-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H7+mUgJTr+Gktk+CnPItqOvSj3GbkuYKZXTzXKzXKw+iloAmpOcQW/nexQ7nxsT3 4rTmI24c8vRKwmgKSiAc7g== 0000902561-99-000466.txt : 19991018 0000902561-99-000466.hdr.sgml : 19991018 ACCESSION NUMBER: 0000902561-99-000466 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19991005 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991015 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ISLE OF CAPRI CASINOS INC CENTRAL INDEX KEY: 0000863015 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 411659606 STATE OF INCORPORATION: DE FISCAL YEAR END: 0425 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-20538 FILM NUMBER: 99729113 BUSINESS ADDRESS: STREET 1: 711 WASHINGTON LOOP STREET 2: 2ND FLR CITY: BILOXI STATE: MS ZIP: 39530 BUSINESS PHONE: 6014367000 MAIL ADDRESS: STREET 1: 711 WASHINGTON LOOP STREET 2: 711 WASHINGTON LOOP CITY: BILOXI STATE: MS ZIP: 39530 FORMER COMPANY: FORMER CONFORMED NAME: CASINO AMERICA INC DATE OF NAME CHANGE: 19930328 FORMER COMPANY: FORMER CONFORMED NAME: ANUBIS II CORP DATE OF NAME CHANGE: 19600201 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 October 5, 1999 Date of Report (Date of earliest event reported) ISLE OF CAPRI CASINOS, INC. (Exact Name of Registrant as Specified in its Charter) ----------------------------------- Delaware 0-20538 41-1659606 (State or other (Commission File Number) (I.R.S. Employer Jurisdiction of Identification No.) Incorporation) --------------------------------- 711 Dr. Martin Luther King, Jr. Boulevard Biloxi, Mississippi 39530 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (228) 436-7000 711 Washington Loop, Second Floor Biloxi, Mississippi 39530 (Former Name or Former Address, if Changed Since Last Report) --------------------------------- Item 5. Other Events. As of October 5, 1999, Isle of Capri Casinos, Inc., a Delaware corporation ("Isle"), and Isle Merger Corp., a Delaware corporation and a wholly-owned subsidiary of Isle ("Merger Sub") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Lady Luck Gaming Corporation, a Delaware corporation ("Lady Luck"). Pursuant to the terms of the Merger Agreement, and subject to the conditions set forth therein (including approval of the transaction by the common stockholders of Lady Luck), Merger Sub will be merged with and into Lady Luck (the "Merger"). At the effective time of the Merger, the separate existence of Merger Sub will cease, Lady Luck will become a wholly-owned subsidiary of Isle and (except as to shares for which dissenters' rights have been properly asserted) each common stockholder of Lady Luck will receive cash in the amount of $12.00 per share for an aggregate share consideration of approximately $59 million. In addition, Isle will assume all of Lady Luck's outstanding debt in the amount of approximately $177 million. The Merger Agreement also provides for the redemption of Lady Luck's outstanding preferred stock in the amount of approximately $22 million. Andrew H. Tompkins, the owner of approximately 46% of Lady Luck's common stock, has agreed to vote for the transaction. Isle has also agreed to make a secured loan of $16.3 million to Lady Luck in order to assist Lady Luck in consummating the Miss Marquette acquisition in October, 1999. Isle also announced that it has entered into a letter of intent to acquire the other 50% interest in Lady Luck's Bettendorf, Iowa facility and related real estate in exchange for approximately 6.3 million shares of Isle common stock, subject to adjustment in certain circumstances. This interest is owned by members of the family of Bernard Goldstein, Isle's Chairman and Chief Executive Officer. This transaction is contingent on the completion of Isle's acquisition of Lady Luck, the approval of Isle's shareholders and other contingencies. The sellers have the option to receive up to $10 million of their consideration in cash rather than Isle stock. As permitted under Item 601(b) of Regulation S-K, the Merger Agreement is filed with this report without the disclosure schedules. Isle will supply a copy of any omitted schedule or similar attachment to the Commission upon request. In addition, the press release of Isle and Lady Luck, dated October 6, 1999, is filed as Exhibit 99.1 and is incorporated herein by reference. Item 7. Financial Statements and Exhibits. (c) Exhibits. Exhibit No. Description - --------- ----------- Exhibit 2.1 Agreement and Plan of Merger, dated as of October 5, 1999. Exhibit 10.1 Stockholder Support Agreement, dated as of October 5, 1999, by Andrew H. Tompkins to and for the benefit of Isle of Capri Casinos, Inc. Exhibit 10.2 Consulting, Advisory and Noncompetition Agreement, dated as of October 5, 1999 by and between Isle of Capri Casinos, Inc. and Andrew H. Tompkins. Exhibit 10.3 Letter of Intent, dated October 5, 1999, between Isle of Capri Casinos, Inc. and Bettendorf Riverfront Development Company, L.C. Exhibit 10.4 Form of Credit Agreement between Gamblers Supply Management Company as the Borrower, and Isle of Capri Casinos, Inc. as the Lender. Exhibit 99.1 Press Release dated October 6, 1999. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ISLE OF CAPRI CASINOS, INC. By: /s/ Allan B. Solomon ------------------------------------- Name: Allan B. Solomon Title: Executive Vice President, Secretary, General Counsel and Director Date: October 15, 1999 EXHIBