any of its subsidiaries enters into any Aztar Acquisition Agreement or any person consummates any Takeover Proposal, (v) this Agreement is terminated by Pinnacle pursuant to Section 7.01(f)(ii), or (vi) this Agreement is terminated by Pinnacle pursuant to Section 7.01(g) as a result of a material and intentional breach by Aztar, then in each case Aztar shall pay Pinnacle a fee equal to $42 million (the “Termination Fee”) and shall reimburse Pinnacle for its fees and expenses incurred in connection with the transactions contemplated hereby up to a maximum of $13 million (the “Termination Expenses”), payable by wire transfer of same day funds; (for the purposes of the foregoing the terms “Aztar Acquisition Agreement” and “Takeover Proposal” shall have the meanings assigned to such terms in Section 4.03 except that the references to “20%” in the definition of “Takeover Proposal” in Section 4.03(a) shall be deemed to be references to “50%”. Payment of the Termination Fee and Termination Expenses to Pinnacle pursuant to (A) clauses (i), (ii) or (iv) above shall be made concurrently with the earlier of the consummation of the Takeover Proposal or the entry of the Aztar Acquisition Agreement, (B) clause (iii) above shall be made concurrently with termination of this Agreement or (C) clause (v) or (vi) above shall be made within two business days of termination of this Agreement.

(c) Aztar acknowledges that the agreement contained in Section 5.07(b) is an integral part of the transactions contemplated by this Agreement, and that, without this agreement, Pinnacle would not enter into this Agreement; accordingly, if Aztar fails promptly to pay any amount due pursuant to Section 5.07, and, in order to obtain such payment, Pinnacle commences a suit that results in a judgment against Aztar for the payments set forth in Section 5.07, Aztar shall pay to Pinnacle its costs and expenses (including attorneys’ fees and expenses) in connection with such suit, together with interest on the amount of the fee at the prime rate plus 2% per annum of Citibank N.A. in effect on the date such payment was required to be made.

44

Section 5.08 Public Announcements . Aztar and Pinnacle will consult with each other before issuing, and provide each other the reasonable opportunity to review, comment upon and concur with, any press release or other public statements with respect to the transactions contemplated by this Agreement, including the Merger, and shall not issue any such press release or make any such public statement prior to such consultation, except as any party, after consultation with counsel, determines is required by applicable law or applicable rule or regulation of the NYSE.

Section 5.09 Aztar Headquarters . For a period of not less than 9 months following the Effective Time, Pinnacle shall maintain the current headquarters of Aztar in Phoenix, Arizona as a divisional headquarters. For the avoidance of doubt, nothing contained herein, shall be deemed to obligate Pinnacle or any of its subsidiaries to employ any individual or group of individuals at such location after the Closing.

ARTICLE VI

Conditions Precedent

Section 6.01 Conditions to Each Party’s Obligation to Effect the Merger . The respective obligation of each party to effect the Merger is subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:

(a) Stockholder Approvals. The Stockholder Approval shall have been obtained.

(b) No Injunctions or Restraints. (i) No (x) temporary restraining order or preliminary or permanent injunction or other order by any Federal or state court of competent jurisdiction preventing consummation of either of the Merger or the other transactions contemplated hereby or (y) applicable Federal or state law prohibiting consummation of either of the Merger or the other transactions contemplated hereby (collectively, “Restraints”) shall be in effect. (ii) No Governmental Authority shall have instituted (or if instituted, shall not have withdrawn) any proceeding seeking any Order the issuance of which would be reasonably likely to result in the failure of the condition set forth in Section 6.01(b)(i).

(c) Statutory Approvals. (i) The waiting period applicable to the consummation of the Merger and the other transactions contemplated hereby under the HSR Act shall have expired or been earlier terminated, and (ii) all Required Gaming Approvals required to be obtained for the consummation of the Merger and the other transactions contemplated hereby from Gaming Authorities in Nevada, New Jersey,

45

Missouri, Indiana, and Louisiana, shall have been obtained and remain in full force and effect (including by way of obtaining an interim casino authorization from the State of New Jersey in the case of New Jersey) (the foregoing Governmental Consents described in clauses (i) and (ii) collectively, the “Required Governmental Consents”). In the case of the obligation of Pinnacle, all Required Governmental Consents that have been obtained shall have been obtained without the imposition of any term, condition or consequence the acceptance of which would, individually or in the aggregate, reasonably be expected to have or result in a Specified Material Adverse Effect.

Section 6.02 Conditions to Obligations of Aztar . The obligation of Aztar to effect the Merger is further subject to satisfaction or waiver of the following conditions:

(a) Representations and Warranties. The representations and warranties of Pinnacle set forth herein shall be true and correct both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “material adverse effect” set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of Pinnacle to consummate the transactions contemplated hereby.

(b) Performance of Obligations of Pinnacle. Pinnacle shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date.

(c) Closing Certificates. Aztar shall have received a certificate signed by an executive officer of Pinnacle, dated the Effective Time, to the effect that, to such officer’s knowledge, the conditions set forth in Sections 6.02(a) and 6.02(b) have been satisfied.

Section 6.03 Conditions to Obligations of Pinnacle . The obligation of Pinnacle to effect the Merger is further subject to satisfaction or waiver of the following conditions:

(a) Representations and Warranties. (i) The representations and warranties of Aztar contained in Sections 3.01(b), 3.01(c), 3.01(m)(ii), and 3.01(p) of this Agreement that are qualified as to materiality or by reference to material adverse effect shall be true and correct, and such representations and warranties of Aztar that are not so qualified shall be true and correct in all material respects, in each case both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date) and (ii) all other representations and warranties of Aztar set forth herein shall be true and correct both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “material adverse effect” set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Aztar.

46

(b) Performance of Obligations of Aztar. Aztar shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date.

(c) Closing Certificates. Pinnacle shall have received a certificate signed by an executive officer of Aztar, dated the Effective Time, to the effect that, to such officer’s knowledge, the conditions set forth in Sections 6.03(a) and 6.03(b) have been satisfied.

Section 6.04 Frustration of Closing Conditions . Neither Aztar nor Pinnacle may rely on the failure of any condition set forth in Section 6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure was caused by such party’s failure to use reasonable best efforts to consummate the Merger and the other transactions contemplated by this Agreement, to the extent required by and subject to Section 5.03.

ARTICLE VII

Termination, Amendment and Waiver

Section 7.01 Termination . This Agreement may be terminated at any time prior to the Effective Time, whether before or (other than pursuant to clauses (d) below) after the Stockholder Approval:

(a) by mutual written consent of Aztar and Pinnacle;

(b) by either Aztar or Pinnacle:

(i) if the Merger shall not have been consummated by the 12-month anniversary of the date of this Agreement (the “Termination Date”); provided, however, that the right to terminate this Agreement pursuant to this Section 7.01(b)(i) shall not be available to any party whose failure to perform any of its obligations under this Agreement results in the failure of the Merger to be consummated by such time;

(ii) if the Stockholder Approval shall not have been obtained at a Stockholders Meeting duly convened therefor or at any adjournment or postponement thereof;

(iii) if any Restraint having the permanent effects set forth in Section 6.01(b)(i) shall be in effect and shall have become final and nonappealable; provided that the party seeking to terminate this Agreement pursuant to this Section 7.01(b)(iii) shall have used its reasonable best efforts to prevent the entry of and to remove such Restraint; or

47

(iv) if any condition to the obligation of such party to consummate the Merger set forth in Section 6.02 (in the case of Aztar) or in Section 6.03 (in the case of Pinnacle) becomes incapable of satisfaction prior to the Termination Date; provided that the failure of any such condition to be capable of satisfaction is not the result of a material breach of this Agreement by the party seeking to terminate this Agreement;

(c) by Aztar, if Pinnacle shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 6.02(a) or (b), and (B) is incapable of being cured by Pinnacle or is not cured by Pinnacle within 120 days following receipt of written notice from Aztar of such breach or failure to perform;

(d) by Aztar in accordance with Section 4.03(b); provided, that, in order for the termination of this Agreement pursuant to this paragraph (d) to be deemed effective, Aztar shall have complied with Section 4.03 and with applicable requirements, including the payment of the Termination Fee and Termination Expenses, of Section 5.07;

(e) by Pinnacle, if Aztar shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 6.03(a) or (b), and (B) is incapable of being cured by Aztar or is not cured by Aztar within 120 days following receipt of written notice from Pinnacle of such breach or failure to perform;

(f) by Pinnacle, if the Board of Directors of Aztar (or any committee thereof) (i) shall have withdrawn or modified, or proposed publicly to withdraw or modify, the approval or recommendation by such Board of Directors of this Agreement or the Merger, or (ii) shall have approved or recommended, or proposed to approve or recommend, a Takeover Proposal (it being understood and agreed that any “stop-look-and-listen” communication by the Board of Directors of Aztar to the stockholders of Aztar limited to the matters specified in Rule 14d-9(f) of the Exchange Act, or any similar communication to the stockholders of Aztar in connection with the commencement of a tender offer or exchange offer limited to the “stop-look-and-listen” matters specified in Rule 14d-9(f), shall not be deemed to constitute an approval or recommendation of a Takeover Proposal); and

(g) by Pinnacle, in the event of a material breach of Section 4.03 or Section 5.01(b).

Section 7.02 Effect of Termination . In the event of termination of this Agreement by either Pinnacle or Aztar as provided in Section 7.01, this Agreement shall forthwith become null and void and have no effect, without any liability or obligation on the part of Aztar or Pinnacle, other than the fee and indemnity provisions of Section 4.01(b), Section 4.01(c), and Section 4.01(d), and the confidentiality provisions of Section 5.02, Section 5.07, this Section 7.02 and Article VIII, which provisions shall survive such termination, and except to the

48

extent that such termination results from the willful and material breach by a party of any of its representations, warranties, covenants or agreements set forth in this Agreement, in which case such termination shall not relieve any party of any liability or damages resulting from its willful and material breach of this Agreement or in the case of Pinnacle, if all of the conditions to Pinnacle’s obligation to consummate the Merger are satisfied (other than the condition set forth in Section 6.03(c)) (and, in the case of the condition set forth in Section 6.03(c), either such condition has been satisfied or Aztar confirms to Pinnacle in writing that it is willing and able to deliver the certificate referred to in Section 6.03(c) as of the Closing Date) and Pinnacle fails to consummate the Merger in accordance with the terms and conditions hereof as a result of its failure to obtain the Financing.

Section 7.03 Amendment . This Agreement may be amended by the parties at any time before or after the Stockholder Approval; provided, however, that after any such approval, there shall not be made any amendment that by law requires further approval by the stockholders of Aztar without the further approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties.

Section 7.04 Extension; Waiver . At any time prior to the Effective Time, a party may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties of the other parties contained in this Agreement or in any document delivered pursuant to this Agreement or (c) subject to the proviso of Section 7.03, waive compliance by the other parties with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.

ARTICLE VIII

General Provisions

Section 8.01 Nonsurvival of Representations and Warranties . None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 8.01 shall not limit any covenant or agreement of the parties that by its terms contemplates performance after the Effective Time and such provisions shall survive the Effective Time.

Section 8.02 Notices . All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given (as of the time of delivery or, in the case of a telecopied communication, of electronic confirmation) if delivered personally, telecopied (which is electronically confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

49

(a) if to Aztar, to:

Aztar Corporation

2390 East Camelback Road, Suite 400

Phoenix, Arizona 85016

Telecopy No.: 602-381-4108

Attention: Nelson A. Armstrong, Jr.

with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Telecopy No.: (212) 735-2000

Attention: David Fox

                 Thomas W. Greenberg

(b) if to Pinnacle, to:

Pinnacle Entertainment, Inc.

3800 Howard Hughes Parkway

Suite 1800

Las Vegas, Nevada 89109

Telecopy No.: (702) 784-7773

Attention: John A. Godfrey

with a copy to:

Wachtell, Lipton, Rosen & Katz

51 West 52^nd Street

New York, New York 10019

Telecopy No.: (212) 403-2000

Attention: Daniel A. Neff

                 Stephanie J. Seligman

                 Mark Gordon

and to:

Irell & Manella LLP

1800 Avenue of the Stars

Suite 900

Los Angeles, California 90067-4276

Telecopy No.: (310) 203-7199

Attention: Alvin Segal

                 C. Kevin McGeehan

50

Section 8.03 Definitions . For purposes of this Agreement:

(a) an “affiliate” of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person, where “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a person, whether through the ownership of voting securities, by contract, as trustee or executor, or otherwise;

(b) “capital stock” or “shares of capital stock” means (a) with respect to a corporation, as determined under the laws of the jurisdiction of organization of such entity, capital stock or such shares of capital stock; (b) with respect to a partnership, limited liability company, or similar entity, as determined under the laws of the jurisdiction of organization of such entity, units, interests, or other partnership or limited liability company interests; or (c) any other equity ownership or participation;

(c) “Gaming Authority” means any Governmental Authority with jurisdiction over any person’s gaming operations; for the avoidance of doubt, in all cases, the term Governmental Authority includes Gaming Authorities whether or not so specified;

(d) “Gaming Laws” means the Federal, state, local or foreign statute, ordinance, rule, regulation, permit, consent, approval, license, judgment, order, decree, injunction or other authorization governing or relating to the current or contemplated casino and gaming activities and operations of any person;

(e) “material adverse change” or “material adverse effect” means, when used in connection with Aztar or Pinnacle, as the case may be, any change, effect, event or occurrence or state of facts (i) that is materially adverse to the business, assets, properties, financial condition or results of operations of such person and its subsidiaries taken as a whole but excluding any of the foregoing resulting from (A) changes in international or national political or regulatory conditions generally (in each case, to the extent not disproportionately affecting the applicable person as compared to other gaming companies), or (B) changes or conditions generally affecting the U.S. economy or financial markets or generally affecting the industry in which the applicable person or any of its subsidiaries operates (in each case, to the extent not disproportionately affecting the applicable person as compared to other gaming companies), (C) changes in tax rates in any state in which Aztar or its subsidiaries operates, (D) the introduction of gaming in any state adjoining any state in which Aztar or its subsidiaries operates, (E) any change in Law that legalizes other forms of gaming in any state in which Aztar operates, as long as such change in Law does not reduce or alter the scope, manner of operation, type, nature or timing of any permitted gaming activities which Aztar or its subsidiaries are permitted to conduct, (F) any change in state Law, as long as such change in Law does not reduce or alter the scope, manner of operation, type, nature or timing of any permitted gaming activities which the applicable person or its subsidiaries are permitted to conduct and as long as such change in Law does not disproportionately affect the applicable person as compared to other gaming companies in the state and (G) any matters disclosed in Section 8.03(e) of the Aztar Disclosure Letter or (ii) that prevents or materially delays such person from performing its material obligations under this Agreement or consummation of the transactions contemplated hereby;

51

(f) “Covered Contracts” means any of the following Contracts (whether or not in writing) collectively with all exhibits and schedules to such Contracts:

(i) any lease of real or personal property providing for annual rentals of $500,000 or more;

(ii) any agreement or series of related agreements involving aggregate commitments over the term thereof of, by or to Aztar or in the aggregate of $2,500,000 or more;

(iii) any agreement or series of related agreements that may involve payments or other consideration to or from Aztar or any of its subsidiaries in excess of $2,500,000 over the term thereof;

(iv) any agreement or agreements containing material indemnification or similar obligations on the part of Aztar or any of its subsidiaries;

(v) any neutrality agreements;

(vi) any agreement or series of related agreement providing for the acquisition or disposition of securities of any person or any assets, in each case involving more than $2,500,000 individually or in the aggregate;

(vii) any partnership, joint venture or other similar agreement or arrangement relating to the formation, creation, operation, management or control of any partnership or joint venture material to Aztar or any of its subsidiaries or in which Aztar or any of its subsidiaries owns any interest valued at more than $2,500,000 without regard to percentage voting or economic interest (unless pursuant to such agreement or arrangement, Aztar and its subsidiaries do not have a future funding obligation reasonably likely to require funding of more than $2,500,000);

(viii) any Material Contract;

(ix) any non-competition Contract or other Contract that (I) purports to limit either the type of business in which Aztar or its subsidiaries (or, after the Effective Time, Pinnacle or its Affiliates) may engage or the manner or locations in which any of them may so engage in any business or contains exclusivity, most favored nation, preferred provider or similar provisions that affect the operation of Aztar and its subsidiaries (or, after the Effective Time, Pinnacle or its Affiliates) or (II) would require the disposition of any material assets or line of business of Pinnacle or its subsidiaries or, after the Effective Time, Pinnacle or its Affiliates;

(x) any Contract that contains a put, call or similar right pursuant to which Aztar or any of its subsidiaries would be required to purchase or sell, as applicable, any equity interests of any person or assets that have a fair market value or purchase price of more than $500,000; or

52

(xi) any other Contract or group of Contracts with a single counterparty (including its affiliates) that, if terminated or subject to a default by any party thereto, individually or in the aggregate, would have or would reasonably be expected to have a material adverse effect on Aztar.

(g) “person” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity; and

(h) “Permitted Investments” shall mean:

a. direct obligations of the United States of America or any member of the European Union or any agency thereof or obligations guaranteed by the United States of America or any member of the European Union or any agency thereof, in each case with maturities not exceeding two years;

b. time deposit accounts, certificates of deposit and money market deposits issued by a bank or trust company that is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital, surplus and undivided profits in excess of $250 million and whose long-term debt, or whose parent holding company’s long-term debt, is rated A (or such similar equivalent rating or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act);

c. repurchase obligations for underlying securities of the types described in clause (a) above entered into with a bank meeting the qualifications described in clause (b) above;

d. commercial paper issued by a corporation (other than an affiliate of Pinnacle) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moody’s, or A-1 (or higher) according to S&P;

e. securities issued or fully guaranteed by any State, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least A by S&P or A by Moody’s;

f. shares of mutual funds whose investment guidelines restrict 95% of such funds’ investments to those satisfying the provisions of clauses (a) through (e) above; and

g. money market funds that (i) comply with the criteria set forth in Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000.0 million.

53

(i) “solvent” means that, as of any date of determination, (a) the amount of the “fair saleable value” of the assets of Pinnacle and its subsidiaries (including Aztar and its subsidiaries) will, as of such date, exceed the value of all “liabilities of Pinnacle and its subsidiaries (including Aztar and its subsidiaries), including contingent and other liabilities,” as of such date, as such quoted terms are generally determined in accordance with applicable federal laws governing determinations of the insolvency of debtors, and, (b) Pinnacle and its subsidiaries (including Aztar and its subsidiaries) will not have, as of such date, an unreasonably small amount of capital for the operation of the businesses in which it is engaged or proposed to be engaged following such date, and (c) Pinnacle and its subsidiaries (including Aztar and its subsidiaries) reasonably believes it will be able to pay its liabilities, including contingent and other liabilities, as they mature. For purposes of this definition, (i) “not have …an unreasonably small amount of capital for the operation of the businesses in which it is engaged or proposed to be engaged” and “able to pay its liabilities, including contingent and other liabilities, as they mature” means that Pinnacle and its subsidiaries (including Aztar and its subsidiaries) reasonably believes it will be able to generate enough cash from operations, asset dispositions or refinancing, or a combination thereof, to meet its obligations as they become due.

(j) “subsidiary” means, with respect to any person, any other person, whether incorporated or unincorporated, of which more than 50% of either the equity interests in, or the voting control of, such other person is, directly or indirectly through subsidiaries or otherwise, beneficially owned by such first person.

Section 8.04 Interpretation and Other Matters . (a) When a reference is made in this Agreement to an Article, Section or Exhibit, such reference shall be to an Article or Section of, or an Exhibit to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns. “Knowledge” of a person and similar terms shall mean the actual knowledge of the executive officers of such person.

(b) Each of Aztar and Pinnacle has or may have set forth information in its respective disclosure letter in a section thereof that corresponds to the section of this Agreement

54

to which it relates. A matter set forth in one section of a disclosure letter need not be set forth in any other section of the disclosure letter so long as its relevance to the latter section of the disclosure letter or section of the Agreement is readily apparent on the face of the information disclosed in the disclosure letter to the person to which such disclosure is being made. The fact that any item of information is disclosed in a disclosure letter to this Agreement shall not be construed to mean that such information is required to be disclosed by this Agreement. Such information and the dollar thresholds set forth herein shall not be used as a basis for interpreting the terms “material,” “material adverse effect” or other similar terms in this Agreement.

(c) Pinnacle agrees to cause Merger Sub to comply with its respective obligations under this Agreement.

Section 8.05 Counterparts . This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each party and delivered to the other parties.

Section 8.06 Entire Agreement; No Third-Party Beneficiaries . This Agreement (including the documents and instruments referred to herein) and the Confidentiality Agreement (i) constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement and (ii) except for the provisions of Section 5.06 (which shall be enforceable by the Indemnified Parties), are not intended to and shall not confer upon any person other than the parties any rights or remedies.

Section 8.07 Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflict of laws.

Section 8.08 Assignment . Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties hereto without the prior written consent of the other party. Any attempted or purported assignment in violation of the preceding sentence shall be null and void and of no effect whatsoever. Subject to the preceding two sentences, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.

Section 8.09 Enforcement . The parties agree that irreparable damage would occur and that the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any federal or state court located in the State of Delaware, this

55

being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of the federal and state courts located in the State of Delaware in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (c) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than a federal or state court in the State of Delaware.

Section 8.10 Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

Section 8.11 WAIVER OF JURY TRIAL . EACH PARTY TO THIS AGREEMENT WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

Section 8.12 Alternative Structure. The parties agree to cooperate in the consideration of alternative structures to implement the transactions contemplated by this Agreement as long as there is no change in the economic terms thereof and such change does not impose any material delay on, or condition to, the consummation of the Merger, or adversely affect Aztar, prior to the Effective Time, or Aztar’s stockholders or result in liability to Aztar’s directors or officers. Any such alternative structure shall constitute a “change of control” with respect to the Aztar Employee Benefit Plans and Aztar Employment Agreements to the same extent that the transactions contemplated hereby constitute a “change of control” with respect to the applicable Plan or Agreement.

56

IN WITNESS WHEREOF, Pinnacle, Aztar and Merger Sub have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above.

PINNACLE ENTERTAINMENT, INC.
By:	/s/ Daniel R. Lee
Name:	Daniel R. Lee
Title:	Chairman of the Board and Chief Executive Officer
PNK DEVELOPMENT 1, INC.
By:	/s/ Daniel R. Lee
Name:	Daniel R. Lee
Title:	Chairman of the Board and Chief Executive Officer
AZTAR CORPORATION
By:	/s/ Neil A. Ciarfalia
Name:	Neil A. Ciarfalia
Title:	Chief Financial Officer, Vice President and Tresurer

57

EX-10.51

Exhibit 10.51

FIRST AMENDMENT TO REDEVELOPMENT AGREEMENT AND

FIRST AMENDMENT TO OPTION FOR GROUND LEASE

THIS FIRST AMENDMENT TO REDEVELOPMENT AGREEMENT AND FIRST AMENDMENT TO OPTION FOR GROUND LEASE (“Amendment”) is made and entered into effective this 23rd day of December, 2004, by and between LAND CLEARANCE FOR REDEVELOPMENT AUTHORITY OF THE CITY OF ST. LOUIS (hereinafter the “LCRA”), a public body corporate and politic established pursuant to the Land Clearance for Redevelopment Authority Law of the State of Missouri, for itself and on behalf of the City of St. Louis, Missouri (hereinafter the “City”), a political subdivision of the State of Missouri, and PINNACLE ENTERTAINMENT, INC., a corporation duly organized and existing under the laws of the State of Delaware (hereinafter the “Redeveloper”).

W I T N E S S E T H:

WHEREAS, on April 22, 2004, LCRA and Redeveloper entered into that certain Redevelopment Agreement (the “Redevelopment Agreement”) which governed the development of certain real property described in Exhibit A to the Redevelopment Agreement and referred to as the “Redevelopment Area”; and

WHEREAS, LCRA and Redeveloper desire to extend the time in which to obtain the preliminary site plan approval from the Missouri Gaming Commission (hereafter “MGC”) contemplated in Section 4.1.2(iv) of the Redevelopment Agreement; and

WHEREAS, the LCRA and Redeveloper desire to clarify their agreement regarding the preliminary site plan approval of the MGC;

WHEREAS, LCRA and Redeveloper entered into that certain Option for Ground Lease (the “Option”) for certain real property bounded by Martin Luther King Drive, Carr Street, First Street and Leonor K Sullivan Drive in the City of St. Louis, Missouri (the “Option Area”); and

WHEREAS, the Option permits the Redeveloper to exercise the Option for Ground Lease for Non-Gaming Uses (as defined in the Ground Lease and which definition is incorporated herein by reference); and

WHEREAS, LCRA and the Redeveloper desire to amend the Option to permit the Redeveloper to purchase the fee interest in the Property in the event that Redeveloper elects to use the Property for a mixed-use project that is substantially comprised of residential units sold on an individual basis as a Non-Gaming Use under the provisions provided herein; and

WHEREAS, LCRA is obligated under the Option to exercise its power of eminent domain to attempt to acquire any property in the Option Area not owned by the LCRA in order to lease or sell such property to Redeveloper if Redeveloper exercises certain rights under the Option; and

WHEREAS, the form of Ground Lease which is Exhibit B to the Option sets forth the process for determining the Base Rent to be paid by Redeveloper under the Ground Lease in the event that Redeveloper exercises its rights under the Option and uses the property in the Option Area for Non-Gaming Uses; and

WHEREAS, LCRA and the Redeveloper desire to amend the form of Ground Lease to provide that the Base Rent for Non-Gaming Uses shall be subject to adjustment based on the amount that the LCRA may be required to pay for any property in the Option Area under its exercise of eminent domain;

WHEREAS, upon a determination of Market Based Rent as set forth herein and in the Option, the Redeveloper contemplates entering into the Ground Lease immediately and redeveloping the Option Area in accordance with the Redevelopment Agreement, including obtaining all approvals of the City and other governmental agencies having jurisdiction over the Option Area.

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, the LCRA and Redeveloper agree as follows:

1. Extension. Sections 4.1.1(viii) and 4.1.2(iv) of the Redevelopment Agreement are each modified to substitute the date January 31, 2005 for December 31, 2004.

2. Preliminary Site Plan Approval. The references to the preliminary site plan approval by the MGC in the Redevelopment Agreement, shall mean the issuance of findings of fact and conclusions of law by the MGC determining that Redeveloper’s site plan appears to comply with Missouri gaming law, and allowing Redeveloper to proceed to the next step of the investigation process, subject to the review and approval by MGC of the final design and licensure.

3. Amendment to Option.

a. The first paragraph of the Option following the “Witnesseth” clause shall be amended and restated as follows:

“In consideration of the option money hereinafter described, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Owner does hereby grant unto Optionee, the exclusive right and option (the “Option”) to lease, under the terms and conditions set forth in the Ground Lease attached hereto as Exhibit B (the “Ground Lease”), up to seven (7) acres of real estate located in the City of St. Louis and further described in Exhibit A, attached hereto and made a part hereof, together with all appurtenances thereto and improvements thereon (the “Property”). In the event that the Optionee elects to use the Property for a mixed-use project that is substantially comprised of residential units sold on an individual basis (the “Residential Uses”) as a Non-Gaming Use, the Optionee may elect to acquire fee simple title to the Property from the Owner.”

- 2 -

b. Section 3 is amended to add the following new paragraph to the end of the section:

“If the Optionee elects to acquire the Property for the Residential Uses in fee simple interest as herein provided, the Optionee shall provide its written notice of such election to the Owner (“Fee Option Notice”) within the Option Term or the Renewal Term. Upon receipt of the Fee Option Notice by Owner, the parties shall agree to a closing date to be set not later than ninety (90) days from the date of the Fee Option Notice. The purchase price for the fee simple interest in the Property shall be determined in accordance with the Appraisal Procedure in Section 3.5 of the Ground Lease for determining the fair market value of the Property for Non-Gaming Uses except that such provisions shall be applied as closely as possible to a fee valuation rather than a leasehold valuation as therein stated. Optionee shall acquire a marketable fee simple interest title in the Property in accordance with Section 5.2 of this Option.”

c. Section 5.2 is amended to add the following to the end thereof:

“In the event that Optionee has elected to acquire fee simple interest in the Property for Residential Uses, then Owner shall convey marketable fee simple interest to Optionee by Special Warranty Deed which title shall be insured by a title insurance policy insuring such title subject only to such encumbrances and exceptions as are reasonably acceptable to Optionee. All taxes, fees, costs and expense items related to the Property shall be prorated between the parties as of the closing date and in the customary manner of the St. Louis City area for commercial transactions of this nature. Otherwise all provisions applicable to the transfer of the leasehold title as set out herein shall be reasonably adopted between the parties to apply as closely as possible to a fee transaction rather than a leasehold transfer unless otherwise agreed by both parties.”

4. Amendment to Ground Lease.

a. Section 3.1 of the Ground Lease entitled: “Definitions” shall be amended by adding the following definition immediately following “Option Notice”:

“Rent Notification Date” shall mean the later of (i) two (2) business days after approval of the preliminary site plan by MGC or (ii) thirty days after commencement of the Appraisal Procedure.

- 3 -

b. Section 3.5 of the Ground Lease entitled: “Market Rental Rate” Determination for Non-Gaming Use” shall be amended as follows:

i. Section 3.5.1 is amended and restated as follows:

“On the Rent Notification Date, the Landlord shall advise Tenant in writing as to the Base Rent amount which Landlord proposes as the Market Rental Rate for the Leased Premises as of the applicable Calculation Date or Adjustment Date. Landlord’s proposed Market Rental Rate shall separately reflect the Market Rental Rate attributable to property owned by Landlord at the commencement of the Appraisal Procedure (the “Landlord Owned Property”) and for each parcel of property Landlord would be acquiring in an eminent domain action, and which includes the Cherrick Distributing property on the map attached as part of Exhibit A to the Option (the “Eminent Domain Property” and the Landlord Owned Property and the Eminent Domain Property are collectively herein referred to as the “Combined Property”). If Tenant does not agree with Landlord’s determination of the Market Rate Rent, Tenant shall notify Landlord within twenty (20) business days after receipt of Landlord’s notice of Tenant’s proposed Market Rental Rate.”

ii. Section 3.5.2 is amended and restated as follows:

“In the event Landlord and Tenant, after good faith negotiations, are unable to agree as to the Market Rental Rate on the Combined Property within sixty (60) days after the Rent Notification Date, either Landlord or Tenant may begin the Appraisal Procedure by sending an Appraisal Notice to the other party, and Landlord and Tenant shall promptly convene a panel of two (2) Appraisers. Landlord shall appoint one member of the panel and Tenant shall appoint one member of the panel. Landlord and Tenant shall each appoint their respective Appraiser member to the panel within ten (10) days after the Appraisal Notice. The Appraisers selected by Landlord and Tenant shall, within forty (40) days after they have been appointed, submit his or her determination of the Fair Market Value on the Landlord Owned Property and the Eminent Domain Property and the Capitalization Rate. After the calculation of the Capitalization Rate and Fair Market Value on the Landlord Owned Property and the Eminent Domain Property by the two (2) Appraisers, a preliminary Fair Market Rental on the Landlord Owned Property and the Eminent Domain Property shall be calculated by each Appraiser using the following formula: the Capitalization Rate shall be multiplied by the Fair Market Value for the Combined Property. In the event that the lower Market Rate Rental for the Combined Property as calculated by the Appraisers is at least 90% of the higher Market Rental Rate of the Combined Property, the average of such two Market Rental Rates of the Combined Property shall be deemed to be the Market Rental Rate

- 4 -

for the Combined Property effective as of the Effective Date or the applicable Adjustment Date. In the event that the Appraisers’ calculations are not within such 90% range, the two (2) Appraisers shall select a third Appraiser who shall, within thirty (30) days of the date selected calculate the Fair Market Value of the Landlord Owned Property and the Eminent Domain Property and the Capitalization Rate. The calculations of the third Appraiser of the Fair Market Value of the Landlord Owned Property and the Eminent Domain Property and/or Capitalization Rate shall be used to determine the Fair Market Value for the Combined Property, by multiplying the Fair Market Value for the Combined Property by the Capitalization Rate. The Fair Market Rental Rate for the Combined Property as determined by the Third Appraiser shall be equal to or between the amounts calculated by the two (2) Appraisers.

Notwithstanding the foregoing and anything herein to the contrary, for the purposes of annual Base Rent payable on the Effective Date as provided in Section 3.4 hereof, in the event that the Landlord acquires the Eminent Domain Property through a condemnation procedure, or settlement in lieu thereof reasonably acceptable to Tenant, the Landlord’s property acquisition cost and related reasonable costs and expenses in connection with the acquisition of the Eminent Domain Property (and without any carrying or interest type additions) shall be deemed the Fair Market Value of the Eminent Domain Property and shall be substituted for the Fair Market Value agreed to by the Landlord and Tenant pursuant to Section 3.5.1 hereof or determined by the Appraisers pursuant to this Section 3.5.2, and the substituted Fair Market Value for the Eminent Domain Property shall apply retroactively to all Base Rent payments by Tenant (whether higher or lower) attributed to the Eminent Domain Property, if any or to the purchase price paid by Tenant in connection with the purchase of the Property. If Tenant fails to exercise its Option to acquire the Eminent Domain Property within twenty (20) days of receipt of the notice of filing of commissioner’s report, Tenant’s Option to lease the Eminent Domain Property shall terminate, and Landlord shall have no further obligation to deliver the Eminent Domain Property to Tenant, Landlord shall provide the Tenant a copy of all filings and pleadings when made with the Court. In addition, Landlord shall promptly provide a copy of all correspondence, agreements (including proposed settlement agreements), and reports, or any portions thereof, generated in connection with the pricing of the Eminent Domain Property during the course of the eminent domain proceedings or settlement thereof.

Notwithstanding the foregoing and anything herein to the contrary and subject to the Landlord’s diligent exercise of its statutory eminent domain authority, Landlord is under no obligation to lease or sell the Eminent Domain Property to Tenant if a court of competent jurisdiction determines that Landlord lacks jurisdiction to acquire the

- 5 -

Eminent Domain Property through the exercise of its asserted statutory eminent domain authority after Landlord’s exhaustion of its rights to appeal such court decision.”

5. Full Force and Effect/Binding Upon Parties/Successors and Assigns. Except as modified and amended by this Amendment, the Redevelopment Agreement, and except as amended by this Amendment, the Ground Lease, shall each remain in full force and effect in accordance with the respective terms thereof. Unless the context otherwise indicates, all other terms and conditions of the Redevelopment Agreement or the Ground Lease which are the same as or directly related to the revised terms and conditions set out in this Amendment are similarly modified to be consistent with this Amendment. Except as modified by this Amendment, the Option shall remain in full force and effect in accordance with its terms. The provisions of this Amendment shall inure to the benefit of and be binding upon the parties hereto, their successors and assigns.

6. Counterparts. This Amendment may be executed in counterparts,

[Signature Page Follows]

- 6 -

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

LAND CLEARANCE FOR REDEVELOPMENT AUTHORITY OF THE CITY OF ST, LOUIS, a public body corporate and politic established pursuant to Section 99.300 et seq. of the Revised Statutes of Missouri 2000, as amended
By:
	Rodney Crim, Executive Director
PINNACLE ENTERTAINMENT, INC., a Delaware corporation
By:	/s/ Jack Godfrey
	Jack Godfrey, Senior Vice President, General Counsel and Secretary

- 7 -

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

LAND CLEARANCE FOR REDEVELOPMENT AUTHORITY OF THE CITY OF ST, LOUIS, a public body corporate and politic established pursuant to Section 99.300 et seq. of the Revised Statutes of Missouri 2000, as amended
By:	/s/ Rodney Crim
	Rodney Crim, Executive Director
PINNACLE ENTERTAINMENT, INC., a Delaware corporation
By:
	Jack Godfrey, Senior Vice President, General Counsel and Secretary

- 8 -

ACKNOWLEDGMENT

STATE OF MISSOURI	)
	)  ss.
CITY OF ST. LOUIS	)

On this 23rd day of December, 2004, before me appeared RODNEY CRIM, to me personally known, who, being for me duly sworn, did say that he is the Executive Director of the LAND CLEARANCE FOR REDEVELOPMENT AUTHORITY OF THE CITY OF ST. LOUIS, MISSOURI, a body politic and corporate organized under the laws of the State of Missouri, and said instrument was signed in behalf of said Authority for itself and on behalf of the City of St. Louis, Missouri by authority of its Board of Commissioners and as authorized by the Board of Alderman of the City of St. Louis, Missouri, and said individual acknowledged said instrument to be the free act and deed of said authority and said City.

IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal in the County and State aforesaid, the day and year first above written.

/s/ Christina Johnson

Notary Public

Christina Johnson

(Printed Name)

My Commission Expires:

              1-21-07              

- 9 -

ACKNOWLEDGMENT

STATE OF NEVADA	)
	)  ss.
CITY OF CLARK	)

On this 23rd day of December, 2004, before me appeared JACK GODFREY, to me personally known, who being by me duly sworn, did say that he is the Senior Vice President, General Counsel and Secretary of PINNACLE ENTERTAINMENT, INC., a Delaware corporation, and that he is authorized to sign the instrument on behalf of said corporation by authority of its Board of Directors, and acknowledged to me that he executed the within instrument as said corporation’s free act and deed.

IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal in the County and State aforesaid, the day and year first above written.

/s/ Elaine Pumphrey

Notary Public

Elaine Pumphrey

(Printed Name)

My Commission Expires:

              12-3-05              

- 10 -

EX-10.52

Exhibit 10.52

SECOND AMENDMENT TO REDEVELOPMENT AGREEMENT

THIS SECOND AMENDMENT TO REDEVELOPMENT AGREEMENT (the “Amendment”) is made as of this 21st day of July, 2005, by and between Land Clearance for Redevelopment Authority of the City of St. Louis (“LCRA”) and Pinnacle Entertainment, Inc., (“Redeveloper”).

RECITALS

A. On April 22, 2004, LCRA and Redeveloper entered into that certain Redevelopment Agreement, as amended (the “Redevelopment Agreement”) which governed the development of certain real property described in Exhibit A to the Redevelopment Agreement and referred to as the “Redevelopment Area”.

B. On July 7, 2005, LCRA and Redeveloper entered into a Property Purchase Agreement, as amended by the First Amendment to Property Purchase Agreement dated as even date herewith, whereby LCRA agreed to sell and Redeveloper agreed to purchase certain property described on Exhibit A thereto (the “LCRA Property”).

C. It is the intent of LCRA to see the LCRA Property developed. It is the desire of Redeveloper to improve the LCRA Property in a manner to be reflected in a plan to be submitted to LCRA not later than six (6) months prior to the Casino Opening Date. Such plan shall incorporate the LCRA Property in the Redeveloper’s overall development plan.

NOW, THEREFORE, in consideration of the premises and the promises herein and other good and valuable consideration, the adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. The following definitions shall be added to Section 1.1:

“Ancillary Development Site” means a site which (a) has been cleared of all prior improvements other than those improvements or rights of third parties with an interest in the LCRA Property; and (b) has been improved with a parking lot(s), landscaping, curbs, gutters and/or sidewalks in a manner that renders the LCRA Property ancillary to the Improvements.

“Casino Opening Date” shall mean the date the casino and hotel (referred to in Subsection 3.12.2) comprising the Improvements have both opened for business.

“LCRA Property” means the property described on Exhibit H.

“Qualified Improvements” means buildings constructed on the LCRA Property, the plans for which have been approved by LCRA which approval shall not be unreasonably withheld, by Redeveloper for a luxury condominium project, market-rate housing, a parking garage, one or more retail or mixed use developments or such other improvements approved by LCRA in its sole discretion.

“Qualified Improvements Costs” means those capital expenditures incurred by Redeveloper in connection with the construction of Qualified Improvements constructed in accordance with Subsection 3.12.1, excluding costs incurred in developing the Ancillary Development Site.

2. Section 3.12.1 is hereby amended by deleting the first sentence therein and by inserting in lieu thereof the following sentence:

“Redeveloper shall exercise reasonable best efforts to construct either: (i) a luxury condominium project associated with the luxury class hotel provided in Section 3.8 above, or (ii) one or more market-rate residential, retail or mixed-use developments located within an area bounded by the Mississippi River, Biddle Street, Interstate 70 and Eads Bridge.”

3. A new Subsection 3.12.3 is hereby added immediately following Subsection 3.12.2:

3.12.3 On or before August 31, 2005, Redeveloper shall acquire fee title to the LCRA Property pursuant to the Property Purchase Agreement between Redeveloper and LCRA dated July 7, 2005, as amended by the First Amendment to Property Purchase Agreement dated as of July 21, 2005. Redeveloper covenants and agrees that it will render the LCRA Property as an Ancillary Development Site on or before the Casino Opening Date and provide written confirmation to LCRA no later than ten (10) days after the Casino Opening Date that the LCRA Property was an Ancillary Development Site by the Casino Opening Date (“Ancillary Development Obligation”).

Not less than six (6) months prior to the Casino Opening Date, the Redeveloper shall send to LCRA for its reasonable approval plans and specifications for the Ancillary Development Site improvements which plans provide that the Ancillary Development Site improvements render the LCRA Property ancillary and complementary to other Improvements or adjacent properties owned by Redeveloper. LCRA’s review of such plans with respect to parking lot(s) shall be based on development standards of comparable surface parking facilities within the City of St. Louis and such approval shall not be unreasonably withheld. The project schedule set forth in Section 3.12.3 shall not apply to the Ancillary Development Site improvements contemplated herein.

Upon satisfaction of the Ancillary Development Obligation and acceptance of a Certificate of Substantial Completion for such work, LCRA agrees to credit Two Million Six Hundred Fifty Five Thousand ($2,655,000.00) toward the Fifty Million Dollar ($50,000,000) capital investment requirement in Subsection 3.12.1. If on or before the date which is sixty (60) months after the Casino Opening Date, the Redeveloper constructs Qualified Improvements on the LCRA Property with Qualified Improvement Costs exceeding Three Million Four Hundred Forty Five Thousand ($3,445,000.00) and Redeveloper provides written notice to LCRA within sixty-one (61) months after the Casino Opening Date which includes written evidence of the Qualified Improvement Costs incurred (“LCRA Property Development”), LCRA shall credit the amount of such Qualified Improvement Costs against the Fifty Million Dollar ($50,000,000) capital investment requirement in Subsection 3.12.1.

- 2 -

4. Exhibit H to the Redevelopment Agreement is attached hereto as Exhibit A.

5. Full Force and Effect/Binding Upon Parties/Successors and Assigns. Except as modified and amended by this Amendment, the Redevelopment Agreement shall remain in full force and effect in accordance with the terms thereof. Unless the context otherwise indicates, all other terms and conditions of the Redevelopment Agreement which are the same as or directly related to the revised terms and conditions set out in this Amendment are similarly modified to be consistent with this Amendment. The provisions of this Amendment shall inure to the benefit of and be binding upon the parties hereto, their successors and assigns.

6. Counterparts. This Amendment may be executed in counterparts.

[Signature Page Follows]

- 3 -

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

LAND CLEARANCE FOR REDEVELOPMENT AUTHORITY OF THE CITY OF ST. LOUIS, a public body corporate and politic established pursuant to Section 99.300 et seq. of the Revised Statues of Missouri 2000, as amended
By:	/s/ Rodney Crim
	Rodney Crim, Executive Director
PINNACLE ENTERTAINMENT, INC., a Delaware corporation
By:	/s/ John A. Godfrey
	John A. Godfrey, Executive Vice President

Exhibit A to the Second Amendment to the Redevelopment Agreement

[Follows]

File No. 554050

EXHIBIT A

[LEGAL DESCRIPTION]

EX-10.54

Exhibit 10.54

[Pinnacle Entertainment Letterhead]

August 12, 2004

Dennis G. Coleman, Executive Director

St. Louis County Port Authority

121 S. Meramec

St. Louis, MO 63105

Re: Lease and Development Agreement dated August 12, 2004 (the “Lease”) by and between St. Louis County Port Authority (the “Authority”) and Pinnacle Entertainment, Inc. (“Pinnacle”)

Dear Dennis:

This letter will confirm our mutual understandings and agreements regarding the Lease, which you and we have executed and delivered today.

As all of us are aware, the effective date of Ordinance No. 21,908 (the “County Ordinance”) has been stayed as a result of the petition drive to place the County Ordinance on the November election ballot. We are pleased that both the Authority and the County Counselor share our view that the County Ordinance is not properly referable to the voters.

Quite apart from the County Ordinance, the County Council adopted a parallel supporting resolution which is not targeted in the referendum drive. Pinnacle and the Authority are in complete agreement that these resolutions are perfectly adequate to implement the regulatory mechanisms provided for under Missouri law for municipal and county input to the Commission as it makes its determination regarding licensure. St. Louis County voters approved licensed casino gaming more than 10 years ago, and the residents of Lemay have repeatedly demonstrated their overwhelming support for the Pinnacle Project. For these reasons, we have agreed to jointly urge and work with the County to challenge the referendum if the petition drive should garner enough signatures for ballot certification. The Authority and Pinnacle also agree to take reasonable cooperative legal actions, as necessary, to assure that the Project proceeds as quickly as is possible under the development schedule in the Lease and to assure that the Lease remains in full force and legal effect.

While we are confident that a challenge of the referendum petition would be successful, and while we do not intend to delay in proceeding under the Lease, there is always the possibility that the referendum seeking to invalidate the County Ordinance will be on the

Dennis G. Coleman, Executive Director

August 12, 2004

Page 2

ballot and that the voters might vote in favor of the referendum which could create challenges to the completion of the Project. In that circumstance, the Authority acknowledges that Pinnacle shall have the right but not the obligation to pursue whatever legal action might be needed to protect and complete the Pinnacle Project. Moreover, the Authority further acknowledges that if there are challenges to the completion of the Pinnacle Project arising from the referendum, Pinnacle shall have the right, by delivery of written notice to the Authority, to declare an event of force majeure and to suspend performance of any or all of its ongoing obligations (tolling all relevant deadlines under the Lease for the completion of work or the satisfaction of Conditions, other than the Commission Acceptance Date Condition, including disbursements by Escrow Agent under the Escrow Agreement) until such impediment has been fully and finally removed to Pinnacle’s satisfaction. Finally, the Authority acknowledges that if as a result of some action caused by the referendum petition process, Pinnacle determines in its discretion that it cannot complete or operate the Pinnacle Project as contemplated under the Lease, Pinnacle shall have the right by delivery of written notice to the Authority to terminate the Lease without penalty and receive a full refund of all Deposits and Prepaid Rent held by the Escrow Agent or released by the Escrow Agent to the Authority in accordance with any applicable provision of the Lease.

Even though the Authority recognizes that Pinnacle could declare an event of force majeure now, the parties have determined to proceed on the Project by agreeing that: (a) all references to the term Effective Date in Section l(c) and 2 of the Lease shall be the later of December 1, 2004, or the Commission Acceptance Date; (b) in the event that without fault of Pinnacle, the Commission Acceptance Date Condition, the Zoning Condition or the Site Permit Condition is not timely satisfied (taking into account any force majeure delays for satisfaction of the Zoning or Site Permit Conditions declared by Pinnacle pursuant to the preceding paragraph), Pinnacle shall have the right, in its sole discretion, to terminate the Lease without penalty, and in such event, if the First Deposit, the Second Deposit and the Prepaid Rent have been placed in escrow pursuant to the Lease, the funds shall be returned to Pinnacle as provided in the paragraph above and neither party shall have any further liability under the terms of the Lease; and (c) references to the Commission Acceptance Date in Section 4 of the Lease shall be the later of December 1, 2004, or the Commission Acceptance Date. Notwithstanding the foregoing, Pinnacle reserves its rights to declare a force majeure event at any time with respect to challenges to the completion of the Project arising from the referendum and the Authority agrees to recognize any such force majeure declaration and the rights of Pinnacle outlined in the paragraph above.

In consideration of the foregoing, Pinnacle has agreed to reimburse $220,728.25 in out-of-pocket expenses borne by the Authority through July 31, 2004, in connection with the selection process, the negotiation of the Lease, certain on-going due diligence and

Dennis G. Coleman, Executive Director

August 12, 2004

Page 3

attention to the concerns addressed in this letter, said amount to be payable subject to Pinnacle’s review and approval of invoices furnished this date by the Authority to Pinnacle. Furthermore, Pinnacle agrees to reimburse the Authority for out-of-pocket expenses borne by the Authority concerning the development of the Project submitted by Real Estate Strategies and reviewed and approved in writing by Pinnacle. Subject to Pinnacle’s prior approval of the scope of services for future legal fees billed by Bryan Cave LLP, Pinnacle also agrees to reimburse the Authority for the actual costs of such fees and expenses subject to approval in writing by Pinnacle.

Terms defined in the Lease and used herein shall have the same meaning as so defined. In the event of any conflict between the Lease, the Escrow Agreement and this letter agreement, this letter agreement shall control and all other terms and provisions of the Lease shall remain in full force and effect. If the foregoing meets with your approval, please sign where indicated below. On behalf of Pinnacle Entertainment, we are pleased that the Authority shares our commitment to this vital and exciting project and our confidence in its ultimate success.

Very truly yours,

/s/ John A. Godfrey

John A. Godfrey

Senior Vice President, Secretary and

      General Counsel

Acknowledged and Agreed this 12th day of August, 2004 St. Louis County Port Authority
By:	/s/ Dennis G. Coleman
Name:	Dennis G. Coleman
Title:	Executive Director

EX-10.55

Exhibit 10.55

Second Amendment to Lease and Development Agreement

Between

St. Louis County Port Authority

And

Pinnacle Entertainment, Inc.

APPROVAL (Please Initial)
/s/ DC		10/28/05
President or COO  ¨		Date
/s/
General Counsel  ¨		Date
/s/ [illegible]		10/28/05
Financial Officer  ¨		Date
/s/ [illegible]		10/27/05
Division Director  ¨		Date
	10/11/05	05-PORT-18
Board Approved:	Date	Resolution #
20-3020-R		300-15
Fund/Org		Account #

SECOND AMENDMENT TO LEASE AND DEVELOPMENT AGREEMENT

This SECOND AMENDMENT TO LEASE AND DEVELOPMENT AGREEMENT (“Amendment”) is made and entered into this 7th day of October, 2005 by and between the ST. LOUIS COUNTY PORT AUTHORITY, a public body corporate and politic of the State of Missouri (“Landlord”) and PINNACLE ENTERTAINMENT, INC., a Delaware corporation (“Tenant”).

RECITALS

A. Landlord and Tenant entered into a Lease and Development Agreement dated as of August 12, 2004 as amended pursuant to the letter agreement between the Landlord and the Tenant of even date therewith (collectively, the “Lease and Development Agreement”) pursuant to which the Tenant agreed, subject to the terms and conditions in the Lease and Development Agreement, to construct and develop the gaming and mixed use Project in unincorporated Lemay, Missouri (the “Project”), including an access route to the property for the Project (the “Project Roadway”).

B. Landlord and Tenant agreed in the Lease and Development Agreement to work together on the development and construction of the Project Roadway; including the assistance of the United States Air Force and the General Services Administration to obtain the defense mapping facilities (the “NIMA Site”).

C. The Landlord has been negotiating with the United States Air Force (the “Air Force”) and the General Services Administration (“GSA”) for the acquisition of the NIMA Site to be used by Landlord for the economic development of the Lemay area.

D. A portion of the NIMA Site will be used for the proposed Project Roadway to the Project.

E. The Landlord has incurred and will continue to incur certain costs in connection with the due diligence on the NIMA Site and the negotiation of the agreements related to the acquisition of the NIMA site, including attorneys fees, environmental due diligence and for outside consultants.

F. The Landlord and the Tenant desire to amend the Lease and Development Agreement to provide for the payment of the fees and costs of the due diligence and negotiation of the acquisition of the NIMA Site.

NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties contained herein, Landlord and Tenant agree to amend the Lease and Redevelopment Agreement as follows:

1. Capitalized Terms. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Lease and Development Agreement.

- 1 -

2. Payment of Fees.

(a) Tenant shall reimburse Landlord for the consulting fees and expenses of Donna Erat in an amount not to exceed $90,000 within 30 days of receipt of an invoice from Landlord for the same, which invoice shall include applicable supporting documentation from Donna Erat.

(b) Tenant shall reimburse Landlord for the consulting fees and expenses of Greenhorne & O’Mara hi an amount not to exceed $64,000 within 30 days of receipt of an invoice from Landlord for the same, which invoice shall include applicable supporting documentation from Greenhorne & O’Mara.

(c) Attached as Exhibit A is scope of services and rate schedule for the services to be performed by Spencer Fane Britt & Brown (“Spencer Fane”) with respect to the Landlord’s acquisition of the NIMA Site. Exhibit A is incorporated herein by reference and the scope of services and rates are approved by Tenant. Attached as Exhibit B is the scope of services and fees for the environmental due diligence to be performed by Environmental Operations, Inc. (“EOI”) on the NIMA Site. Exhibit B is incorporated herein by reference and the scope of services and fees are approved by Tenant. The Spencer Fane fees and expenses and the EOI fees and expenses are hereinafter collectively referred to as the “NIMA Site Fees.” Tenant shall reimburse Landlord for the NIMA Site Fees subject to Tenant’s review and approval of the written invoices submitted by Spencer Fane and EOI to Landlord for payment. Tenant shall make any objections to the invoices within 20 days of receipt or such invoices shall be deemed approved. Tenant shall reimburse Landlord within 30 days of its approval of such invoices. Tenant’s reimbursement of Spencer Fane fees and expenses shall not exceed $280,000, and Tenant’s reimbursement of EOI fees and expenses shall not exceed $424,000 unless otherwise agreed in writing by Tenant.

(d) Other than the NIMA Site Fees and subject to the provisions of section 4 below, Landlord agrees to pay all other related fees and expenses concerning the NIMA Site unless otherwise agreed in writing by Tenant.

(e) In consideration of Tenant’s cooperation and payment of the NIMA Site Fees, Landlord agrees, upon acquisition of the NIMA Site and in compliance with the Intergovernmental Agreement (among the Landlord, Tenant and the other signatory parties thereto (the “Intergovernmental Agreement”)), to provide Tenant reasonable directional and advertising signage easements on the NIMA Site, including but not limited to easements for a potential pylon sign and/or a welcome arch to be owned, designed and maintained by Tenant.

3. Repayment of NIMA Site Fees. In the event that (i) the HUD Empowerment Zone funds referred to in Section 2(h) of the Lease and Development

- 2 -

Agreement are reallocated as contemplated therein and as provided for under the Intergovernmental Agreement for use with respect to the Project Roadway and the economic development of the NIMA Site, and/or (ii) the Landlord sells or otherwise transfers the NIMA Site for an amount in excess of Landlord’s actual out-of-pocket costs for acquisition and environmental remediation on the Site (excluding those costs that have been funded by the Tenant), and/or (iii) Landlord obtains and sells tax credits for environmental remediation or development of the NIMA Site, then, to the extent permissible by law, the Landlord agrees to use the funds identified in provisos (i) or (ii) or the proceeds from the sale of tax credits described in (iii) above to reimburse the Tenant for the NIMA Site Fees paid by Tenant and to take reasonable affirmative actions complying with the terms of the Intergovernmental Agreement and this Agreement to assure that the funds in provisos (i) or (ii) or the proceeds from the sale of the tax credits described in (iii) above can be used to reimburse the NIMA Site Fees Tenant has paid for Landlord. Upon sale or transfer of the NIMA Site, the Landlord shall include the NIMA Site Fees along with Landlord’s out-of-pocket costs for acquisition and environmental remediation in the sale price for any third party.

4. Environmental Remediation of NIMA Site Necessary for Project Roadway. In the event Landlord acquires the NIMA Property, Landlord and Tenant agree to negotiate regarding the environmental remediation of the NIMA Property upon terms and conditions that are mutually agreeable to the Landlord and Tenant.

5. Tax Credits. Landlord and Tenant acknowledge that Section 4(p)(iv) of the Lease provides, among other things, that the Landlord will cooperate with the Tenant and take reasonable actions, in support of the Tenant to seek Brownfields and/or other incentives from the State of Missouri in connection with the Second Priority Route. The Landlord and the Tenant hereby agree that of Section 4(p)(iv) of the Lease shall apply, without limitation, with respect to tax credits and other incentives or benefits that may be available under the Missouri Voluntary Cleanup Program and under the Missouri Brownfield Redevelopment Program, Mo. Rev. Stat. §§ 447.700 et seq., the Missouri Petroleum Storage tank Insurance Fund, or any similar state or federal program for any environmental assessment or remediation work performed or paid for by Tenant in connection with the Project Roadway. The parties further acknowledge and agree that, Landlord shall take cooperative actions as requested by Tenant that include assisting Tenant and its counsel by providing any endorsements or documents that may be reasonably required to facilitate or support Tenant’s pursuit of financial incentives, for any environmental assessment or remediation work performed or paid for by Tenant in accordance with the Lease or this Agreement. Such cooperative actions shall include joining in the application(s) for tax credits to the Missouri Department of Economic Development and the Missouri Department of Natural Resources. All tax credits obtained pursuant to such cooperative efforts shall be administered by Tenant as Project Developer and used for the benefit of the Project.

6. Cooperation. In accordance with the terms of the Intergovernmental Agreement, Landlord is negotiating to acquire the NIMA Site with the United States Air Force and the GSA. Pursuant to Section 2 hereof, Tenant has agreed to pay certain fees of the Landlord in connection with the acquisition of the site. In that regard, the Landlord

- 3 -

and representatives of the Air Force and the GSA have formed various committees, including an environmental committee, to address the environmental remediation of the NIMA Site. Landlord agrees that it will request permission from the United States Air Force and GSA that Tenant have a representative on the environmental committee. Landlord and Tenant further agree that Landlord shall in connection with its negotiations to acquire and its acquisition of the NIMA Site, take reasonable actions to cooperate with the Tenant and Tenant’s attorneys that include (i) sharing information with Tenant relating to Tenant’s development of the access road under that certain “Road Development Agreement: between the Tenant and the St. Louis County, and (ii) obtaining input of the Tenant on preparation of plans, studies, and the performance of any environmental remediation that may be necessary for the development of the access road on the NIMA Site.

7. Full Force and Effect/Binding Upon Parties/Successors and Assigns. Except as modified and amended by this Amendment, the Lease and Development Agreement shall each remain in full force and effect in accordance with its terms. Unless the context otherwise indicates, all other terms and conditions of the Lease and Development Agreement which are the same as or directly related to the revised terms and conditions set out in this Amendment are similarly modified to be consistent with this Amendment. The provisions of this Amendment shall inure to the benefit of and be binding upon the parties hereto, their successors and assigns.

8. Counterparts. This Amendment may be executed in counterparts.

IN WITNESS WHEREOF, the undersigned have set their hands and seals as of the date first written above.

LANDLORD:
ST. LOUIS COUNTY PORT AUTHORITY
By:	/s/ Dennis G. Coleman
Name:	Dennis G. Coleman
Title:	President/CEO

APPROVED AS TO FORM

General Counsel, Economic Council

of St. Louis County

- 4 -

TENANT:
PINNACLE ENTERTAINMENT, INC.
By:	/s/ Wade Hundley
Name:	Wade Hundley
Title:	President/CEO

- 5 -

EXHIBIT A

[Scope of Services and Rate Schedule for services to be performed by Spencer Fane Britt & Brown]

Exhibit A

EXHIBIT B

[Scope of services and fees for environmental due diligence to be performed by Environmental Operations, Inc.]

Exhibit B

EX-10.61

Exhibit 10.61

EXECUTION COPY

RIVERBOAT CASINO SALE AND PURCHASE AGREEMENT

THIS RIVERBOAT CASINO SALE AND PURCHASE AGREEMENT (this “Agreement”) is entered into as of this 24^th day of February, 2006, by and among:

(i) President Casinos, Inc., debtor and debtor-in-possession (“Seller”) in a chapter 11 bankruptcy case, Case No. 02-53005 (the “Seller Case”) pending in the United States Bankruptcy Court for the Eastern District of Missouri (the “Bankruptcy Court”);

(ii) President Riverboat Casino-Missouri, Inc., a Missouri corporation (the “Company”), debtor and debtor-in-possession in a chapter 11 bankruptcy case in the Bankruptcy Court that is jointly administered with the Seller Case (the “Company Case” and, collectively with the Seller Case, the “Case”); and

(iii) Pinnacle Entertainment, Inc., a Delaware corporation, or a subsidiary thereof (“Buyer”).

RECITALS

A. Seller is the owner of all of the Closing Shares (as herein defined) of the Company.

B. The Company is the owner and operator of a riverboat casino, located on the Mississippi River riverfront in St. Louis, Missouri and moored to a barge known as Admiral Barge One and connected by a porte-cochere (collectively, the “Riverboat Casino”), more particularly described as:

Name:	The Admiral
Official No.:	204086
Name:	Admiral Barge One
Official No.:	689603

C. An official committee of unsecured creditors (the “Committee”) has been appointed in the Company Case pursuant to section 1102 of the United States Bankruptcy Code (the “Bankruptcy Code”).

D. Seller, with the support of the Committee and holders of Seller’s 12% Senior Notes due 2001 and 13% Senior Notes due 2001 (the “Bondholders”), desires to sell, and Buyer desires to purchase, the Closing Shares upon the terms and conditions set forth in this Agreement and subject to further action of the Bankruptcy Court.

E. Following execution of this Agreement, Seller and the Company shall seek authority from the Bankruptcy Court to hold an auction at which Buyer’s offer for the Closing Shares shall be subject to higher and better offers of third parties.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and adequacy of which hereby is acknowledged, and with the intent to be legally bound hereby, the parties agree as follows:

1. PURCHASE AND SALE OF CLOSING SHARES; RIVERBOAT CASINO ASSETS OWNED BY THE COMPANY; TRADEMARK LICENSE.

(a) Closing Shares to be Sold. Subject to the provisions of this Agreement, Seller shall sell and Buyer shall purchase, all of Seller’s right, title and interest in, to and under the Closing Shares, free and clear of any lien, mortgage, security interest, pledge, encroachment, easement, defect of title or other claim, charge or encumbrance of any nature whatsoever, or any restriction on transferability, option, right of first refusal, or restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership (collectively, “Encumbrances”), but subject in each case to applicable state and federal securities laws.

(b) Riverboat Casino Assets Owned by the Company. Immediately following the Closing, the Company shall have good and marketable title to all assets, properties and rights owned by the Company or otherwise material to the operation of the Riverboat Casino wherever such assets, properties and rights are located, and whether real, personal or mixed, tangible or intangible, which Riverboat Casino Assets, to the maximum extent permitted under Section 1141(C) of the Bankruptcy Code, will be free and clear of all claims and interests of creditors of the Company, other than the Company Liabilities (as defined in Section 3(a)) (collectively, the “Riverboat Casino Assets”); provided, however, the Riverboat Casino Assets shall not include any of the Excluded Assets (as defined in Section 9(c)(vi) below). The Riverboat Casino Assets shall include, but in no way be limited to, the following assets and properties of the Company:

(i) the Riverboat Casino, together with its furniture, fixtures, equipment, necessaries, uniforms, apparel, supplies held for consumption, life saving equipment (including life boats and inflatable boats), spare parts, radio equipment, cordage, general outfit and all other appurtenances and appliances belonging to the Riverboat Casino, and the Company’s parking and transportation shuttles and other vehicles, whether aboard the Riverboat Casino or on shore at the time of Closing;

(ii) all of the Company’s right, title and interest in and to (A) the Lease between the Company and the City of St. Louis Port Commission (the “City Lease”) and such other executory leases, subleases, easements, licenses, concessions or other agreements made for the benefit of the Company listed or described on Schedule 1(b)(ii)(A), whether written or oral, granting to any person the right to use or occupy real property (the “Parking Leases”; the City Lease and the Parking Leases are, collectively, the “Real Property Leases”), (B) subject to the compliance by the Company with the covenant contained in Section 8(a)(xviii), the Company’s collective bargaining agreement with Hotel Employees, Restaurant Employees Local 74, AFL-CIO as provided in Schedule 6(h), and (C) other executory leases or contracts either (I) listed on Schedule 1(b)(ii)(C) or (II) entered

- 2 -

into after the date of this Agreement in compliance with the provisions hereof and designated in writing by Buyer as an “Assumed Executory Lease and Executory Contract” by no later than five (5) Business Days (as defined in Section 2(d)(i)) after the date on which the Company Plan of Reorganization (as defined in Section 9(c) below) is filed (collectively, the “Assumed Executory Leases and Executory Contracts”); provide, however, that if Seller or Company assumes any executory lease or contract prior to the Closing and after the date of this Agreement without the prior written consent of Buyer, such assumed executory lease or contract shall be the sole responsibility of Seller or Company, as applicable, and shall constitute an Excluded Asset within the meaning of Section 9(c)(vi)(5) hereof unless and until such time, if any, as Buyer agrees to accept such executory lease or contract.

(iii) subject to Section 2(e) below, all of the right, title and interest of the Company and Seller in and to the following property if acquired by the Company or Seller after the date of this Agreement but prior to the Closing:

Parcel 1:

Lot “A” of Cherrick’s Subdivision, according to the plat thereof recorded in Plat Book 70 page 29 of the St. Louis City Records and in City Block 17 and 18 of the City of St. Louis, State of Missouri

Parcel 2:

Lot “C” of Cherrick’s Subdivision, according to the plat thereof recorded in Plat Book 70 page 29 of the St. Louis City Records and in City Block 18 of the City of St. Louis, State of Missouri

(Parcels 1 and 2 collectively referred to herein as the “Cherrick Lot”) and any and all rights and interest of the Company and/or Seller in and to the Cherrick Lot as described in and arising under that certain letter agreement, of even date herewith, among Seller, Company and Buyer (collectively, “Additional Real Estate”);

(iv) all gambling games, slot machines, tables, other gaming equipment and associated equipment that are used by the Company in the operation of the Riverboat Casino, together with the Company’s inventory of gaming chips, tokens, scrip, markers, gaming supplies and other items held for use by the Company at the Riverboat Casino in the ordinary course of business (“Gaming Equipment”);

(v) all cash in cashiers’ cages, vaults, carts, drawers, cash registers and gaming devices and machines, and any other cash or cash equivalents required to remain in the Company at all times as required by the regulators of the Missouri Gaming Commission or the regulations of such gaming commission (“Included Cash”);

(vi) all food processing and preparation and washing equipment, machines and fixtures, racks, trays, buffet tables, furniture, flatware, serving ware, utensils, crockery, plates, cutlery and other similar items, uniforms, napkins, linens and other tangible personal property held by the Company for use in connection with its food service and dining facilities at the Riverboat Casino;

- 3 -

(vii) to the extent relating to the Company’s marketing and operation of the Riverboat Casino, all books, records, files and papers, whether in hard copy or computer format, including books of account, sales and promotional literature, manuals and data, sales and purchase correspondence, customer lists, lists of present and former suppliers, personnel and employment records of present or former employees, and documentation developed or used for accounting or marketing purposes;

(viii) all of the Company’s right, title and interest in and to each of the following and all copies and other tangible embodiments thereof: (A) the “Admiral” name and all variants and derivations thereof, and all other fictitious business names, trademarks (registered and unregistered), service marks, trade dress, logos, trade names and the goodwill of the Company’s business associated therewith, and all applications, extensions, registrations, and renewals in connection therewith but excluding Seller’s Trademarks (as defined in Section 1(c) below), which may only be used by Buyer pursuant to and in accordance with Section 1(c) hereof, (B) all copyrightable works, all copyrights, and all applications, registrations and renewals in connection therewith in both published works and unpublished works and (C) all trade secrets and confidential and other business information (including ideas, research and development, know-how, formulas, works for hire, gaming, security and food service processes and techniques, market research, tracking methods, census reports, designs, drawings, specifications and business and marketing plans and proposals) (collectively, “Intellectual Property”);

(ix) all of the Company’s right, title and interest in and to licenses, permits, franchises, zoning rights, approvals, registrations, consents and authorizations used in, or necessary to the operation of the Riverboat Casino as presently operated or the other Riverboat Casino Assets, including those listed in Schedule 6(i) (collectively “Gaming Licenses”);

(x) all of the Company’s right, title and interest in and to all post office boxes, e-mail addresses, telephone and facsimile numbers and domain names held for use in connection with the operation of the Riverboat Casino;

(xi) all computer software, proprietary or otherwise (including data and related documentation), sales and promotional literature, manuals, customer and supplier correspondence, plats, architectural plans, drawings, designs, blueprints, specifications and studies that are owned or used in connection with the operation of the Riverboat Casino, in all cases in any form or medium, other than the Excluded Software;

(xii) all know-how, trade secrets, customer tracking information, customer databases, customer and supplier information, personnel information, technical information, process technology, plans, drawings, innovations, designs, ideas, proprietary blueprints and information and other information, including player tracking information related to Riverboat Casino Assets, and fixed asset, general ledger and risk management data (the Company will provide Buyer with assistance to incorporate the fixed asset, general ledger and risk management data into Buyer’s computer systems) owned or used by the Company in connection with the operation of the Riverboat Casino;

- 4 -

(xiii) all inventory of merchandise held for resale and all food and beverage inventory, including rights to vending and concession inventory, held for sale or service to patrons and/or employees of the Riverboat Casino (collectively, the “Inventory”);

(xiv) all prepaid expenses relating to the Riverboat Casino (“Prepaid Expenses”);

(xv) all accounts receivable and related deposits, security, or collateral therefor, including recoverable customer deposits and receivables (collectively, the “Receivables”);

(xvi) all security deposits deposited by or on behalf of the Company as lessee or sublessee under the Assumed Executory Leases and Executory Contracts existing on the Closing Date and all deposits of the Company with utilities and other providers of services to the Riverboat Casino (the “Security Deposits”);

(xvii) all of the Company’s rights to any indemnity payments and insurance contracts, relating to the Riverboat Casino Assets held by the Company;

(xviii) any credits, carryforwards, operating losses and other attributes related to Taxes (as defined in Section 6(p)(i), but excluding any refunds for Taxes described in Section 9(c)(vii)(11) below; and

(xix) At Buyer’s election, any other asset (except assets included in the definition of Excluded Assets) reflected on the Balance Sheet of the Company dated as of November 30, 2005, and delivered to Buyer in accordance with Section 6(d).

(c) Trademark License. In further consideration of the payment of the Purchase Price, and the mutual covenants under this Agreement, Seller grants to Buyer and Company a non-exclusive, fully paid-up right and license to use the names “President”, “President Riverboat Casino” and other related trademarks and services marks of Seller (collectively, the “Seller’s Trademarks”) under the common law and under any trademark or service mark registrations in connection with (i) the exploitation of the Riverboat Casino Assets within a one hundred fifty (150) mile radius of the St. Louis, Missouri city limits and (ii) the advertisement of the Riverboat Casino nationwide (the “Trademark License”). During the term of the Trademark License, Seller shall not license the use of Seller’s Trademarks to any other Person. The Trademark License shall be effective for a period of two (2) years from the Closing Date. Upon expiration of the Trademark License, Buyer will cease all further use of Seller’s Trademarks and Buyer will have no further rights thereto. Any termination or expiration of the Trademark License shall not terminate or otherwise affect any other provision of this Agreement. As used herein, “Person” means any natural person, business trust, corporation, partnership, limited liability company, joint stock company, proprietorship, association, trust, joint venture, unincorporated association or any other legal entity of whatever nature.

2. CONSIDERATION.

(a) Purchase Price. The aggregate consideration to be paid by Buyer to Seller for the Closing Shares shall be the payment of a cash amount equal to (A) Thirty-One

- 5 -

Million Five Hundred Thousand Dollars ($31,500,000) (the “Base Price”), less (B) the Deficiency (as defined in Section 2(d), if any, plus (C) the Surplus (as defined in Section 2(d))), if any (the “Purchase Price”); but subject to reduction to the extent provided in Section 9(d) below. The Purchase Price shall be payable as follows: (I) Buyer is paying a refundable $1,500,000 cash deposit (the “Deposit”) by wire transfer of immediately available funds to an escrow account (the “Escrow Account”) held in an interest bearing account for the benefit of Buyer, by U.S. Bank National Association as escrow agent under an Escrow Agreement in substantially the form attached hereto as Exhibit A (the “Escrow Agreement”) within three (3) Business Days of the execution of this Agreement; and (II) on the Closing Date, (x) the Deposit (with interest accrued thereon, if any) shall be paid over to Seller from the Escrow Account, and (y) Buyer shall pay the Purchase Price, less the Deposit (plus interest accrued thereon, if any), by wire transfer of immediately available funds to such account or accounts as Seller shall direct. The Purchase Price shall be subject to adjustment by (A) the prorations set forth in Section 2(b), (B) the payment of any Cure Amounts (as defined below) by Buyer in accordance with Section 2(c), (C) any additional amount that becomes payable in accordance with Section 2(e), and (D) any amounts which shall be credited toward the Purchase Price or become payable to the Company, as the case may be, in accordance with Section 2(f). If Buyer increases the amount of the cash consideration offered for the Closing Shares or otherwise modifies the terms and conditions of its bid as set forth in this Agreement in order to outbid a proponent of a higher and better offer, then the Purchase Price shall automatically be increased by an equal amount and/or the terms and conditions hereof shall be automatically modified and, if Buyer is the successful bidder, Buyer and Seller shall execute a written instrument to memorialize such increased Purchase Price (and change in form of consideration, as applicable) and such modifications to the terms and conditions hereof. All interest and other earnings on the Deposit shall, whether or not the Closing occurs, be the property of Buyer. In the event of a termination of this Agreement as provided in Section 16 hereof (other than a termination pursuant to Section 16(c)) then the Deposit, with interest accrued thereon, if any, shall be immediately returned to Buyer and both parties shall execute and deliver mutual escrow instructions to Escrow Agent to that effect. If (1) the Bankruptcy Court enters the Procedures Order (as defined in Section 9 below), (2) all conditions set forth in Section 4 hereof have been satisfied (or on the Closing Date will be satisfied) or waived by Buyer, and (3) Seller terminates the Agreement pursuant to Section 16(c), then the Deposit (excluding interest accrued thereon, if any, which interest shall in any event be returned to Buyer) shall be forfeited to Seller, without prejudice to any legal remedy for additional money damages that Seller may have, if any, against Buyer as a result of such breach; provided, however, that Seller’s legal remedies hereunder shall be limited exclusively to money damages; provided, further, that in no event shall Seller have the right to specific performance or any other equitable remedy against Buyer in connection with this Agreement or the transactions contemplated hereby.

(b) Costs and Prorations.

(i) To the extent applicable, all transfer, recording or similar Taxes and fees and expenses incurred in connection with redocumentation of the Admiral and Admiral Barge One with the United States Coast Guard shall be borne by Seller, and Seller hereby undertakes to timely remit all such amounts to the applicable authority and to prepare and file all proper Tax Returns and reports with respect thereto.

- 6 -

(ii) All real and personal property Taxes and assessments, rents, water rates and charges, electric, gas and telephone charges and all other apportionable operating costs and charges and expenses with respect to the Riverboat Casino Assets will be apportioned and adjusted between Seller and Buyer as of the Closing, provided that if the Closing will occur before the Tax rate or assessment is fixed for the year in which the Closing takes place, the apportionment of such real and personal property Taxes will be made upon the basis of the Tax rate for the preceding year applied to the latest assessed valuation, but such apportionment will be readjusted as soon as the applicable rate and assessment is fixed. Seller and Buyer at Closing shall execute and deliver a closing statement reflecting their reasonable estimate of the prorations of expenses described above in a form reasonably satisfactory to each party. Any net proration due to Buyer will reduce the Purchase Price, and any net proration due to Seller will increase the Purchase Price. To the extent adjustments cannot be determined as of Closing, the parties shall make such post-Closing adjustments (by the reduction or increase of the Purchase Price and payment of such amount by which the Purchase Price is increased in cash to Seller or amount by which the Purchase Price is reduced in cash to Buyer, as applicable) as are appropriate and to resolve open items as soon as practicable after such charges have been finally ascertained.

(c) Cure Amounts. Seller shall be solely responsible for all cure amounts payable under Bankruptcy Code Section 365 to the extent necessary for the Company to assume the Assumed Executory Leases and Executory Contracts (“Cure Amounts”). Seller at its sole option shall either pay all such Cure Amounts in cash no later than Closing, or shall direct Buyer in writing to pay such Cure Amounts out of the Purchase Price (with a corresponding reduction thereof) otherwise required by this Agreement to be paid to Seller, in which case Buyer shall pay such Cure Amounts at Closing.

(d) Determination of Surplus or Deficiency, Post-Closing Purchase Price Adjustment.

(i) On or before the seventh (7th) Business Day preceding the Closing Date, Seller shall prepare and deliver to Buyer an interim balance sheet (the “Estimated Closing Balance Sheet”) of Seller as of the close of business on the final day of the calendar month immediately preceding the calendar month during which the Closing Date occurs (the “Test Month”), together with a statement of Seller’s Net Current Assets (as defined in Section 2(d)(vi) as of such date calculated in accordance with generally accepted accounting principles (“GAAP”) and the accounting practices of Seller applied on a consistent basis. The amount of Net Current Assets set forth in the Estimated Closing Balance Sheet shall be final and binding for purposes of determining the amount of any Surplus or Deficiency used in calculating the Purchase Price to be paid at Closing, unless Buyer delivers in good faith a written statement that Buyer objects to the calculation of Net Current Assets at least two (2) Business Days prior to the anticipated Closing Date (the “Objection Notice”) together with Buyer’s determination of the Net Current Assets as of the Test Month. Seller shall make available to Buyer and its representatives the books, records and workpapers used to prepare the Estimated Closing Balance Sheet. In the event of an Objection Notice, Seller and Buyer shall negotiate in good faith during the period preceding the Closing Date to resolve the dispute. If the dispute is not resolved by the specified Closing Date, (A) Buyer shall pay the Purchase Price at the Closing based upon the amount of any Deficiency or Surplus, as applicable, calculated with reference to the Net

- 7 -

Current Assets as determined by Buyer or Seller (whichever is lower), and (B) Buyer shall deposit into escrow pursuant to the Escrow Agreement, an amount (the “Adjustment Escrow Deposit”) equal to the difference between (i) the Purchase Price calculated with reference to the higher Net Current Assets amount, and (ii) the amount of the Purchase Price paid by Buyer at the Closing in accordance with clause (A) above. “Surplus” means the amount, if any, by which Net Current Assets as determined in accordance with this Section 2(d)(i) is a positive number and “Deficiency” means the amount, if any, by which Net Current Assets as determined in accordance with this Section 2(d)(i) is a negative number. “Business Day” means any day other than Saturday, Sunday and any day on which banking institutions in the State of Missouri are authorized by law to close.

(ii) As promptly as practicable after the Closing Date, but in no event later than sixty (60) days after the Closing Date (such date on which the Closing Balance Sheet is delivered, the “Closing Financial Statements Delivery Date”), Buyer will prepare and deliver to Seller a balance sheet of Seller as of the close of business on the day immediately preceding the Closing Date (the “Closing Balance Sheet”) and a calculation of Net Current Assets as of such date, each in accordance with GAAP and the accounting practices of Seller applied on a consistent basis. The Closing Balance Sheet and the calculation of the Net Current Assets shall be accompanied by a certificate of an officer of Buyer to the effect that the Closing Balance Sheet presents fairly, in accordance with GAAP and the accounting practices of Seller applied on a consistent basis, the financial condition of Seller as of the close of business on the day immediately preceding the Closing Date.

(iii) Seller and its financial advisors and/or accountants (the “Seller’s Advisors”) will be entitled to reasonable access during normal business hours to the relevant records, personnel and working papers of Buyer to aid in their review of the Closing Balance Sheet and the calculation of Net Current Assets therefrom. The Closing Balance Sheet and the calculation of Net Current Assets therefrom shall be deemed to be accepted by Seller and shall be conclusive for the purposes of the adjustment described in Section 2(d)(iv) and (v) except to the extent, if any, that Seller or Seller’s Advisors shall have delivered, within thirty (30) days after the Closing Financial Statements Delivery Date, a written notice to Buyer setting forth objections thereto, specifying in reasonable detail any such objection (it being understood that any amounts not disputed as provided herein shall be paid promptly). If a change proposed by Seller is disputed by Buyer, then Buyer and Seller shall negotiate in good faith to resolve such dispute. If, after a period of thirty (30) days following the date on which Seller gives Buyer notice of any such proposed change, any such proposed change still remains disputed, then Buyer and Seller hereby agree that a nationally recognized accounting firm reasonably and mutually acceptable to Buyer and Seller (the “Accounting Firm”) shall resolve any remaining disputes. The Accounting Firm shall act as an arbitrator to make a determination with respect to the issues that are disputed by the parties, based on presentations by Seller and Buyer, and by independent review of the Accounting Firm if deemed necessary in the sole discretion of the Accounting Firm, which determination shall be limited to only those issues still in dispute. The decision of the Accounting Firm shall be final and binding and shall be in accordance with the provisions of this Section 2(d)(iii). The fees and expenses of the Accounting Firm, if any, shall be shared equally by Buyer and Seller. The date on which the Net Current Assets is finally determined pursuant to this Section 2(d)(iii) is referred to hereinafter as the “Determination Date.”

- 8 -

(iv) If the amount of Net Current Assets used to calculate the Purchase Price paid at Closing pursuant to Section 2(d)(i)(A) above is greater than the amount of Net Current Assets as determined pursuant to Section 2(d)(iii) above, Seller shall pay to Buyer, as an adjustment to the Purchase Price, an amount equal to such difference, and the Adjustment Escrow Deposit shall be immediately returned to Buyer. Any payments required to be made by Seller pursuant to this Section 2(d)(iv) shall be made within ten (10) days of the Determination Date by wire transfer of immediately available funds to an account designated by Buyer.

(v) If the amount of Net Current Assets used to calculate the Purchase Price paid at Closing pursuant to Section 2(d)(i)(A) above is less than the amount of Net Current Assets as determined pursuant to Section 2(d)(iii) above, Buyer shall pay to Seller, as an adjustment to the Purchase Price, an amount equal to such difference. Any payments required to be made by Buyer pursuant to this Section 2(d)(v) shall be made within ten (10) days of the Determination Date first, by payment to Seller out of the Adjustment Escrow Deposit made pursuant to Section 2(d)(i)(B) and then, to the extent of any additional payment required to be made by Buyer, by wire transfer of immediately available funds to an account designated by Seller. Any balance of the Adjustment Escrow Deposit after payment of amounts required to be paid to Seller under this subsection shall be immediately returned to Buyer.

(vi) For purposes of this Section 2(d), “Net Current Assets” means an amount equal to:

(A) the sum of the respective book values of (1) Included Cash, (2) Inventory, (3) Prepaid Expenses, (4) Security Deposits, (5) Receivables (less any reserve for collectibility established in accordance with Seller’s past practice), and (6) the New Slots Reimbursement (as defined below), less

(B) the sum of the respective book values of (1) Accounts Payable and (2) Accrued Expenses and Deferred Obligations, as defined in Section 3(a)(iii);

in each case as the book values of such assets and liabilities are determined in accordance with GAAP, except that the New Slots Reimbursement shall be calculated as set forth in this subsection (vi). The term “New Slots Reimbursement” means an amount that is equal to the sum of the Depreciated Values, as of Closing, of all new slot machines installed on the Riverboat Casino between the date this Agreement is executed and the Closing Date with the prior written consent of Buyer, which shall not be unreasonably withheld. The term “Depreciated Value” means, with respect to each such new slot machine, an amount determined by multiplying:

(i) Company’s direct acquisition cost (including freight and out-of-pocket costs for third party installation, to the extent third party installation is consistent with Company’s past practice) of such new slot machine, times

(ii) a percentage, not less than fifty percent (50%), equal to (a) ninety percent (90%) less (b) the product often percent (10%) times the number of

- 9 -

months during which such slot machine has been in service as of Closing (disregarding fractional months).

In no event, however, shall the amount of the New Slots Reimbursement exceed Two Million Dollars ($2,000,000). Prior to committing to the purchase or lease of new slot machines, the Company shall notify Buyer of the number and models of machines, the name of the vendor/lessor, and the estimated cost of third party installation, if any. Buyer shall have ten (10) days within which to notify Company of its approval, or of any objection to such purchase, which objection must specify the basis for the objection. If Buyer fails to deliver timely written notice of objection, Buyer shall be deemed to have approved Company’s proposed purchase or lease.

(e) Purchase Price of Additional Real Estate. If the Company acquires the Additional Real Estate prior to Closing, then Buyer shall pay to Seller additional Purchase Price in an amount equal to the lesser of (I) Five Million Dollars or (II) sum of the Company’s and/or Seller’s reasonable out-of-pocket costs to acquire the same (including but not limited to closing costs, commissions and other expenses allocated to Company or Seller, and excluding any attorneys fees of Company and/or Seller associated with the acquisition or with participation in condemnation proceedings, if applicable); provided, however, that in no event shall the Buyer or the Company post-Closing, be responsible for any interest expense incurred by Seller and/or Company with respect to indebtedness incurred for the acquisition of such Additional Real Estate.

(f) Delay In Obtaining Confirmation Order. Seller believes that, within 120 days after the Sale Order becomes a Final Order (as defined in Section 4(a) below), Seller will be able to obtain the Confirmation Order. The terms “Sale Order” and “Confirmation Order” are defined in Sections 9(b) and 9(c), respectively. If, at the end of such 120 day period:

(i) the conditions in Sections 4(a) or 4(b) have not been fulfilled, and

(ii) the conditions in Sections 5(b), 5(d), 5(e), 5(f) and 5(g) have been fulfilled or duly waived by Seller, and

(iii) the conditions contained in Sections 4(i), 4(j), 4(m)(i) and 4(o) have been fulfilled or duly waived by Buyer,

then the Base Purchase Price shall be subject to reduction on a daily basis as set forth in this Section 2(f). If the conditions referenced in the above clauses (ii) and (iii) (the “Outstanding Conditions”) have not been fulfilled or duly waived by the end of such 120 day period, but thereafter are fulfilled or waived prior to the Seller obtaining the Confirmation Order, then the Base Purchase Price shall be subject to reduction on a daily basis effective on the date that the last of the Outstanding Conditions has been fulfilled or duly waived. The reduction in the Base Purchase Price shall be an amount equal to the product of Five Hundred Thousand Dollars ($500,000) times the number of whole months elapsed from the first day after such 120 day period (or after fulfillment or waiver of all Outstanding Conditions, if applicable), to the Closing Date, with any partial month to be

- 10 -

pro-rated based on the actual number of days elapsed. Notwithstanding the foregoing, no reduction shall be made to the Base Purchase Price under this Section 2(f) if the Confirmation Order is obtained on or before September 30, 2006, or on or before the 120th day after the Sale Order becomes a Final Order, whichever is later.

3. COMPANY LIABILITIES.

(a) Buyer acknowledges that on and following the Closing, the Riverboat Casino Assets will be subject to the following Liabilities (the “Company Liabilities”), which obligations shall remain the obligations of the Company:

(i) subject to Seller’s obligations under Section 2(c), all of the Company’s respective obligations under the Assumed Executory Leases and Executory Contracts (but not including obligations arising out of a Default thereunder prior to the Closing), to the extent such obligations accrue from and after the Closing Date (the term “Default”, as used herein, meaning (A) a breach, default or violation, (B) the occurrence of an event that with or without the passage of time or the giving of notice, or both, would constitute a breach, default or violation or cause an Encumbrance to arise, or (C) with respect to any Contract (as defined in Section 6(h)), the occurrence of an event that with or without the passage of time or the giving of notice, or both, would give rise to a right of termination, renegotiation or acceleration or a right to receive damages or a payment of penalties);

(ii) all of the Company’s respective obligations with respect to accounts payable arising on or after June 20, 2002, the Case petition date, and existing on the Closing Date, excluding the Administrative Claims (as defined in Section 9(c)(viii)) for professional fees (the “Accounts Payable”); and

(iii) (A) the accrued Liability of the Company as of Closing to pay the ultimate winnings owed to individuals playing the Company’s progressive slot machines and games primary progressive reserve, games reserve for top awards, slots reserve for top awards (it being agreed that the progressive slot Liability shall be determined by a meter reading by Buyer and Seller at Closing); (B) poker progressive reserve of the Company; (C) gift shop certificate Liability of the Company; (D) the Company’s lost and found money; (E) the Company’s customer safekeeping deposits; (F) players club accrual (or other outstanding complementaries) of the Company; (G) outstanding chips/tokens of the Company; (H) the Company’s accruals for unpaid wages, salary, holiday, vacation, personal day, sick day, severance and other employee benefits, all as determined in accordance with good and customary gaming practice; (I) all obligations of the Company for cash compensation for the period since February 28, 2006 under a Management Incentive Program in the amount identified on Schedule 6(f) hereto (provided that amounts contingent on future performance of the Company shall be estimated based on Company’s year to date performance, and prorated on a per diem basis between Seller and Buyer as of Closing), and (J) all obligations of the Company with respect to other accrued expenses existing on the Closing Date (collectively, “Accrued Expenses and Deferred Obligations”);

(b) Following the Closing, neither Buyer nor the Company will assume or otherwise have any responsibility with respect to any other Liability of Seller or the

- 11 -

Company not expressly included within the definition of Company Liabilities, including the Excluded Liabilities (as defined in Section 9(c)(viii)) and Buyer acknowledges that it shall have no monetary recourse against Seller with respect to any such other Liability.

4. BUYER’S CONDITIONS. Buyer’s obligation to purchase the Closing Shares is expressly conditioned (unless waived by Buyer in writing) upon satisfaction of each of the following conditions:

(a) The entry by the Bankruptcy Court of the Procedures Order, the Sale Order and the Confirmation Order, as respectively defined in Section 9 below, each of which shall have become a Final Order. The Sale Order shall, among other things, authorize the sale of the Closing Shares to Buyer free and clear of all Encumbrances, and contain all of the provisions described in Section 9(c) hereof. “Final Order” means an order or judgment of the Bankruptcy Court, or the Commission for purposes of Section 4(i), which has not been reversed, stayed, modified or amended, that is in full force and effect, and as to which (I) the time to appeal or application for review by a higher court has expired without any appeal or application for review having been filed, or (II) any appeal or application for review by a higher court that has been or may be taken has resulted in entry of an order affirming the decision of the Bankruptcy Court or the Commission for purposes of Section 4(i), with all additional review periods from that affirmance having expired without any appeal or other application for review thereof having been filed;

(b) The entry of such further orders as required to implement this Agreement, including a Final Order under Section 365 or 1123(b)(2) of the Bankruptcy Code authorizing assumption by Seller and/or the Company of Assumed Executory Leases and Executory Contracts, with specific findings that upon payment by Seller and/or the Company of the Cure Amounts, all Defaults required to be cured in order for the Company to assume the Assumed Executory Leases and Executory Contracts have been cured and that the Company has provided adequate assurance of future performance necessary to satisfy the requirements of Section 365 of the Bankruptcy Code;

(c) Receipt by Buyer on the Closing Date on board the Riverboat Casino of the Riverboat Casino’s drawings and specifications and other technical information in Seller’s or the Company’s possession;

(d) The maintenance and delivery to Buyer of the original Certificates of Documentation of the Admiral and Admiral Barge One, as applicable, issued by the United States Coast Guard, National Riverboat Casino Documentation Center;

(e) The receipt on the Closing Date by Buyer of the original stock certificates evidencing the Closing Shares, free and clear of any Encumbrances, but subject to applicable state and federal securities laws, together with stock power or powers executed by Seller, conveying to Buyer all of Seller’s right, title and interest in and to the Closing Shares;

(f) Seller’s representations and warranties set forth in Section 6 below, taken as a whole, shall be true and correct in all material respects on the Closing Date (as though made then and as though the Closing Date were substituted for the date of this

- 12 -

Agreement), which shall be certified by an officer of Seller as of Closing, provided that for purposes of determining whether such representations and warranties are true and correct in all material respects, all “materiality” and/or “knowledge” qualifications contained in such representations and warranties set forth in Section 6 shall be disregarded;

(g) Seller’s representations and warranties set forth in Section 6(p) below shall be true and correct in all respects on the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement), which shall be certified by an officer of Seller as of Closing;

(h) Seller and the Company shall each have performed and complied in all material respects with all obligations and covenants required to be performed and observed by them under this Agreement prior to or as of the Closing, which shall be certified by an officer of Seller as of Closing;

(i) The Missouri Gaming Commission, or such other commission or governmental authority having appropriate jurisdiction (the “Commission”) shall have issued all licenses, permits, approvals, consents, authorizations and orders (which shall be Final Orders) as are required in order for Buyer to acquire the Closing Shares and for the Company to lawfully operate the Riverboat Casino following the Closing under the laws and regulations of the State of Missouri, including the gaming license and liquor license described in Schedule 6(i), (the “MGC Approval”), and the Company shall have indefeasibly paid in full or settled all outstanding amounts owed to the Commission as set forth on Schedule 6(l) hereof;

(j) All other necessary filings shall have been completed, waiting periods observed and governmental approvals obtained as determined to the reasonable satisfaction of Buyer, including Hart Scott-Rodino Anti-Trust Improvement Act of 1976 (the “HSR Act”), if applicable;

(k) There shall not have occurred any material adverse change in the business, operations, prospects or condition (financial or otherwise) of the Company and the Riverboat Casino Assets, taken as a whole, other than any change, event, occurrence, effect or state of facts relating to (I) any new casino development or similar project in the St. Louis metropolitan area, or (II) any condemnation proceeding involving, or other loss of use of, the Cherrick Lot (a “Material Adverse Change”);

(l) The Sale Order shall contain a finding that notice of the Sale Motion was proper and the Confirmation Order shall contain a finding that notice of the Confirmation Order was proper;

(m) Buyer shall have:

(i) performed at Buyer’s expense, a Phase I environmental assessment of the Riverboat Casino and all real property owned by the Company or otherwise used in the operation of the Riverboat Casino Assets (the “Environmental Assessment”), and the Environmental Assessment shall not have disclosed any fact, condition or circumstance which, in Buyer’s reasonable judgment (and without any requirement to conduct any additional environmental testing or analysis), could reasonably

- 13 -

be expected to lead to remedial investigation or remediation costs or other Liabilities in the aggregate amount of $100,000 or more (a “Material Environmental Liability”); provide however, that this condition 4(m)(i) shall lapse and shall be deemed to have been satisfied in all respects on the date that is thirty (30) days after the date of this Agreement, or if sooner, the day immediately preceding the hearing on the Procedures Order referred to in Section 9(a) below (the “Environmental Due Diligence Period”); provide, further, that during the Environmental Due Diligence Period, Buyer and Seller shall discuss possible solutions to any Material Environmental Liability which may arise, including environmental insurance, a reduction of the Purchase Price or other solution, any of which would require the mutual written agreement of Buyer and Seller (in the sole and absolute discretion of each); and

(ii) received from Seller a written report of the 2006 physical survey of the Riverboat Casino to be conducted by ABS Consulting (the “ABS Report”), which report shall state that the annual survey of the Riverboat Casino required by the Missouri Gaming Commission for 2006 has been completed, that the structure, watertight integrity and stability thereof are in compliance with the Company’s original stability letter dated November 10, 1994, and that the Riverboat Casino’s major components are fit to continue their intended purpose as a permanently moored casino platform and casino entry platform, respectively, in the State of Missouri;

(n) Seller shall have delivered a certificate of its secretary dated the Closing Date and certifying (I) that attached thereto is a true and complete copy of the certificate or articles of incorporation and by-laws of Seller and the Company as in effect on the date of such certification and (II) as to the incumbency and specimen signature of each officer of Seller and the Company executing this Agreement or any other document delivered in connection herewith (such certificate to contain a certification by another officer of Seller as to the incumbency and signature of the officer signing the certificate referred to in this clause (n));

(o) Buyer shall have received, at Seller’s expense, the commitment of a title insurance company reasonably acceptable to Buyer (“Title Company”) as of the Closing Date to issue, with respect to the City Lease and (if owned) the Cherrick Lot:

(i) an ALTA extended coverage leasehold title insurance policy in the amount of $30,000,000 insuring leasehold title to the City Lease in the Company and, if applicable, an ALTA extended coverage title insurance policy in the amount of $5,000,000 (or such lesser amount representing the cost to acquire tile to the Cherrick Lot) insuring fee title to the Cherrick Lot in the Company, and (A) including an endorsement insuring Buyer against loss or damage sustained by reason of the Title Company denying liability under the new title policy by reason of knowledge imputed to the Company or Seller through its officers and directors and other fiduciaries of company (the “Non-Imputation Coverage”), (B) dated as of the Closing Date, and (C) subject only to Permitted Exceptions (as defined below), or

(ii) an endorsement to any existing owner’s coverage title insurance policies insuring the Company and delivered to buyer which shall include (A) if available, Non-Imputation Coverage, (B) updating the date of the existing title policy to the Closing Date, and (C) insuring over any matter which is not a Permitted Exception.

- 14 -

For the purposes of this Agreement, “Permitted Exceptions” means (1) liens for real property Taxes and assessments for the current year, not yet delinquent, (2) liens or encumbrances arising out of any activity of Buyer with respect to the City Lease, (3) except as described on Schedule 4(o), those matters listed on Schedule B of the title report or the existing title policy, as applicable, a copy of which has been provided to Buyer prior to the date hereof, and (4) those matters listed on Schedule B of any new title report or title policy, as applicable, which are approved by Buyer at least ten (10) days prior to Closing.

(p) Seller shall have delivered to Buyer with respect to the City Lease, a Lease and Sublease Estoppel Certificate and Consent Agreement, in substantially the form attached hereto as Exhibit B (with such changes thereto as Buyer shall approve, such approval not to be unreasonably withheld or delayed), duly executed by each of the parties thereto;

(q) Seller shall have delivered to Buyer with respect to the Parking Leases, an estoppel certificate, in substantially the form attached hereto as Exhibit C (with such changes thereto as Buyer shall approve, such approval not to be unreasonably withheld or delayed), executed by each counterparty other than the Company under any written Real Property Lease;

(r) The Main Office and the other Excluded Assets shall have been effectively assigned and transferred, in such form and with such timing as Buyer shall reasonably approve (including Buyer’s satisfaction that the resulting Taxes either will not be the responsibility of Company post-Closing or will be fully accrued as a current liability in the calculation of Net Current Assets), without representation or warranty of the Company of any kind, to an entity other than the Company and the Company shall no longer have any interest or Liability therein;

(s) A trademark assignment, in form and substance reasonably satisfactory to Buyer and in a form recordable with the United States Patent and Trademark Office, pursuant to which Seller shall have effectively assigned and transferred to the Company each of the trademarks listed on Schedule 6(g), each of which shall be deemed to be included in the Riverboat Casino Assets;

(t) Receipt by Buyer on or prior to the Closing Date of the duly executed resignations by the officers and directors from all of their respective positions with the Company and such other evidence as Buyer may request of termination of employment of such officers and directors by the Company, in each case, concurrently with the Closing; and

(u) The Company shall have a current license from the Commission to operate the Riverboat Casino which does not contain any newly imposed conditions, restrictions or limitations that are not reasonably acceptable to Buyer and that are not remedied by Seller prior to Closing.

- 15 -

5. SELLER’S CONDITIONS. Seller’s obligation to sell the Closing Shares to Buyer is expressly conditioned (unless waived by Seller in writing) upon satisfaction of each of the following conditions:

(a) The (I) payment of the Purchase Price (less the Deposit (with interest accrued thereon, if any)) by wire transfer from Buyer and (II) the receipt of the Deposit (with interest accrued thereon, if any) from the Escrow Agent;

(b) The receipt of copies (certified by the secretary of Buyer) of the resolutions of Buyer’s board or other documentation authorizing the execution, delivery and performance of this Agreement and the transactions and documents contemplated herein;

(c) The entry by the Bankruptcy Court of the Procedures Order, the Sale Order and the Confirmation Order;

(d) Buyer’s representations and warranties in Section 7 below, taken as a whole, shall be true and correct in all material respects on the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement), which shall be certified by an officer of Buyer as of Closing, provided that for purposes of determining whether such representations and warranties are true and correct in all material respects, all “materiality” and “in all material respects” qualifications contained in such representations and warranties set forth in Section 7 shall be disregarded;

(e) Buyer shall have performed and complied in all material respects with all obligations and covenants required to be performed and observed by Buyer under this Agreement prior to or as of the Closing, which shall be certified by an officer of Buyer as of closing;

(f) The MGC Approval shall have been obtained; and

(g) All necessary filings shall have been completed, waiting periods observed and governmental approvals obtained for the sale of the Closing Shares as determined to the reasonable satisfaction of Seller, including the HSR Act.

6. SELLER’S REPRESENTATIONS. Seller hereby represents and warrants to Buyer that the following statements contained in this Section 6 are correct and complete as of the date of this Agreement:

(a) Seller has and on the Closing Date will have (in each case, subject to liens and claims to be discharged upon the issuance of the Sale Order) good and lawful title to and possession of the Closing Shares, free and clear of all Encumbrances. The Company has and on the Closing Date will have (in each case, subject to liens and claims to be discharged upon the issuance of the Confirmation Order) good and lawful title to and possession of the Riverboat Casino Assets, free and clear of all claims and interests of creditors of the Company (to the maximum extent permitted under Section 1141(C) of the Bankruptcy Code), other than the Company Liabilities.

(b) Provided the Sale Order and the Confirmation Order are issued by the Bankruptcy Court and subject to the other terms and conditions of this Agreement, the Riverboat Casino and the other Riverboat Casino Assets shall be owned by the Company following the Closing Date free and clear of all claims and interests of creditors of the Company other than the Company Liabilities. Provided the Sale Order and the Confirmation Order are issued by the Bankruptcy Court, the Closing Shares shall be owned

- 16 -

by Buyer following the Closing Date free and clear of all Encumbrances. All of the tangible personal property of the Company that is necessary for the operation of the Riverboat Casino in the same manner as presently operated by the Company is physically located at the Riverboat Casino or at the properties covered by the Assumed Executory Leases and Executory Contracts. Except as set forth in Schedule 6(b), all tangible personal property included in the Riverboat Casino Assets are suitable for the purposes for which they are used, in good working condition, reasonable wear and tear excepted, and are free from any known defects. The Hull Certification attached to Schedule 6(b) hereto is true and correct and is in full force and effect.

(c) Seller and the Company are corporations duly organized, validly existing and in good standing under the laws of the jurisdiction in which they were incorporated and are qualified to do business as foreign corporations in each jurisdiction where they are required to be qualified to avoid Liability or disadvantage. Seller and Company have all requisite corporate power and authority necessary to execute and deliver this Agreement, sell the Closing Shares (in the case of Seller) and otherwise perform their respective obligations under this Agreement and any documents related hereto, subject only to the issuance of the Sale Order by the Bankruptcy Court. Subject to the issuance of the Sale Order and the Confirmation Order, this Agreement and any related document executed and delivered by Seller and/or the Company (as applicable) has been, or will be, duly executed and delivered by Seller and/or the Company (as applicable) and constitutes, or, when executed will constitute, a valid and binding obligation of Seller and/or Company, enforceable against Seller and/or Company in accordance with its terms, subject only to the issuance of the Sale Order by the Bankruptcy Court.

(d) Attached to this Agreement as Schedule 6(d) are the audited balance sheets of the Company as of February 28, 2002 and 2003, February 29, 2004 and February 28, 2005, the related unaudited statements of operations and cash flows for the years then ended (the “Annual Financial Statements”), and the unaudited balance sheet of the Company as of January 31, 2006 (the “Balance Sheet”) and the related statement of operations for the eight months then ended (the “Interim Financial Statements”, and together with the Annual Financial Statements, the “Financial Statements”). The date of the Balance Sheet is referred to herein as the “Balance Sheet Date.” The Financial Statements are, and the Post-Signing Financial Statements (as defined in Section 8(v)) will be true, correct and complete and fairly present in all material respects the financial position of the Company as of the dates shown and the results of the Company’s operations for the periods covered thereby. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis, except that the Financial Statements lack full footnote disclosures and the Interim Financial Statements are subject to year end adjustment consistent with prior periods.

(e) Schedule 6(e) attached to this Agreement sets forth a list of all real property used by the Company in connection with its ownership and operation of the Riverboat Casino. Except for the Cherrick Lot and the Real Property Leases identified on Schedule 6(e), for easement rights which are shown on the title policy as appurtenant to the City Lease and for public rights of way, the lawful operation or occupancy of the Riverboat Casino does not require use of any other real property, for parking, access, support or any other purpose, and no other real property is now being used in conjunction with the

- 17 -

operation or occupancy of the Riverboat Casino. Except for the Cherrick Lot and the Real Property Leases identified on Schedule 6(e), the Company does not own, lease, license, hold or use any other land, buildings or other interest, including any option, in real property. A true and complete copy of each written Real Property Lease identified on Schedule 6(e) has been delivered to Buyer, including all amendments or modifications thereto and any other agreements related thereto such as options, rights of first offer or rights of first refusal to purchase the leased premises or any portion thereof. Each oral Real Property Lease has been described in reasonable detail on Schedule 6(e). Each of the Real Property Leases, and the leases described in Schedule 6(e), is in full force and effect and no claim of Default by either tenant or landlord thereunder has been made. The description of the leased premises in each Real Property Lease describes the real property being used thereunder fully and adequately. The Company has not received written notice of any condemnation proceedings by any public authority relating to any of the real property leased by the Company, except for any condemnation proceeding involving the parking lot known as Cherrick Lot (a “Cherrick Proceeding”), and, to Seller’s Knowledge, none are pending. The Riverboat Casino has adequate water supply, sanitary facilities, telephone, gas, electricity and fire protection services and other public utilities sufficient to operate the Riverboat Casino as it is presently operated. Except as set forth on Schedule 6(e), the Company has the exclusive right to occupy the real property leased pursuant to the Real Property Leases identified on Schedule 6(e) and the Company has not granted any leases, subleases, licenses, concessions, options, or other agreements, written or oral, to any third party granting the right to use or occupy said real property.

(f) Except as described on Schedule 6(f), and except with respect to the Excluded Assets, the business of the Riverboat Casino has been conducted in the ordinary course since the Balance Sheet Date, all accounts payable have been paid in the ordinary course since the Balance Sheet Date, and there has not been with respect to the Company any of the items specified below since the Balance Sheet Date:

(i) any increase in the compensation payable or to become payable to any director, officer, employee or agent of the Company, except for increases for non-officer employees made in the ordinary course of business or as otherwise consented to in writing by Buyer, nor any other change in any employment or consulting arrangement, nor any incentive payments earned by any director, officer, employee or agent of the Company;

(ii) any sale, assignment or transfer of any Riverboat Casino Assets, or any additions to or transactions involving any Riverboat Casino Assets, other than those made in the ordinary course of business or as otherwise consented to in writing by Buyer;

(iii) other than in the ordinary course of business or pursuant to the Company Plan of Reorganization, any waiver or release of any claim or right or cancellation of any debt held (other than Excluded Liabilities);

(iv) any damage, destruction or loss, whether or not covered by insurance, (A) materially and adversely affecting the Riverboat Casino Assets or the operations, assets, properties or prospects of the Riverboat Casino Assets or (B) of any item

- 18 -

or items carried on its books of account individually or in the aggregate at more than $100,000, or any material repeated, recurring or prolonged shortage, cessation or interruption of supplies or utility or other services required to operate the Riverboat Casino Assets; and

(v) receipt of notice or actual or threatened labor trouble, strike or other occurrence, event or condition of any similar character which has had or would reasonably be expected to materially and adversely affect the Riverboat Casino Assets or the transactions contemplated by this Agreement or any other document delivered in connection herewith.

(g) Schedule 6(g) attached to this Agreement contains a complete and accurate list and summary description of all registered Intellectual Property owned by the Company or its affiliates. All copyrights, trademarks and service marks that have been registered are currently in compliance with all formal legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications), are valid and enforceable, and are not subject to any maintenance fees or Taxes or Actions falling due within ninety (90) days after the Closing Date. No such copyright, trademark or service mark has been or is now involved in any interference, reissue, reexamination, or opposition proceeding. To Seller’s Knowledge, none of the registered intellectual property of the Company infringes, or has been alleged to infringe, any copyright, trademark, service mark or other proprietary right of any other Person.

(h) Schedule 6(h) sets forth a list or description of all written or oral contracts, agreements, leases, instruments, or other documents or commitments, arrangements, undertakings, practices or authorizations material to the business of the Company, and that is binding upon the Company or its property under any Applicable Law (“Contracts”), including Contracts of the type described below:

(i) employment agreements; collective bargaining agreements, multiemployer plan adoption agreements and other agreements affecting any union employee of the Company; and deferred compensation agreements, relocation agreements and other agreements affecting any nonunion employee of the Company;

(ii) leases of any tangible personal property, including gaming equipment, food service machinery and equipment, and office, printing or computer equipment;

(iii) license agreements (other than the Gaming Licenses), whether as licensor or licensee (excluding licenses from third parties implied by the sale of a product and paid up licenses for commonly available shrink wrap software applications);

(iv) joint venture agreements, affiliation and endorsement agreements, advertising agreements with minimum purchase provisions or other undertakings which have not yet been satisfied by the Company, and public relations Contracts;

- 19 -

(v) Contracts by which any material product or service offered by the Company or any material operating function of the Company (including gaming, food service, personnel and security) have been outsourced to a third party;

(vi) any guarantee or other pledging of the Company’s credit or financial resources for the obligations of officers, directors, employees or affiliates of the Company or any other Person (except endorsements in the ordinary course of business);

(vii) any Contract that has been entered into outside of the ordinary course of the Company’s business;

(viii) any other Contract which is material to the Company or to the operation of the Riverboat Casino; and

(ix) any Contract to pay brokerage commissions or parking operation or facilities fees with respect to the Real Property Leases.

Seller has delivered or made available to Buyer true and complete copies of each Contract or has provided a summary of the material terms thereof, all of which are in force and effect and may be assumed by the Company subject to this Agreement or Buyer’s consent, as applicable, provided the Sale Order and Confirmation Order is obtained. Except as provided in Schedule 6(h), there are no other material agreements material to the business of the Company, that are binding upon the Company or its property under any Applicable Law.

(i) Schedule 6(i) attached to this Agreement sets forth a list of all Gaming Licenses of the Company. Other than Gaming Licenses listed on Schedule 6(i), no other Gaming License or other governmental permit, license, registration, certificate of occupancy, approval and other governmental authorization is required for the complete operation of the Riverboat Casino Assets as currently operated. All Gaming Licenses listed on Schedule 6(i) are in full force and effect, and neither the Company nor Seller (as applicable) is in Default thereunder. Complete and correct copies of all of the Gaming Licenses have heretofore been delivered or made available to Buyer by Seller.

(j) Except as set forth in Schedule 6(j) and other than the Case, there is not pending or, to Seller’s Knowledge, threatened any suit, Action, arbitration or legal, administrative or other proceeding by or against or affecting Seller, the Company or any of the Riverboat Casino Assets, other than any Cherrick Proceeding and, to Seller’s Knowledge, no basis exists therefor, and there are no suits, Actions or proceedings pending in which the Company is the plaintiff or claimant with respect to the Riverboat Casino Assets. Except as set forth in Schedule 6(j) or as contemplated by this Agreement, the Procedures Order, the Confirmation Order and the Company Plan of Reorganization, neither Seller, the Company nor any of the Riverboat Casino Assets is subject to any order, writ, injunction or decree of any federal, state, local or foreign court, department, agency or instrumentality or any award in any arbitration proceeding (“Court Orders”). Neither Seller nor the Company is in Default with respect to any Court Orders. There is no Action, suit or proceeding pending or, to Seller’s Knowledge, threatened which questions the legality or propriety of the transactions contemplated hereby.

- 20 -

(k) Schedule 6(k) lists the names, addresses, dates of hire, positions and current annual compensation rates of all of the Company’s employees and officers as of the date indicated therein. The Company has paid in full to all employees and officers, as and when such amounts have become due, or made appropriate accruals therefor on its books of account, all salary, wages, commissions, bonuses and other direct compensation for all services performed by them. The Company has withheld or collected from each payment made to each of its employees the amount of all Taxes required to be withheld or collected therefrom, and the Company has paid the same when due to the proper authorities. Except as disclosed in Schedule 6(k), there are no controversies, grievances or claims pending with the Company by any of the Company’s employees, former employees or beneficiaries of employees of the Company with respect to their employment or benefits incident thereto, including sexual harassment and discrimination claims and claims arising under workers’ compensation laws which have not been resolved and, to Seller’s Knowledge, no basis exists therefor. Except as listed in Schedule 6(k), there is no union representation of the Company’s employees, and, to Seller’s Knowledge, there has been no attempt by a labor organization to organize the Company’s employees into a collective bargaining unit.

(l) Except as described in Schedule 6(l), there has been no material Default by the Company under any statute, law, ordinance, regulation, order or rule of any federal, state, local or foreign government or any court or tribunal of competent jurisdiction, administrative agency, department, commission, instrumentality, body or other governmental authority or instrumentality, domestic or foreign (each, a “Governmental Authority”) that have not previously been cured or for which all consequences of noncompliance (including without limitation full payment of fines, penalties and other amounts) have already occurred, and neither Seller nor the Company has received any notices from any Governmental Authority regarding any alleged material Defaults that are currently applicable to Seller, the Company or any Riverboat Casino Assets under any Applicable Laws.

(m) Except as set forth in Schedule 6(m), the Company is not a party to, nor has the Company established, any pension, profit-sharing, cafeteria, medical reimbursement, 401(k), retirement, deferred compensation, stock option, incentive, vacation, hospitalization, medical, disability or life insurance, severance, termination, bonus or other employee benefit plan, contract, arrangement or understanding of the Company or any Person required to be aggregated with, or treated as the same employer as the Company under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or the Internal Revenue Code of 1986, as amended (“Code”) (collectively hereinafter referred to as an “ERISA Affiliate”), whether or not covered by ERISA or qualified within the meaning of Section 401(A) of the Code, and whether single-employer or multi- employer, which is presently in force or which has been terminated within the six (6) calendar year period prior to this year. The employee benefit and welfare plans set forth in Schedule 6(m) do not qualify for the special provisions for multi-employer plans set forth in 29 U.S.C. Section 1384 and this Agreement does not invoke a complete or partial withdrawal as contemplated by 29 U.S.C. Section 1384, or the attenuating penalties and liabilities to Buyer as set forth therein.

(n) Except as described in Schedule 6(n), neither the execution and delivery by Seller and/or Company of this Agreement, nor the performance of the

- 21 -

transactions performed or to be performed by Seller and/or the Company hereunder, (I) require any filing, consent, notice, registration, renegotiation or approval of any third party (including any Governmental Authority) or any customer, supplier, landlord, licensor or union or (II) violate in any material respect or constitute a Default in any material respect, or cause any payment obligation or Encumbrance to arise under (A) any laws of any Governmental Authority, including all federal, state and local statutes, regulations, ordinances, orders, decrees or any other laws, common law theories or reported decisions of any court thereof (“Applicable Law”) or Court Order to which Seller or the Company is subject (other than any approvals or orders of the Bankruptcy Court or any consent required under the HSR Act), (B) the certificate or articles of incorporation or bylaws of Seller or the Company, or (C) any Contract, Gaming License or other document to which Seller or the Company is a party or by which the Riverboat Casino Assets may be bound.

(o) The Company has authorized 1,000 shares of Company Common Stock of which 1,000 shares are issued and outstanding (the “Closing Shares”), all of which are owned of record by Seller. Other than the Closing Shares, there are no other equity securities, options, warrants, convertible securities, Contracts or rights of any kind to purchase or otherwise acquire any equity securities of the Company. No shares of the capital stock of the Company are held as treasury stock. All of the Closing Shares have been duly authorized and validly issued, are fully paid and non-assessable, were not issued in violation of the terms of any Contract binding upon the Company or any holder thereof, and were issued in compliance with the certificate or articles of incorporation and bylaws of the Company and all applicable federal, state and foreign securities laws, rules and regulations. There are no Contracts to which Seller or the Company is a party among any Persons which (i) affect or relate to the voting or giving of written consents with respect to any security, or (ii) restrict the transfer of the Closing Shares.

(p) Taxes.

(i) The Company has filed (or there has been filed on its behalf) all Tax Returns that were required to be filed with respect to the Company (including Tax Returns of any consolidated, affiliated, combined, unitary or similar group of which the Company is or was a member to the extent the Company would be liable for any Taxes imposed on the Company or any other such member under Treasury Regulation §1.1502-6 or corresponding provisions of state, local or foreign law or as a transferee or successor, by contract or otherwise) under applicable laws and regulations. All such Tax Returns were correct and complete in all material respects and were prepared in substantial compliance with all applicable laws and regulations. All Taxes due and owing by the Company, or of any consolidated, affiliated, combined, unitary or similar group of which the Company is or was a member (whether or not shown on any Tax Return) to the extent the Company would be liable for any Taxes imposed on the Company or any other such member under Treasury Regulation § 1.1502-6 or corresponding provisions of state, local or foreign law or as a transferee or successor, by contract or otherwise, have been paid. Except as described in Schedule 6(p), the Company is not currently the beneficiary of any extension of time within which to file any Tax Return. As used herein, “Taxes” means all taxes, duties, charges, fees, levies or other assessments imposed by any taxing authority including income, gross receipts, value-added, excise, withholding, personal property, real estate, sale, use, ad valorem, license, lease, service, severance, stamp, transfer, payroll, employment, customs,

- 22 -

duties, alternative, add-on minimum, estimated and franchise taxes (including any interest, penalties or additions attributable to or imposed on or with respect to any such assessment). As used herein, “Tax Return” means any return (including any information Tax Return), report, statement, schedule, notice, form, declaration, claim for refund or other document or information filed with or submitted to, any governmental body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any legal requirement relating to any Tax.

(ii) The Company was properly includible in Seller’s consolidated federal income Tax Returns for all open Tax periods prior to and including the Closing Date.

(iii) Neither Seller nor the Company has undergone a Code § 382 change in ownership; provided, however, in the event that any portion of the consolidated net operating loss carryforward allocable to the Company under Treasury Regulations § 1.1502-21(B) is determined to be subject to a consolidated or subgroup 382 limitation, Seller shall elect in accordance with Treasury Regulations § 1.1502-95(C) to apportion to the Company a portion of the consolidated § 382 limitation (value element, adjustment element and net unrealized build-in gains) sufficient to permit the Company to absorb the apportioned consolidated net operating loss carryforward that is otherwise available to the Company and its new consolidated group; and provided, further, that Seller makes no representation as to the effects of the transactions contemplated by this Agreement.

(iv) No claim has ever been made by an authority in a jurisdiction where the Company does not file Tax Returns that the Company is or may be subject to taxation by that jurisdiction. There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of the Company.

(v) Except as described in Schedule 6(p), no foreign, federal, state, or local Tax audits or administrative or judicial Tax proceedings are pending or being conducted with respect to the Company (including with respect to any consolidated, affiliated, combined, unitary or similar group of which the Company is or was a member to the extent the Company would be liable for any Taxes imposed on the Company or any other such member under Treasury Regulation §1.1502-6 or corresponding provisions of state, local or foreign law or as a transferee or successor, by contract or otherwise). Seller shall remit any refund of Taxes received by Seller to the extent such refund is attributable to the Company or its business (including any refund that may result from Tax proceedings as described in Schedule 6(p)), but excluding any Tax refunds described in Section 9(c)(vii)(11). Except as described in Schedule 6(p), neither Seller, to the extent attributable to the Company, nor the Company has received from any foreign, federal, state, or local taxing authority (including jurisdictions where the Company has not filed Tax Returns) any (A) notice indicating an intent to open an audit or other review, (B) request for information related to Tax matters, or (C) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any taxing authority against the Company.

(vi) Neither Seller, to the extent applicable to the Company, the Company nor any of their respective subsidiaries has waived any statute of limitations in

- 23 -

respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(vii) Neither Seller nor the Company are foreign persons and Seller and the Company are “United States Persons” as defined in Code Section 7701(a)(3).

(viii) The Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any:

(A) change in method of accounting for a taxable period ending on or prior to the Closing Date;

(B) “closing agreement” as described in Code § 7121 (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date;

(C) installment sale or open transaction disposition made on or prior to the Closing Date; or

(D) prepaid amount received on or prior to the Closing Date.

(ix) Seller will not treat the stock of the Company as worthless under Code § 165.

(x) Seller will not elect, on behalf of the Company, to reduce the basis of the depreciable property of the Company under Code § 108(b)(5).

(q) The Company does not have any direct or indirect liability, indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or endorsement of or by any Person, whether accrued, absolute, contingent, matured, unmatured, liquidated, unliquidated, known or unknown (“Liability”) except for (I) Liabilities which are adequately reflected and reserved against in the Balance Sheet, and (II) Liabilities arising under the Contracts, provided that none of the Liabilities described in this section relates to any Default, breach of warranty, tort, infringement or violation of Applicable Law or arose out of any action, order writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, investigation or dispute (“Action”).

Other than the representations and warranties contained in this Agreement, Seller makes no representation or warranty as to the seaworthiness of the Riverboat Casino or the condition or fitness of the Riverboat Casino or any of the other Riverboat Casino Assets thereof for any particular purpose other than the purpose for which they are currently used. For purposes of this Agreement, “Seller’s Knowledge” means the actual knowledge of any of its executive officers as of the date of this Agreement, after reasonable inquiry.

7. BUYER’S REPRESENTATIONS. As of the date hereof and as of the Closing, Buyer hereby represents and warrants to Seller that (A) Buyer is a corporation duly formed, validly existing and in good standing under the laws of the jurisdiction identified in

- 24 -

the preamble to this Agreement and is in good standing under the laws of the State of Missouri, (B) Buyer has all requisite power and authority necessary to enter into this Agreement and to carry out its obligations hereunder, (C) Buyer is a citizen of the United States within the meaning of 46 U.S.C. Section 2, authorized to own and operate the Riverboat Casino in the coastwise trade, (D) Buyer has had full opportunity to inspect the Riverboat Casino, its various components and systems and the other Riverboat Casino Assets, and Buyer is relying solely on the representations and warranties made by Seller herein and its own evaluation of the seaworthiness of the Riverboat Casino and the condition and fitness of the other Riverboat Casino Assets in connection with its agreement to purchase the Riverboat Casino Assets, (E) all documents and information furnished by Buyer to Seller with respect to Buyer’s financial condition, sources of financing and capability of operating a gaming establishment are true and correct in all material respects, (f) other than any filings required to be made under the HSR Act, the approval of the City of St. Louis under the terms of the City Lease, and the approval of the Bankruptcy Court, the Commission and the applicable liquor authorities, no consent, approval or action of, filing with or notice to any governmental or regulatory authority or other third party on the part of Buyer is required in connection with the (I) execution, delivery and performance of this Agreement or (II) consummation of the transactions contemplated hereby, (g) the execution and delivery by Buyer of this Agreement and the performance by Buyer of its obligations hereunder do not (I) conflict with or result in a violation or breach of any of the terms, conditions or provisions of the certificate of incorporation or By-laws of Buyer or (II) conflict with or result in a violation or breach of any term or provision of any law or order applicable to Buyer or any of its assets and properties, other than such conflicts, violations or breaches that could not in the aggregate reasonably be expected to adversely affect the validity or enforceability of this Agreement and (h) Buyer has sufficient cash and/or available credit facilities (and has provided Seller with evidence thereof) to pay the Purchase Price and to make all other necessary payments of fees and expenses in connection with the transactions contemplated by this Agreement, including in respect of the Company Liabilities.

8. COVENANTS.

(a) Pre-Closing Covenants of Seller and Company. Seller hereby covenants and agrees that prior to the Closing Date it shall (and shall cause the Company, as applicable, to), and Company hereby covenants and agrees that prior to the Closing Date it shall:

(i) make available to Buyer’s representatives true and correct originals or copies of all records relating to the construction and operation of the Riverboat Casino which are in Seller’s or the Company’s possession (with Buyer to bear the cost of any copying costs) including drawings and specifications;

(ii) cause the Riverboat Casino to be insured through and including the Closing Date with the same coverages, limits, policies and underwriters as in effect on the date hereof;

- 25 -

(iii) use all commercially reasonable efforts to cause those conditions to the Closing which are reasonably within Seller’s and/or the Company’s control to be timely satisfied;

(iv) (A) not amend, modify, terminate (partially or completely), grant any waiver under or give any consent with respect to any Contract that is an Assumed Executory Lease and Executory Contract, provided that Company may amend its existing lease of office space to extend the term up to and including January 31, 2007, at a rent not exceeding $5,200 per month; (B) not materially Default under any Contract that is an Assumed Executory Lease and Executory Contract, provide, that if such Default is cured prior to the Closing, Seller shall not have breached this clause (B); (C) not create any Encumbrance on any of the Riverboat Casino Assets other than the Company Liabilities or pursuant to this Agreement or the Procedures Order or otherwise in the ordinary course of business; (D) not compromise, settle or otherwise adjust any Assumed Liability; (E) not alter the salaries or other compensation payable to any employee in any material respect, other than in the ordinary course of business with respect to employees with salaries and bonuses of less than $50,000 and other than with respect to new employees hired in the ordinary course of business; and (F) take all reasonable action within its control to prevent any of the changes or events listed in Section 6(f) from occurring, in each case other than pursuant to the Company Plan of Reorganization and this Agreement and other than in respect of claims not being assumed by the Company;

(v) deliver to Buyer within fifteen (15) days after the end of each calendar month unaudited financial statements of the Company for such month, consisting of a balance sheet, a statement of income (including detailed revenue classifications) and a statement of cash flows (all such financial statements, the “Post-Signing Financial Statements”);

(vi) give Buyer and its representatives (including Buyer’s accountants, counsel, consultants, employees and such other representatives as Buyer may designate from time to time), upon reasonable notice and during normal business hours, full access to the Riverboat Casino Assets, and all Contracts, books, records and affairs of Seller and the Company related to the Riverboat Casino Assets, and Seller shall cause its officers and employees to furnish to Buyer copies of all documents, records and information related to the Riverboat Casino Assets as Buyer or its representatives may reasonably request;

(vii) subject to the restrictions set forth in this Agreement, use commercially reasonable efforts (A) to operate the Riverboat Casino in the ordinary course of business consistent with Seller’s and the Company’s practices during and prior to the period following the filing of its bankruptcy petition, and (B) as necessary to cause the representations and warranties of Seller in Section 6 to be true and correct in all material respects as of the Closing Date;

(viii) notify Buyer, in writing, prior to implementing operational decisions of a material nature outside the ordinary course of business and obtain Buyer’s written consent prior to entering into any Contract involving an amount in excess of $75,000 or for a term extending more than ninety (90) days beyond the Closing Date; provided, however, that if Buyer’s consent is not obtained where required, then the sole remedy of

- 26 -

Buyer shall be to require that the Contract in question be included among the Excluded Assets under Section 9(c)(vii);

(ix) not take a position (or cause the Company to take a position) on any income Tax Return, before any governmental agency charged with the collection of any income Tax, or in any judicial proceeding that is in any way inconsistent with the allocation of the Purchase Price as agreed to by Seller and Buyer at or prior to the Auction (as defined in Section 9(a) below);

(x) subject to the restrictions set forth in this Agreement, use (or cause the Company to use) commercially reasonable efforts (but shall not be required to increase wages or benefits) to keep available the services of the current employees and agents of Seller and the Company and to maintain its relations and goodwill with the suppliers, customers, distributors of Seller or the Company and any others having a business relation with Seller or the Company;

(xi) obtain Buyer’s consent, in writing, prior to modifying or terminating any Real Property Lease or abandoning any real property covered by a Real Property Lease, or selling, transferring, or otherwise conveying any interest in any other real property owned by the Company which supports the Riverboat Casino operations (except real property that is among the Excluded Assets), which consent shall not be unreasonably withheld;

(xii) promptly disclose to Buyer in writing any information set forth in the Schedules that is no longer complete, true or applicable and any information of the nature of that set forth in the Schedules that arises after the date hereof and that would have been required to be included in the Schedules if such information had been obtained on the date of delivery thereof; provided, however, that none of such disclosures shall be deemed to modify, amend or supplement the representations and warranties of Seller or the Schedules hereto for the purposes of this Agreement (including Section 4 and Section 12 hereof) unless Buyer shall have consented thereto in writing;

(xiii) not treat the stock of the Company as worthless under Code § 165;

(xiv) not elect, on behalf of the Company, to reduce the basis of the depreciable property of the Company under Code § 108(b)(5);

(xv) promptly provide to Buyer a copy of the Phase I environmental assessment report performed by Penn National Gaming, Inc. in August 2004 (the “Prior Environmental Assessment”);

(xvi) pay the Accounts Payable, Accrued Expenses and Deferred Obligations of the Company consistent with its practices during the pendency of the Company’s bankruptcy proceeding;

(xvii) prior to acquiring any additional Gaining Equipment described in Section 1(b)(iv), by purchase or by lease (with a term exceeding thirty days or without an option to terminate at no cost to Company upon at most thirty days’ written notice) Seller

- 27 -

and/or Company, as applicable, shall first obtain the prior written consent of Buyer, in Buyer’s sole and absolute discretion;

(xviii) except with Buyer’s prior written consent, not enter into any amendment of or extension to any existing agreement between the Company and the Hotel Employees, Restaurant Employees Local 74, AFL-CIO (any such agreement, a “Union Agreement”); provided, however, that Buyer’s prior written consent shall not be required for any amendment or extension which both (A) extends the Union Agreement for a period ending no sooner than 60 days and no later than 120 days after Closing, and (B) imposes no financial or operational obligations on Company which are materially more onerous than the contract terms previously disclosed by Company to Buyer;

(xix) assign to Company any and all interests of Seller in and to the Contracts to be assumed by Buyer pursuant to Section 1(b)(ii) hereof, in a form reasonably acceptable to Buyer;

(xx) promptly upon signing of this Agreement, Company shall request a determination pursuant to Section 505(b) of the Bankruptcy Code of any unpaid Missouri income Tax Liability of the Company, and Seller shall request a determination pursuant to Section 505(b) of the Bankruptcy Code of any unpaid income Tax Liability of a consolidated group which included the Company as a member, in each case, incurred during the Tax year ending on February 28, 2003 and February 29, 2004 and February 28, 2005; and

(xxi) promptly upon filing of the Tax Returns for the Tax year ending on February 29, 2006 and prior to the Closing Date, Company shall request a determination pursuant to Section 505(b) of the Bankruptcy Code of any unpaid Missouri income Tax Liability of the Company, and Seller shall request a determination pursuant to Section 505 (b) of the Bankruptcy Code of any unpaid income Tax Liability of a consolidated group which included the Company as a member, in each case, incurred for the Tax year ending on February 28, 2006;

(xxii) at the earlier to occur of the expiration of the software maintenance agreement, or the Closing Date, enter into a new maintenance agreement with respect to the Excluded Software so that none of the Assumed Executory Leases and Executory Contracts cover maintenance for Excluded Software;

provided, however, notwithstanding anything to the contrary herein, the Company may, at any time and from time to time, distribute, dividend, transfer, assign or otherwise dispose of any or all of the Excluded Assets; provide, further that, notwithstanding any other provision in this Agreement, so long as the Company Plan of Reorganization is prepared and prosecuted in good faith, the failure of the Company Plan of Reorganization to be confirmed by the Bankruptcy Court shall not constitute a breach by Seller of any covenant herein; and provided, further that, notwithstanding any other provision in this Agreement, nothing in this Agreement shall be deemed to restrict or prohibit either the Company or the Committee from including provisions in the Company Plan of Reorganization (including provisions regarding the treatment of creditors) that either the Company or the Committee deem to be

- 28 -

appropriate or in furtherance of its fiduciary duties, so long as nothing so included in the Company Plan of Reorganization is inconsistent with the provisions of this Agreement.

(b) Post-Closing Covenant of Seller. Seller further covenants that:

(i) Seller will not treat the stock of the Company as worthless under Code § 165;

(ii) Seller will not elect, on behalf of the Company, to reduce the basis of the depreciable property of the Company under Code § 108(b)(5);

(iii) Seller shall apportion the consolidated Section 382 limitation to Buyer under the circumstances and in the manner described in Section 6(p)(iii),

(iv) promptly upon the close of the Tax year in which the Closing Date occurs and the filing of the relevant federal income Tax Return for such Tax year, Seller shall request or cause [the liquidating trustee of the Seller’s estate] to request pursuant to Section 505(b) of the Bankruptcy Code a determination of any unpaid Liability of the consolidated group which included the Company as a member for income Tax incurred during the Tax year of such group in which the Closing Date occurred;

(v) Seller shall prepare, in consultation with the Company, Missouri income Tax Returns and, in respect of the filing of such Missouri income Tax Returns, a Section 505(b) determination request letter for filing by the Company with appropriate Missouri Taxing authorities for the short-Tax year ending on the Closing Date, and Seller shall make appropriate reserves to provide for payment of additional income Tax Liability if such short-year Tax Returns are selected for examination by Missouri Taxing authorities and such examination results in the assertion of additional Liability against the Company;

(vi) the effective date of any plan of reorganization or liquidation confirmed by the Bankruptcy Court in the Seller Case shall not occur until either (a) the 60-day period provided for under Section 505(b)(2)(A)(i) of the Bankruptcy Code expires without the consolidated group Tax Returns being selected for examination in response to requests made in accordance with Section 8(a)(xx) hereof (i.e. for Tax periods ending February 28, 2003, February 29, 2004 and February 28, 2005), or (b) the 180-day period provided for under Section 505(b)(2)(A)(ii) of the Bankruptcy Code expires in response to requests regarding consolidated group Tax Returns made in accordance with Section 8(a)(xx) hereof (i.e. for Tax periods ending February 28, 2003, February 29, 2004 and February 28, 2005) and Seller has made in consultation with Buyer appropriate reserves sanctioned by the Bankruptcy Court to provide for payment of any additional income Tax liability asserted against the Company or Seller’s consolidated group; and

(vii) Seller shall not allow the Seller Case to be closed until either (a) the 60-day period provided for under Section 505(b)(2)(A)(i) of the Bankruptcy Code expires without the Tax Returns being selected for examination in response to requests made in accordance with Sections 8(a)(xxi) and 8(b)(iv) and 8(b)(v) hereof (i.e. for the Tax period ending February 28, 2006 and the Tax year in which the Closing Date occurs), or (b) the 180-day period provided for under Section 505(b)(2)(A)(ii) of the Bankruptcy Code expires

- 29 -

in response to requests regarding Tax Returns made in accordance with Sections 8(a)(xxi), 8(b)(iv) and 8(b)(v) (i.e. for the Tax period ending February 28, 2006 and the Tax year in which the Closing Date occurs) and Seller has made in consultation with Buyer appropriate reserves sanctioned by the Bankruptcy Court to provide for payment of any additional income Tax liability asserted against the Company or Seller’s consolidated group.

Except as otherwise credited toward the Purchase Price pursuant to Section 2(f), to the extent employees of Seller or the Company are owed salary, wages or other benefits in connection with services rendered to Seller and/or the Company through the Closing Date (excluding accrued vacation pay), Seller and/or the Company (as applicable) shall pay all such amounts (including any incentive pay) to its employees on a timely basis after the Closing in accordance with Seller’s regular payroll procedures. Buyer acknowledges and agrees that, notwithstanding anything to the contrary in this Agreement, following the Closing, Seller and/or any entity other than the Company that will be responsible under the Company Plan of Reorganization for distributing assets on or after the effective date of the Company Plan of Reorganization to creditor classes may, at any time and from time to time, distribute, pay-out, dividend, assign or otherwise dispose of any of their respective assets, including without limitation the Excluded Assets and the Purchase Price (collectively, “Distributions”), to their respective creditors, provided, however, that this provision shall in no event apply to the Company or be deemed to authorize the distribution of any assets owned by the Company following the Closing.

(c) Covenants of Buyer.

(i) Buyer hereby covenants and agrees that it shall (A) use all commercially reasonable efforts to cause those conditions to the Closing which are reasonably within Buyer’s control to be timely satisfied, and (B) use all commercially reasonable efforts to cause the representations and warranties of Buyer in Section 6 to be true and correct in all material respects as of the Closing Date.

(ii) From the Closing Date until the date on which the Case is closed and at Seller’s expense, Buyer shall permit Seller and its authorized representatives, upon reasonable notice to Buyer and at a time convenient to Buyer, to have access to the books and records of Seller and the Company being transferred to Buyer as part of the Riverboat Casino Assets, for the purpose of obtaining any information necessary for the preparation and filing of any Tax Returns or other reports to any governmental authority for any period or for any other reason related to the Case. Buyer shall retain such records consistent with Buyer’s normal record retention policies.

(iii) Promptly after Buyer’s receipt thereof, Buyer shall provide to Seller a copy of the Environmental Assessment to be performed by Buyer under Section 4(m).

(d) Tax Matters.

(i) Seller shall include the items of the Company (including any items required to be taken into account by Treasury Regulations §§ 1.1502-13 and 1.1502-19) on Seller’s consolidated federal income Tax Returns for all periods through the ending

- 30 -

of Seller’s Tax year including the Closing Date in accordance with Treasury Regulations § 1.1502-76(b)(1)(ii)(A)(I) and pay all federal income Taxes attributable to such income. Any items of the Company that occur on the Closing Date other than items occurring after the Closing which are outside the Company’s ordinary course of business shall not be subject to the next day rule as such rule is provided in Treasury Regulations § 1.1502-76(b)(1)(ii)(B). For all taxable periods ending on or before the Closing Date, Seller shall cause the Company to join in Seller’s consolidated federal income Tax Return (and any consolidated, affiliated, combined, unitary or similar other Tax Return where required or previously filed) and, in jurisdictions where Company separately reports, Seller shall cause to be filed with respect to the Company separate company state and local income Tax Returns and shall cause to be timely paid any Taxes imposed on Company. All such Tax Returns shall be prepared and filed in a manner consistent with prior practice, except as required by a change in applicable law or regulation. Buyer shall have the right, at its expense, to review and comment on any such Tax Returns (and, as applicable, determination request letters prepared in accordance with Section 505(b) of the Bankruptcy Code) prepared by Seller. Buyer shall cause the Company to furnish information to Seller as reasonably requested by Seller to allow Seller to satisfy its obligations under this section in accordance with past custom and practice. The Company and Buyer shall consult and cooperate with Seller as to any elections to be made on Tax Returns of the Company for periods ending on or before the Closing Date. Buyer shall include the Company in its combined or consolidated income Tax Returns, as applicable, for all periods other than periods ending on or before the Closing Date. Buyer and Seller shall, and shall each cause its affiliates to, provide to the other such cooperation and information, as and to the extent reasonably requested, in connection with the filing of any Tax Return, determination of Liability for Taxes, or conduct of any audit, litigation or other proceeding with respect to Taxes, which cooperation and information shall include providing copies of all relevant Tax Returns (including any relevant Tax Return of Seller or any group of Seller that includes the Closing Date), together with relevant accompanying schedules and workpapers.

(ii) Seller shall pay Buyer the amount of any Tax refund received by Seller resulting from the carryback by Company of any post-closing income Tax attribute of the Company into Seller’s consolidated income Tax Return.

(iii) Seller shall allow the Company and its counsel to participate, at its expense, in any audit of Seller’s consolidated federal income Tax Returns to the extent that such Tax Returns relate to the Company. Seller shall not settle any such audit in a manner that would adversely affect the Company after the Closing Date without the prior written consent of Buyer, which consent shall not be unreasonably withheld or delayed.

(iv) Seller shall join Buyer, at Buyer’s option, in making an election under Code § 338(h)(10) (and any corresponding elections under state, local, or foreign Tax law) (collectively a “§ 338(h)(10) Election”) with respect to the purchase and sale of the stock of the Company hereunder. Any § 338(h)(10) Election must be made by Buyer, and Buyer shall be required to notify Seller of such election, not later than 90 days prior to the extended due date of Seller’s federal income Tax Return (whether or not extended) for the fiscal year during which the Closing occurs, provided that Buyer shall in any event notify Seller within 30 days after Buyer has made any Section 338(h)(10) Election. Seller will pay any Tax attributable to the making of the § 338(h)(10) Election. At

- 31 -

the Closing, Seller will deliver to Buyer a fully executed IRS Form 8023 reflecting the § 338(h)(10) Election and any similar form provided for under state, local or foreign law.

(v) Seller shall, and shall cause the Company to, take all necessary actions such that all Tax sharing agreements or similar agreements with respect to or involving the Company shall be terminated as of the Closing Date and such that, after the Closing Date, the Company shall not be bound thereby or have any Liability thereunder.

(vi) Buyer shall pay to Seller all refunds of Taxes received by Buyer or the Company after the Closing Date and attributable to Taxes paid by the Company with respect to any pre-closing period or portion thereof (other than those refunds to which Buyer is entitled pursuant to Section 8(d)(ii)). Buyer shall not be required to seek any such Tax refund whether at Seller’s request or otherwise or whether through the filing of amended Tax Returns, claims for refunds or otherwise, if Buyer believes the Company is not reasonably entitled to seek such refund. In the event that Seller chooses to seek any such Tax refund directly, Buyer, at Seller’s reasonable expense, will cooperate fully with Seller in preparing and filing any related claims, amended Tax Returns or other documents (including but not limited to relevant powers of attorney or other required authorizations that would permit Seller to represent the Company and receive directly any Tax Refunds resulting from Seller’s filing such claims, amended Tax Returns or other required documents). Buyer is entitled to waive the carryback of any net operating loss or other item of the Company for any post-Closing period or portion thereof.

(vii) Buyer shall not, and shall not cause, any Tax Return of the Company for any period ending on or before the Closing Date to be amended without the prior written consent of Seller.

(viii) Buyer shall not make, and shall not cause any election to be made, other than the § 338(h)(10) Election as permitted by Section 8(d)(iv), with respect to the Company that could increase the Tax Liability of the Company for any period or portion thereof ending on or before the Closing Date to the extent such election would cause the Company or Seller to pay additional Taxes (excluding for this purpose any election that would result solely in any reduction in any net operating loss carryforward attributable to the Company for periods ending after the Closing Date).

(ix) Seller shall not make, and shall not cause any election to be made, with respect to the Company that could increase the Tax Liability of the Company for any period or portion thereof ending on or after the Closing Date to the extent such election would cause the Company or Buyer to pay additional Taxes (including for this purpose any election that would result solely in any reduction in any net operating loss carryforward attributable to the Company for periods ending on or before the Closing Date).

(x) Seller agrees that at Buyer’s election, Seller shall cooperate with Buyer in restructuring this transaction as a purchase of the assets of the Company in order to achieve 1031 exchanges under the Code (“Exchange”) of some or all of the Riverboat Casino Assets, or with any arrangements for deferred or multi-party Exchanges; provided, however, such election shall be exercised by Buyer in writing on or before the date on which Qualified Bidders (as defined in Section 9(a) are required to submit their bids

- 32 -

at Auction and shall be accompanied by a proposed asset purchase agreement granting the Company and Seller substantively the same rights and the same aggregate consideration as are contained for Seller in this Agreement.

9. BANKRUPTCY COURT APPROVALS.

(a) Bid Protections, Procedures Order and Sale Motion. Promptly following the execution of this Agreement (and in no event later than five (5) Business Days thereafter), Seller will file a motion with the Bankruptcy Court (the “Approval Motion”) seeking an order of the Bankruptcy Court in form reasonably satisfactory to Buyer and consistent with this Agreement (the “Procedures Order”) which:

(i) authorizes the payment by Seller and Company to Buyer of Six Hundred Fifty Thousand Dollars ($650,000) (the “Break Up Fee”), in the event this Agreement is terminated and a distribution of the Break Up Fee to Buyer is required as provided in Section 16 hereof;

(ii) approves the sale of the Closing Shares to Buyer pursuant to this Agreement, but subject to higher and better offers of third parties for the Closing Shares or the Riverboat Casino Assets at an outcry auction to be conducted pursuant to Section 363(B) of the Bankruptcy Code (the “Auction”); and

(iii) authorizes and directs Seller to pay fees and indemnity obligation amounts due to U.S. Bank National Association pursuant to the Escrow Agreement, attached hereto as Exhibit A, as allowed administrative expenses of the Seller within the meaning of Section 503 of the Bankruptcy Code.

Seller shall use its commercially reasonable efforts to obtain entry of the Procedures Order within thirty (30) days after the execution of this Agreement.

The Procedures Order shall provide that any Qualified Bidder may structure its bid at the Auction as a purchase of the Riverboat Casino Assets from the Company, rather than as a bid for the Closing Shares. Except as otherwise permitted in this Agreement, each bid shall be substantially on the terms of, or on more favorable terms for Seller or the Company (as applicable) than, those set forth in this Agreement.

The Procedures Order shall provide that (i) if it is determined that a Person other than Buyer has made the highest and/or best offer at the Auction (the “Winning Buyer”), (ii) the Winning Buyer does not close on its agreement for the sale of the Closing Shares or the Riverboat Casino Assets, as applicable, and (iii) no other participant at the Auction who made a superior offer to Buyer has the right or chooses to exercise the right to close on the Closing Shares or the Riverboat Casino Assets, as applicable, then Buyer shall have the option, at its sole discretion, to purchase the Closing Shares or the Riverboat Casino Assets on the same terms as this Agreement, as the same may be modified by the last bona fide bid of the Buyer made at the Auction (the “Backup Option”). Such Backup Option must be exercised, if at all, within ten (10) days after delivery of written notice from Seller to Buyer that the Winning Buyer has not closed on the sale of the Closing Shares or Riverboat Casino Assets. Notice of exercise of the Backup Option shall be in writing delivered to Seller, together with Buyer’s earnest money deposit of $1,500,000 to be

- 33 -

deposited with Escrow Agent on terms substantially identical to those set forth in Exhibit A attached hereto. If the Backup Option is timely exercised, then the parties shall proceed to the Closing under this Agreement (as modified by Buyer’s last bona fide bid at the Auction, and any other modifications agreed to by both Seller and Buyer) in good faith, and any specific time deadlines for a party’s performance of an obligation, or for exercise of a right or privilege, contained in this Agreement shall be extended by a time period not greater than the period of time elapsed between the date of the Auction and the date on which the Backup Option is exercised. The Backup Option granted in this paragraph shall apply only to with respect to Pinnacle Entertainment, Inc. or its designee, and not any other party which may become the “Buyer” as a result of the Auction.

The Procedures Order shall also establish the following bidding rules for the Auction: Each competing bidder shall, at least five (5) days before the Auction, deliver to Seller and/or the Company, as applicable, (I) a refundable cash deposit of $1,500,000, (II) reasonable proof of the interested party’s ability to consummate a purchase of the Closing Shares, or the Riverboat Casino Assets, as applicable, including a copy of such party’s annual, quarterly and monthly financial statements for the most recently ended fiscal periods, certified to be true correct and complete in all material respects, and (III) an executed Sale and Purchase Agreement on substantially the terms of, or on more favorable terms than those set forth in, this Agreement, except as may be necessary to reflect an offer for the purchase of only the Riverboat Casino Assets (and not the Closing Shares), which Sale and Purchase Agreement shall (A) specify the amount of cash or other consideration offered by the competing bidder for the Closing Shares, and/or the Riverboat Casino Assets, as applicable, (B) not be subject to unperformed due diligence or closing conditions, nor provide for an expense reimbursement, break-up amount or Backup Option, and (C) constitute an irrevocable offer by such competing bidder to complete its proposed purchase upon the terms set forth therein. Once a competing bid that satisfies the above-enumerated requirements has been submitted to Seller, the Company or the Committee, such bid may be modified by the applicable bidder at any time prior to the Auction to the extent that such modifications would, in the opinion of the Committee, after consultation with Seller, the Company and the Bondholders, improve the quality of such bid.

No competing offer will be considered unless the aggregate consideration to Seller or the Company under such bid is at least $250,000 more than the sum of the Purchase Price plus the Break Up Fee, and the Committee, after consultation with the Bondholders, Seller and the Company, determines in its sole discretion that such offer, taken as a whole, is a higher and/or better bid than the bid set forth in this Agreement. In the event that the Committee shall so determine that such bid is a higher and/or better bid than that set forth in this Agreement, Buyer shall have the right to amend this Agreement as necessary in its reasonable discretion in order to cause Buyer’s bid hereunder to be comparable to such higher and/or better bid. Only those persons who have submitted an offer in compliance with this section and the Procedures Order shall be a “Qualified Bidder.” Each Qualified Bidder shall be invited to attend the Auction at the Office of Thompson Coburn LLP, which Auction must be attended in person. Seller and the Company shall cause the Auction to commence at 10 a.m. (Central Time) on May 16, 2006, provided the Procedures Order has been entered prior to such date. Subject to the limitations set forth above, the opening price at such Auction shall be the highest and/or best offer of a Qualified Bidder (as determined by the Committee in its sole discretion after consultation with the Bondholders, Seller and

- 34 -

the Company). Subsequent bids shall be in increments of $100,000 or such greater amount as designated by the Committee from time to time during the Auction. At the request of Buyer, Seller shall provide or cause the Committee to provide its valuation of any competing bid that constitutes the highest and/or best offer at the time of such request.

Seller, the Company and the Committee shall consider bids submitted by Buyer and the Qualified Bidders during the Auction and the Committee, after consultation with the Bondholders, Seller and the Company, shall make a determination of the highest and/or best offer in its sole discretion. The determination of which bidder has submitted the highest and/or best offer for the Closing Shares and/or the Riverboat Casino Assets, as applicable, at the Auction shall be made by the Committee in its sole discretion after consultation with the Bondholders, Seller and the Company, subject to the final determination by the Court at the Sale Hearing referred to in Section 9(b). At the Sale Hearing, the Court shall consider the results of the Auction and shall make a final determination of the highest and/or best offer to the Company’s bankruptcy estate. After the determination of the winning bidder, Seller, or the Company, as applicable, shall promptly execute the Sale and Purchase Agreement previously executed and submitted by such winning bidder, together with any changes thereto necessitated by the parties’ actions at the Auction.

(b) Sale Order. Within three (3) Business Days following the Auction Seller and the Company will file with the Bankruptcy Court a motion to approve the sale of the Closing Shares (the “Sale Motion”), through which they will seek an order of the Bankruptcy Court in form reasonably satisfactory to Buyer and consistent with this Agreement (the “Sale Order”); and Seller and the Company shall use their best efforts to obtain a hearing on the Sale Order (the “Sale Hearing”) as soon as practicable after the filing of the Sale Motion. The Sale Order shall, among other things (i) order the sale of the Closing Shares to Buyer pursuant to Section 363(B) of the Bankruptcy Code on the terms and conditions set forth in this Agreement and authorize Seller and Company to proceed with this transaction, (ii) order that the sale of the Closing Shares shall be free and clear of all Encumbrances and provide for an injunction in favor of Buyer and its property, including the Closing Shares, prohibiting any holder of a claim from taking any action or enforcing any Encumbrance against the Closing Shares or the Riverboat Casino Assets and (iii) include specific findings that: (A) Buyer is a good faith purchaser of the Closing Shares and under Section 363(m) of the Bankruptcy Code and is entitled to all protections thereby; that Buyer is not a successor to Seller or Company and this Agreement does not constitute a de facto merger or consolidation of Seller and Buyer or Company and Buyer; Buyer is not a mere consolidation or substantial continuation of Seller’s or Company’s business; Buyer is entering the sale in good faith; (B) any objections to this Agreement and related transactions are overruled, and that future objections to this Agreement or related transactions are barred; (C) any subsequent bankruptcy proceedings by Seller or the Company or reorganized Seller or dismissal of the Case shall not affect this Agreement or related transactions; (D) that Seller and Company have full authority to execute this Agreement; and all necessary corporate action has been taken; no consents or approvals other than those expressly provided in this Agreement are required for consummation of this Agreement and related transactions; (E) approval of this Agreement and consummation of the transactions are in best interest of Seller and the Company and their respective creditors and estates; (F) reasonable opportunity to object or be heard with respect to the Sale Motion has been

- 35 -

afforded to all interested entities; (G) this Agreement was negotiated, proposed and entered by Seller, Company and Buyer, without collusion, in good faith, and from arms length bargaining positions with parties represented by counsel and financial advisors; (H) the terms and conditions of this Agreement and related transaction are fair and reasonable; (I) the Bankruptcy Court retains exclusive jurisdiction to enforce the Sale Order; and (J) such other items as are reasonably acceptable to Buyer. Both Buyer’s and Seller’s obligations to complete the sale and purchase of the Closing Shares are conditioned upon the Bankruptcy Court’s entry of the Sale Order and a Confirmation Order as set forth in Section 9(c).

(c) Confirmation Order. Promptly following the Sale Hearing, Seller and the Company shall seek an order of the Bankruptcy Court (the “Confirmation Order”) confirming a Plan of Reorganization of the Company (the “Company Plan of Reorganization”). Both Buyer’s and Seller’s obligations to complete the sale and purchase of the Closing Shares are conditioned upon the Bankruptcy Court’s entry of the Confirmation Order. Seller agrees that each of the Company Plan of Reorganization and the Confirmation Order must be in form and substance reasonably satisfactory to Buyer and shall not be inconsistent with the provisions of this Agreement, and shall further provide for the following:

(i) the Purchase Price shall be used to pay in full, as of the effective date of the Company Plan of Reorganization, all allowed pre-petition priority claims against and post-petition administrative expenses of the Company other than Company Liabilities;

(ii) the portion of the Purchase Price allocated to the Riverboat Casino Assets in accordance with the Procedures Order and/or the Sale Order shall be used to fund the treatment provided under the Company Plan of Reorganization of allowed secured and non-priority unsecured claims against the Company;

(iii) except with respect to the Company Liabilities as described in Section 3 hereof, the discharge of all secured and unsecured claims against the Company;

(iv) except with respect to the Company Liabilities as described in Section 3 hereof, the issuance of an injunction in favor of Buyer, the Company and their respective properties, including the Riverboat Casino Assets, prohibiting any holder of a claim against the Company in existence as of the date immediately preceding the effective date of the Company Plan of Reorganization from taking any action to collect, assess, enforce or recover such claim;

(v) provide that Buyer shall be the owner of all of the Closing Shares, which shall represent all of the issued and outstanding capital stock of the Company;

(vi) ratify the findings in the Sale Order and include specific findings that: (1) reasonable opportunity to object or be heard with respect to the Confirmation Order has been afforded to all interested entities; and (2) the Bankruptcy Court retains exclusive jurisdiction to enforce the Confirmation Order;

- 36 -

(vii) the following assets shall be excluded from the Riverboat Casino Assets (collectively, the “Excluded Assets”): (1) officer and crew personal effects; (2) all cash (including checks received prior to the close of business on the Closing Date, whether or not deposited or cleared prior to the close of business on the Closing Date) other than Included Cash; (3) all commercial paper, certificates of deposit and other bank deposits, treasury bills and other cash equivalents other than the Included Cash; (4) all rights of the Company to claims or recoveries under Chapter 5 of the United States Bankruptcy Code; (5) all contracts, leases and other agreements other than the Assumed Executory Leases and Executory Contracts; (6) all rights of Seller and/or the Company under the Seller’s 401(k) plan and related trusts, insurance policies, third party administration agreements and similar arrangements sponsored by Seller for current or former employees of the Company; (7) the building, improvements and tangible personal property (other than certain items of tangible personal property used in the operation of the Riverboat Casino and listed on Schedule 6(b)), located at 800 First Street, St. Louis, Missouri 63102 (the “Main Office”); (8) subject to Buyer’s rights under the Trademark License, all right, title and interest of Seller in the name “President,” “President Riverboat Casino” and variants thereof, and all marks and logos, whether or not registered, incorporating such names or portions thereof, (9) all risk management, general ledger and fixed asset software (excluding data and related documentation), in each case which are owned, used, or licensed by Seller as licensee or licensor in connection with the Riverboat Casino (“Excluded Software”); (10) With respect to the Excluded Assets, all outstanding claims arising under Seller’s insurance policies from damage to or with respect to such Excluded Assets prior to the Closing Date; (11) all rights to any refunds for Taxes accruing to the owner of the Riverboat Casino Assets for the period prior to and including the Closing Date, including but not limited to all claims for refund for Missouri state and local sales and use Taxes, regardless whether such claims were actually filed prior to the Closing Date; (12) all rights of recovery from insurers and other third parties (including those currently being pursued in a suit styled IN THE MATTER OF THE COMPLAINT OF THE AMERICAN MILLING COMPANY, UNLIMITED, H&B MARINE, INC., corporations and AMERICAN MILLING, LP, a limited partnership, FOR EXONERATION FROM, OR LIMITATION OF, LIABILITY, Case No. 4:98CV00575SNL (the “Limitation Action”), and rights to recover in a claim against American Milling Company’s excess insurer, by Winterville Marine Service and/or Captain John O. Johnson, all resulting from an allision on April 4, 1998, of the M/V Anne Holly and her barges with the Admiral; and (13) all rights of the Company to receive restitution payments pursuant to any decree, award, judgment or other order of a court of competent jurisdiction (including but not limited to orders entered in respect of criminal law violations and settlements of contested civil matters), as listed on Schedule 6(j) under the heading “Excluded Restitution Payments.” Following the Closing, Seller shall have access upon reasonable prior notice to all papers, books and records (including electronic records) of every kind and nature pertaining to the ownership and operation of the Admiral prior to and after the allision with the Anne Holly on April 4, 1998 to the extent necessary to prove the damages resulting therefrom; for the avoidance of doubt, such materials shall not be included within the definition of Excluded Assets.

(viii) pursuant to Section 1141(c) of the Bankruptcy Code and other than with respect to the Assumed Liabilities, the Company shall hold the Riverboat Casino Assets free and clear of, all claims and interests of creditors to the maximum extent permitted under Section 1141(c) of the Bankruptcy Code (the “Excluded Liabilities”), and,

- 37 -

without limiting the foregoing, the Confirmation Order shall specifically provide that the Company shall hold the Riverboat Casino Assets free and clear of each of the following (which shall be deemed to be Excluded Liabilities): (1) Liabilities for Taxes related to all Tax periods (or portions thereof) ending on or prior to the Closing, including, without limitation, Liabilities for Taxes arising out of distribution, dividend, transfer, assignment or any other permitted disposition of any or all of the Excluded Assets prior to the Closing, regardless of whether such Taxes relate to Tax periods (or portions thereof) ending on or prior to the Closing; (2) Liabilities for any costs or expenses incurred arising out of or related to the administration of the Bankruptcy Case, including any accrued professional fees and expenses of attorneys, accountants, financial advisors and other professional advisors (collectively, the “Administrative Claims”); (3) Liabilities arising out of or related to the Excluded Assets; (4) any Cure Amounts payable by Seller pursuant to Section 2(c), (5) Liability for salary, wages or other benefits of employees in connection with services rendered to Seller and/or the Company, including incentive payments, through the Closing Date (excluding accrued vacation pay) to the extent not accrued on Company’s books and taken into account in the determination of Net Current Assets at Closing, (6) Liabilities of Seller under this Agreement, and (7) Liabilities arising out of or related to the resignation and/or termination of the employment of the officers and directors of the Company occurring prior to or concurrently with the Closing in accordance with Section 4(t) hereof.

(ix) the assumption by the Company of the Assumed Executory Leases and Executory Contracts under Section 365 of the Bankruptcy Code;

(x) the affirmation of each of the provisions of the Sale Order;

(xi) the retention by the Bankruptcy Court of exclusive jurisdiction to enforce all provisions of the Confirmation Order relating to the Sale Order; and

(xii) provide that the effective date of the Company Plan of Reorganization shall not occur until either (a) the 60-day period provided for under Section 505(b)(2)(A)(i) of the Bankruptcy Code expires without the Missouri income Tax Returns of the Company being selected for examination in response to requests regarding such Tax Returns made in accordance with Section 8(a)(xx) hereof (i.e. for Tax periods ending February 28, 2003, February 29, 2004 and February 28, 2005), or (b) the 180-day period provided for under Section 505(b)(2)(A)(ii) of the Bankruptcy Code expires in response to requests regarding the Company’s Missouri income Tax Returns made in accordance with Section 8(a)(xx) hereof (i.e. for Tax periods ending February 28, 2003, February 29, 2004 and February 28, 2005) and Seller has made in consultation with Buyer appropriate reserves sanctioned by the Bankruptcy Court to provide for payment of any additional income Tax liability asserted against the Company.

(d) Return of Deposit. If this Agreement is terminated in accordance with Section 16 hereof for any reason (other than a termination by Seller pursuant to Section 16(c)), then the Deposit (together with interest thereon) shall be immediately returned to Buyer.

(e) Superpriority Claim. Buyer shall have (and is hereby granted by Seller) a Superpriority administrative expense claim senior to all other administrative

- 38 -

expenses in the Seller Case in an amount equal to the sum of the Deposit (together with interest thereon) and the Break Up Fee. The grant of the superpriority claim described herein shall be included in the Procedures Order.

10. MGC APPROVAL. Within thirty (30) Business Days after the issuance of the Procedures Order, Buyer shall file with the Commission all applications, certifications and other documents as may be appropriate to obtain the MGC Approval, which applications, certifications and other documents shall be limited only to matters directly related to those approvals and orders that are necessary in order for the Company to lawfully operate the Riverboat Casino under the laws and regulations of the State of Missouri, and make available to Seller copies of all such materials (except personal information and confidential financial information regarding Buyer’s directors, officers, employees and principal shareholders), together with evidence of such filing; provide, however, Seller acknowledges that Buyer has other pending applications and matters before the MGC and this provision shall not limit or inhibit Buyer in such proceedings. Buyer shall use all commercially reasonable efforts to comply with all requests of the Commission and to obtain the MGC Approval and shall not to take any action that could reasonably be expected to impede or delay the issuance by the Commission of the MGC Approval or result in the refusal of the Commission to issue the MGC Approval. From time to time at Seller’s written request, Buyer shall deliver a written update of the status of such application and the most recent communications between Buyer and the Commission. Each of the Company and Seller agrees (i) to disclose non-public information provided to it by Buyer pursuant to this Agreement only to its representatives, agents, professional advisors and employees that have a need to know such confidential non-public information in connection with transactions contemplated under this Agreement and (ii) to keep confidential and cause its representatives, agents, professional advisors and employees to keep confidential all non-public information provided to it by Buyer pursuant to this Agreement that is designated by Buyer as confidential; provided that nothing herein shall prevent Company or Buyer from disclosing any such information (a) upon the request or demand of any governmental authority having jurisdiction over it, (b) in response to any order of any court or other governmental authority or as may otherwise be required pursuant to any requirement of law, including applicable securities law, (c) in connection with the enforcement of this Agreement or any other obligation of Buyer, and (d) that has been publicly disclosed other than in breach of this Section. Each of Company and Seller agrees that upon receipt of non-public information from Buyer, it will use such information solely for the purpose of evaluating, negotiating, enforcing or consummating the transactions contemplated under this Agreement and for no other purposes. The obligations of confidentiality contained in this Section 10 shall survive the Closing or an earlier termination of this Agreement.

11. CLOSING. The closing of the sale and purchase of the Closing Shares and the other transactions contemplated hereby (the “Closing”) shall occur as promptly as practicable, and in any event on the date (the “Closing Date”) which is the tenth (10th) Business Day following the later to occur of either: (1) the date on which the satisfaction (or written waiver) of the conditions to Closing set forth in Sections 4 and 5 (other than conditions with respect to actions the respective parties will take at the Closing itself) occurs or (2) the closing of the books for the preceding calendar month in which such conditions to Closing have been satisfied or waived. The Closing shall occur at the principal office of Seller or as otherwise agreed by the parties hereto.

- 39 -

(a) At Closing, Seller shall deliver to Buyer the instruments, documents and agreements required to be delivered by Seller under Section 4 hereof.

(b) At Closing, Buyer shall do or deliver to Seller the following:

(i) pay the Purchase Price less the Deposit (with interest accrued thereon, if any) by wire transfer of immediately available funds to such account or accounts as Seller shall direct in writing;

(ii) deliver to Seller irrevocable written authorization to apply the Deposit (with interest accrued thereon, if any) against the Purchase Price; and

(iii) deliver to Seller the instruments, documents and agreements required to be delivered by Buyer under Section 5 hereof (to the extent required to be delivered at such time).

12. BROKERS. Except for Libra Securities Corporation and other financial advisors to Seller, which have been engaged by and at the expense of Seller, each party hereto represents that it has not retained a broker or other Person entitled to any commission or other compensation in connection with the transaction contemplated herein. Each of Seller and Buyer shall indemnify and hold the other harmless from and against the rights or claims of any Person claiming through such party to be entitled to any such commission or compensation; provided that Buyer is not responsible for payment of Seller’s advisors, including, without limitation, Libra Securities Corporation.

13. DELIVERY. The Closing Shares shall be deemed delivered to Buyer hereunder at St. Louis, Missouri, simultaneous with the Closing. Except as otherwise provided in Section 2(b), Buyer shall not be responsible for any sale, use or similar Taxes, fees and expense imposed in Missouri or elsewhere upon or in connection with the sale of the Closing Shares.

14. SELLER’S REPRESENTATIONS, WARRANTIES AND COVENANTS. Notwithstanding anything to the contrary herein, prior to the Closing, Buyer will not have any recourse to Seller in the event any of the representations and warranties made herein or deemed made are untrue as at any time of expression thereof, except in the case of fraud and except that Buyer may terminate this Agreement in accordance with Section 16 hereof and, if applicable, shall have the right to receive payment of the Deposit and/or Break Up Fee as provided in, and subject to the terms and conditions set forth in, this Agreement; provide, however, that Buyer’s obligation to purchase the Closing Shares at Closing is expressly conditioned (unless waived by Buyer in writing) upon satisfaction of each of the conditions set forth in Section 4. The only remedy for a breach of such representations and warranties shall be Buyer’s option not to close and Buyer’s right to terminate this Agreement in accordance with and subject to the limitations set forth in Sections 4 and 16. Without limiting the foregoing, following the Closing, Buyer shall have no remedy whatsoever for any breach of any representation or warranty made by Seller herein, except in the case of fraud. All representations, warranties and (except as set forth in the following sentence) covenants set forth in this Agreement or in any certificate, document or other instrument delivered in connection herewith shall terminate at the earlier of (I) the Closing and

- 40 -

(II) termination of this Agreement in accordance with Section 16; provided, however, that those covenants that contemplate actions to be taken or restrict actions from being taken after the Closing or termination of this Agreement, as the case may be, shall survive in accordance with their terms.

15. RISK OF LOSS.

(a) All risk of loss, whether total loss, constructive total loss or less than total loss or constructive total loss, to the Riverboat Casino Assets shall be borne by Seller prior to the Closing and any insurance proceeds for events occurring prior to the Closing shall be for Seller’s account, regardless of when received. Buyer shall have no obligation to purchase the Closing Shares if the Riverboat Casino suffers any material damage prior to Closing which is not remedied by Seller to Buyer’s reasonable satisfaction prior to the Closing. In the event that the Riverboat Casino Assets suffer damage which does not constitute a total loss or constructive total loss, Buyer may, at its sole option, elect to purchase the Closing Shares, in which case Seller shall assign to Buyer at Closing all of its rights to any insurance proceeds payable with respect to such loss.

(b) All risk of loss, whether total loss, constructive total loss or less than total loss or constructive total loss, to the Riverboat Casino Assets shall be borne by Buyer subsequent to the Closing and any insurance proceeds for events occurring subsequent to the Closing shall be for Buyer’s account.

16. TERMINATION EVENTS. This Agreement may be terminated prior to the Closing Date:

(a) by Buyer or Seller upon written notice to the other party at any time prior to the Closing (I) if the Confirmation Order has not been entered on or before December 31, 2006, or the Procedures Order has not been entered on or before the date that is forty (40) days after the date of this Agreement (or such later date(s) as mutually agreed to by the parties with respect to the foregoing) or (II) Closing shall not have occurred on or before the date that is six (6) months after the date of the Bankruptcy Court’s entry of a Confirmation Order (or such later date as is mutually agreed to by the parties hereto by reason of the failure of any condition precedent under Section 4, provided that such failure did not result primarily from the terminating party materially breaching any covenant contained in this Agreement, or unless the terminating party shall have waived such condition precedent in writing); provided that such period shall automatically be extended by an additional six (6) months if the sole reason the Closing has not occurred is due to the fact that MGC Approval has not been obtained within the initial six (6) month period and there does not exist an event, condition, or circumstance that Buyer reasonably determines may negatively affect the granting of the MGC Approval (any such date being referred to herein as the “Termination Date”);

(b) by Buyer upon written notice to Seller if Buyer is in compliance in all material respects with this Agreement and Seller or Company fails to perform any material obligation required to be performed by Seller or Company, as applicable, prior to or at the Closing, which failure continues for twenty (20) Business Days after written notice from Buyer to Seller or the Company, as applicable, of such failure;

- 41 -

(c) by Seller upon written notice to Buyer if Seller is in compliance in all material respects with this Agreement and Buyer fails to perform any material obligation required to be performed by Buyer prior to or at the Closing, which failure continues for twenty (20) Business Days after written notice from Seller to Buyer of such failure;

(d) by mutual written agreement of Buyer and Seller;

(e) by Seller or Buyer upon written notice to the other if either (A) Seller or Company, with the approval of the Bankruptcy Court, enters into a contract for the sale of the Closing Shares or any Riverboat Casino Assets to a Person other than Buyer or Buyer’s designee, or (B) the Bankruptcy Court approves a competing plan of reorganization or liquidating plan relating to the Closing Shares not incorporating this Agreement (a “Competing Plan”);

(f) by Buyer upon written notice to Seller if any of the conditions of Section 4 cannot be met and will not be waived by Buyer;

(g) by Seller upon written notice to Buyer if any of the conditions of Section 5 cannot be met and will not be waived by Seller; and

(h) by Seller or Buyer after the Termination Date in the event the Company Plan of Reorganization is not confirmed.

Upon a valid termination of this Agreement by Seller pursuant to subsection (c) above, the Deposit (excluding interest accrued thereon, if any) shall be forfeited to Seller, but without prejudice to any legal remedy for money damages that Seller may have, if any, against Buyer as a result of such breach; provided, however, that Seller’s legal remedies hereunder shall be limited exclusively to money damages; provided, further, that in no event shall Seller have the right to specific performance or any other equitable remedy against Buyer in connection with this Agreement or the transactions contemplated hereby. Upon a valid termination of this Agreement pursuant to subsection (a), (b), (d), (e), (f), (g) or (h), the Deposit (with interest accrued thereon, if any) shall be immediately returned to Buyer and both parties shall execute mutual escrow instructions to Escrow Agent to that effect. Upon a valid termination of this Agreement pursuant to subsection (b), or subsection (e), the Break Up Fee shall be paid to Buyer pursuant to the terms of this Agreement, in full satisfaction of all claims of Buyer for breach of this Agreement, and as liquidated damages.

17. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Missouri, and where applicable, the federal laws of the United States.

18. NO CONTRIBUTION. Following the Closing, Seller shall not seek, nor will Seller be entitled to, contribution from, or indemnification by, the Company, under the Company’s charter documents, this Agreement, applicable corporate laws or other laws or otherwise, in respect of amounts due from Seller in connection with any claim or suit arising under this Agreement.

19. JURISDICTION. In the event any dispute shall arise in connection with the interpretation of this Agreement or the respective rights and obligations of the parties

- 42 -

hereunder, each party submits to the exclusive jurisdiction of the Bankruptcy Court for the resolution of such dispute.

20. NOTICES. All notices or other communications required or permitted to be given under this Agreement shall be given in writing and delivered personally or sent by registered mail (with postage prepaid) or recognized courier or fax to the following address and fax number, or to such other address as any party may from time to time designate in a notice to the other.

If to Buyer:	Pinnacle Entertainment, Inc. 3800 Howard Hughes Pkwy., Suite 1800 Las Vegas, NV 89109 Attention: John A. Godfrey Telephone: (702) 784-7748 Facsimile:    (702) 784-7778
with a copy to:	Irell & Manella LLP 1800 Avenue of the Stars Los Angeles, CA 90067 Attention: C. Kevin McGeehan Telephone: (310) 277-1010 Facsimile:    (310) 203-7199
If to Seller:	President Casinos, Inc. 1000 North Leonor K. Sullivan Blvd. St. Louis, MO 63102-2568 Attention: John S. Aylsworth President & Chief Operating Officer Telephone: (314) 622-3140 Facsimile:    (314) 622-3049
with a copy to:	Thompson Coburn, LLP One US Bank Plaza St. Louis, Missouri 63101 Attention: David A. Lander and Gerard K. Sandweg, Jr. Telephone: (314) 552-6067 Facsimile:    (314) 552-7000

- 43 -

and with a copy to:	Milbank, Tweed, Hadley & McCloy LLP 30th Floor Los Angeles, California 90017 Attention: Robert J. Moore and David B. Zolkin Telephone: (213) 892-4000 Facsimile:    (213) 629-5063
and with a copy to:	Blackwell Sanders Peper Martin LLP 720 Olive St., Suite 2400 St. Louis, MO 63101 Attention: David A. Warfield Telephone: (314) 345-6451 Facsimile:    (314) 345-6060

Any such notice or communication shall be deemed to have been duly served (if given or made personally) immediately or (if given or made by facsimile) upon evidence of transmission or upon confirmed answerback or (if given or made by recognized courier) once the return receipt for the served notice has been signed by the party receiving the notice or (if given or made by letter) three (3) Business Days after posting or and in proving the same it shall be sufficient to show that the envelope containing the same was duly addressed, stamped and posted. Each notice or communication made by telefax shall be followed by a confirmation copy to be sent by post. Failure to send any confirmation copy shall have no effect on the validity or deemed delivery of the notice or communication.

21. FURTHER ASSURANCES. Seller and Buyer shall do and perform such other and further acts and execute and deliver any and all such other and further instruments as may be required by law or reasonably requested by the other (and at such other party’s cost) to establish, maintain and protect the respective rights and remedies of the other and to carry out and effect the intent and purpose of this Agreement.

22. ENTIRE AGREEMENT; COUNTERPARTS. This Agreement, together with a letter agreement of even date concerning the Cherrick Lot, constitutes the entire understanding of the parties and supersedes any and all other agreements, written or oral, with respect to the subject matter hereof. This Agreement may only be modified or amended by a written instrument signed by the party or parties against which such modification or amendment is to be enforced. Seller shall cause the Company to join in, and agree to be bound by, any waiver, consent or agreement made or given by Seller under this Agreement. This Agreement may be executed in two or more counterparts which together shall constitute a single agreement.

23. BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding on the parties hereto and inure to the benefit of their respective successors and assigns. Buyer shall have the right to transfer or assign its rights in and to this Agreement upon written notice of assignment to Seller: (i) to any entity controlled by, controlling or under common control with Buyer, or (ii) through collateral assignments to the Administrative Agent for the benefit of Buyer’s lenders as required under its credit facility; provided,

- 44 -

however, such assignment shall not relieve Buyer from the due performance of all of Buyer’s obligations under this Agreement.

24. HEADINGS; INTERPRETATION. The section and other headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. Unless the context of this Agreement clearly requires otherwise, (A) references to the plural include the singular, the singular the plural, the part the whole, (B) references to any gender include all genders, (C) “including” has the inclusive meaning frequently identified with the phrase “but not limited to,” and (D) references to “hereunder” or “herein” relate to this Agreement. Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. Each accounting term used herein that is not specifically defined herein shall have the meaning given to it under GAAP.

25. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. Any items listed or described on the Exhibits or Schedules shall be listed or described under a caption that specifically identifies the Section(s) of this Agreement to which the item relates (which, in each case, shall constitute the only valid disclosure with respect to such Section(s)).

[The balance of this page has been left blank intentionally.]

- 45 -

IN WITNESS WHEREOF, the parties hereto have caused this Riverboat Casino Sale and Purchase Agreement to be executed by their duly authorized representatives as of the day and year first above written.

THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES (reference sec. 2(d)(iii) hereof).

SELLER:
PRESIDENT CASINOS, INC.
By:	/s/ Ralph J. Vaclavik
Name:	Ralph J. Vaclavik
Title:	Sr. VP & CFO
COMPANY:
PRESIDENT RIVERBOAT CASINO- MISSOURI, INC.
By:	/s/ Ralph J. Vaclavik
Name:	Ralph J. Vaclavik
Title:	Sr. VP & CFO
BUYER:
PINNACLE ENTERTAINMENT, INC.
By:	/s/ Wade Hundley
Name:	Wade Hundley
Title:	President

- 46 -

EXHIBIT A

Insert Form of Escrow Agreement

- 47 -

Exhibit A

ESCROW AGREEMENT

THIS ESCROW AGREEMENT (this “Agreement”) is entered into as of February 24, 2006, by PRESIDENT CASINOS, INC., a Delaware corporation (“Seller”), PRESIDENT RIVERBOAT CASINO-MISSOURI, INC., a Missouri corporation (“Company”), PINNACLE ENTERTAINMENT, INC., a Delaware corporation (“Buyer”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association as escrow agent (the “Escrow Agent”). Each of Seller and Company is a debtor-in-possession in Case No. 02-53404-SEG pending in the United States Bankruptcy Court for the Eastern District of Missouri (“Bankruptcy Court”).

BACKGROUND

A. Pursuant to order of the Bankruptcy Court, Seller is offering for sale the stock of Company or assets of Company associated with its riverfront casino operations conducted in St. Louis, Missouri (“Riverboat Casino”) at the President Casino at the Admiral.

B. In connection with entering into a Riverboat Casino Sale and Purchase Agreement, of even date herewith, among Buyer, Seller and Company (“Purchase Agreement”), the Buyer is posting certain of its funds as an earnest money deposit.

C. Escrow Agent has agreed to act as escrow agent on behalf of the parties, on the terms set forth in this Agreement.

NOW, THEREFORE, for and in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows:

Section 1. Appointment of Escrow Agent. Buyer and Company hereby mutually appoint and designate Escrow Agent to act as escrow agent under this Agreement, and the Escrow Agent hereby accepts such appointment, for the purpose of receiving, holding, investing, reinvesting and ultimately distributing the Escrow Fund (as hereinafter defined) in accordance with the terms hereof. The Escrow Fund shall be maintained as a segregated fund maintained by Escrow Agent for the benefit of the parties to the Purchase Agreement.

Section 2. Escrow Deposit. Buyer hereby is depositing the amount of One Million Five Hundred Thousand Dollars ($1,500,000.00) into an escrow account established with the Escrow Agent (the “Escrow Deposit”), such funds to be held, invested, reinvested and distributed by the Escrow Agent in accordance with this Agreement (the Escrow Deposit so delivered to the Escrow Agent pursuant to this Section 2, together with all income earned thereon, is referred to herein as the “Escrow Fund”).

Section 3. Investment of Escrow Fund. From time to time, after the Escrow Deposit made pursuant to Section 2 hereof and until such time as the entire Escrow Fund has been disbursed pursuant to Section 4 hereof, the Escrow Agent shall invest the Escrow Fund in

such of the following securities, and in such proportion and maturing at such times, as Buyer shall specify in its written instructions to the Escrow Agent:

(i) direct obligations, which mature in ninety (90) days or less, of the United States of America or any instrumentality thereof, for the payment of which the full faith and credit of the United States of America is pledged; or

(ii) bank accounts, including savings accounts and bank money market accounts of banks or trust companies (including the Escrow Agent) organized under the laws of the United States of America or any state thereof, and having a combined capital and surplus of at least $50,000,000;

(iii) short term obligations such as bankers’ acceptances and overnight repurchase obligations; and

(iv) Money Market Mutual Funds that invest primarily in U.S. Treasury bills, notes and bonds and other instruments issued directly by the U.S. Government (“U.S. Treasury Obligations”) and other obligations issued or guaranteed as to payment of principal and interest by the U.S. Government, its agencies or instrumentalities (“U.S. Government Obligations”), bank and commercial instruments that may be available in the money markets, high quality short-term taxable obligations issued by state and local govemments, their agencies and instrumentalities and repurchase agreements relating to U.S. Government Obligations and qualified first tier money market collateral.

In the absence of duly authorized and complete directions regarding investment of cash held in the Escrow Fund, Escrow Agent shall automatically invest and reinvest the same in units of the money market mutual funds identified on Schedule B attached hereto and incorporated herein, which funds may be managed by an affiliate of the Escrow Agent.

The Escrow Agent may make any and all investments permitted by this Section 3 through its own bond or investment department. The Escrow Agent shall not be responsible for any loss suffered from any investment of the Escrow Fund, except to the extent caused by the gross negligence or misconduct of Escrow Agent.

Section 4. Disbursement of Escrow Fund. The Escrow Agent shall disburse the Escrow Fund in accordance with the following terms and conditions:

(a) To Buyer. The Escrow Agent shall distribute the Escrow Fund to Buyer three (3) business days after receipt of notice from either Buyer or Seller to the effect that the Auction (as that term is defined in the Purchase Agreement) has concluded and Buyer was not the successful bidder for the Closing Shares or the Riverboat Casino Assets (as those terms are defined in the Purchase Agreement) with Escrow Agent providing a copy of such notice immediately to such other party. In the event that Buyer provides the notice required by this Section 4(a), Escrow Agent shall hold the Escrow Fund until three (3) business days following receipt by Seller from Escrow Agent of a copy of Buyer’s notice, and if Seller shall deliver a

2

written objection to such distribution within such period, then Escrow Agent shall continue to hold the Escrow Fund pending further joint written instructions of the parties or an order of the Bankruptcy Court or other court of competent jurisdiction

(b) Other Distributions. If Escrow Agent receives notice from either Buyer or Seller that Buyer is the successful bidder for the Closing Shares or the Riverboat Casino Assets, the Escrow Agent shall continue to hold, invest and reinvest the Escrow Fund as provided herein pending:

(i) joint written instructions of Seller and Buyer to the effect that the Escrow Fund is to be paid to Seller or Company in connection with the closing of the sale of the Closing Shares or Riverboat Casino Assets, or is to be returned to Buyer if the Buyer is entitled to the Escrow Fund under the terms of the Purchase Agreement, or is otherwise to be distributed as set forth in such notice;

(ii) written instructions of Seller to the effect that Buyer has forfeited its right to the Escrow Fund under the terms of the Purchase Agreement, that the Escrow Fund is to be distributed to Seller, whereupon Escrow Agent shall promptly deliver a copy of such instructions to Buyer; or

(iii) delivery by either the Buyer or Seller to the Escrow Agent of an order of the Bankruptcy Court directing some other distribution of the Escrow Deposit.

Escrow Agent shall distribute the Escrow Fund as so directed by any of the foregoing notices, on the third (3rd) business day following its receipt of such notice; provided, however, that in the case of a notice under clause (ii), Escrow Agent shall hold the Escrow Fund until three (3) business days following receipt by Buyer from Escrow Agent of a copy of Seller’s notice, and if Buyer shall deliver a written objection to such distribution within such period, then Escrow Agent shall continue to hold the Escrow Fund pending further joint written instructions of the parties or an order of the Bankruptcy Court or other court of competent jurisdiction.

(c) Earnings. All earnings on the Escrow Deposit shall be the property of Buyer, who shall be solely responsible for payment of any and all taxes imposed with respect thereto.

Section 5. Escrow Agent Matters.

(a) The Escrow Agent may rely upon and shall be protected in acting or refraining from acting upon any written notice, instructions or request furnished to it hereunder and believed by it to be genuine and to have been signed or presented by the proper party or parties.

(b) The Escrow Agent shall not be liable for any action taken by it in good faith and without gross negligence, and believed by it to be authorized or within the rights or powers conferred upon it by this Agreement, and may consult with counsel of its own choice and shall have full and complete authorization and protection for any action taken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel.

3

(c) Buyer and Seller hereby agree to indemnify the Escrow Agent for, and to hold the Escrow Agent harmless against, any loss, liability or expense incurred without gross negligence or bad faith on the part of the Escrow Agent, arising out of or in connection with the Escrow Agent’s entering into this Agreement and carrying out the Escrow Agent’s duties hereunder, including costs and expenses of successfully defending the Escrow Agent against any claim of liability with respect thereto. One-half of any payment made pursuant to this Section 5(c) shall be made by Buyer, and one-half shall be made by Seller. Should any controversy arise between or among Seller, Buyer and the Escrow Agent with respect to (i) this Agreement or (ii) any rights to payment, application or delivery of the Escrow Fund, or any part thereof, and a substitute escrow agent is not appointed subject to clause (d) below, the Escrow Agent shall have the right to institute a bill of interpleader or any other appropriate proceeding in the Bankruptcy Court to determine the rights of the parties. Should a bill of interpleader or other proceeding be instituted, or should the Escrow Agent be involved in any manner whatsoever on account of this Agreement, the non-prevailing party or parties shall pay the Escrow Agent its reasonable attorney fees and any other disbursements, expenses, losses, costs or cash damages in connection with or resulting from such litigation.

(d) The Escrow Agent may resign hereunder (i) at any time with the consent of the parties hereto, and the appointment of a substitute escrow agent by Buyer and Company, or (ii) upon thirty (30) days’ written notice to the parties hereto, whereupon Buyer and Company shall appoint a successor escrow agent, or (iii) upon appointment by the Bankruptcy Court of a substitute escrow agent and acceptance by the substitute escrow agent.

Section 6. Termination. Except for the provisions of Section 5, which shall survive this Agreement, (a) this Agreement shall terminate with respect to Buyer at such time, if any, as the Escrow Fund is returned to Buyer pursuant to Section 4(a), (b) this Agreement shall terminate as to all other parties hereto when all of the Escrow Funds have been distributed by the Escrow Agent in accordance with this Agreement, and (c) this Agreement shall terminate as to the Escrow Agent (but not as to other parties) as of the effective resignation of the Escrow Agent pursuant to Section 5.

Section 7. Notice. All notices, demands, requests, or other communications, except monthly statements by the Escrow Agent, which may be or are required to be given, or made by any party to any other party pursuant to this Agreement, shall be in writing and shall be telecopied, hand delivered (including delivery by courier) or mailed by first-class, registered or certified mail, return receipt requested, postage prepaid and addressed as follows:

(a) If to Buyer:

Pinnacle Entertainment, Inc.

3800 Howard Hughes Pkwy., Suite 1800

Las Vegas, NV 89109

Attention: John A. Godfrey

Telephone: (702) 784-7748

Facsimile:    (702) 784-7778

4

with a copy to:

Irell & Manella LLP

1800 Avenue of the Stars

Suite 900

Los Angeles, California 90067

Attention: C. Kevin McGeehan, Esq.

Telephone: (310) 203-7110

Facsimile:    (310) 203-7199

(b) If to Company:

President Riverboat Casino–Missouri, Inc.

1000 North Leonor K. Sullivan Blvd.

St. Louis, MO 63102-2568

Attention: Ralph J. Vaclavik

                 Senior Vice President & Chief Financial Officer

Telephone: (314) 622-3144

Facsimile:    (314) 622-3049

with a copy to:

David A. Lander

Mark V. Bossi

One U.S. Bank Plaza

St. Louis, Missouri 63101

Telephone: (314) 552-6067

Facsimile:    (314) 552-7000

and to:

Milbank, Tweed, Hadley & McCloy LLP

30^th Floor

Los Angeles, California 90017

Attention: Robert J. Moore and

                 David B. Zolkin

Telephone: 213-892-4000

Facsimile:    213-629-5063

5

and with a copy to:

Blackwell Sanders Peper Martin LLP

720 Olive St., Suite 2400

St. Louis, MO 63101

Attention: David A. Warfield

Telephone: 314-345-6451

Facsimile:    314-345-6060

(c) If to Escrow Agent:

U.S. Bank National Association

Corporate Trust Services

EP-MN-WS3C

60 Livingston Avenue

St. Paul, MN 55107

Attn: Thomas H. Caruth

Telephone: (651) 495-3911

Facsimile:    (651) 495-8096

Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication which shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt or the affidavit of messenger, or (with respect to a facsimile) the answer back being deemed conclusive, but not exclusive, evidence of such delivery if notice is confirmed by any other method permissible hereunder) or at such time as delivery is refused by the addressee upon presentation. Notwithstanding the foregoing, the Escrow Agent shall be deemed to have received notice on the business day following the business day such notice is delivered pursuant to this section, if such notice is delivered after 2:00 p.m. St. Louis, Missouri time. Each party may designate by notice in writing a new address or an individual authorized to deliver notices to which any notice, demand, request or communication may thereafter be so given.

Section 8. Benefit and Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. No person or entity other than the parties hereto is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the parties hereto, and the covenants and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the parties hereto or their respective successors and assigns as permitted

6

hereunder. No party to this Agreement may assign this Agreement or any rights hereunder without the prior written consent of all of the parties hereto.

Section 9. Entire Agreement; Amendment. This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior oral or written agreements, commitments or understandings with respect to such matters. This Agreement may not be changed orally, but only by an instrument in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

Section 10. Headings. The headings of the sections and subsections contained in this Agreement are inserted for convenience only and do not form a part or affect the meaning, construction or scope thereof.

Section 11. Choice of Law; Jurisdiction. This Agreement shall be governed by and construed under and in accordance with the laws of the State of Missouri (but not including the choice-of-law rules thereof). Each party submits to the exclusive jurisdiction of the Bankruptcy Court for the determination of any and all disputes concerning the Deposit or the distribution thereof, provided that the right of Escrow Agent to indemnification under Section 5 may be enforced in any court of competent jurisdiction.

Section 12. Signature in Counterparts and by Facsimile. This Agreement may be executed in separate counterparts, none of which need contain the signatures of all parties, each of which shall be deemed to be an original, and all of which taken together constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than the number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto. Signatures transmitted by facsimile machine shall be treated as original signatures for all purposes of this Agreement.

Section 13. Compensation of Escrow Agent. The Escrow Agent shall be compensated for its services as set forth on Schedule A hereto, such fee to be paid by Buyer and Seller equally.

Section 14. Patriot Act. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. For a non-individual person such as a business entity, a charity, a Trust or other legal entity we will ask for documentation to verify its formation and existence as a legal entity. We may also ask to see financial statements, licenses, identification and authorization documents from individuals claiming authority to represent the entity or other relevant documentation.

[The balance of this page has been left blank intentionally]

7

IN WITNESS WHEREOF, each of the parties hereto has caused this Escrow Agreement to be duly executed on its behalf, as of the day and year first above written.

PRESIDENT CASINOS, INC.
By:	________________________________________
Name:	________________________________________
Title:	________________________________________
PRESIDENT RIVERBOAT CASINO-MISSOURI, INC.
By:	________________________________________
Name:	________________________________________
Title:	________________________________________
PINNACLE ENTERTAINMENT, INC.
By:	________________________________________
Name:	________________________________________
Title:	________________________________________
ESCROW AGENT: U.S. BANK NATIONAL ASSOCIATION, as Escrow Agent
By:	________________________________________
Name:	________________________________________
Title:	________________________________________

8

Schedule A

One Time $2,000

Schedule B

U.S. BANK MONEY MARKET ACCOUNTS

U.S. BANK NATIONAL ASSOCIATION

ACCOUNT DESCRIPTION AND TERMS

The U.S. Bank Money Market account is a U.S. Bank National Association (“U.S. Bank”) interest-bearing money market deposit account designed to meet the needs of U.S. Bank’s Corporate Trust Services Escrow Group and other Corporate Trust customers of U.S. Bank. Selection of this investment includes authorization to place funds on deposit with U.S. Bank.

U.S. Bank uses the daily balance method to calculate interest on this account (actual/365 or 366). This method applies a daily periodic rate to the principal balance in the account each day. Interest is accrued daily and credited monthly to the account. Interest rates are determined at U.S. Bank’s discretion, and may be tiered by customer deposit amount.

The owner of the account is U.S. Bank as Agent for its trust customers. U.S. Bank’s trust department performs all account deposits and withdrawals. The deposit account is insured by the Federal Deposit Insurance Corporation up to $100,000.

EXHIBIT B

Insert Form of Lease and Sublease Estoppel Certificate and Consent Agreement

- 48 -

Exhibit B

(Space above this line reserved for Recorder’s use only)

LEASE AND SUBLEASE ESTOPPEL CERTIFICATE

(Regarding Lease and Sublease Agreement recorded January 19, 2000 in

Book 1602M page 1695 in the Recorder of Deeds Office of the City of St. Louis)

by

THE CITY OF ST. LOUIS, MISSOURI

(LESSOR)

and

THE PORT AUTHORITY OF THE CITY OF ST. LOUIS

(LESSEE/SUBLESSOR)

to

PRESIDENT RIVERBOAT CASINO-MISSOURI, INC.

(SUBLESSEE)

Dated:                    , 20    

Legal Description of Property: See Exhibit A attached hereto

Address of Parties: Set forth in Section 20.4 of Sublease and Section 9 hereof

This LEASE AND SUBLEASE ESTOPPEL CERTIFICATE (“Agreement”) is made and entered into as of the      day of                     , 2006, by THE CITY OF ST. LOUIS, MISSOURI, a municipal corporation of the State of Missouri, as lessor (the “City”), and THE PORT AUTHORITY OF THE CITY OF ST. LOUIS, a political subdivision of the State of Missouri, as lessee/sublessor (the “Port Authority”), to PRESIDENT CASINOS, INC. (“PCI”), PRESIDENT RIVERBOAT CASINO-MISSOURI, INC., as sublessee (“President”) and PINNACLE ENTERTAINMENT, INC. (“Buyer”).

W I T N E S S E T H:

WHEREAS, this Agreement is made with reference to that certain Lease and Sublease Agreement by the City, as lessor, the Port Authority, as lessee/sublessor and the President, as sublessee, with an effective date as of January 18, 2000 (more particularly described on Exhibit B hereto, the “Sublease”), pertaining to mooring rights within the Port District of the City of St. Louis (as more particularly described in the Sublease, the “Mooring Rights”) within the Mooring Area and Levee (more particularly described on Exhibit A hereto and as defined in the Sublease, the “Mooring Area” and the “Levee”).

WHEREAS, PCI proposes to sell the stock of President to Buyer pursuant to a Riverboat Casino Sale and Purchase Agreement dated February     , 2006, and by order of the United States Bankruptcy Court for the Eastern District of Missouri (such transaction, the “Sale Transaction”);

WHEREAS, in connection with the Sale Transaction, the City and Port Authority have been requested to make certain assurances to PCI, President and Buyer, as more fully set forth below.

NOW, THEREFORE, the City and Port Authority state as follows:

1. Definitions. Capitalized terms used but not defined herein shall have the meaning given them in the Sublease.

2. Estoppel. Knowing that Buyer will rely thereon in completing the Sale Transaction, City and Port Authority (City and Port Authority are collectively referred to herein as the “Landlord”) hereby state as follows:

(a) The term of the Sublease commenced on January 18, 2000, and currently expires on January 18, 2025 (with respect to the lease from the City to the Port Authority) and January 17, 2025 at 11:59 p.m. (St. Louis time) (with respect to the sublease from the Port Authority to President).

(b) A true and complete list of the Sublease documents and all amendments, supplements and modifications thereto is set forth on Exhibit B. The Sublease is in full force and effect, has not been modified, changed, altered or amended in any respect except as indicated on Exhibit B and except as modified by this Agreement, and represents the entire agreement among the City, Port Authority and President with respect to the Levee and the Mooring Area (the Levee and the Mooring Area are collectively referred to herein as the “Premises”).

3

(c) President has accepted and is now in possession of the Premises and is paying the rental under the Sublease pursuant to the provisions of the Sublease. To Landlord’s knowledge, President has not assigned, sublet or otherwise transferred its interest under the Sublease. Neither the City nor the Port Authority has assigned its interest therein, either in whole or in part.

(d) The annual Base Rent payable under the Sublease is $29,250.00, which is based on $14.625 per linear foot of Mooring Area, and $0.14625 per square foot of Levee area, and is payable on January 1 of each Lease Year. The Base Rent rate was last adjusted January 1, 2004, and shall not be adjusted again except in accordance with Section 4.1.B. of the Sublease. The monthly Percentage Rent payable under the Sublease is calculated and determined in accordance with Section 4.2 of the Sublease and is not subject to adjustment.

(e) The annual Base Rent required to be paid under the Sublease has been paid for the period up to and including                     , 2006. The monthly Percentage Rent required to be paid under the Sublease has been paid for the period up to and including                    , 2005. As of the date hereof, all additional rent and other charges required to be paid under the Sublease have been paid except                                  [if no exceptions, state none].

(f) No rent under the Sublease has been paid for more than thirty (30) days in advance of its due date, except for the Base Rent which is paid annually.

(g) As of the date hereof, to Landlord’s knowledge, (1) there are no defaults existing under the Sublease on the part of President nor have events occurred that, with the passage of time or the giving of notice, or both, would constitute a default by President under the Sublease; (2) there is no existing basis for Landlord to cancel or terminate the Sublease; and (3) there exist no defenses, offsets, credits, increases in rent or claims of Landlord pursuant to any of the agreements, terms, covenants or conditions of the Sublease.

(h) As of the date hereof, to Landlord’s knowledge, (1) there are no defaults existing under the Sublease on the part of Landlord nor have events occurred that, with the passage of time or the giving of notice, or both, would constitute a default by Landlord under the Sublease; (2) there is no existing basis for President to cancel or terminate the Sublease, (3) there exist no defenses, offsets, credits, deductions in rent or claims of President against the enforcement of any of the agreements, terms, covenants or conditions of the Sublease; and (4) there are no unexpired free rent periods, rent concessions or other unpaid allowances (including, without limitation, unpaid tenant improvement allowances) owing to President.

(i) There are no unsatisfied obligations of the President under that certain Relocation Funding Agreement by and among the City, the Port Authority, the President and Mercantile Bank National Association, dated January 18, 2000.

(j) President has no right or option to extend, renew or cancel the Sublease or to lease additional space adjacent to the Premises or to purchase all or any portion of the Premises (or such additional space), except as may be set forth in the Sublease.

(k) There are no actions, whether voluntary or otherwise, pending against Landlord under the Bankruptcy Laws of the United States or any state thereof.

4

(l) The security deposit being held by Landlord under the Sublease is $ -0-.

(m) No plans are pending with the City to modify, amend or cancel the Sublease for municipal purposes pursuant to the Section 20.20 of the Sublease.

(n) Landlord has no actual knowledge that any substance regulated by Environmental Laws is present, or has been used, generated, released, discharged, stored or disposed of by any party, on, under, in or about the Premises.

[SIGNATURE PAGE FOLLOWS]

5

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

ATTEST:		CITY:
		CITY OF ST. LOUIS, a municipal corporation of the State of Missouri
	CITY REGISTER
		By:
		Its:	Mayor
		APPROVED AS TO FORM ONLY:
			CITY COUNSELOR
ATTEST:		PORT AUTHORITY:
		THE PORT AUTHORITY OF THE CITY OF ST. LOUIS, a political subdivision of the State of Missouri
		By:
		Its:
		APPROVED AS TO FORM ONLY:
		COUNSEL, PORT AUTHORITY OF THE CITY OF ST. LOUIS

6

EXHIBIT C

Insert Form of Real Property Lease Estoppel Certificate

- 49 -

Exhibit C

LANDLORD ESTOPPEL CERTIFICATE

[Date]

Re: Lease: Lease dated                                                                      , by and between [Name & Jurisdiction of Landlord] (“Landlord”) and [Name & Jurisdiction of Target Company] (“Tenant”)

Address of Premises: _________________________

Commencement Date: _________________________

Expiration Date: _____________________________

Current Monthly Base Rent: $___________________

Security Deposit: $___________________________

Rent Paid Through: ___________________________

Ladies and Gentlemen:

Reference is made to the Lease referenced above by and between Landlord, as landlord, and Tenant, as tenant, as amended by                                          (collectively, the “Lease”), with respect to the Premises.

Tenant and                                          (“Purchaser”) have entered into an agreement under which the Purchaser is acquiring the Tenant’s business operations. Pursuant to such agreement, Tenant is required to obtain confirmation from Landlord regarding certain matters regarding the Lease and the Premises. Landlord hereby certifies, warrants and represents as follows:

1. The term of the Lease currently expires on                                         , subject to Tenant’s right to extend, if so provided in Paragraph 8 below.

2. A true and complete list of the Lease and all amendments, supplements and modifications thereto is set forth on Exhibit A. The Lease is in full force and effect, has not been modified, changed, altered or amended in any respect except as indicated on Exhibit A, and represents the entire agreement between the Landlord and Tenant with respect to the Premises.

3. Tenant has accepted and is now in possession of the Premises and is paying the rental under the Lease pursuant to the provisions of the Lease. To Landlord’s knowledge, Tenant has not assigned, sublet or otherwise transferred its interest under the Lease or entered into any agreement or understanding to do so and no one, other than Tenant and Tenant’s employees, occupies or has any right to occupy any part of the Premises. The Landlord has not assigned its interest in the Lease, either in whole or in part.

4. The monthly base rent payable under the Lease is $                                        .

5. The fixed minimum monthly rent and all additional rent and other charges required to be paid under the Lease have been paid for the period up to and including                                         .

6. As of the date hereof, there are no defaults existing under the Lease on the part of Tenant or, to Landlord’s knowledge, no events have occurred that, with the passage of time or the giving of notice, or both, would constitute a default by Tenant under the Lease; there is no existing basis for Landlord to cancel or terminate the Lease; there exist no defenses, offsets, credits, rent increases or claims of Landlord pursuant to any of the agreements, terms, covenants or conditions of the Lease.

7. As of the date hereof, there are no defaults existing under the Lease on the part of Landlord or, to Landlord’s knowledge, no events have occurred that, with the passage to time or the giving of notice, or both, would constitute a default by Landlord under the Lease; there is no existing basis for Tenant to cancel or terminate the Lease; there exist no defenses, offsets, credits, deductions in rent or claims against the enforcement of any of the agreements, terms, covenants or conditions of the Lease; there exist no defenses, offsets, credits, deductions in rent or claims against the enforcement of any of the agreements, terms, covenants or conditions of the Lease; and there are no unexpired free rent periods, rent concessions or other unpaid allowances (including, without limitation, unpaid tenant improvement allowances) owing to Tenant.

8. Tenant has no right or option to extend, renew or cancel the Lease or to lease additional space at the Property or to purchase all or any portion of the Property except as follows:                                                              .

9. There are no actions, whether voluntary or otherwise, pending against Landlord under the Bankruptcy Laws of the United States or any state thereof.

10. The security deposit being held by landlord under the Lease is $                                                             .

This letter shall inure to the benefit of and may be relied upon by Purchaser and its successors and assigns.

Sincerely,

By:

Name:

Title:

2

TABLE OF CONTENTS

	Page
1.      PURCHASE AND SALE OF CLOSING SHARES; RIVERBOAT CASINO ASSETS OWNED BY THE COMPANY; TRADEMARK LICENSE	2
2.      CONSIDERATION	5
3.      COMPANY LIABILITIES	11
4.      BUYER’S CONDITIONS	12
5.      SELLER’S CONDITIONS	16
6.      SELLER’S REPRESENTATIONS	16
7.      BUYER’S REPRESENTATIONS	24
8.      COVENANTS	25
9.      BANKRUPTCY COURT APPROVALS	33
10.    MGC APPROVAL	39
11.    CLOSING	39
12.    BROKERS	40
13.    DELIVERY	40
14.    SELLER’S REPRESENTATIONS, WARRANTIES AND COVENANTS	40
15.    RISK OF LOSS	41
16.    TERMINATION EVENTS	41
17.    GOVERNING LAW	42
18.    NO CONTRIBUTION	42
19.    JURISDICTION	42
20.    NOTICES	43
21.    FURTHER ASSURANCES	44
22.    ENTIRE AGREEMENT; COUNTERPARTS	44
23.    BINDING EFFECT AND ASSIGNMENT	44
24.    HEADINGS; INTERPRETATION	45
25.    INCORPORATION OF EXHIBITS AND SCHEDULES	45

EXHIBIT A	Form of Escrow Agreement
EXHIBIT B	Form of Lease and Sublease Estoppel Certificate and Consent Agreement
EXHIBIT C	Form of Real Property Lease Estoppel Certificate

- i -

EX-10.62

Exhibit 10.62

EXECUTION COPY

February 24, 2006

President Casinos, Inc.

President Riverboat Casinos-Missouri, Inc.

1000 North Leonor K. Sullivan Blvd.

St. Louis, MO 63102-2568

Re: Parking area known as “Cherrick Lot”

Gentlemen:

This letter is being delivered to you simultaneously with the execution and delivery of a Riverboat Casino Sale and Purchase Agreement, dated the date of this letter, among Pinnacle Entertainment, Inc., as “Buyer,” President Casinos, Inc., as “Seller,” and President Riverboat Casinos-Missouri, Inc., as “Company” (the “Purchase Agreement”). Capitalized terms used in this letter, that are not defined in this letter, have the meanings given to them in the Purchase Agreement.

We understand that the parking lot primarily used by the Company’s patrons for the last several years is located directly across Leonor K. Sullivan Blvd (formerly known as Wharf Street) from the Riverboat Casino, which lot is commonly referred to as the “Cherrick Lot”, and which has the following legal description:

Parcel 1:

Lot “A” of Cherrick’s Subdivision, according to the plat thereof recorded in Plat Book 70 page 29 of the St. Louis City Records and in City Block 17 and 18 of the City of St. Louis, State of Missouri

Parcel 2:

Lot “C” of Cherrick’s Subdivision, according to the plat thereof recorded in Plat Book 70 page 29 of the St. Louis City Records and in City Block 18 of the City of St. Louis, State of Missouri

The Cherrick Lot is the subject of a condemnation proceeding commenced by the Land Clearance for Redevelopment Authority for the City of St. Louis, Missouri (“LCRA”). Buyer is building a new casino project near the Cherrick Lot and has acquired an option from the LCRA to purchase the Cherrick Lot after it has been taken by the LCRA in the condemnation proceeding (the “Option Agreement”). The Company and the Unsecured Creditors’ Committee

President Casinos, Inc.

President Riverboat Casinos-Missouri, Inc.

February 24, 2006

Page 2

in the Company’s bankruptcy case have filed a proceeding in the Bankruptcy Court seeking, among other things, an injunction against the LCRA’s prosecution of the condemnation proceeding (the “Condemnation Injunction Litigation”). Both the LCRA and the Buyer are defendants in the Condemnation Injunction Litigation.

We understand that Wimar Tahoe Corporation, an affiliate of Columbia Sussex Corporation (“Wimar”), is the current record owner of the Cherrick Lot, that the Company has requested the Bankruptcy Court to enjoin Wimar from denying the Company and its patrons access to the Cherrick Lot, and that the Company and Wimar are presently involved in various discussions and negotiations concerning the Company’s potential purchase of the Cherrick Lot, or the negotiation of a lease or other arrangement by which the Cherrick Lot may be available for use in connection with the operation of the Riverboat Casino. Seller and Company have requested that Buyer confirm its intentions with respect to the Cherrick Lot in the event that Buyer or an affiliate of the Buyer acquires an interest therein.

By its signature to this letter, Buyer hereby covenants and agrees as follows:

(1) In the event that the LCRA condemns the Cherrick Lot, Buyer shall exercise the option, pursuant to its legal rights under the Option Agreement, to acquire title to the Cherrick Lot from the LCRA, provided the aggregate price required to be paid as compensation for the Cherrick Lot does not exceed Five Million Dollars ($5,000,000).

(2) If Buyer or any affiliate of Buyer acquires the Cherrick Lot, whether as contemplated by paragraph (1) above or otherwise, Buyer or Buyer’s affiliate shall permit patrons of the Company (or any successor of the Company) the exclusive right to park on the Cherrick Lot for a validation fee not exceeding $1.50 per day for each vehicle parked on the Cherrick Lot, such fee to be billed to the Company (or the Company’s successor). This exclusive validation arrangement shall extend for a term ending on the earlier of (a) the date on which the Buyer opens its new casino project on Laclede’s Landing, or (b) December 31, 2008.

By their signatures to this letter, in consideration of Buyer’s covenants and agreements set forth herein, Seller and Company agree to dismiss or withdraw the Condemnation Injunction Litigation without prejudice.

This letter is executed in connection with, and is further consideration for, the various covenants and undertakings of the parties in the Purchase Agreement. The undertakings of the parties in this letter shall survive any termination of the Purchase Agreement, regardless of the reason for such termination.

President Casinos, Inc.

President Riverboat Casinos-Missouri, Inc.

February 24, 2006

Page 3

This agreement is subject to approval of the United States Bankruptcy Court for the Eastern District of Missouri. The parties hereby agree to continue the Condemnation Injunction Litigation pending such approval.

If this comports with your understanding, please sign all three counterparts of this letter, and return one (1) fully signed original of this letter to the undersigned.

Very truly yours,
Pinnacle Entertainment, Inc.
By	/s/ Wade Hundley
Title	President

Accepted and Agreed this 24^th day of February, 2006:

President Casinos, Inc.		President Riverboat Casinos-Missouri, Inc.
By	/s/ Ralph J. Vaclavik	By	/s/ Ralph J. Vaclavik
Title	Sr VP & CFO	Title	Sr VP & CFO

EX-10.63

Exhibit 10.63

Strictly Confidential

Lehman Commercial Paper Inc. 745 Seventh Avenue New York, New York 10019	Lehman Brothers Inc. 745 Seventh Avenue New York, New York 10019
Bear, Stearns & Co. Inc. 383 Madison Avenue New York, New York 10179	Bear Stearns Corporate Lending Inc. 383 Madison Avenue New York, New York 10179

March 13, 2006

COMMITMENT LETTER

PERSONAL AND CONFIDENTIAL

Pinnacle Entertainment, Inc.

3800 Howard Hughes Parkway

Las Vegas, Nevada 89109

Attention: Daniel R. Lee, Chairman of the Board and

                 Chief Executive Officer

Ladies and Gentlemen:

This commitment letter agreement (together with all exhibits and schedules hereto, the “Commitment Letter”) will confirm the understanding and agreement among Lehman Commercial Paper Inc. (“LCPI”), Lehman Brothers Inc. (“Lehman Brothers”), Bear, Stearns & Co. Inc. (“Bear Stearns” together with Lehman Brothers, the “Arrangers”) and Bear Stearns Corporate Lending Inc. (“BSCL”; together with LPCI, the “Initial Lenders”; the Initial Lenders and the Arrangers being referred to herein collectively as the “Commitment Parties”) and Pinnacle Entertainment, Inc., a Delaware corporation (together with each of its subsidiaries, the “Company”), in connection with the proposed financing for the acquisition of all of the issued and outstanding capital stock of Aztar Corporation (together with each of its subsidiaries, the “Acquired Business”). We understand that the Company proposes to acquire all of the issued and outstanding capital stock of the Acquired Business (the “Acquisition”). The date on which the Acquisition is consummated is referred to as the “Closing Date.”

You have advised us that the total funds needed to finance the Acquisition (including (i) fees and expenses (which will be approximately $149 million), (ii) the refinancing of approximately $731 million of existing debt of the Acquired Business (the “Acquired Business Existing Public Debt”), (iii) the refinancing of approximately $646 million of existing debt of the Company (the “Company Existing Public Debt”; together with the Acquired Business Existing Public Debt, the “Existing Public Debt”) and (iv) premiums in connection with the redemption of the Existing Public Debt of approximately $73 million) will be approximately $3,057 million and that such funds will be provided from the following sources:

• $1,650 million of borrowings by the Company under Senior Term Loan Facilities (collectively with a $500 million Revolving Credit Facility, but not including any future incremental credit facility, the “Credit Facilities”) among the Company, the Initial Lenders and the financial institutions party thereto;

• the issuance by the Company of $1,250 million (less the amount of the Existing Public Debt that remains outstanding after the Closing Date and accrued interest and tender premiums allocable thereto) in aggregate principal amount of high yield securities (the “Notes”) or, in the event the Notes are not issued at the time the Acquisition is consummated, $1,250 million (less the amount of the Existing Public Debt that remains outstanding after the Closing Date and accrued interest and tender premiums allocable thereto) of borrowings by the Company under a senior subordinated increasing rate interim loan facility (the “Interim Loan Facility” and, together with the Credit Facilities, the “Facilities”); and

• approximately $157 million of existing cash balances from the Company and the Acquired Business (assuming the Company does not receive any additional insurance proceeds during 2006 and on or prior to the Closing Date).

As used below, the defined term “Company” will mean both the Company prior to the Acquisition and, as applicable, the Company together with the Acquired Business, after giving effect to the Acquisition.

1. The Commitments.

(a) You have requested (i) that the Initial Lenders (collectively with each other entity that becomes a lender under the Credit Facilities, the “Senior Lenders”) commit to provide the entire amount of the Credit Facilities upon the terms and subject to the conditions set forth in this Commitment Letter and in the Summary of Terms of Credit Facilities attached hereto as Exhibit A (the “Credit Facilities Term Sheet”) and (ii) that the Initial Lenders (collectively with each other entity that becomes a lender under the Interim Loan Facility, the “Interim Lenders”; the Interim Lenders and the Senior Lenders are referred to herein collectively as the “Lenders”) commit to provide the entire amount of the Interim Loan Facility upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Summary of Terms of Interim Loans attached hereto as Exhibit B (the “Interim Loans Term Sheet” and, together with the Credit Facilities Term Sheet, the “Term Sheets”).

(b) Based on the foregoing, (i) LCPI is pleased to confirm by this Commitment Letter its commitment to you to provide or cause one or more of its affiliates to provide 50% of the Credit Facilities and (ii) BSCL is pleased to confirm by this Commitment Letter its commitment to you to provide or cause one or more of its affiliates to provide 50% of the Credit Facilities (collectively, the “Senior Loan Commitment”).

(c) Based on the foregoing, (i) LCPI is pleased to confirm by this Commitment Letter its commitment to you to provide or cause one or more of its affiliates to provide 50% of the Interim Loan Facility and (ii) BSCL is pleased to confirm by this Commitment Letter its commitment to you to provide or cause one or more of its affiliates to provide 50% of the Interim Loan Facility (collectively, the “Interim Loans Commitment” and, together with the Senior Loan Commitment, the “Commitments”). You agree that if the Initial Lenders determine, in consultation with the Company, that it would be advisable to structure the loans under the Interim Loan Facility (the “Interim Loans”) as securities to facilitate syndication of the Interim Loans Commitment, the documentation contemplated by this Commitment Letter will be modified to the extent necessary to provide for an issuance of securities and otherwise such securities shall have the same terms as those of the Interim Loans.

2

(d) Pursuant to an Engagement Letter, dated as of the date hereof (the “Engagement Letter”), among you and the Arrangers, as further consideration for the Interim Loans Commitment, you have engaged the Arrangers to act as your exclusive joint underwriters, exclusive joint initial purchasers and/or exclusive joint placement agents and joint book managers in connection with the sale of the Permanent Securities (as defined in the Engagement Letter).

(e) It is agreed that the Arrangers will act as the sole joint book-runners and sole joint lead arrangers for the Credit Facilities and the Interim Loan Facility and that LCPI will act as the sole and exclusive Administrative Agent (acting in such role, the “Administrative Agent”) for the Credit Facilities and the Interim Loan Facility and BSCL will act as the sole and exclusive Syndication Agent (the “Syndication Agent”; and together with the Administrative Agent, the “Agents”) for the Credit Facilities and the Interim Loan Facility. Each of the Commitment Parties will have the rights and authority customarily given to financial institutions in such roles, but will have no duties other than those expressly set forth herein. You agree that no other agents, co-agents, arrangers or book-runners will be appointed, no other titles will be awarded and no compensation (other than that expressly contemplated by the Credit Facilities Term Sheet or the Fee Letter referred to below) will be paid in connection with the Credit Facilities or the Interim Loan Facility unless you and we so agree.

(f) The commitments and agreements of the Commitment Parties described herein are subject to (i) there not having been a Material Adverse Effect (as defined below) since December 31, 2005 (the date of the most recent audited financial statements delivered to the Arrangers as of the date hereof) or any change, effect, event, development or occurrence or state of facts since December 31, 2005 that individually or in the aggregate has had or would reasonably be expected to have a Material Adverse Effect, (ii) the Arrangers having been afforded a period of at least 30 consecutive days following the delivery of indicative ratings and the launch of the general syndication of the Facilities and immediately prior to the Closing Date to syndicate the Facilities, which the Arrangers agree shall be launched promptly after the availability of the applicable confidential information memorandum, and (iii) the other conditions set forth below or referred to in the Funding Conditions attached hereto as Exhibit D. “Material Adverse Effect” shall mean any change, effect, event or occurrence or state of facts (A) that is materially adverse to the business, assets, properties, financial condition or results of operations of the Acquired Business taken as a whole but excluding any of the foregoing resulting from (I) changes in international or national political or regulatory conditions generally (in each case, to the extent not disproportionately affecting the Acquired Business as compared to other gaming companies), (II) changes or conditions generally affecting the U.S. economy or financial markets or generally affecting the industry in which the Acquired Business operates (in each case, to the extent not disproportionately affecting the Acquired Business as compared to other gaming companies), (III) changes in tax rates in any state in which the Acquired Business operates, (IV) the introduction of gaming in any state adjoining any state in which the Acquired Business operates, (V) any change in law that legalizes other forms of gaming in any state in which the Acquired Business operates, as long as such change in law does not reduce or alter the scope, manner of operation, type, nature or timing of any permitted gaming activities which the Acquired Business is permitted to conduct, (VI) any change in state law, as long as such change in law does not reduce or alter the scope, manner of operation, type, nature or timing of any permitted gaming activities which the Acquired Business is permitted to conduct and as long as such change in law does not disproportionately affect the Acquired Business as compared to other gaming companies in the state) and/or (VII) any matters disclosed in Section 8.03(e) of the disclosures schedules to the Merger Agreement of the Acquired Business or (B) that prevents or materially delays the Acquired Business from performing its material obligations under the Merger Agreement or the consummation of the transactions contemplated thereby.

2. Fees and Expenses. In consideration of the execution and delivery of this Commitment Letter by the Commitment Parties, you agree to pay the fees and expenses set forth in Annex A-I to the

3

Credit Facilities Term Sheet and in the Fee Letter dated the date hereof (the “Fee Letter”) as and when payable in accordance with the terms thereof. In consideration of the execution and delivery of this Commitment Letter by the Initial Lenders as Interim Lenders, you agree to pay the fees and expenses contemplated by the Fee Letter as and when payable in accordance with the terms thereof.

3. Indemnification.

(a) The Company hereby agrees to indemnify and hold harmless each of the Commitment Parties, the other Lenders and each of their respective affiliates and all their respective officers, directors, partners, trustees, employees, shareholders, advisors, agents, attorneys and controlling persons and each of their respective heirs, successors and assigns (each, an “Indemnified Person”) from and against any and all losses, claims, damages and liabilities to which any Indemnified Person may become subject arising out of or in connection with this Commitment Letter, the Credit Facilities, the Interim Loan Facility, the Extended Term Loans (as defined in the Interim Loans Term Sheet), the Exchange Notes (as defined in the Interim Loans Term Sheet), the use of the proceeds therefrom, the Acquisition, any of the other transactions contemplated by this Commitment Letter or the Engagement Letter, any other transaction related thereto or any claim, litigation, investigation or proceeding relating to any of the foregoing, regardless of whether any Indemnified Person is a party thereto, and to reimburse each Indemnified Person promptly upon demand for all out-of-pocket and documented legal and other expenses reasonably incurred by it in connection with investigating, preparing to defend or defending, or providing evidence in or preparing to serve or serving as a witness with respect to, any lawsuit, investigation, claim or other proceeding relating to any of the foregoing (including, without limitation, in connection with the enforcement of the indemnification obligations set forth herein); provided, however, that no Indemnified Person will be entitled to indemnity hereunder in respect of any loss, claim, damage, liability or expense to the extent that it is found by a final, non-appealable judgment of a court of competent jurisdiction that such loss, claim, damage, liability or expense resulted from the gross negligence or willful misconduct of such Indemnified Person. In no event will any Indemnified Person be liable on any theory of liability for indirect, special or consequential damages, lost profits or punitive damages as a result of any failure to fund any of the Credit Facilities or the Interim Loan Facility contemplated hereby or otherwise in connection with the Credit Facilities or Interim Loan Facility. No Indemnified Person will be liable for any damages arising from the use by unauthorized persons of information, projections or other materials sent through electronic, telecommunications or other information transmission systems that are intercepted by unauthorized persons.

(b) The Company further agrees that, without the prior written consent of each of the Commitment Parties, which consent will not be unreasonably withheld, it will not enter into any settlement of a lawsuit, claim or other proceeding arising out of this Commitment Letter or the transactions contemplated by this Commitment Letter unless such settlement includes an explicit and unconditional release from the party bringing such lawsuit, claim or other proceeding of all Indemnified Persons. The Company shall not be liable for any settlement effected without its consent, such consent not to be unreasonably withheld.

(c) In case any action or proceeding is instituted involving any Indemnified Person for which indemnification is to be sought hereunder by such Indemnified Person, then such Indemnified Person will promptly notify the Company of the commencement of any action or proceeding; provided, however, that the failure so to notify the Company will not relieve the Company from any liability that it may have to such Indemnified Person pursuant to this Section 3 or from any liability that it may have to such Indemnified Person other than pursuant to this Section 3. Notwithstanding the above, following such notification, the Company may elect in writing to assume the defense of such action or proceeding, and, upon such election, it will not be liable for any legal costs subsequently incurred by such Indemnified Person (other than reasonable costs of investigation and providing evidence) in connection therewith,

4

unless (i) it has failed to provide counsel reasonably satisfactory to such Indemnified Person in a timely manner, (ii) counsel provided by the Company reasonably determines that its representation of such Indemnified Person would present it with a conflict of interest or (iii) the Indemnified Person reasonably determines that there may be legal defenses available to it which are different from or in addition to those available to the Company. In connection with any one action or proceeding, the Company will not be responsible for the fees and expenses of more than one separate law firm (in addition to local counsel) for all Indemnified Persons.

(d) The Company and the Commitment Parties agree that if any indemnification or reimbursement sought pursuant to this Section 3 is judicially determined to be unavailable for a reason other than the gross negligence or willful misconduct of such Indemnified Person, then the Company will contribute to the amount paid or payable by such Commitment Party, as a result of such losses, claims, damages, liabilities and expenses for which such indemnification or reimbursement is held unavailable (i) in such proportion as is appropriate to reflect the relative benefits to the Company, on the one hand, and such Commitment Party, as the case may be, on the other hand, in connection with the transactions to which such indemnification or reimbursement relates, or (ii) if the allocation provided by clause (i) above is judicially determined not to be permitted, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative faults of the Company, on the one hand, and such Commitment Party, on the other hand, as well as any other equitable considerations.

4. Expiration of Commitment. The Commitments will expire at 5:00 p.m., New York City time, on March 31, 2006 unless on or prior to such time you have executed and returned to the Arrangers a copy of this Commitment Letter, the Fee Letter and the Engagement Letter. If you do so execute and deliver to the Arrangers this Commitment Letter, the Fee Letter and the Engagement Letter, each Initial Lender agrees to hold its Commitments available for you until the earliest of (i) the consummation of the Acquisition with or without the funding of the Credit Facilities or the Interim Loan Facility, (ii) the termination of any definitive executed agreement in respect of the Acquisition (an “Acquisition Agreement”) and (iii) 5:00 p.m., New York City time, on the one year anniversary of the date hereof; provided, that, in the event the date of signing of an Acquisition Agreement by the Company and the Acquired Business or any of their respective affiliates (the “Signing Date”) occurs on or prior to the one year anniversary of the date hereof, the foregoing date specified in this clause (iii) will be extended to the date that is the earlier of (A) the one-year anniversary of the Signing Date and (B) the 18-month anniversary of the date hereof. The Commitments will terminate on the Closing Date, and you agree to rely exclusively on your rights and the commitments set forth in the Credit Documentation and Interim Loan Agreement in respect of all loans and extensions of credit to be made after the Closing Date.

5. Confidentiality.

(a) This Commitment Letter, Fee Letter and the Engagement Letter and the terms and conditions contained herein and therein may not be disclosed by the Company to any person or entity without the prior written consent of the Commitment Parties, such consent not to be unreasonably withheld or delayed other than (i) to the Acquired Business and such of your and their agents and advisors, (ii) other than the Fee Letter and the Engagement Letter, to the rating agencies, (iii) in any filing in any public record in which it is required by law (or deemed advisable by the Company in connection with the Acquisition) to be filed, (iv) at the request of any regulatory body, and (v) such other disclosures required by a judicial or administrative proceeding or as otherwise required by law or regulation.

(b) You acknowledge that each Commitment Party and its affiliates (the term “Commitment Party,” when used in this paragraph, includes all such affiliates) may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you may have conflicting interests regarding the transactions described herein and

5

otherwise. The Commitment Parties will not use confidential information obtained from you by virtue of the transactions contemplated by this Commitment Letter or their other relationships with you in connection with the performance by the Commitment Parties of services for other companies, and the Commitment Parties will not furnish any such information to other companies. You also acknowledge that the Commitment Parties have no obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to you, confidential information obtained from other companies.

6. Assignment and Syndication.

(a) The parties hereto agree that the Arrangers will have the right, in consultation with you, to syndicate the Facilities and the Commitments to one or more groups of financial institutions or other investors; provided, that the commitments hereunder may not be assigned, in whole or in part, prior to the Closing Date without your prior written consent. The Arrangers will have the right, in consultation with you, to manage all aspects of any such syndication, including decisions as to the selection of financial institutions or other investors to be approached and when they will be approached, the acceptance of commitments, the amounts offered, the amounts allocated and the compensation provided. Upon the reasonable request of the Arrangers, the Company shall use its commercially reasonable efforts to assist the Arrangers in such syndication process, including, without limitation: (i) ensuring that the syndication efforts benefit from the existing lending relationships of the Company (and, to the extent practicable, the Acquired Business); (ii) arranging for direct contact between senior management and other representatives and advisors of the Company (and, to the extent practicable, the Acquired Business) and the proposed Lenders; (iii) assisting in the preparation of Confidential Information Memoranda and other marketing materials to be used in connection with any syndication, including causing such Confidential Information Memoranda to conform to market standards for similar transactions as reasonably determined by the Arrangers and, at the reasonable request of the Arrangers, the preparation of versions of the Confidential Information Memoranda that do not contain material non-public information concerning the Company or the Acquired Business, their respective affiliates or their securities for purposes of United States federal and state securities laws; and (iv) hosting, with the Arrangers, one or more meetings of prospective Lenders, and, in connection with any such Lender meeting, consulting with the Arrangers with respect to the presentations to be made at such meeting, and making available appropriate officers and representatives of the Company (and, to the extent practicable, the Acquired Business) to rehearse such presentations prior to such meetings, as reasonably requested by the Arrangers. You also agree that, at your expense, you will work with the Arrangers to procure a rating for the Credit Facilities and the Interim Loan Facility by Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Group prior to the commencement of the general syndication of the Facilities.

(b) To assist the Arrangers in their syndication efforts, you agree promptly to prepare and provide to the Arrangers such information with respect to the Company, the Acquired Business, the Acquisition and the other transactions contemplated hereby as it may reasonably request, including all financial information and projections as it may reasonably request, including a reasonably detailed business plan for fiscal 2006 through fiscal 2011 in form and substance consistent with what the Company has delivered to the Arrangers in prior financing transactions (the “Projections”). You hereby represent and covenant that to the best of your knowledge (i) all information other than the Projections (the “Information”), that has been or will be made available to the Arrangers by you or any of your representatives is or will be, when furnished, and when taken as a whole, complete and correct in all material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, taken as a whole, not materially misleading in light of the circumstances under which such statements are made and (ii) the Projections that have been or will be made available to the Arrangers by you or any of your representatives, in connection with the transactions contemplated hereby, have been or will be prepared in good faith based upon assumptions believed to be reasonable at the time made. You understand that in

6

arranging and syndicating the Facilities and the Commitments we may use and rely on the Information and Projections without independent verification thereof. If, at any time from the date hereof until the Closing Date, any of the representations and covenants in this section would be, to your knowledge, incorrect if the information or Projections were being furnished, and such representations and warranties were being made, at such time, then you will use your commercially reasonable efforts to promptly supplement the Information and the Projections so that such representations and warranties will be correct under those circumstances.

(c) To ensure an orderly and effective syndication of the Facilities and the Commitments, you agree that, from the date hereof until the earlier of the termination of the syndication as determined by the Arrangers and 45 days following the Closing Date, you will not, and will not permit any of your affiliates to, syndicate or issue, attempt to syndicate or issue, announce or authorize the announcement of the syndication or issuance of, or engage in discussions concerning the syndication or issuance of, any debt facility, or debt or equity security of the Company or any of its subsidiaries (other than the syndication of the Facilities and the offering of the Notes, in each case, as contemplated hereby, and any equity securities the proceeds from which would be used to prepay the Tranche X Term Loans (as defined in the Credit Facilities Term Sheet)), including any renewals or refinancings of any existing debt facility, that would in the Arrangers judgment be expected to have an adverse impact on the syndication of the Facilities.

7. Survival. The provisions of this Commitment Letter relating to the payment of fees and expenses, indemnification and contribution and confidentiality and the provisions of Sections 6 and 8 hereof will survive the expiration or termination of the Commitments or this Commitment Letter (including any extensions) and the execution and delivery of definitive financing documentation provided, that the provisions hereof relating to indemnification will be superseded on the Closing Date to the extent replaced by the provisions of the financing documentation.

8. Choice of Law; Jurisdiction; Waivers.

(a) This Commitment Letter will be governed by and construed in accordance with the laws of the State of New York. The Company and the Commitment Parties hereby irrevocably submit to the non-exclusive jurisdiction of any New York State court or Federal court sitting in the County of New York in respect of any suit, action or proceeding arising out of or relating to the provisions of this Commitment Letter or the Fee Letter and irrevocably agree that all claims in respect of any such suit, action or proceeding may be heard and determined in any such court. The parties hereto hereby waive any objection that they may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in any such court, and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. The parties hereto hereby waive, to the fullest extent permitted by applicable law, any right to trial by jury with respect to any action or proceeding arising out of or relating to this Commitment Letter or the Fee Letter.

(b) No Senior Lender or Interim Lender will be liable in any respect for any of the obligations or liabilities of any other Senior Lender or Interim Lender under this letter or arising from or relating to the transactions contemplated hereby.

9. Miscellaneous.

(a) This Commitment Letter may be executed in one or more counterparts, each of which will be deemed an original, but all of which taken together will constitute one and the same instrument. Delivery of an executed signature page of this Commitment Letter by facsimile transmission will be effective as delivery of a manually executed counterpart hereof. This Commitment Letter may not be amended or waived except by an instrument in writing signed by each of the Commitment Parties and you.

7

(b) The Company may not assign any of its rights, or be relieved of any of its obligations, without the prior written consent of each of the Lenders (and any purported assignment without such consent will be null and void).

(c) This Commitment Letter and the attached Exhibits and Schedules set forth the entire understanding of the parties hereto as to the scope of the Commitments and the obligations of the Lenders and the Commitment Parties hereunder. This Commitment Letter supersedes all prior understandings and proposals, whether written or oral, between any of the Lenders and you relating to any financing or the transactions contemplated hereby. This Commitment Letter is in addition to the agreements of the parties contained in the Engagement Letter and the Fee Letter.

(d) This Commitment Letter has been and is made solely for the benefit of the parties signatory hereto, the Indemnified Persons, and their respective heirs, successors and assigns, and nothing in this Commitment Letter, expressed or implied, is intended to confer or does confer on any other person or entity any rights or remedies under or by reason of this Commitment Letter or the agreements of the parties contained herein.

(e) You acknowledge that the Lenders and the Commitment Parties may be (or may be affiliated with) full service financial firms and as such from time to time may effect transactions for their own account or the account of customers, and hold long or short positions in debt or equity securities or loans of companies that may be the subject of the transactions contemplated by this Commitment Letter. You hereby waive and release, to the fullest extent permitted by law, any claims you have with respect to any conflict of interest arising from such transactions, activities, investments or holdings, or arising from the failure of any Commitment Party or one or more Lenders or any of their respective affiliates to bring such transactions, activities, investments or holdings to your attention.

(f) You agree to provide us, prior to the Closing Date, with all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the U.S.A. Patriot Act.

8

If you are in agreement with the foregoing, kindly sign and return to us the enclosed copy of this Commitment Letter.

Very truly yours,
LEHMAN COMMERCIAL PAPER INC.
By:	/s/ William J. Hughes
Name:	William J. Hughes
Title:	Managing Director
LEHMAN BROTHERS INC.
By:	/s/ William J. Hughes
Name:	William J. Hughes
Title:	Managing Director
BEAR, STEARNS & CO. INC.
By:	/s/ Richard Bram Smith
Name:	Richard Bram Smith
Title:	Senior Managing Director
BEAR STEARNS CORPORATE LENDING INC.
By:	/s/ Richard Bram Smith
Name:	Richard Bram Smith
Title:	Vice President

Accepted and agreed to as of the date first above written:
PINNACLE ENTERTAINMENT, INC.
By:	/s/ Stephen H. Capp
Name:	Stephen H. Capp
Title:	Executive Vice President and Chief Financial Officer

EXHIBIT A TO COMMITMENT LETTER

SUMMARY OF TERMS OF CREDIT FACILITIES

Set forth below is a summary of certain of the terms of the Credit Facilities and the documentation related thereto. Capitalized terms used and not otherwise defined herein have the meanings set forth in the Commitment Letter to which this Summary of Terms is attached and of which it forms a part.

I.	Parties
	Borrower	Pinnacle Entertainment, Inc. (the “Company”).
	Guarantors	Each of the Company’s direct and indirect subsidiaries (other than foreign subsidiaries of the Company to the extent it would result in material adverse tax, foreign gaming or foreign law consequences, Unrestricted Subsidiaries and Immaterial Subsidiaries (each to be defined in a manner consistent with the Second Amended and Restated Credit Agreement, dated as of December 14, 2005 (the “Existing Credit Agreement”)) and certain other exceptions consistent with the Existing Credit Agreement), among the Company, the lenders party thereto, LCPI, as administrative agent, and BSCL, as syndication agent) (the “Guarantors”; the Company and the Guarantors, collectively, the “Credit Parties”).
	Unrestricted Subsidiaries	The subsidiaries of the Company in Argentina, Chile and the Bahamas and other subsidiaries of the Company acquired or formed after the Closing Date that meet requirements to be agreed. Foreign Unrestricted Subsidiaries may engage in the casino/hotel business and own casino/hotel assets in foreign jurisdictions.
	Joint Lead Arrangers and Joint Book-Runners	Lehman Brothers Inc. and Bear, Stearns & Co. Inc. (in such capacities, the “Arrangers”).
	Syndication Agent	Bear Stearns Corporate Lending Inc. (in such capacity, the “Syndication Agent”).
	Administrative Agent	Lehman Commercial Paper Inc. (in such capacity, the “Administrative Agent”).
	Senior Lenders	A syndicate of banks, financial institutions and other entities arranged by the Arrangers with the consultation of the Company; provided, that any such syndication prior to the Closing Date shall comply with the terms and conditions set forth in the Commitment Letter (collectively, the “Senior Lenders”).

A-1

II.	Types and Amounts of Credit Facilities
	Senior Term Loan Facilities	Senior Term Loan Facilities (the “Term Loan Facilities”) in an aggregate principal amount equal to $1,650 million (the loans thereunder, the “Term Loans”) as follows:
		A six and one-half-year term loan facility (the “Tranche X Term Loan Facility”) in an aggregate principal amount equal to $400 million (the loans thereunder, the “Tranche X Term Loans”). The Tranche X Term Loans will be repayable in equal quarterly installments in an aggregate annual amount equal to 1% of the initial principal amount of the Term Loans during the five years and three months following the one year anniversary of the Closing Date with the balance payable on the six and one-half year anniversary of the Closing Date.
		A seven-year term loan facility (the “Tranche B Term Loan Facility”, and collectively with the Tranche X Term Loan Facility, the “Term Loan Facilities”) in an aggregate principal amount equal to $1,250 million (the loans thereunder, the “Tranche B Term Loans”, and collectively with the Tranche X Term Loans, the “Term Loans”). The Tranche B Term Loans will be repayable in equal quarterly installments in an aggregate annual amount equal to 1% of the initial principal amount of the Tranche B Term Loans during the five years and nine months following the one year anniversary of the Closing Date with the balance payable on the seventh anniversary of the Closing Date.
	Availability	The Term Loans will be made in a single drawing on the Closing Date.
	Purpose	The proceeds of the Term Loans will be used to finance, in part, the Acquisition (including related fees and expenses (including severance costs)), to refinance certain existing indebtedness of the Acquired Business and the Company, and for general corporate purposes of the Company and its subsidiaries, including without limitation to finance capital expenditures, asset purchases, other investments.
	Incremental Credit Facility	The Company will have the right to solicit commitments for a pre-approved (but not pre-committed) increase in the Revolving Credit Facility and/or an incremental term loan facility (the “Incremental Term Loan Facility”) in an aggregate principal amount up to $300 million on, in the case of the Incremental Term Loan Facility, terms substantially the same as those applicable to the Tranche B Term Loan Facility (subject to exceptions consistent with those in the Existing Credit Agreement). The term loans under the Incremental Term Loan Facility (the “Incremental Loans”), together with the Term Loans,

A-2

	are referred to herein as the “Senior Term Loans.” Such increases in the Revolving Credit Facility or Incremental Loans may be provided by existing Senior Lenders or other persons who become Senior Lenders in connection therewith and will be subject to customary conditions and price protection consistent with the Existing Credit Agreement. No Senior Lender will be obligated to provide any such increase or Incremental Loans.
Purpose	The proceeds from the Incremental Term Loan Facility may be used for general corporate purposes of the Company and its subsidiaries, including, without limitation, for permitted acquisitions, to finance the capital expenditures, asset purchases and other investments and to prepay the Interim Loans or the Term Loans (as defined in Exhibit C to the Commitment Letter).
Revolving Credit Facility	A five-year revolving credit facility (the “Revolving Credit Facility”; together with the Term Loan Facilities and any Incremental Term Loan Facility, the “Credit Facilities”) in an aggregate principal amount equal to $500 million (the loans thereunder, the “Revolving Credit Loans”, and together with the Senior Term Loans, the “Loans”).
	The Company shall have the right on or prior to the Closing Date, to solicit commitments for an additional amount of commitments in respect of the Revolving Credit Facility such that the aggregate commitments in respect of the Revolving Credit Facility do not exceed $750 million. Such increases in the Revolving Credit Facility may but shall not be required to be provided by existing Senior Lenders.
Availability	The Revolving Credit Facility will be available on a revolving basis during the period commencing on the Closing Date and ending on the fifth anniversary of the Closing Date (the “Revolving Credit Termination Date”); provided, that an amount to be agreed of Revolving Credit Loans may be used to finance the Acquisition.
Letters of Credit	A portion of the Revolving Credit Facility not in excess of an amount to be agreed will be available for the issuance of letters of credit (the “Letters of Credit”) by one or more Senior Lenders to be selected in the syndication process (each such Senior Lender in such capacity, an “Issuing Senior Lender”). The face amount of any outstanding Letters of Credit will reduce availability under the Revolving Credit Facility on a dollar-for-dollar basis. No Letter of Credit will have an expiration date after the earlier of (i) one year after the

A-3

		date of issuance, unless the Issuing Senior Lender otherwise agrees, and (ii) five business days prior to the Revolving Credit Termination Date; provided that any Letter of Credit with a one-year tenor may provide for the renewal thereof for additional one year periods (which shall in no event extend beyond the date referred to in clause (ii) above).
		Drawings under any Letter of Credit will be reimbursed by the Company (whether with its own funds or with the proceeds of Revolving Credit Loans) on the next business day. Each Senior Lender under the Revolving Credit Facility will acquire an irrevocable and unconditional pro rata participation in each Letter of Credit.
	Swing Line Loans	A portion of the Revolving Credit Facility not in excess of an amount to be agreed will be available for swing line loans (the “Swing Line Loans”) from Lehman Commercial Paper Inc. (in such capacity, the “Swing Line Senior Lender”) on same-day notice. Any such Swing Line Loans will reduce availability under the Revolving Credit Facility on a dollar-for-dollar basis. Each Senior Lender under the Revolving Credit Facility will acquire an irrevocable and unconditional pro rata participation in each Swing Line Loan.
	Maturity	The Revolving Credit Termination Date.
	Purpose	The proceeds of the Revolving Credit Loans will be used to finance the Company’s capital expenditures, asset purchases and other investments and for general corporate purposes of the Company and its subsidiaries (including certain construction projects).
III.	Certain Payment Provisions
	Fees and Interest Rates	As set forth on Annex A-I.
	Optional Prepayments and Commitment Reductions	Loans may be prepaid in minimum amounts to be agreed upon without premium or penalty. Optional prepayments of the Senior Term Loans will be applied ratably to each tranche and to the installments thereof ratably in accordance with the then outstanding amounts thereof and may not be reborrowed. The unutilized portion of the commitments under the Revolving Credit Facility may, upon five business days’ notice, be permanently reduced or terminated by the Company without premium or penalty, in minimum amounts to be agreed.

A-4

	Mandatory Prepayments and Commitment Reductions	The following amounts will be applied to prepay the Senior Term Loans (subject to exceptions and thresholds that are consistent with those set forth in the Existing Credit Agreement):
		(i)       100% of the net cash proceeds of any issuance or incurrence of indebtedness (other than indebtedness otherwise permitted under the Credit Documentation (as defined below)) after the Closing Date by the Company or any of its subsidiaries;
		(ii)      100% of the net cash proceeds of any sale or other disposition (including as a result of casualty or condemnation) by the Company or any of its subsidiaries of any assets and certain insurance proceeds recoveries (other than business interruption), with exceptions for proceeds that are re-invested within 12 months or committed to be re-invested within 12 months and actually re-invested within a further six months of such commitment, in each case, in assets otherwise permitted under the Credit Documentation (except for the sale of inventory in the ordinary course of business, a general basket and de minimis exceptions consistent with the Existing Credit Agreement with adjustments to reflect the Acquisition, certain designated dispositions consistent with those under the Existing Credit Agreement, and certain other dispositions to be agreed upon); and
		(iii)     50% of excess cash flow (to be defined in a manner that is consistent with the Existing Credit Agreement) for each fiscal year of the Company (commencing with the fiscal year following the fiscal year in which the Closing Date occurs).
		Each such prepayment of the Senior Term Loans will be applied ratably to each tranche and to the installments thereof in direct order of maturity and may not be reborrowed; provided, that proceeds from any event specified in clause (i) above and the proceeds from certain insurance recoveries shall be applied first to the prepayment of the Tranche X Term Loans.
		In addition, the Tranche X Term Loans shall be prepaid with 100% of the net cash proceeds of any sale or issuance of equity (other than issuances pursuant to employee stock plans and other exceptions to be agreed) after the Closing Date by the Company. Any such amounts prepaid may not be reborrowed.
IV.	Collateral	The obligations of each Credit Party in respect of the Credit Facilities and certain interest rate hedge agreements and cash management arrangements provided

A-5

		by affiliates of the Lenders at the time such agreements or arrangements are entered into will be secured by a perfected first priority security interest (subject to permitted liens) in substantially all of its tangible and intangible assets (including, without limitation, intellectual property, real property, licenses, permits and all of the capital stock of each of the Company’s direct and indirect domestic subsidiaries and 65% of the voting stock and 100% of the non-voting stock of certain of its first-tier foreign subsidiaries (other than Unrestricted Subsidiaries)), except for assets as to which the Arrangers determine, in their reasonable discretion, that the costs of obtaining such a security interest are excessive in relation to the value of the security to be afforded thereby and those assets which are not required to be collateral under the Existing Credit Agreement, and subject to legal or regulatory limitations.
		To the extent any security interest in the intended Collateral or any deliverable related to the perfection of security interests in the intended Collateral (other than any Collateral the security interest in which may be perfected by the filing of a UCC financing statement or the delivery of stock certificates and the security agreement giving rise to the security interest therein) is not provided on the Closing Date after your use of commercially reasonable efforts to do so, the provision of such security interest(s) or deliverable shall not constitute a condition precedent to the availability of the Credit Facilities on the Closing Date but shall be required to be delivered after the Closing Date pursuant to arrangements to be mutually agreed by the Administrative Agent and the Company.
V.	Certain Conditions
	Initial Conditions	The availability of the Credit Facilities is subject to the conditions set forth on Exhibit D to the Commitment Letter.
	On-Going Conditions	The making of each extension of credit will be conditioned upon (i) the accuracy in all material respects (except to the extent otherwise qualified by materiality or similar qualification) of all representations and warranties in the definitive financing documentation with respect to the Credit Facilities (the “Credit Documentation”) (including, without limitation, the material adverse change and litigation representations) and (ii) there being no default or event of default in existence at the time of, or after giving effect to the making of, such extension of credit; provided that, the only representations and

A-6

		warranties relating to the Acquired Business and its businesses the making of which shall be a condition to availability of the Credit Facilities on the Closing Date shall be the representations made by the Acquired Business in the Merger Agreement.
VI.	Certain Documentation Matters	The Credit Documentation will contain the following representations, warranties, covenants and events of default, subject to exceptions, materiality qualifiers, thresholds and grace periods where appropriate to be determined and generally consistent with the Existing Credit Agreement:
	Representations and Warranties	Financial statements (including pro forma financial statements); absence of undisclosed liabilities; no material adverse change (which as of the Closing Date shall be defined in a manner consistent with the Commitment Letter and thereafter as mutually agreed by the parties); corporate existence; compliance with law; corporate power and authority; enforceability of Credit Documentation; no conflict with law or contractual obligations; no material litigation; no default; ownership of property; indebtedness; liens; intellectual property; taxes; Federal Reserve regulations; ERISA; Investment Company Act; licenses; permits; franchises and regulatory approvals; subsidiaries; environmental matters; solvency; labor matters; accuracy of disclosure; creation and perfection of security interests; status of the Credit Facilities as senior debt; use of proceeds; Regulation H; gaming laws; and insurance proceeds.
	Affirmative Covenants	Delivery of financial statements, reports, accountants’ letters, annual budgets (including projections), officers’ certificates and other information reasonably requested by the Senior Lenders; payment of other obligations; continuation of business and maintenance of existence and material rights and privileges; compliance with laws and material contractual obligations; maintenance of property and insurance; maintenance of books and records; right of the Senior Lenders to inspect property and books and records; notices of defaults, litigation and other material events; compliance with environmental laws; further assurances (including, without limitation, with respect to security interests in after-acquired property); post-closing filings with gaming authorities; and agreement to obtain within 90 days after the Closing Date interest rate protection such that interest on at least 40% of the Company’s long-term debt is fixed or hedged for a period of not less than three years on terms and conditions reasonably satisfactory to the Arrangers.

A-7

Construction Monitoring	A third party construction monitor arrangement consistent with the terms set forth in the Existing Credit Agreement.
Financial Covenants	Only the following: minimum interest coverage ratio, maximum senior leverage ratio and maximum total debt leverage ratio. The financial covenants shall apply to the Company and its subsidiaries and shall be tested on a rolling four-quarter basis at the end of each fiscal quarter after the Closing Date.
Negative Covenants	Consistent with those set forth in the Existing Credit Agreement (with modifications to be agreed upon to reflect the Acquisition), limitations on: indebtedness (including preferred stock); liens; guarantee obligations; mergers and acquisitions, consolidations, liquidations and dissolutions; sales of assets; dividends and other payments in respect of capital stock; maintenance capital expenditures and discretionary capital expenditures; investments, loans and advances; optional payments and modifications of subordinated and other debt instruments; transactions with affiliates; sale and leasebacks; changes in fiscal year; negative pledge clauses; changes in lines of business; restrictions on subsidiary distributions; hedge agreements; and changes to the Deferred Compensation Plan and Directors and Officers’ Trust (each to be defined in a manner consistent with the Existing Credit Agreement).
Events of Default	Nonpayment of principal when due; nonpayment of interest, fees or other amounts after a grace period to be agreed upon; material inaccuracy of representations and warranties; violation of covenants (subject, in the case of certain affirmative covenants, to a grace period to be agreed upon); cross-default to indebtedness in excess of an amount to be agreed upon; bankruptcy events; certain ERISA events; material judgments; actual or asserted invalidity of any guarantee or security document, subordination provisions or security interest; and a change of control (the definition of which is to be agreed but which will include, without limitation, a change of control under the definitive documentation governing the Interim Loan Facility (the “Interim Loan Agreement”)).
Voting	Amendments and waivers with respect to the Credit Documentation will require the approval of Senior Lenders holding not less than a majority of the aggregate amount of the Senior Term Loans, Revolving Credit Loans (including participations in Letters of Credit and Swing Line Loans) and unused commitments under the Credit Facilities, except (subject to customary lender replacement provisions) that (i) the consent of each Senior Lender directly and adversely affected thereby will be required with respect to (a) reductions in the

A-8

	amount or extensions of the scheduled date of final maturity of any loan, (b) reductions in the rate of interest or any fee or extensions of any due date thereof, (c) increases in the amount or extensions of the expiry date of any Senior Lender’s commitment, (d) modifications to the pro rata provisions of the Credit Documentation or (e) modifications to the assignment and participation provisions of the Credit Documentation which further restrict assignments thereunder and (ii) the consent of 100% of the Senior Lenders will be required with respect to (a) modifications to any of the voting percentages and (b) releases of all or substantially all of the collateral or all or substantially all of the Guarantees other than in accordance with the provisions of the Credit Documentation. In addition, the consent of Senior Lenders holding a majority of the aggregate amount of the funded and unfunded commitments under a Credit Facility will be required with respect to certain modifications disproportionately affecting such Credit Facility.
Assignments and Participations	Each Senior Lender may assign any or all of its loans and commitments to its affiliates or to one or more banks, financial institutions or other entities. Except for assignments (i) by or to the Arrangers and their respective affiliates, (ii) to another Senior Lender or to an affiliate of a Senior Lender or (iii) of funded Senior Term Loans, assignments will require the consent of the Administrative Agent and, so long as no event of default has occurred and is continuing, the Company (which consent in each case will not be unreasonably withheld or delayed). Non-pro rata assignments will be permitted. Partial assignments (other than to another Senior Lender or to an affiliate of a Senior Lender), must be at least $1.0 million, in the case of the Term Loan Facilities, and $5.0 million, in the case of the Revolving Credit Facility, unless otherwise agreed by the Company and the Administrative Agent. Upon assignment, the assignee will become a Senior Lender for all purposes under the Credit Documentation under documentation reasonably acceptable to the Administrative Agent. Promissory notes will be issued under the Credit Facilities only upon request.
Yield Protection	The Credit Documentation will contain customary provisions (i) protecting the Senior Lenders against increased costs or loss of yield resulting from changes in reserve, tax, capital adequacy and other requirements of law and from the imposition of or changes in withholding or other taxes and (ii) indemnifying the Senior Lenders for “breakage costs” incurred in connection with, among other things, any prepayment of a LIBOR Loan (as defined in Annex A-I) on a day other than the last day of an interest period with respect thereto.

A-9

Expenses and Indemnification	The Company will pay (i) all reasonable, documented out-of-pocket expenses of the Administrative Agent, the Syndication Agent and the Arrangers associated with the syndication of the Credit Facilities and the preparation, negotiation, execution, delivery and administration of the Credit Documentation and any amendment or waiver with respect thereto (including the reasonable documented fees, disbursements and other charges of one counsel (and, if necessary, one local counsel per jurisdiction), and the charges of IntraLinks) and (ii) all reasonable and documented out-of-pocket expenses of the Administrative Agent and the Senior Lenders (including the reasonable documented fees, disbursements and other charges of one counsel) in connection with the enforcement of the Credit Documentation or in any bankruptcy case or insolvency proceeding.
	The Administrative Agent, the Syndication Agent, the Arrangers and the Senior Lenders (and their affiliates and each of their respective officers, directors, partners, trustees, employees, shareholders, advisors, agents, attorneys and controlling persons and each of their respective heirs, successors and assigns) will have no liability for, and will be indemnified and held harmless against, any loss, liability, cost or expense incurred in respect of the financing contemplated hereby or the use or the proposed use of proceeds thereof (except to the extent resulting from the gross negligence, bad faith or willful misconduct of the indemnified party).
Governing Law and Forum	State of New York.
Counsel to the Administrative Agent and the Arrangers	Simpson Thacher & Bartlett LLP.

A-10

Annex A-I

Interest and Certain Fees

Interest Rate Options	The Company may elect that the loans comprising each borrowing bear interest at a rate per annum equal to:
	(i) the Base Rate plus the Applicable Margin (“Base Rate Loans”); or
	(ii) the LIBOR Rate plus the Applicable Margin (“LIBOR Loans”);
	provided, that Swing Line Loans will always be Base Rate Loans.
	As used herein:
	“Base Rate” means the higher of (i) the prime lending rate as set forth on the British Banking Association Telerate Page 5 (the “Prime Rate”), and (ii) the federal funds effective rate from time to time plus 0.5%.
	“Applicable Margin” means a per annum rate equal to (i) 1.50%, in the case of Base Rate Loans and (ii) 2.50%, in the case of LIBOR Loans); provided, that, on and after delivery of the financial statements required under the Credit Documentation, the Applicable Margin in respect of the Revolving Credit Facility shall be subject to adjustment based on adjusted leverage levels to be agreed.
	“LIBOR Rate” means the rate (adjusted for statutory reserve requirements for eurocurrency liabilities) at which eurodollar deposits for one, two, three or six months (as selected by the Company) are offered in the interbank eurodollar market.
	No new LIBOR interest period may be selected when any event of default is continuing.
Interest Payment Dates	For Base Rate Loans, quarterly in arrears.
	For LIBOR Loans, on the last day of each relevant interest period and, in the case of any interest period longer than three months, on each successive date three months after the first day of such interest period.
Commitment Fees	The Company will pay a commitment fee calculated from the Closing Date at 0.50% per annum, on the average daily unused portion of the Revolving Credit Facility payable quarterly in arrears; provided, that, on and after delivery of the financial statements required under the Credit Documentation, the commitment fee shall be subject to adjustment based on adjusted leverage levels to be agreed. Swing Line Loans will, for purposes of the commitment fee calculations only, not be deemed to be a utilization of the Revolving Credit Facility.

A-I-1

Letter of Credit Fees	The Company will pay a commission on all outstanding Letters of Credit at a per annum rate equal to the Applicable Margin then in effect with respect to LIBOR Loans under the Revolving Credit Facility on the face amount of each Letter of Credit. Such commission will be shared ratably among the Senior Lenders participating in the Revolving Credit Facility and will be payable quarterly in arrears.
	In addition to letter of credit commissions, a fronting fee calculated at a rate per annum to be agreed upon by the Company and the Issuing Senior Lender on the face amount of each Letter of Credit will be payable quarterly in arrears to the Issuing Senior Lender for its own account. In addition, customary administrative, issuance, amendment, payment and negotiation charges will be payable to the Issuing Senior Lender for its own account.
Default Rate	Overdue amounts (including overdue interest) will bear interest at a rate equal to 2% per annum above the rate applicable to Base Rate Loans.
Rate and Fee Basis	All per annum rates will be calculated on the basis of a year of 360 days (or 365 or 366 days, as applicable, in the case of Base Rate Loans the interest rate payable on which is then based on the Prime Rate) and the actual number of days elapsed.

A-I-2

EXHIBIT B TO COMMITMENT LETTER

SUMMARY OF TERMS OF INTERIM LOANS

Set forth below is a summary of certain of the terms of the Interim Loan Facility and the documentation related thereto. Capitalized terms used and not otherwise defined herein have the meanings set forth in the Commitment Letter to which this Summary of Terms is attached and of which it forms a part.

Borrower	The Company.
Joint Book-Runners and Joint Lead Arrangers	Lehman Brothers and Bear Stearns.
Administrative Agent.	LCPI.
Syndication Agent.	BSCL.
Loans	$1,250 million (less the principal amount of the Existing Public Debt that remains outstanding after the Closing Date and accrued interest and tender premiums allocable thereto) in aggregate principal amount of senior subordinated increasing rate loans due 2007 (the “Interim Loans”).
Subordination	The Interim Loans and all obligations with respect thereto will be subordinated in right of payment to the payment in full of all obligations of the Company under the Credit Facilities and certain refinancings thereof on terms satisfactory to the Lenders in their sole discretion. The Company will not be permitted to incur any indebtedness that is subordinated to any borrowings under the Credit Facilities and senior to any other indebtedness of the Company. Nothing in the subordination provisions will prevent any holder of Interim Loans from receiving and retaining any proceeds originally received by the Company or any subsidiary of the Company that were used to repay Interim Loans to the extent required under the “Mandatory Repayment” provision described below, and the same may be retained by such holder free and clear of any claims by holders of any debt, pursuant to these subordination provisions or otherwise.
Security	None.
Use of Proceeds	The proceeds of the Interim Loans will be used to finance, in part, the Acquisition (including related fees and expenses (including severance costs)), to refinance certain existing indebtedness of the Acquired Business and the Company, and for general corporate purposes of the Company and its subsidiaries, including without limitation to finance capital expenditures, asset purchases, other investments.

B-1

Maturity	365 days from the date of initial funding (the “Maturity Date”).
Funding Date	The Closing Date.
Mandatory Rollover	If (i) the Interim Loans are not repaid in full on or prior to the Maturity Date and (ii) the conditions precedent set forth in Exhibit C to the Commitment Letter are satisfied, then the Interim Loans will be automatically extended on the Maturity Date into Extended Term Loans due on the ninth anniversary of the Maturity Date of the Company (the “Extended Term Loans”) in an aggregate principal amount equal to the aggregate principal amount of Interim Loans so extended. The Extended Term Loans will have the terms set forth in Exhibit C to the Commitment Letter. Under certain circumstances, Extended Term Loans may be exchanged by the holders thereof for Exchange Notes (the “Exchange Notes”). The Exchange Notes will have the terms set forth in Exhibit C to the Commitment Letter. The Exchange Notes will be issued, undated, on the Closing Date and placed in an escrow account and held by a mutually agreeable fiduciary pending such exchange.
Interest	The Interim Loans will bear interest at a variable per annum rate equal to the sum of (a) a base rate to be selected by the Company on the date of funding equal to either (i) the one-, three- or six- month London Interbank Offered Rate, reset monthly or quarterly, as the case may be (the “LIBOR Rate”), calculated on the basis of the actual number of days elapsed in a year of 360 days, or (ii) the Base Rate (as defined in the Credit Facilities Term Sheet), plus (b) a spread (the “Spread”) equal to (i) 450 basis points in case of the LIBOR Rate or (ii) 350 basis points in case of the Base Rate. The Spread will increase by 75 basis points upon the 180 day anniversary of the date of funding of the Interim Loans and 50 basis points each 90 day anniversary thereafter. The interest rate on the Interim Loans will not at any time exceed 11.0% per annum. Interest will be payable quarterly, in arrears, on the Maturity Date and on the date of any prepayment of the Interim Loans. Notwithstanding the limitations set forth in this paragraph, overdue amounts (including overdue interest) will bear interest at a rate equal to 2% above the rate otherwise applicable thereto. For Interim Loans outstanding after the Maturity Date, interest will be payable on demand at the default rate.
Guarantees	The Interim Loans will be guaranteed on a senior subordinated basis by each affiliate of the Company that

B-2

	guarantees all or a portion of the indebtedness under the Credit Facilities (the “Guarantors”). A subsidiary’s guarantee will be released upon the sale of such subsidiary, subject to use of the proceeds therefrom to repay Interim Loans and/or borrowings to the extent required under the Credit Facilities.
Mandatory Repayment	The Company will repay Interim Loans with the net cash proceeds from (i) any direct or indirect public offering or private placement of debt securities of the Company or any of the Company’s subsidiaries or any equity securities of the Company, (ii) the incurrence of any other indebtedness by the Company or any subsidiary of the Company (other than borrowings under the Credit Facilities and certain permitted indebtedness as in effect on the Closing Date) and (iii) any future issuance or sale of stock of subsidiaries or sales of assets (subject to reinvestment rights and customary ordinary course exceptions) by the Company or any subsidiary of the Company, subject, in the case of clauses (i) (in the case of equity securities only), (ii) and (iii) only, to the prior repayment of any amount outstanding under the Credit Facilities and required to be prepaid with the proceeds thereof, in each case at 100% of the principal amount of the Interim Loans repaid, plus all accrued and unpaid interest and fees to the date of the repayment.
Optional Repayment	The Interim Loans may be repaid, in whole or in part on a pro rata basis, at the option of the Company at any time upon three business days’ prior written notice at a price equal to 100% of the principal amount thereof, plus all accrued and unpaid interest and fees to the date of repayment.
Payments	Payments by the Company will be made by wire transfer of immediately available funds.
Transferability	With the consent of the Administrative Agent (which consent will not be unreasonably withheld or delayed), each of the Interim Lenders will be free to sell or transfer all or any part of its Interim Loans to any third party and to pledge any or all of the Interim Loans to any commercial bank or other institutional lender. Participations will not require the consent of the Company or the Administrative Agent; provided, that prior to 180 days after the Closing Date, (i) any such sale or transfer shall be consummated in consultation with the Company and (ii) the Initial Lenders shall continue to hold, pro rata based on their respective initial Commitments, at least 51% of the aggregate principal amount of Interim Loans (it being understood that the foregoing shall not limit the ability of the Initial Lenders to sell participations in their Interim Loans).

B-3

Amendments	Modifications to the terms of the Interim Loan Agreement may be made with the consent of the holders of a majority in aggregate principal amount of the Interim Loans then outstanding, except that (subject to customary lender replacement provisions) without the consent of each holder of Interim Loans affected thereby, no modification or change may (i) extend the maturity of or time of payment of interest on any Interim Loans, (ii) reduce the rate of interest or the principal amount of any Interim Loans, (iii) alter the repayment provisions of the Interim Loans, (iv) change the subordination provisions in a manner that would adversely affect the holders of the Interim Loans or (v) reduce the percentage of holders necessary to modify or change the Interim Loans.
Yield Protection	The Interim Loan Agreement will contain customary provisions (i) protecting the Interim Lenders against increased costs of loss of yield resulting from changes in reserve, tax, capital adequacy and other requirements of law and from the imposition of or changes in witholding and other taxes and (ii) indemnifying the Interim Lenders for “breakage costs” incurred in connection with, among other things, any repayment of the Interim Loans on a day other than the last day of an interest period.
Representations and Warranties	The Interim Loan Agreement will contain such representations and warranties of the Company and the Guarantors as are customary for financings of this kind (based on the representations and warranties contained in the Credit Documentation).
Covenants	The Interim Loan Agreement will contain such covenants of the Company and the Guarantors as are customary for financings of this kind (based on covenants as are customary for an indenture governing a high yield senior subordinated note issue (but with baskets and exceptions more restrictive in certain respects, as determined by the Arrangers to be consistent with financings of this type)).
Conditions Precedent	The obligation of each of the Interim Lenders to provide or cause one of its affiliates to provide the Interim Loans will be subject to (i) the conditions set forth on Exhibit D to the Commitment Letter, (ii) the accuracy in all material respects (except to the extent otherwise qualified by materiality or similar qualification) of all representations and warranties in the Interim Loan Agreement (including, without limitation, the material adverse change (which as of the Closing Date shall be defined in a manner consistent with the Commitment Letter and thereafter as mutually agreed by the parties) and litigation representations) and (iii) there being no default or event of default in existence at the time of, or after giving effect to the making of, the Interim Loans; provided that, the

B-4

	only representations and warranties relating to the Acquired Business and its businesses the making of which shall be a condition to availability of the Interim Loans on the Closing Date shall be the representations made by the Acquired Business in the Merger Agreement.
Events of Default; Remedies	The Interim Loan Agreement will contain such events of default as are customary for financings of this kind, including, without limitation, a change of control (the definition of which is to be agreed), based on events of default as are customary for an indenture governing a high yield senior subordinated note issue (but more restrictive in certain respects, as determined by the Arrangers to be consistent with financings of this type).
Governing Law	State of New York.
Counsel to the Administrative Agent and the Arrangers	Simpson Thacher & Bartlett LLP.

B-5

EXHIBIT C TO COMMITMENT LETTER

SUMMARY OF TERMS OF EXTENDED TERM LOANS AND EXCHANGE NOTES

Capitalized terms used but not defined herein have the meanings assigned to them in the Commitment Letter to which this Exhibit C is attached.

Borrower/Issuer	The Company.
Extended Term Loans	On the Maturity Date, subject to satisfaction of the conditions set forth below, the outstanding Interim Loans will be automatically extended into Extended Term Loans. The Extended Term Loans will be governed by the provisions of the Interim Loan Agreement and, except as expressly set forth below, will have the same terms as the Interim Loans.
Exchange Notes	At any time on or after the Maturity Date, a holder of Extended Term Loans may exchange all or a portion (in a minimum increment of $500,000) of the Extended Term Loans to be exchanged for Exchange Notes having a principal amount equal to the principal amount of the Extended Term Loan for which it is exchanged and having a fixed interest rate equal to the interest rate on the Extended Term Loan at the time of exchange provided that the Company may defer the first issuance of Exchange Notes until such time as the Company has received requests to issue an aggregate of at least $25,000,000 in principal amount of Exchange Notes. The Exchange Notes and the Extended Term Loans will rank pari passu with each other.
	The Company will issue Exchange Notes under an indenture that complies with the Trust Indenture Act of 1939, as amended (the “Indenture”). The Company will appoint a trustee reasonably acceptable to the Arrangers. The Exchange Notes and the Indenture will be fully executed and deposited into escrow on the Closing Date.
Maturity	The Extended Term Loans and the Exchange Notes will mature on the ninth anniversary of the Maturity Date (the “Final Maturity Date”).
Conditions Precedent	The obligation of each of the Interim Lenders to extend the Interim Loans to Extended Term Loans will be subject to the absence of a bankruptcy or other insolvency proceeding of the Company or any of its subsidiaries (other than Immaterial Subsidiaries) or a payment default in respect of the Interim Loan Facility or the Credit Facilities.
Interest Rate	The Extended Term Loans will bear interest at an increasing rate equal to the Initial Rollover Rate plus the Rollover Spread (as defined below); provided that the interest rate in effect at any time shall not exceed 11.0%.

C-1

	“Initial Rollover Rate” shall be determined as of the Maturity Date of the Interim Loans and shall equal the interest rate borne by the Interim Loans on the day immediately preceding the Maturity Date.
	“Rollover Spread” shall be 50 basis points during the three-month period commencing on the Maturity Date. The Rollover Spread shall increase by 50 basis points upon each three-month anniversary thereafter.
	Interest will accrue on any overdue amount (whether interest or principal, including defaulted interest), to the extent lawful, at a rate per annum equal to 200 basis points over the then current interest rate, until such amount (plus all accrued and unpaid interest) is paid in full.
	Interest on the Extended Term Loans will be payable quarterly in arrears on the first business day of each fiscal quarter of the Company, on the Maturity Date of the Extended Term Loans and on the date of any prepayment thereof.
	Interest on the Exchange Notes will be payable semi-annually in arrears on the first business day of each first and third fiscal quarter of the Company, on the Maturity Date of the Exchange Notes and on the date of any prepayment thereof.
Subordination	Same as Interim Loans.
Guarantees	Same as Interim Loans.
Mandatory Repayment	Same as Interim Loans in the case of Extended Term Loans and in the case of the Exchange Notes, only if so provided therein.
Change of Control	Same as Interim Loans in the case of Extended Term Loans.
	Each holder of Exchange Notes will be entitled to require the Company, and the Company must offer, to repurchase the Exchange Notes held by such holder at a price of 101% of the principal amount thereof, plus all accrued and unpaid interest and fees to the date of repurchase, upon the occurrence of a Change of Control (as defined in the Interim Loan Agreement).
Optional Repayment	Except as set forth below, the Extended Term Loans may be repaid or redeemed, in whole or in part, at the option of the Company at any time upon three business days’ prior written notice at a price equal to 100% of the principal amount thereof, plus all accrued and unpaid interest and fees to the date of repayment.

C-2

	The Exchange Notes will be redeemable during the first four years from the Maturity Date at any time, in whole or in part, at the option of the Company, subject to a redemption price equal to the sum of (i) 100% of the principal amount of the Exchange Notes and (ii) a make-whole premium calculated using a rate of treasuries plus 50 basis points.
	The Exchange Notes will be redeemable at any time, in whole or in part, at the option of the Company, after the fourth anniversary of the Maturity Date, at redemption prices equal to par plus accrued interest plus a premium equal to half the coupon on such Exchange Notes, which premium will decline ratably on each subsequent yearly anniversary of the funding of the Interim Loans to zero on the date that is two years prior to the maturity of the Exchange Notes.
	In addition, on or prior to the third anniversary of the Closing Date, up to 35% of the original principal amount of the Exchange Notes may be redeemed from the proceeds of a qualifying equity offering by the Company at a redemption price equal to par plus the coupon and accrued interest.
Yield Protection	Same as Interim Loans.
Payments	Same as Interim Loans.
Covenants	Same as Interim Loans, in the case of the Extended Term Loans. The Exchange Notes will have such covenants as are customary for an indenture governing a high yield senior subordinated note issue (but with baskets and exceptions more restrictive in certain respects, as determined by the Arrangers to be consistent with financings of this type).
Events of Default	Same as Interim Loans, in the case of the Extended Term Loans. The Exchange Notes will have such events of default as are customary for an indenture governing a high yield senior subordinated note issue (but more restrictive in certain respects, as determined by the Arrangers to be consistent with financings of this type).
Transferability	Unlimited except as otherwise provided by law.
Defeasance Provisions	None with respect to Extended Term Loans. The Exchange Notes will have defeasance provisions customary for high yield securities.
Amendments	Same as Interim Loans.

C-3

Registration Rights Within 90 days after the first issuance of any Exchange Notes, the Company will be required to file a shelf registration statement with respect to the Exchange Notes (a “Shelf Registration Statement”). The Company and the Guarantors, jointly and severally, will pay liquidated damages in the form of increased interest of 50 basis points on the principal amount of Exchange Notes outstanding to holders of Exchange Notes (i) if the Shelf Registration Statement is not filed within 90 days of the Maturity Date (as provided above) or is not declared effective by the SEC within 180 days of the Maturity Date, until such Shelf Registration Statement is filed or declared effective (as applicable), and (ii) during any period of time (subject to customary exceptions) following the effectiveness of the Shelf Registration Statement that such Shelf Registration Statement is not available for sales thereunder. After 12 weeks, the liquidated damages will increase by 50 basis points, and will increase by 50 basis points for each 12-week period thereafter to a maximum increase in interest of 200 basis points. The Company will be required to effect an “A/B” exchange offer to all holders of Exchange Notes within 180 days of the issuance of the Exchange Notes if the holders of a majority in principal amount of the Exchange Notes then outstanding so request. The Company may choose to effect one or more “A/B” exchange offers in respect of Exchange Notes either prior to or after they have been included in the Shelf Registration Statement. Once any particular Exchange Notes have been exchanged in an “A/B” exchange offer, the Company shall have no further obligation to include such Exchange Notes in the Shelf Registration Statement.

C-4

EXHIBIT D TO COMMITMENT LETTER

FUNDING CONDITIONS

Capitalized terms used but not defined herein have the meanings assigned to them in the Commitment Letter to which this Exhibit D is attached and of which it forms a part. The availability of the Credit Facilities and Interim Loan Facility is conditioned upon satisfaction of the conditions precedent summarized below.

(a) Each Credit Party shall have executed and delivered customary definitive financing documentation with respect to the Interim Loan Facility and the Credit Facilities reasonably satisfactory to the Administrative Agent, the Arrangers and their counsel reflecting the terms of this Commitment Letter. Notwithstanding anything to the contrary, the terms of the documentation shall be such that they do not impair the availability of the Credit Facilities or the Interim Loan Facility on the Closing Date if the conditions set forth herein are satisfied.

(b) There shall not exist (pro forma for the Acquisition and the financing thereof) any default or event of default under the Credit Facilities or the Interim Loan Agreement.

(c) The Acquisition shall have been consummated pursuant to the Merger Agreement and other customary documentation reasonably satisfactory to the Arrangers (it being understood that the Merger Agreement in the form dated as of March 13, 2006 is satisfactory to the Arrangers), and no provision thereof shall have been waived, amended, supplemented or otherwise modified in a manner that is material and adverse to the interests of the Lenders without the consent of the Arrangers. No stockholder rights plan or other “poison pill” of the Acquired Business shall become exercisable in connection with the Acquisition.

(d) The Company shall have complied with all of its material obligations under and agreements in the Commitment Letter, the Engagement Letter and the Fee Letter.

(e) A majority of each issue of Existing Public Debt shall have accepted a tender and exit consent offer (the “Tender Offer”) made on terms reasonably satisfactory to the Arrangers, or all of each issue of Existing Public Debt has been redeemed or covenant defeased. The Tender Offer, redemption or defeasance, as the case may be, shall have settled or become effective, as the case may be, contemporaneous with the Closing Date.

(f) Each of the conditions set forth in Sections 6.01(a), (b) and (c) of the Merger Agreement (in the form referred to in paragraph (c) above) shall have been and shall remain satisfied.

(g) At least 30 days prior to the Closing Date, the Arrangers shall have received audited, in the case of the fiscal year-end, and unaudited, in the case of interim (which shall have been reviewed by the independent accountants for the Company or the Acquired Business, as the case may be, as provided in Statement on Auditing Standards No. 100) annual and quarterly consolidated financial statements of the Company and the Acquired Business and all other completed or probable acquisitions (including pro forma financial statements) meeting the requirements of Regulation S-X for a Form S-3 registration statement under the Securities Act of 1933, as amended.

(h) Each of the Facilities (other than the Incremental Term Loan Facility) shall have been rated by Moody’s and S&P.

D-1

(i) The Arrangers shall have received the results of recent lien searches with respect to the Company and the Acquired Business, and such searches shall not reveal any liens other than liens permitted by the Credit Documentation (which permitted liens shall be no more restrictive than those in the Existing Credit Agreement) or liens to be discharged substantially concurrently with the closing of the Credit Facilities pursuant to documentation satisfactory to the Arrangers.

(j) To the extent contemplated in Exhibit A to the Commitment Letter, all documents and instruments required to perfect the first priority security interest in the collateral under the Credit Facilities (including delivery of stock certificates and undated stock powers executed in blank) shall have been executed and be in proper form for filing, and, in connection with the real estate collateral, the Administrative Agent shall have received satisfactory title insurance policies (each with exceptions for matters listed on Schedule B of the title policies issued in connection with the Existing Credit Agreement), surveys and other customary documentation to the extent reasonably requested by it.

(k) The Arrangers shall be satisfied that the Company shall have used all commercially reasonable efforts to take such steps as may be reasonably requested by the Arrangers to cause the Notes to be issued and sold prior to the Closing Date, which efforts will include, without limitation, the preparation of a preliminary prospectus or preliminary offering memorandum or preliminary private placement memorandum suitable for use in a customary “high-yield road show” not less than 30 days prior to the Closing Date and the participation of senior management and representatives of the Company and, to the extent practicable, the Acquired Business in the road show and the other matters contemplated by the Fee Letter and the Engagement Letter.

(l) The Lenders shall have received a customary solvency certificate from the Company’s chief financial officer as to the solvency of the Credit Parties, taken as a whole, and such customary legal opinions from counsel to the Company (including, where appropriate, local counsel) as the Arrangers may reasonably request.

D-2

EX-11.1

Exhibit 11.1

Pinnacle Entertainment, Inc.

Computation of Per Share Earnings

	For the three months ended December 31,
	Basic								Diluted (a)
	2005		2004			2003			2005		2004			2003
	(in thousands, except per share data-unaudited)
Average number of common shares outstanding		40,957		36,308			25,643			40,957		36,308			25,643
Average common shares due to assumed conversion of stock options		0		0			0			2,529		1,871			360
Total shares		40,957		36,308			25,643			43,486		38,179			26,003
Income (loss) from continuing operations	$	6,826	$	(5,323	)	$	(9,304	)	$	6,826	$	(5,323	)	$	(9,304	)
Income from discontinued operations, net		666		549			690			666		549			690
Net income (loss)	$	7,492	$	(4,774	)		(8,614	)	$	7,492	$	(4,774	)		(8,614	)
Per share data:
Income (loss) from continuing operations	$	0.17	$	(0.15	)	$	(0.36	)	$	0.16	$	(0.15	)	$	(0.36	)
Income from discontinued operations, net		0.01		0.02			0.02			0.01		0.02			0.02
Net income (loss) per share	$	0.18	$	(0.13	)	$	(0.34	)	$	0.17	$	(0.13	)	$	(0.33	)
	For the years ended December 31,
	Basic								Diluted (a)
	2005		2004			2003			2005		2004			2003
	(in thousands, except per share data-unaudited)
Average number of common shares outstanding		40,703		34,730			25,861			40,703		34,730			25,861
Average common shares due to assumed conversion of stock options		0		0			0			2,248		1,440			77
Total shares		40,703		34,730			25,861			42,951		36,170			25,938
Income (loss) from continuing operations	$	3,589	$	7,180		$	(29,871	)	$	3,589	$	7,180		$	(29,871	)
Income from discontinued operations, net		2,536		1,981			1,629			2,536		1,981			1,629
Net income (loss)	$	6,125	$	9,161		$	(28,242	)	$	6,125	$	9,161		$	(28,242	)
Per share data:
Income (loss) from continuing operations	$	0.09	$	0.20		$	(1.15	)	$	0.08	$	0.20		$	(1.15	)
Income from discontinued operations, net		0.06		0.06			0.06			0.06		0.05			0.06
Net income (loss) per share	$	0.15	$	0.26		$	(1.09	)	$	0.14	$	0.25		$	(1.09	)

(a) When the computed diluted values are anti-dilutive, the basic per share values are presented on the face of the consolidated statements of operations.

EX-12.1

Exhibit 12.1

Pinnacle Entertainment, Inc.

Ratio of Earnings to Fixed Charges

($’s in thousands)

	For the years ended December 31,
	2001			2002			2003			2004			2005
Earnings:
Pre-tax income (loss)	$	(31,949	)	$	(21,674	)	$	(37,373	)	$	14,424		$	12,386
Add fixed charges		52,365			52,773			58,856			60,789			62,385
Less capitalized interest		(481	)		(788	)		(1,513	)		(5,102	)		(7,130	)
Total Earnings	$	19,935		$	30,311		$	19,970		$	70,111		$	42,869
Fixed Charges:
Interest expense – inclusive of the amortization of debt issuance costs	$	48,751		$	48,669		$	54,001		$	51,778		$	49,535
Capitalized interest		481			788			1,513			5,102			7,130
Estimated interest portion in rent expense		3,133			3,316			3,342			3,909			5,720
Total Fixed Charges	$	52,365		$	52,773		$	58,856		$	60,789		$	62,385
Ratio of earnings to fixed charges		0.38x			0.57x			0.34x			1.15x			0.69x

EX-21.1

Exhibit 21.1

Pinnacle Entertainment, Inc.

List of Subsidiaries

Subsidiary	State of Organization
Belterra Resort Indiana, LLC	Nevada
Biloxi Casino Corp.	Mississippi
Boomtown, LLC	Delaware
Casino Magic Corp.	Minnesota
Casino Magic Antofagasta, SA	Chile
Casino Magic Buenos Aires, SA	Argentina
Casino Magic Calama, SA	Chile
Casino Magic Chile, SA	Chile
Casino Magic (Europe) B.V.	Netherlands
Casino Magic Hellas Management Services, SA	Greece
Casino Magic Neuquen, SA	Argentina
Casino Magic Talca, SA	Chile
Casino Magic Rancagua, SA	Chile
Casino One Corporation	Mississippi
Casino Parking, Inc. (50%)	Mississippi
Crystal Park Hotel and Casino Development Company, LLC	California
HP/Compton, Inc.	California
Landing Condominium, LLC	Louisiana
Louisiana-I Gaming, A Louisiana Partnership in Commendam	Louisiana
Ogle Haus, LLC	Indiana
PNK (BOSSIER CITY), Inc.	Louisiana
PNK (Chile 1), LLC	Chile
PNK (Chile 2), LLC	Chile
PNK Development 1, Inc.	Delaware
PNK Development 2, Inc.	Delaware
PNK Development 3, Inc.	Delaware
PNK Development 4, Inc.	Delaware
PNK Development 5, Inc.	Delaware
PNK Development 6, Inc.	Delaware
PNK Development 7, LLC	Delaware
PNK Development 8, LLC	Delaware
PNK Development 9, LLC	Delaware
PNK Development 10, LLC	Delaware
PNK Development 11, LLC	Nevada
PNK Development 12, LLC	Nevada
PNK Development 13, LLC	New Jersey
PNK Development 14, LLC	Missouri
PNK Development 15, LLC	Pennsylvania
PNK Development 16, LLC	Indiana
PNK (ES), LLC	Delaware
PNK (EXUMA), LIMITED	Bahamas
PNK (LAKE CHARLES), L.L.C.	Louisiana
PNK (PA), LLC	Pennsylvania
PNK (RENO), LLC	Nevada
PNK (ST. LOUIS RE), LLC	Delaware
PNK (ST. LOUIS 4S), LLC	Delaware
Port St. Louis Condominium, LLC (50%)	Missouri
Realty Investment Group, Inc.	Delaware
Soc. Inmobiliaria Casino Magic Calama, SA	Chile
Soc. Inmobiliaria Casino Magic Chile, SA	Chile
Soc Inmobiliaria Casino Magic Talcahuano, SA	Chile
St. Louis Casino Corp.	Missouri
Yankton Investments, LLC	Nevada

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-90426 and 333-130880 of Pinnacle Entertainment, Inc. filed on Form S-3 and Registration Statement Nos. 333-27501, 333-31065, 333-67155, 033-63793, 333-86223, 333-31162, 333-62378, 333-60616 and 333-107081 on Form S-8 of our reports dated March 15, 2006, relating to the consolidated financial statements and financial statement schedule of Pinnacle Entertainment, Inc. and management’s report on the effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K of Pinnacle Entertainment, Inc. for the year ended December 31, 2005.

/s/    DELOITTE & TOUCHE LLP

Las Vegas, Nevada

March 15, 2006

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Daniel R. Lee, certify that:

1. I have reviewed this annual report on Form 10-K of Pinnacle Entertainment, Inc.;

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 our evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter 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.

/S/    DANIEL R. LEE Daniel R. Lee	Date: March 15, 2006
Chairman of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Stephen H. Capp, certify that:

1. I have reviewed this annual report on Form 10-K of Pinnacle Entertainment, Inc.;

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 our evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter 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.

/S/    STEPHEN H. CAPP Stephen H. Capp	Date: March 15, 2006
Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CHIEF EXECUTIVE OFFICER CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Pinnacle Entertainment, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2005, as filed with the Securities and Exchange Commission (the “Report”), I, Daniel R. Lee, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: March 15, 2006	/S/    DANIEL R. LEE Daniel R. Lee
	Chairman of the Board and Chief Executive Officer

A signed original 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.

EX-32.2

Exhibit 32.2

CHIEF FINANCIAL OFFICER CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Pinnacle Entertainment, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2005, as filed with the Securities and Exchange Commission (the “Report”), I, Stephen H. Capp, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: March 15, 2006	/S/    STEPHEN H. CAPP Stephen H. Capp
	Executive Vice President and Chief Financial Officer

A signed original 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.

EX-99.1

Exhibit 99.1

GOVERNMENT REGULATION AND GAMING ISSUES

The ownership and operation of gaming companies are subject to extensive regulation. In particular, Indiana, Louisiana, Mississippi, Missouri, Nevada, California, Argentina and The Bahamas have regulations affecting the operation of our gaming business and the ownership and disposition of our securities. We summarize these regulations below. Unless the context indicates otherwise, all references to “we,” “our,” “ours,” and “us” refer to Pinnacle Entertainment, Inc. and its consolidated subsidiaries.

Our certificate of incorporation requires that any person (as defined in our certificate of incorporation) who owns or controls our securities must comply with gaming regulations governing such person’s “suitability” as an investor. These provisions apply to all the securities offered or issued by us. Any purchaser or holder of securities that we have offered or issued shall be deemed to have agreed to such provisions. If a person owns or controls our securities or the securities of our affiliated companies and is determined by a gaming authority to be unsuitable to own or control such securities or in the sole discretion of our board of directors is deemed likely to jeopardize our right to conduct gaming activities in any of the jurisdictions in which we conduct or intend to conduct gaming activities, we may redeem, and if required by a gaming authority shall redeem, such person’s securities to the extent required by the gaming authority or deemed necessary or advisable by us.

If a gaming authority requires us, or if we deem it necessary or advisable, to redeem a holder’s securities, we will serve notice on the holder who holds the securities subject to redemption and will call for the redemption of the securities of such holder at a redemption price equal to that required to be paid by the gaming authority making the finding of unsuitability, or if such gaming authority does not require a certain price per share to be paid, a sum deemed reasonable by us.

Indiana. The ownership and operation of riverboat casinos at Indiana-based sites are subject to extensive state regulation under the Indiana Riverboat Gambling Act (the “Indiana Act”), as well as regulations which the Indiana Gaming Commission (the “Indiana Commission”) has adopted pertaining to the Indiana Act. The Indiana Act grants broad and pervasive regulatory powers and authorities to the Indiana Commission. The comprehensive regulations cover ownership, reporting, rules of game and operational matters; thus, the Indiana Act and regulations are significant to prospects for successfully operating the Belterra facility. The Indiana Act has been challenged based on its constitutionality on two occasions and was found constitutional on both occasions.

The Indiana Act authorizes the issuance of up to ten riverboat owner’s licenses to be operated from counties that are contiguous to the Ohio River and Lake Michigan. In October 2000, Belterra, the tenth riverboat, commenced operations along the Ohio River. Five of the riverboats are in counties contiguous to the Ohio River and five are in counties contiguous to Lake Michigan. The Indiana Act originally included an eleventh license for a county contiguous to Patoka Lake. In April 2003, the Indiana General Assembly passed legislation that eliminated the license for a county contiguous to Patoka Lake, but authorized the establishment and operation of a riverboat casino in Orange County, Indiana. Under this legislation, the Indiana Commission is authorized to enter into an operating agreement for up to 20 years with a qualified operator for this facility. The Indiana Commission has selected an operator for the facility and has entered into an operating agreement with this operator. The Orange County riverboat casino is not expected to begin operations until 2006, at the earliest.

A riverboat owner’s license is a revocable privilege and is not a property right under the Indiana Act. An Indiana license entitles the licensee to own and operate one riverboat. In its

2003 session, the Indiana General Assembly passed legislation that became effective July 1, 2003, that permits a company to own up to 100% of two separate riverboat owner licenses. An Indiana riverboat owner’s license has an initial effective period of five years; thereafter, a license is subject to annual renewal. After the expiration of the initial license, the Indiana Commission will conduct a complete re-investigation every three years, but the Indiana Commission reserves the right to investigate licenses at any times it deems necessary. The Indiana Commission has broad discretion over the initial issuance of licenses and over the renewal, revocation, suspension, restriction and control of riverboat owner’s licenses. Officers, directors and principal owners of the actual license holder and employees who are to work on the riverboat are subject to substantial disclosure requirements as a part of securing and maintaining necessary licenses. The license granted to Belterra had an initial five-year term, which expired on October 22, 2005. We submitted a formal request for a renewal of Belterra’s riverboat owner’s license within the timetable established by the Indiana Commission, and on November 17, 2005, the Indiana Commission approved the renewal of Belterra’s riverboat owner’s license for a period of one year. The license will be subject to annual renewal.

Contracts to which Belterra is party are subject to disclosure and approval processes imposed by the regulations. A riverboat owner licensee may not enter into or perform any contract or transaction in which it transfers or receives consideration which is not commercially reasonable or which does not reflect the fair market value of the goods or services rendered or received. All contracts are subject to approval by the Indiana Commission. Suppliers of gaming equipment and materials must also be licensed under the Indiana Act.

Licensees are statutorily required to disclose to the Indiana Commission the identity of all directors, officers and persons holding direct or indirect beneficial interests of 1% or greater. The Indiana Commission also requires a broad and comprehensive disclosure of financial and operating information on licensees and their principal officers, their parent corporations and other upstream owners. The Indiana Act prohibits contributions to a candidate for a state, legislative, or local office, to a candidate’s committee or to a regular party committee by the holder of a riverboat owner’s license or a supplier’s license, by an officer of a licensee, by an officer of a person that holds at least a 1% interest in the licensee or by a person holding at least a 1% interest in the licensee. The Indiana Commission has promulgated a rule requiring quarterly reporting of such licensees, officers, and persons.

Prior to June 2002, riverboats were required to conduct excursions, which limited the times during which patrons could enter the riverboat. In June 2002, the Indiana General Assembly authorized riverboats to either continue conducting excursions or to implement a flexible boarding schedule and remain dockside in order to allow patrons to enter the riverboat at any time during operating hours. Belterra began dockside operation on August 1, 2002.

Under the Indiana Act, “adjusted gross receipts” (“AGR”) means the total of all cash and property received from gaming less cash paid out as winnings and uncollectible gaming receivables (not to exceed 2%). Those riverboats electing to operate dockside will be subject to the following graduated wagering tax based on a state fiscal year (July 1 of one year through June 30 of the following year):

• 15% of the first $25 million of AGR.

• 20% of AGR in excess of $25 million, but not exceeding $50 million.

• 25% of AGR in excess of $50 million, but not exceeding $75 million.

- 2 -

• 30% of AGR in excess of $75 million, but not exceeding $150 million.

• 35% of AGR in excess of $150 million.

A wagering tax of 22.5% is imposed on those riverboats that continue to conduct excursions.

The Indiana Act also prescribes an additional tax for admissions, based on $3 per person. Those riverboats conducting excursions must pay the admissions tax on a passenger per excursion basis which requires payment of the admission tax on carryover patrons. Those riverboats conducting dockside operations pay the admission tax on each person admitted to the riverboat. The carryover patron calculation is, thus, eliminated with the commencement of dockside operations. Real property taxes are imposed on riverboats at rates determined by local taxing authorities. Income to us from Belterra is subject to the Indiana adjusted gross income tax. Sales on a riverboat and at related resort facilities are subject to applicable use, excise and retail taxes. The Indiana Act requires a riverboat owner licensee to directly reimburse the Indiana Commission for the costs of inspectors and agents required to be present while authorized gaming is conducted.

In its 2003 legislative session, the Indiana General Assembly authorized riverboat casinos to remain open 24 hours per day, seven days a week, with those hours to be set at the election of the riverboat. In July, 2003, Belterra began continuous 24-hour gaming each day of the week. In its 2003 legislative session, the Indiana General Assembly imposed a retroactive wagering tax on all riverboats, moving the effective date of the 2002 graduated wagering tax from August 1, 2002 to July 1, 2002. The state Department of Revenue has assessed this retroactive tax on the riverboats, without providing an offset for taxes paid at a higher tax rate during that one-month period. Belterra and the other riverboat casinos have filed protests with the state, asserting that this interpretation of the legislation is erroneous and should be set aside.

Through the establishment of purchasing goals, the Indiana Act encourages minority and women’s business enterprise participation in the riverboat gaming industry. Each riverboat licensee must establish goals of expending at least 10% of total dollar value of the licensee’s qualified contracts for goods and services with minority business enterprises and 5% with women business enterprises. The Indiana Commission may suspend, limit or revoke the owner’s license or impose a fine for failure to comply with the statutory goals. The Indiana Commission has indicated it will be vigilant in monitoring attainment of these goals. We are currently in compliance with such purchasing goals.

Minimum and maximum wagers on games on the riverboat are left to the discretion of the licensee. Wagering may not be conducted with money or other negotiable currency. There are no statutory restrictions on extending credit to patrons; however, the matter of credit continues to be a matter of potential legislative action.

If an institutional investor acquires 5% or more of any class of voting securities of a holding company of a licensee, the investor is required to notify the Indiana Commission and to provide additional information, and may be subject to a finding of suitability. Institutional investors who acquire 15% or more of any class of voting securities are subject to a finding of suitability. Any other person who acquires 5% or more of any class of voting securities of a holding company of a licensee is required to apply to the Indiana Commission for a finding of suitability.

A riverboat licensee or an affiliate may not enter into a debt transaction of $1,000,000 or more without approval of the Indiana Commission. The Indiana Commission has taken the position that a “debt transaction” includes increases in maximum amount available under

- 3 -

revolving credit facilities. A riverboat owner licensee or any other person may not lease, hypothecate, borrow money against or loan money against or otherwise securitize a riverboat owner’s license. Indiana Commission regulations also require a licensee or applicant (or affiliate) to conduct due diligence to ensure that each person with whom the licensee or applicant (or affiliate) enters into a debt transaction would be suitable for licensure under the Indiana Act. The Indiana Commission rules require that:

• a written request for approval of the debt transaction, along with relevant information regarding the debt transaction, be submitted to the Indiana Commission at least ten days prior to a scheduled meeting of the Indiana Commission;

• a representative of the riverboat licensee or applicant be present at the meeting to answer any questions; and

• a decision regarding the approval of the debt transaction be issued by the Indiana Commission at the next following meeting.

The Indiana Commission rules also authorize the Executive Director of the Indiana Commission to waive certain of these requirements with the approval of the chairperson of the Indiana Commission and an outside financial expert retained by the Indiana Commission.

A licensee, or its parent company, that is publicly traded must notify the Indiana Commission of a public offering that will be registered with the SEC. The licensee must notify the Indiana Commission within 10 business days of the initial filing of a registration statement with the SEC. An ownership interest in a licensee may only be transferred in accordance with the Indiana Act and rules promulgated thereunder.

The Indiana Commission has promulgated a rule that prohibits distributions, excluding distributions for the payment of taxes, by a licensee to its partners, shareholders, itself or any affiliated entity if the distribution would impair the financial viability of the riverboat gaming operation. The Indiana Commission has also promulgated a rule mandating licensees to maintain a cash reserve against defaults in gaming debts. The cash reserve must be equal to licensee’s average payout for a three-day period based on the riverboat’s performance the prior calendar year. The cash reserve can consist of cash on hand, cash maintained in Indiana bank accounts and cash equivalents not otherwise committed or obligated.

Louisiana. The ownership and operation of our riverboat gaming vessels in Louisiana are subject to the Louisiana Gaming Control Law, including the Louisiana Riverboat Economic Development and Gaming Control Act and applicable regulations (collectively, the “Louisiana Act”). The Louisiana Gaming Control Board (the “Board”) is the sole and exclusive regulatory and supervisory board for gaming operations and activities in Louisiana. The Louisiana Department of Public Safety, Office of State Police, Gaming Enforcement Section (the “Division”) provides investigatory, regulatory, and enforcement services to the Board in the implementation, administration, and enforcement of the Louisiana Act. The Louisiana Attorney General acts as legal counsel to the Board.

The Louisiana Act is based upon the public policy declarations that the development of a controlled gaming industry to promote economic development requires thorough and careful exercise of legislative power to protect the general welfare of the people by keeping the state free from criminal and corrupt elements. The Louisiana Act thus seeks, among other things, to (i) prevent unsavory or unsuitable persons from having any direct or indirect involvement with gaming at any time or in any capacity; (ii) establish and maintain responsible accounting

- 4 -

practices and procedures; (iii) maintain effective control over the financial practices of licensees, including establishing procedures for reliable record keeping and making periodic reports to the Board; (iv) prevent cheating and fraudulent practices; (v) develop and implement comprehensive compulsive and problem gambling programs; (vi) provide a source of state and local revenues through fees; and (vii) ensure that gaming licensees, to the extent practicable, employ and contract with Louisiana residents, women, and minorities.

The Board is responsible for issuing the gaming license and is empowered to issue up to fifteen licenses to conduct gaming activities on riverboats in accordance with applicable law. However, no more than six licenses may be granted to riverboats operating from any one designated waterway. The Louisiana Act provides that an initial license to conduct gaming operations is valid for a term of five years and may be renewed for successive five year terms after the initial term upon application and continued satisfaction of suitability standards and other provisions of the Louisiana Act.

Louisiana subsidiaries or our affiliates currently hold three riverboat gaming licenses: (i) Louisiana-I Gaming, a Partnership in Commendam, the operator of Boomtown New Orleans, which expires March 22, 2010, subject to renewal; (ii) PNK (Bossier City), Inc., the operator of Boomtown Bossier City, which expires November 28, 2009, subject to renewal; and (iii) PNK (LAKE CHARLES), L.L.C., the developer and operator of L’Auberge du Lac in Lake Charles, which expires April 19, 2007, subject to renewal.

A gaming license is deemed to be a pure and absolute revocable privilege under the Louisiana Act, and not a right. As such, a gaming license may be denied, revoked, suspended, conditioned, or limited at any time by the Board. To issue a license, the Board must find that the applicant has demonstrated by clear and convincing evidence that such applicant is suitable, which requires submission of detailed personal and financial information followed by a thorough investigation. Pursuant to the Louisiana Act, “suitable” means that the applicant (i) is a person of good character, honesty, and integrity; (ii) is a person whose prior activities, criminal record, if any, reputation, habits and associations do not pose a threat to the public interest of the State of Louisiana or to the effective regulation and control of gaming, or create or enhance the dangers of unsuitable, unfair, or illegal practices, methods, and activities in the conduct of gaming or the carrying on of business and financial arrangements in connection therewith; (iii) is capable of and likely to conduct the activities for which such applicant is licensed pursuant to the Louisiana Act; and (iv) is not otherwise disqualified pursuant to the Louisiana Act. In addition, the Board will not grant any license unless it finds that (i) the applicant is capable of conducting gaming operations, which means that the applicant can demonstrate the capability, either through training, education, business experience, or a combination of the above, to operate a gaming casino; (ii) the proposed financing of the riverboat and the gaming operations is adequate for the nature of the proposed operation and from a source suitable and acceptable to the Board; (iii) the applicant demonstrates a proven ability to operate a vessel of comparable size, capacity and complexity to a riverboat in its application for a license; (iv) the applicant designates the docking facilities to be used by the riverboat; (v) the applicant shows adequate financial ability to construct and maintain a riverboat; (vi) the applicant has a good faith plan to recruit, train, and upgrade minorities in all employment classifications; and (vii) the applicant will provide the maximum practical opportunities for participation by the broadest number of minority-owned businesses.

Once the Board has issued a license, the licensee must maintain suitability throughout the term of the license and any renewal terms and has a continuing duty to inform the Board of any possible violation of the Louisiana Act. In addition, other persons may be subject to the suitability standards of the Louisiana Act and may be required to hold certain permits under the Louisiana Act, including without limitation the following: (i) certain of our and the licensee’s officers, directors, key gaming employees, and non-key gaming employees;

- 5 -

(ii) persons who manufacture any gaming device, supplies, or equipment for use under the provisions of the Louisiana Act; (iii) persons who supply, sell, lease, or repair, or contract to supply, sell, lease, or repair gaming devices, equipment, and supplies to a licensee; and (iv) persons who furnish services or goods and receive compensation or remuneration in excess of one hundred thousand dollars per calendar year for such goods or services, as defined by the rules of the Board, to a licensee. We believe that we have obtained or applied for all necessary findings of suitability and/or permits with respect to such persons associated with us or our Louisiana licensed riverboat gaming vessels. The Board may, however, in its discretion require additional persons to file applications for permits or findings of suitability.

A licensee may conduct its gaming operations only in accordance with the terms of the license and must also comply with all restrictions and conditions relating to the operation of riverboat gaming, as specified in the Louisiana Act, including restrictions on gaming space, rules and odds of authorized games, and permitted devices. The Louisiana Act was amended in 2001 to provide that gaming may only be conducted on a riverboat while it is docked and that the licensee shall not conduct cruises or excursions; except that in the parish of the official gaming establishment, with the additional exception of not more than one riverboat located on Lake Pontchartrain, a riverboat must cruise for not less than three nor more than eight hours per round trip, and gaming is not permitted while a riverboat is docked, other than under certain limited circumstances as provided by the Louisiana Act. None of our riverboat gaming vessels are located in the parish of the official gaming establishment. The Louisiana Act also prescribes the grounds and procedures for the revocation, limitation, or suspension of licenses or permits.

A licensee must periodically report the following information to the Board, which is not confidential and is to be available for public inspection: (i) the licensee’s net gaming proceeds from all authorized games; (ii) the amount of net gaming proceeds tax paid; and (iii) all quarterly and annual financial statements presenting historical data that are submitted to the Board, including annual financial statements that have been audited by an independent certified public accountant. An annual license fee is payable to the State of Louisiana in the amount of $50,000 for each riverboat for the first year of operation and $100,000 for each year thereafter. In addition, our Louisiana riverboat gaming vessels are subject to annual license and franchise fees in the amount of 21.5% of net gaming proceeds. The local governing authority of the parish or municipality in which the licensed berth of a riverboat is located may also levy certain admission fees, computed in various ways as provided by the Louisiana Act. As to Boomtown Bossier City, the Louisiana Act establishes that the admission fee for any riverboat located within Bossier City in Bossier Parish shall be four and five-tenths percent of monthly net gaming proceeds. For Boomtown New Orleans, the Louisiana Act provides that the admission fee for any riverboat licensed to operate within the unincorporated area of Jefferson Parish on the West Bank of the Mississippi River shall be six percent of weekly net gaming proceeds. As to L’Auberge du Lac, the Louisiana Act provides that the local governing authority in Calcasieu Parish may, in lieu of the admission fee, levy a fee not to exceed four and five-tenths percent of the monthly net gaming proceeds, which fee shall be established by contract between the governing authority and the licensee.

The transfer of a license or an interest in a license is prohibited. The sale, assignment, transfer, pledge, or disposition of a security or securities that represent 5% or more of the total outstanding shares issued by a holder of a license is conditional and ineffective if disapproved by the Board. Moreover, the prior written approval of the Board is required of all persons involved in the sale, purchase, assignment, lease, grant or foreclosure of a security interest, hypothecation, transfer, conveyance or acquisition of an ownership interest (other than in a corporation) or economic interest of five percent (5%) or more in any licensee. Failure to obtain approval of a transfer is grounds for license revocation. A security issued by a holder of a license must generally disclose these restrictions.

- 6 -

Any person with an ownership interest or economic interest in a licensee may be required to submit to an investigation by the Board to determine suitability. Any person acquiring a five percent or more ownership interest or economic interest shall be subject to a suitability determination, unless otherwise exempted. Under certain circumstances, an “institutional investor” otherwise required to be found suitable or qualified shall be presumed suitable or qualified upon submitting documentation sufficient to establish qualifications as an institutional investor, as defined in the Louisiana Act. An institutional investor must also certify that (i) it owns, holds, or controls publicly traded securities of a licensee or its parent company in the ordinary course of business for investment purposes only; (ii) it does not exercise influence over the affairs of the issuer of the securities or of the licensee; and (iii) it does not intend to exercise influence over the affairs of the issuer of the securities or of the licensee. The exercise of voting privileges with regard to publicly traded securities shall not be deemed to constitute the exercise of influence over the affairs of a licensee.

If the Board finds that the individual owner or holder of a security of a corporate licensee or intermediary company or any person with an economic interest in a licensee is not qualified under the Louisiana Act, the Board may require, under penalty of suspension or revocation of the license, that the person not (i) receive dividends or interest on securities of the licensee or company holding a license, (ii) exercise directly or indirectly a right conferred by securities of the licensee or company holding a license, (iii) receive remuneration or economic benefit from the licensee or company holding a license, or (iv) continue in an ownership or economic interest in the licensee, or remain as a manager, officer, director, or partner of a licensee.

In addition to its obligation to periodically submit detailed financial and operating reports to the Board, a licensee or person acting on a licensee’s behalf must notify the Board and obtain prior written approval whenever it (i) applies for, receives, accepts, or modifies the terms of any loan, line of credit, third-party financing agreement, sale with buy-back or lease-back provisions, or similar financing transaction; (ii) makes use of any cash, property, credit, loan, or line of credit; or (iii) guarantees or grants any other form of security for a loan. Exceptions to prior written approval include, without limitation, any transaction for less than $2,500,000 in which all of the lending institutions are federally regulated; transactions which do not substantially modify or alter the terms of an existing, previously approved loan transaction, or transactions involving publicly registered debt and securities sold pursuant to a firm underwriting agreement. Transactions involving publicly registered debt and securities registered with the Securities and Exchange Commission and sold pursuant to a firm underwriting agreement are, however, subject to certain notice and reporting requirements.

If it should be determined that the Louisiana Act has been violated by us or any of our Louisiana subsidiaries holding riverboat gaming licenses, the Board could revoke, suspend, limit, or condition the licenses, subject to compliance with certain statutory and regulatory procedures. In addition, we, the Louisiana subsidiaries holding riverboat gaming licenses, and the persons involved in any violations of the Louisiana Act could be subject to substantial fines for each separate violation of the Louisiana Act at the discretion of the Board. Decisions of the Board may generally be appealed to the 19th Judicial District Court for the Parish of East Baton Rouge, State of Louisiana.

Certain related Louisiana legislation required statewide local elections on a parish-by-parish basis to determine whether to prohibit or continue to permit licensed riverboat gaming, licensed video poker gaming, and licensed land-based gaming. The applicable local elections have occurred in all parishes in which we operate our riverboat gaming vessels, and the voters in those parishes voted to continue licensed riverboat and video poker gaming. However, it is noteworthy that the current legislation does not provide for any moratorium on future local elections on gaming.

- 7 -

Mississippi. The ownership and operation of casino gaming facilities in Mississippi are subject to extensive state and local regulation, but primarily the licensing and regulatory control of the Mississippi Gaming Commission (the “Mississippi Commission”). The Mississippi Gaming Control Act (the “Mississippi Act”), which originally legalized dockside casino gaming in Mississippi, is similar to the Nevada Gaming Control Act discussed below. The Mississippi Commission has adopted regulations which are also similar in many respects to the Nevada gaming regulations.

The laws, regulations and supervisory procedures of the Mississippi Commission are based upon declarations of public policy that are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and safeguarding of assets and revenues, providing for reliable record keeping and requiring the filing of periodic reports with the Mississippi Commission; (iv) the prevention of cheating and fraudulent practices; (v) providing a source of state and local revenues through taxation and licensing fees; and (vi) ensuring that gaming licensees, to the extent practicable, employ Mississippi residents. The regulations are subject to amendment and interpretation by the Mississippi Commission. We believe that our compliance with the licensing procedures and regulatory requirements of the Mississippi Commission will not affect the marketability of our securities. Changes in Mississippi laws or regulations may limit or otherwise materially affect the types of gaming that may be conducted and such changes, if enacted, could have an adverse effect on us and our Mississippi gaming operations, if we decide to build a replacement facility in Biloxi.

The Mississippi Act provides for legalized gaming in each of the fourteen counties that border the Gulf Coast or the Mississippi River, but only if the voters in such counties have not voted to prohibit gaming in that county. In recent years, certain anti-gaming groups proposed for adoption through the initiative and referendum process certain amendments to the Mississippi Constitution, which would prohibit gaming in the state. The proposals were declared illegal by Mississippi courts on constitutional and procedural grounds. The latest ruling was appealed to the Mississippi Supreme Court, which affirmed the decision of the lower court. If another such proposal were to be offered and if a sufficient number of signatures were to be gathered to place a legal initiative on the ballot, it is possible for the voters of Mississippi to consider such a proposal . While we are unable to predict whether such an initiative will appear on a ballot or the likelihood of such an initiative being approved by the voters, if such initiative were passed and gaming were prohibited in Mississippi, it could have an adverse impact on us and our Mississippi gaming operation.

Currently, gaming is permissible in nine of the fourteen eligible counties in the state and gaming operations have commenced in seven counties. Under Mississippi law, gaming vessels must be located on the Mississippi River or on navigable waters in eligible counties along the Mississippi River or in the waters lying south of the counties along the Mississippi Gulf Coast. Recently the Mississippi Legislature amended the Mississippi Act to permit licensees in the three counties along the Gulf Coast to establish land-based casino operations, provided the gaming areas do not extend more than 800 feet beyond the nineteen-year mean high water line, except in Harrison County where the 800-foot limit can be extended as far as the southern boundary of Highway 90.

The Mississippi Act permits unlimited stakes gaming on a 24-hour basis and does not restrict the percentage of space which may be utilized for gaming. The Mississippi Act permits substantially all traditional casino games and gaming devices.

- 8 -

We and any subsidiary of ours that operates a casino in Mississippi (a “Mississippi Gaming Subsidiary”) are subject to the licensing and regulatory control of the Mississippi Commission. We are currently registered under the Mississippi Act as a publicly traded corporation (a “Mississippi Registered Corporation”), and our subsidiary, Casino Magic Corp., has been licensed as an Intermediary Company (an “Intermediary Company”), both of which have been found suitable with respect to the ownership of Casino Magic Biloxi. As a Mississippi Registered Corporation, we are required periodically to submit detailed financial and operating reports to the Mississippi Commission and furnish any other information which the Mississippi Commission may require. If we are unable to continue to satisfy the registration requirements of the Mississippi Act, we and any Mississippi Gaming Subsidiary cannot own or operate gaming facilities in Mississippi. No person may become a stockholder of or receive any percentage of profits from an Intermediary Company or a Mississippi Gaming Subsidiary of a Mississippi Registered Corporation without first obtaining licenses and approvals from the Mississippi Commission. We have obtained such approvals from the Mississippi Commission.

The Mississippi Gaming Subsidiary must maintain a gaming license from the Mississippi Commission to operate a casino in Mississippi. Such licenses are issued by the Mississippi Commission subject to certain conditions, including, but not limited to, the continued compliance with all applicable state laws and regulations. There are no limitations on the number of gaming licenses that may be issued in Mississippi. Gaming licenses require the payment of periodic fees and taxes, are not transferable, are issued for a three-year period. Casino Magic Biloxi was granted a renewal of its gaming license by the Mississippi Commission on December 17, 2003. This license expires on January 22, 2007.

Certain of our officers and employees and the officers, directors and certain key employees of Casino Magic Biloxi must be found suitable or approved by the Mississippi Commission. We believe that we have obtained or applied for all necessary findings of suitability with respect to such persons associated with us or Casino Magic Biloxi, although the Mississippi Commission in its discretion may require additional persons to file applications for findings of suitability. In addition, any person having a material relationship or involvement with us or Casino Magic Biloxi, may be required to be found suitable, in which case those persons must pay the costs and fees associated with such investigation. The Mississippi Commission may deny an application for a finding of suitability for any cause that it deems reasonable. Changes in certain licensed positions must be reported to the Mississippi Commission. In addition to its authority to deny an application for a finding of suitability, the Mississippi Commission has jurisdiction to disapprove a change in a person’s corporate position or title and such changes must be reported to the Mississippi Commission. The Mississippi Commission has the power to require us and Casino Magic Biloxi to suspend or dismiss officers, directors and other key employees or sever relationships with other persons who refuse to file appropriate applications or who the authorities find unsuitable to act in such capacities. Determination of suitability or questions pertaining to licensing are not subject to judicial review in Mississippi.

At any time, the Mississippi Commission has the power to investigate and require the finding of suitability of any of our record or beneficial stockholders. The Mississippi Act requires any person who acquires more than 5% of any class of voting securities of a Mississippi Registered Corporation, as reported to the SEC, to report the acquisition to the Mississippi Commission, and such person may be required to be found suitable. Also, any person who becomes a beneficial owner of more than 10% of any class of voting securities of a Mississippi Registered Corporation, as reported to the SEC, must apply for a finding of suitability by the Mississippi Commission. The Mississippi Commission generally has exercised its discretion to require a finding of suitability of any beneficial owner of more than 5% of any

- 9 -

class of voting securities of a Mississippi Registered Corporation. If a stockholder who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information, including a list of beneficial owners. Any record or beneficial stockholder required to apply for a finding of suitability must pay all investigative fees and costs of the Mississippi Commission in connection with such investigation.

The Mississippi Commission has adopted a regulation which provides that under certain circumstances, an “institutional investor,” as defined in the regulation, which acquires more than 10%, but not more than 15%, of a Mississippi Registered Corporation’s voting securities may apply to the Mississippi Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Mississippi Registered Corporation, any change in the Mississippi Registered Corporation’s corporate charter, bylaws, management, policies or operations of the Mississippi Registered Corporation or any of its gaming affiliates, or any other action which the Mississippi Commission finds to be inconsistent with holding the Mississippi Registered Corporation’s voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes include: (i) voting on all matters voted on by the stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Mississippi Commission may determine to be consistent with such investment intent.

Any person who fails or refuses to apply for a finding of suitability or a license within thirty (30) days after being ordered to do so by the Mississippi Commission may be found unsuitable. The same restrictions apply to a record owner, if the record owner, after request, fails to identify the beneficial owner. Any person found unsuitable and who holds, directly or indirectly, any beneficial ownership of the securities beyond such time as the Mississippi Commission prescribes, may be guilty of a misdemeanor. We may be subject to disciplinary action if, after receiving notice that a person is unsuitable to be a stockholder or to have any other relationship with us, Casino Magic Corp. or Casino Magic Biloxi, the company involved: (i) pays the unsuitable person any dividend or other distribution upon such person’s voting securities; (ii) recognizes the exercise, directly or indirectly, of any voting rights conferred by securities held by the unsuitable person; (iii) pays the unsuitable person any remuneration in any form for services rendered or otherwise, except in certain limited and specific circumstances; or (iv) fails to pursue all lawful efforts to require the unsuitable person to divest himself of the securities, including, if necessary, the immediate purchase of the securities for cash at a fair market value.

We may be required to disclose to the Mississippi Commission, upon request, the identities of the holders of any of our debt or other securities. In addition, under the Mississippi Act, the Mississippi Commission may in its discretion require the holder of any debt security of a Mississippi Registered Corporation to file an application, be investigated and be found suitable to own the debt security. Although the Mississippi Commission generally does not require the individual holders of obligations, such as our 8.25% Senior Subordinated Notes due 2012 and 8.75% Senior Subordinated Notes due 2013, to be investigated and found suitable, the Mississippi Commission retains the discretion to do so for any reason, including, but not limited to, a default, or where the holder of the debt instrument exercises a material influence over the gaming operations of the entity in question. Any holder of debt securities required to apply for a finding of suitability must pay all investigative fees and costs of the Mississippi Commission in connection with such an investigation.

- 10 -

If the Mississippi Commission determines that a person is unsuitable to own a debt security, then the Mississippi Registered Corporation may be sanctioned, including the loss of its approvals, if without the prior approval of the Mississippi Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by the unsuitable person in connection with those securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction.

Each Mississippi Gaming Subsidiary must maintain in Mississippi a current ledger with respect to ownership of its equity securities, and we must maintain in Mississippi a current list of our stockholders which must reflect the record ownership of each outstanding share of any class of equity securities issued by us. The ledger and stockholder lists must be available for inspection by the Mississippi Commission at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Mississippi Commission. A failure to make such disclosure may be grounds for finding the record holder unsuitable. We must also render maximum assistance in determining the identity of the beneficial owner.

The Mississippi Act requires that the certificates representing securities of a Mississippi Registered Corporation bear a legend indicating that such securities are subject to the Mississippi Act and the regulations of the Mississippi Commission. We have received from the Mississippi Commission a waiver of this legend requirement. The Mississippi Commission has the power to impose additional restrictions on the holders of our securities at any time. Substantially all material loans, leases, sales of securities and similar financing transactions by a Mississippi Registered Corporation or a Mississippi Gaming Subsidiary must be reported to or approved by the Mississippi Commission. In addition, the regulations of the Mississippi Commission require us to file a Loan to Licensees Report within thirty (30) days following certain financing transactions and the offering of certain debt securities. If the Mississippi Commission were to deem it appropriate, the Mississippi Commission could order such transactions rescinded. A pledge of the stock of a Mississippi Gaming Subsidiary and the foreclosure of such a pledge are ineffective without the prior approval of the Mississippi Commission. Moreover, restrictions on the transfer of an equity security issued by a Mississippi Gaming Subsidiary and agreements not to encumber such securities are ineffective without the prior approval of the Mississippi Commission.

A Mississippi Registered Corporation may not make a public offering of its securities without the prior approval of the Mississippi Commission if any part of the proceeds of the offering is to be used to finance the construction, acquisition or operation of gaming facilities in Mississippi or to retire or extend obligations incurred for those purposes. Under the regulations of the Mississippi Commission, a Mississippi Gaming Subsidiary may not guarantee a security issued by an affiliated company pursuant to a public offering, or pledge its assets to secure payment or performance of the obligations evidenced by the security issued by the affiliated company, without the prior approval of the Mississippi Commission. Such approval, if given, does not constitute a recommendation or approval of the investment merits of the securities subject to the offering.

On December 18, 2004, the Mississippi Commission granted us prior approval to make public offerings and private placements of securities for a period of two years, subject to certain conditions (the “Mississippi Shelf Approval”). The Mississippi Shelf Approval also includes approval for Casino Magic Biloxi to guarantee any security issued by, and for Casino Magic Biloxi to hypothecate its assets to secure the payment or performance of, any obligations evidenced by a security issued by us in a public offering or private placement under the Mississippi Shelf Approval. The Mississippi Shelf Approval also includes approval to place

- 11 -

restrictions upon the transfer of and enter into agreements not to encumber the equity securities of Casino Magic Biloxi. The Mississippi Shelf Approval, however, may be rescinded for good cause without prior notice upon the issuance of an interlocutory stop order by the Mississippi Commission. The Mississippi Shelf Approval does not constitute a finding, recommendation or approval of the Mississippi Commission as to the accuracy or the adequacy of any prospectus or the investment merits of any securities offered thereby. Any representation to the contrary is unlawful. Changes in control of our company through merger, consolidation, acquisition of assets, management or consulting agreements or any form of takeover, cannot occur without the prior approval of the Mississippi Commission. Entities seeking to acquire control of a Mississippi Registered Corporation must satisfy the Mississippi Commission in a variety of stringent standards prior to assuming control of the Mississippi Registered Corporation. The Mississippi Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction.

The Mississippi legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and other corporate defense tactics that affect corporate gaming licensees in Mississippi and Mississippi Registered Corporations may be injurious to stable and productive corporate gaming. The Mississippi Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Mississippi’s gaming industry and to further Mississippi’s policy to: (i) assure the financial stability of corporate gaming operators and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs.

Approvals are, in certain circumstances, required from the Mississippi Commission before a Mississippi Registered Corporation may make exceptional repurchases of voting securities (such as repurchases which treat holders differently) in excess of the current market price and before a corporate acquisition opposed by management may be consummated. Mississippi’s gaming regulations also require prior approval by the Mississippi Commission of a plan of recapitalization proposed by the Mississippi Registered Corporation’s board of directors in response to a tender offer made directly to the Mississippi Registered Corporation’s stockholders for the purpose of acquiring control of the Mississippi Registered Corporation.

Neither we nor any Mississippi Gaming Subsidiary may engage in gaming activities in Mississippi while also conducting gaming operations outside of Mississippi without approval of the Mississippi Commission. The Mississippi Commission may require determinations that, among other things, there are means for the Mississippi Commission to have access to information concerning the out-of-state gaming operations of us and our affiliates. We have previously obtained a waiver of foreign gaming approval from the Mississippi Commission for operations in other states in which we conduct gaming operations and will be required to obtain the approval or a waiver of such approval from the Mississippi Commission prior to engaging in any additional future gaming operations outside of Mississippi.

If the Mississippi Commission decides that we or Casino Magic Biloxi violated a gaming law or regulation, the Mississippi Commission could limit, condition, suspend or revoke our approvals and the license of Casino Magic Biloxi, subject to compliance with certain statutory and regulatory procedures. In addition, we, Casino Magic Corp., Casino Magic Biloxi and the persons involved could be subject to substantial fines for each separate violation. Because of such a violation, the Mississippi Commission could attempt to appoint a supervisor to operate our Mississippi casino facilities. Limitation, conditioning or suspension of any gaming license

- 12 -

or approval or the appointment of a supervisor could (and revocation of any gaming license or approval would) materially adversely affect us, our gaming operations and our results of operations.

License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Mississippi and to the counties and cities in which a Mississippi Gaming Subsidiary’s respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon (i) a percentage of the gross gaming revenues received by the casino operation, (ii) the number of gaming devices operated by the casino, or (iii) the number of table games operated by the casino. The license fee payable to the State of Mississippi is based upon “gaming receipts” (generally defined as gross receipts less payouts to customers as winnings) and the current maximum tax rate imposed is 8% of gaming receipts in excess of $134,000 per month. The gross revenue fees imposed by the local governments equal approximately 4% of the gaming receipts.

The Mississippi Commission’s regulations require as a condition of licensure or license renewal that an existing licensed gaming establishment’s plan include adequate parking facilities in close proximity to the casino complex and infrastructure facilities, such as hotels, which amount to at least 100% of the casino cost. The Mississippi Commission’s current infrastructure requirement applies to new casinos or acquisitions of closed casinos. Casino Magic Biloxi was grandfathered under a prior version of that regulation that required the infrastructure investment to equal only 25% of the casino’s cost.

In recognition of the widespread damage and business disruptions Hurricane Katrina inflicted upon all casinos along the Gulf Coast, the Mississippi Commission is not currently enforcing many of its regulations pertaining to, among other things, internal controls and land-based infrastructure investments. At this point we are unable to predict what action the Mississippi Commission might undertake as damaged casinos begin rebuilding and reopening. We do expect, however, that the Mississippi Commission will require that all licensees comply with all applicable regulations prior to resuming operations.

The sale of food or alcoholic beverages at Casino Magic Biloxi is subject to licensing, control and regulation by the applicable state and local authorities. The agencies involved have full power to limit, condition, suspend or revoke any such license, and any such disciplinary action against Casino Magic Biloxi could (and revocation would) have a materially adverse effect upon our operations. Certain of our and Casino Magic Biloxi’s officers and managers must be investigated by the Alcoholic Beverage Control Division of the State Tax Commission (the “ABC”) in connection with Casino Magic Biloxi’s liquor permits at Casino Magic Biloxi. Changes in licensed positions must be approved by the ABC.

Nevada. The ownership and operation of casino gaming facilities in Nevada are subject to: (i) the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the “Nevada Act”); and (ii) various local regulations. Our gaming operations are subject to the licensing and regulatory control of the Nevada Gaming Commission (the “Nevada Commission”), the Nevada State Gaming Control Board (the “Nevada Board”) and the City of Reno. The Nevada Commission, the Nevada Board and the City of Reno are collectively referred to as the “Nevada Gaming Authorities.”

The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of

- 13 -

responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) providing a source of state and local revenues through taxation and licensing fees. Changes in such laws, regulations and procedures could have an adverse effect on Boomtown Reno’s gaming operations.

Our subsidiary which operates Boomtown Reno and two other gaming operations that have only slot machines (the “Gaming Subsidiary”) is required to be licensed by the Nevada Gaming Authorities. The gaming licenses require the periodic payment of fees and taxes and are not transferable. We are currently registered by the Nevada Commission as a publicly traded corporation (a “Nevada Registered Corporation”) and have been found suitable as the parent company of the Gaming Subsidiary, which is a gaming licensee under the terms of the Nevada Act. As a Nevada Registered Corporation, we are required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information which the Nevada Commission may require. No person may become a stockholder of, or holder of an interest of, or receive any percentage of profits from, a gaming licensee without first obtaining licenses and approvals from the Nevada Gaming Authorities. We and the Gaming Subsidiary have obtained from the Nevada Gaming Authorities the various registrations, findings of suitability, approvals, permits and licenses required in order to engage in gaming activities in Nevada.

The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, us or the Gaming Subsidiary in order to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Our and the Gaming Subsidiary’s officers, directors and certain key employees, must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. Our officers, directors and key employees who are actively and directly involved in gaming activities of the Gaming Subsidiary may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position. If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with us or the Gaming Subsidiary, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require us or the Gaming Subsidiary to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada. We and the Gaming Subsidiary are required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities and similar financing transactions by us and the Gaming Subsidiary must be reported to or approved by the Nevada Commission.

If it were determined that the Nevada Act was violated by the Gaming Subsidiary, the gaming licenses it holds could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, we, the Gaming Subsidiary and the persons involved could be subject to substantial fines for each separate

- 14 -

violation of the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor could be appointed by the Nevada Commission to operate Boomtown Reno and, under certain circumstances, earnings generated during the supervisor’s appointment (except for reasonable rental value of the casino) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of the gaming licenses of the Gaming Subsidiary or the appointment of a supervisor could (and revocation of any gaming license would) negatively affect our gaming operations.

Any beneficial holder of our voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and be found suitable as a beneficial holder of our voting securities if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation.

The Nevada Act requires any person who acquires beneficial ownership of more than 5% of a Nevada Registered Corporation’s voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of a Nevada Registered Corporation’s voting securities apply to the Nevada Commission for a finding of suitability within thirty days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an “institutional investor,” as defined in the Nevada Act, which acquires more than 10%, but not more than 15%, of a Nevada Registered Corporation’s voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. In certain circumstances, an institutional investor can hold up to 19% of a Nevada Registered Corporation’s voting securities for a limited period of time and maintain the waiver. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Nevada Registered Corporation, any change in the Nevada Registered Corporation’s corporate charter, restated bylaws, management, policies or operations of the Nevada Registered Corporation, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding the Nevada Registered Corporation’s voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information, including a list of beneficial owners. The applicant is required to pay all costs of investigation.

Any person who fails or refuses to apply for a finding of suitability or a license within thirty days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. We are subject to disciplinary action if, after we receive notice that a person is unsuitable to be a stockholder or to have any other relationship with us or the Gaming Subsidiary, we: (i) pay that person any dividend or interest upon our voting securities, (ii) allow that person to exercise, directly or indirectly, any voting right conferred through

- 15 -

securities held by that person, (iii) pay remuneration in any form to that person for services rendered or otherwise, or (iv) fail to pursue all lawful efforts to require such unsuitable person to relinquish such person’s voting securities including, if necessary, the immediate purchase of said voting securities for cash at fair market value.

The Nevada Commission may, in its discretion, require the holder of any debt security of a Nevada Registered Corporation to file applications, be investigated and be found suitable to own the debt or other security of a Nevada Registered Corporation if the Nevada Commission has reason to believe that such holder’s acquisition of such debt or other security would otherwise be inconsistent with the policy of the State of Nevada. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Nevada Registered Corporation can be sanctioned, including the loss of its approvals if, without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction.

We are required to maintain a current stock ledger in Nevada which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. We are also required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require that our stock certificates bear a legend indicating that the securities are subject to the Nevada Act. However, to date the Nevada Commission has not imposed such a requirement on us.

We are not permitted to make a public offering of our securities without the prior approval of the Nevada Commission if the securities or the proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. On February 24, 2005, the Nevada Commission granted us prior approval to make public offerings for a period of two years, subject to certain conditions (the “Nevada Shelf Approval”). The Nevada Shelf Approval also applies to any affiliated company wholly owned by us (an “Affiliate”), which is a publicly traded corporation or would thereby become a publicly traded corporation pursuant to a public offering. The Nevada Shelf Approval, however, may be rescinded for good cause without prior notice upon the issuance of an interlocutory stop order by the Chairman of the Nevada Board. The Nevada Shelf Approval does not constitute a finding, recommendation or approval of the Nevada Gaming Authorities as to the accuracy or the adequacy of the prospectus or the investment merits of the securities offered thereby. Any representation to the contrary is unlawful.

Changes in control of a Nevada Registered Corporation through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby such person obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Nevada Registered Corporation must satisfy the Nevada Board and Nevada Commission in a variety of stringent standards prior to assuming control of such Nevada Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control to be investigated and licensed as part of the approval process relating to the transaction.

- 16 -

The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada corporate gaming licensees, and Nevada Registered Corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada’s gaming industry and to further Nevada’s policy to: (i) assure the financial stability of corporate gaming licensees and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before the Nevada Registered Corporation can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by the Nevada Registered Corporation’s Board of Directors in response to a tender offer made directly to the Nevada Registered Corporation’s stockholders for the purposes of acquiring control of the Nevada Registered Corporation.

License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the City of Reno, in which the Gaming Subsidiary’s operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly, or annually and are based upon either: (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. An entertainment tax is also paid by casino operations where live entertainment is furnished in connection with an admission charge and the serving or selling of food or refreshments, or the selling of any merchandise.

Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively, “Licensees”), and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation by the Nevada Board of such Licensee’s participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. Licensees are also subject to disciplinary action by the Nevada Commission if they knowingly violate any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in activities or enter into associations that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employ, contract with, or associate with a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of unsuitability.

Missouri. On November 3, 1992, a statewide referendum authorized gaming in the State of Missouri on the Missouri and the Mississippi Rivers. On April 29, 1993, Missouri enacted revised legislation (as amended, the “Missouri Gaming Law”) which amended the existing legislation. In a decision handed down on January 25, 1994, the Missouri Supreme Court held that games of chance were prohibited under the Missouri constitution. In a statewide election held on November 8, 1994, Missouri voters approved the adoption of an amendment to the Missouri Constitution which permits the legislature to allow games of chance to be conducted on excursion boats and floating facilities on the Mississippi River and the Missouri River. As a result of the amendment, games of chance are also permitted subject to Missouri Gaming Law. Pursuant to the Missouri Gaming Law, there are eleven operating riverboat gaming facility sites in Missouri: one in Caruthersville; one in Boonville; three in the St. Louis area; four in the Kansas City area; one in LaGrange; and one in St. Joseph.

- 17 -

On September 1, 2004, the Missouri Gaming Commission selected one of our subsidiaries, Casino One Corporation (“Casino One”) as a priority to be investigated to determine suitability for Class A licenses in both the City of St. Louis and in the County of St. Louis. Subsequent to receipt of these designations, Casino One filed on behalf of both the St. Louis City and the St. Louis County sites applications to obtain permanent docking and placement of the gaming facilities in a basin within 1,000 feet of the Mississippi River. Approval for placement and permanent docking are required under the Missouri Gaming Law. On January 12, 2005 and on May 25, 2005, the Missouri Gaming Commission issued Findings of Fact, Conclusions of Law and Final Orders, dated respectively, granted approval to Casino One of the location of the St. Louis City and the St. Louis County gaming facilities.

Casino One’s Petition for Approval of Permanent Docking, Historic Design Elements of Applicant’s Excursion Boat and Request from Applicant for Hearing with the Missouri Gaming Commission with respect to the proposed project in the City of St. Louis, Missouri (the “Petition”) was opposed by Columbia Sussex at a hearing held by the Missouri Gaming Commission on November 19, 2004. On December 9, 2004, Columbia Sussex, a Kentucky based company that was attempting to purchase the President Casino on the St. Louis Waterfront, filed an opposition to the Petition (the “Opposition”) with the Missouri Gaming Commission, alleging that our Petition does not satisfy Missouri law and that the construction of our proposed St. Louis City facility will economically harm the President Casino. In addition to several other claims, Columbia Sussex’s Opposition was based upon its assertion that the Missouri Gaming Commission’s practice of commencing its measurement of 1,000 feet from the river’s high water mark is arbitrary and without support in law. We filed a response to the Opposition that argued that the proposed project complies with all Missouri laws and asserting that the prospective competitor lacked standing to oppose the Application.

On January 12, 2005, the Missouri Gaming Commission held a public hearing regarding our application as to the St. Louis City project at which we, the Missouri Gaming Commission’s Hearing Officer, and Columbia Sussex made presentations. At the conclusion of the hearing the Missouri Gaming Commission voted to adopt the Hearing Officer’s Findings of Fact, Conclusions of Law and Final Orders (i) finding that the location of the excursion gambling boat is suitable as it complies with Missouri law, subject to the right of the Missouri Gaming Commission to require alterations to the site plan unrelated to its location and the right to approve final design, (ii) determining that the excursion gambling boat can be continuously docked subject to licensure and obtaining all governmental approvals or permits necessary to operate a floating facility as a continuously docked excursion gambling boat, and (iii) stating that the exterior design of the proposed excursion gambling boat satisfies Missouri law. The findings by the Missouri Gaming Commission allow the applicant to proceed to the next step of the investigation process.

On January 26, 2005, Columbia Sussex and three other plaintiffs filed a three count petition against the Missouri Gaming Commission and Casino One in the Circuit Court of Cole County, Missouri. In addition to Columbia Sussex, named plaintiffs are Wimar Tahoe Corporation (as an owner of Property near the proposed Casino One site), President of Columbia Sussex, William J. Yung (as a Missouri tax payer) and Fred Dehner, a resident of Osage Beach, Missouri (as a registered Missouri voter and tax payer).

The plaintiffs sought to undo the Missouri Gaming Commission’s approval of our Casino One facility. The factual allegations for each of the plaintiffs’ three claims are that the Missouri Gaming Commission could not grant approval to Casino One because the facility’s gaming floor is not within 1,000 feet of the main channel of the Mississippi River.

- 18 -

The City of St. Louis filed a motion to intervene as a defendant in the case. On April 8, 2005, the Circuit Court for Cole County granted the motion of the City of St. Louis to intervene and dismissed the plaintiffs’ Petition for lack of subject matter jurisdiction on the grounds that jurisdiction to review decisions of the Missouri Gaming Commission was in the Missouri Court of Appeals for the Western District of Missouri, not the Circuit Court of Cole County.

On April 18, 2005, the same three plaintiffs filed a request for judicial review of the Missouri Gaming Commission’s decision in the Missouri Court of Appeals Western District (the two cases are referred to herein as the “Appeals”). The plaintiffs name the Missouri Gaming Commission and Casino One as “defendants” in their petition. The City of St. Louis has moved to intervene in the case.

On May 11, 2005, the same three plaintiffs filed an appeal of the April 8, 2005 Cole County Circuit Court decision dismissing the case in the Circuit Court of Cole County for lack of subject matter jurisdiction. In August 2005, the plaintiffs filed a motion to consolidate the Appeals for a decision by the Court of Appeals. On August 18, 2005, the Court of Appeals denied the motion of the plaintiffs to consolidate the Appeals. On August 24, 2005, the record on appeal was filed by the plaintiffs with the Missouri Court of Appeals.

In October 2005, Columbia Sussex withdrew its application for a Class A license for the neighboring President Casino. The President Casino then moved to intervene in the Appeals which motion of the President has been denied by the Court of Appeals. The appeal of the decision of the Cole County Circuit Court dismissing that case for lack of subject matter jurisdiction has been fully briefed by the City of St. Louis, the Missouri Gaming Commission, and by us. The direct appeal from the decision of the Missouri Gaming Commission has been stayed pending a resolution of the appeal of the Cole County decision. The appeal of the decision of the Circuit Court of Cole County dismissing that case for lack of subject matter jurisdiction has been fully briefed by the City of St. Louis, the Missouri Gaming Commission and by us. The direct appeal from the decision of the Missouri Gaming Commission remains stayed pending resolution of the appeal of the Cole County decision. The appeal of the Cole County decision was argued before a three judge panel of the Court of Appeals on February 9, 2006. Opponents of gaming in Missouri have brought several legal challenges to gaming in the past and may possibly bring similar challenges in the future. For example, on November 25, 1997, the Missouri Supreme Court overturned a state lower court and held that a portion of the Missouri Gaming Law that authorized excursion gaming facilities in “artificial basins” up to 1,000 feet from the Mississippi or Missouri rivers was unconstitutional. This ruling created uncertainty as to the legal status of several excursion gaming riverboat facilities in the state. On November 3, 1998, a statewide referendum was held, whereby the voters amended the constitution to allow “artificial basins” for existing facilities, effectively overturning the above Missouri Supreme Court decision. There can be no assurances that the Opposition or any future challenges, if brought, would not interfere with the development, construction and operation of gaming operations in Missouri, including the development, construction and operation of our St. Louis City and County projects.

All direct, indirect or beneficial owners of our common stock, holding an interest of 5% or more in us, are subject to licensing requirements of the Missouri Gaming Commission that require the filing of an application that includes extensive suitability and financial information and is subject to review and approval of Missouri Gaming Commission. We are permitted to require any such “key person” or business that either fails to file for a license with the Missouri Gaming Commission or is not found suitable by the Missouri Gaming Commission, to divest itself of all such common stock in accordance with our certificate of incorporation. The Missouri Gaming Commission or its Director may also determine that any other holder of our

- 19 -

common stock is subject to the above licensing requirements regardless of the percentage interest of ownership in us.

Under the Missouri Gaming Law, the ownership and operation of riverboat gaming facilities in Missouri are subject to extensive state and local regulation. After the receipt of licensing approval from and in the discretion of the Missouri Gaming Commission, the construction of the St. Louis facilities and the commencement of operations of the St. Louis facilities, we, Casino One, our subsidiary that will operate the St. Louis City and County projects, any subsidiaries, and some of their officers and employees are and will be subject to specific regulations, including ongoing licensing requirements. As part of the application and licensing process for a gaming license, the applicant must submit detailed financial, operating and other reports to the Missouri Gaming Commission. Each applicant has an ongoing duty to update the information provided to the Missouri Gaming Commission in the application, usually within seven days of a material change in the information on file with the Commission. Casino One has frequently updated its application materials since it initially filed its applications. In addition to the information required of the applicant, directors, officers, affiliated business entities and other defined “key persons” (which include individuals and companies designated by the Missouri Gaming Commission) must submit Personal Disclosure Forms, which include detailed financial information, and are subject to thorough investigations. In addition, we and some of our officers and directors have submitted Personal Disclosure Forms and applications to the Missouri Gaming Commission. All gaming employees must obtain an occupational license issued by the Missouri Gaming Commission. Suppliers are also subject to licensing requirements of the Missouri Gaming Commission.

The operators’ licenses (or “Class A” gaming licenses) are issued through application to the Missouri Gaming Commission, which requires, among other things:

• suitability investigations into an applicant’s character, financial responsibility, experience, and qualifications;

• suitability investigations into each designated key person or affiliated business entity’s character, financial responsibility, experience and qualifications;

• disclosure of required financial (see above) and other personal information on each key person or designated affiliated business entity;

• disclosure of detailed information about the applicant’s history, business, affiliations, officers, directors and owners;

• an affirmative action plan for the hiring and training of minorities and women; and

• an economic development or impact report.

License fees cover all related costs of the Missouri Gaming Commission investigation and are a minimum of $50,000 for the initial application and $25,000 annually thereafter. We and Casino One each are undergoing a full licensing investigation and hearing in connection with its licensing as above stated.

- 20 -

The Missouri Gaming Law and implementing regulations impose restrictions on the use of and do not permit the transfer of the gaming licenses as well as limitations on transactions engaged in by licensees. The licenses issued by the Missouri Gaming Commission may not be transferred nor pledged as collateral. The Missouri Gaming Law regulations bar a licensee from taking any of the following actions without prior notice to, and approval by, the Missouri Gaming Commission:

• any transfer or issuance of an ownership interest in a gaming licensee that is not a publicly held company;

• any transfer or issuance of an ownership interest of five percent or more of the issued and outstanding ownership interest of a company which is publicly traded and is a holding company;

• any private incurrence of debt by the licensee or any holding company of $1,000,000 or more;

• any public issuance of debt by a licensee or its holding company; and

• defined “significant related party transactions.”

In addition, the licensee must notify the Missouri Gaming Commission of other transactions, that include the transfer of five percent or more of an ownership interest in the licensee or holding company if publicly held and any transaction of at least $1,000,000.

The restrictions on transfer of ownership apply to us as well as the direct licensee, Casino One. Gaming equipment may not be pledged. Corporate stock of some licensees may not be pledged except in narrow circumstances and subject to regulatory conditions.

Missouri statutes and administrative rules contain detailed requirements and conditions concerning the operation of a licensed excursion gaming boat facility, including, but not limited to the following:

• a charge of two dollars per gaming customer per excursion that licensees must either collect from each customer or pay itself to the Missouri Gaming Commission;

• minimum payouts;

• the payment of a 20% tax on adjusted gross receipts;

• prohibitions against providing credit to gaming customers;

• the use of credit cards and the cashing of checks by customers;

• providing security on the excursion gambling boat, including a requirement that each licensee reimburse the Missouri Gaming Commission for all costs of any Missouri Gaming Commission staff, including Missouri Highway Patrol Officers necessary to protect the public on the licensee’s riverboat;

• the receipt of liquor licenses from the Missouri Gaming Commission and local jurisdictions; and

- 21 -

• the adoption of minimum control standards for the conduct of gaming and the operation of the facility approved by the Missouri Gaming Commission.

The Missouri Gaming Commission has the power, as well as broad discretion in exercising this power, to revoke or suspend gaming or occupational licenses and impose other penalties for violations of the Missouri Gaming Law and the rules and regulations promulgated thereunder, including without limitation, forfeiture of all gaming equipment used for improper gaming and fines of up to three times a licensee’s highest daily gross receipts during the preceding twelve months.

Although the Missouri Gaming Law provides no limit on the amount of riverboat space that may be used for gaming, the Missouri Gaming Commission is empowered to impose space limitations through the adoption of rules and regulations. In addition, the Missouri Gaming Law imposes as to each customer a $500 loss limit per two-hour period established by each licensee with the approval of the Missouri Gaming Commission. In order to establish an excursion schedule, which allows patrons to enter and exit the gaming floor during the excursion the licensee must prove to the satisfaction of the Missouri Gaming Commission that it can enforce the $500 loss limit.

In addition, the Missouri Gaming Commission is empowered to determine on a city and county-specific basis where “dockside” or permanently-docked gaming is appropriate and may be permitted. The Missouri Gaming Commission has authorized all eleven licensed sites to operate all or a portion of their facilities on a continuously docked basis.

California. Operation of California card club casinos such as the Hollywood Park-Casino and the Crystal Park Casino is governed by the Gambling Control Act (the “GCA”) and is subject to the oversight of the California Attorney General and the California Gambling Control Commission. Under the GCA, a California card club casino may only offer certain forms of card games, including Poker, Pai Gow, and California Blackjack. A card club casino may not offer many of the card games and other games of chance permitted in Nevada and other jurisdictions where we conduct business. Although the California Attorney General takes the position that, under the GCA, only individuals, partnerships or privately-held companies (as opposed to publicly-traded companies such as us) are eligible to operate card club casinos, the enactment of California Senate Bill 100 (“SB-100”) in 1995, and the subsequent enactment of Senate Bill-8 permit a publicly-owned racing association to own and operate a card club casino if it also owns and operates a race track on the same premises.

In September 1995, the Attorney General granted us a provisional registration under SB-100 to operate the Hollywood Park-Casino, which provisional registration was renewed effective January 1, 1999. Pursuant to the GCA, on September 10, 1999, in connection with the sale of the Hollywood Park Race Track, we were no longer eligible to operate the Hollywood Park-Casino and therefore entered into a sublease arrangement of the Hollywood Park-Casino with the same third party operator which leases the Crystal Park Casino.

The GCA provides that the California Gambling Control Commission may require any person who owns an interest in the premises of a licensed gambling establishment or in real property used by a licensed gambling establishment to register with the commission, apply for a finding of suitability, or apply for a gambling license. Thus, in our role as the landlord of premises leased to gambling establishments, we may be required by the California Gambling Control Commission to comply with any of these three requirements.

In addition, in the event the GCA were to be amended to permit publicly-traded companies such as us to operate card clubs, we, and our officers, directors and certain

- 22 -

stockholders, would likely have to file the necessary licensing applications with the Attorney General, if we wished to operate the Hollywood Park-Casino or the Crystal Park Casino.

Pursuant to the GCA, the operator of a card club casino, and its officers, directors and certain stockholders are required to be registered by the Attorney General and licensed by the municipality in which it is located. A permanent registration will not be granted until the California Department of Justice completes its review of such applications and the applications of the corporate officers and directors of such operators. The Attorney General has broad discretion to deny a gaming registration and may impose reasonably necessary conditions upon the granting of a gaming registration. Grounds for denial include felony convictions, criminal acts, convictions involving dishonesty, illegal gambling activities, and false statements on a gaming application. Such grounds also generally include having a financial interest in a business or organization that engages in gaming activities that are illegal under California law. In addition, the California Attorney General possesses broad authority to suspend or revoke a gaming registration on any of the foregoing grounds, as well as for violation of any federal, state or local gambling law, failure to take reasonable steps to prevent dishonest acts or illegal activities on the premises of the card club casino, failure to cooperate with the Attorney General in its oversight of the card club casino and failure to comply with any condition of the registration. The City of Inglewood and the City of Compton have granted the operator of the Hollywood Park-Casino and the Crystal Park Casino all municipal gaming licenses necessary for operation of such facilities, and the operator has received permanent registrations for both locations from the California Department of Justice.

Argentina. In Argentina, the regulation of gaming is generally under the jurisdiction of the provinces of the country. All of our casinos in Argentina are located in the province of Neuquén. In May 1994, the Provincial Government of Neuquén enacted a casino privatization program to issue twelve-year exclusive concession agreements to operate existing casinos. The concession agreements are renewable for five or ten years, provided that certain conditions are met. The Executive Power of Neuquén granted a casino license to Casino Magic Corporation pursuant to a Concession Agreement dated December 21, 1994, between the Provincial Government of Neuquén and Casino Magic Neuquén S.A. (the “Concession Agreement”). Casino Magic Corporation and Casino Magic Neuquén S.A. are direct or indirectly wholly-owned subsidiaries of ours. The Concession Agreement granted Casino Magic Neuquén S.A. the exclusive right to operate casinos in the cities of Neuquén and San Martín de los Andes in the Province of Neuquén. The Concession Agreement also granted Casino Magic Neuquén the exclusive right to operate casinos within 50 kilometers (31.05 miles) of its existing properties as long as those casinos are within the Province of Neuquén. It should be noted that we still retain a priority to match any bidding offer to open and operate other casinos within the Province of Neuquén, however, such casinos would not be covered by the exclusivity provisions of the Concession Agreement and provided that in the corresponding bidding process our original offer is not lower than 15% of that of the best offeror’s. We also opened a new facility in the city of Junín de los Andes, in the Province of Neuquén. This casino was opened under the scope of the existing casino license for the property located in San Martín de los Andes. In July 2005, we closed the largest of our casinos located in the city of Neuquen, which had been operating since 1995, and opened a larger facility including a more lavish casino; an upscale restaurant; a wine bar; three other casino bars; and a large entertainment venue, one mile away from the original location on approximately 20 acres owned by us. Additionally, we have obtained a casino license to open casinos in the cities of Caviahue and Copahue, in the Province of Neuquén. These casino licenses are for a term of 12 years and are renewable for an additional 10 year term at the discretion of the granting authority. Currently our four casinos (in the cities of Neuquén, San Martín de los Andes, Junín de los Andes, and Copahue) along with the one we anticipate opening in the near future in the city of Caviahue are the only casinos legally authorized by the Executive Power of the Province of Neuquén to operate in the province of Neuquén, in west central Argentina.

- 23 -

On July 14, 2003, the Executive Power of Neuquén approved the terms of an agreement establishing the conditions for the renewal of our casino license pursuant to which we operate our three Neuquén casinos, either for a five year or for a ten year term. In July 2005, we opened the new facility in order to qualify for and obtain the ten year extension through 2016. Although we have filed for an extension with the Provincial Government of Neuquén, as of the date of this report, the extension has not been formally granted. The Concession Agreement establishes that the shareholders approved by the Provincial Government of Neuquén shall maintain control (i.e. 51% of the shareholding of the corporate capital with voting power) of the licensee. It also establishes that any transfer of shares up to 49% of its shareholding in the licensee shall not require prior authorization. Otherwise, prior authorization from the Provincial Government of Neuquén shall be required. Notwithstanding that, no transfer of shares shall be performed to those persons detailed under Section 5 of the bidding terms approved under the casino privatization program (i.e. among others, foreign persons or legal entities if in their country there are no regulations prohibiting money laundering, natural or legal persons that cannot contract with the Province of Neuquén). We cannot predict what effect the enactment of any laws, regulations or pronouncements relating to casino operations would have on the operations of Casino Magic Argentina.

The Bahamas. The Hotel Corporation of The Bahamas, a corporation owned by the Bahamian Government, is the only entity in The Bahamas that can own a casino in The Bahamas. In turn the Hotel Corporation of The Bahamas enters into management agreements with companies to operate the casino.

The applicant seeking to operate a casino must first obtain a license from the Gaming Board for the Commonwealth of the Bahamas (“Bahamas Gaming Board”). Prior to the Bahamas Gaming Board granting a license to operate a casino extensive investigations are conducted on each of the principal shareholders of the company and well as the directors and officers of the company. In this regard character references, photographs, police certificates, fingerprints and birth certificates must be submitted.

A hearing is held to determine the application and the Secretary of the Bahamas Gaming Board sends a notice to the applicant, the Commissioner of Police any person who has filed an objection to the application and place an advertisement in the newspaper advising of the time and place of the hearing. If there are no objections to the application and provided that the Bahamas Gaming Board considers the applicant to be a fit and proper entity to operate the casino a license will be issued.

All employees of the applicant must be granted a Certificate of Approval to work in the casino. Inspectors of the Bahamas Gaming Board will conduct the appropriate investigations to determine whether the employees are “fit and proper” to be employed in the casino in the capacities specified.

The Casino License, as well as the Certificates of Approval and Permits issued to the employees are renewable annually. Our license was granted on December 14, 2005 and is valid through December 31, 2006 and is renewable on January 1 annually thereafter.

Other. In addition to the requirements discussed above, if we sought to establish gaming operations in any jurisdiction in which we currently do not operate, we would need to be registered, licensed, or found suitable to conduct gaming activities in that jurisdiction and, if successful in doing so, would be subject to such jurisdiction’s regulatory requirements applicable to gaming companies. Holders of our securities would also be subject to additional requirements regarding the ownership and disposition of their securities, including possibly being called forward by applicable gaming authorities to be licensed or found suitable to be the beneficial owner of our securities.

- 24 -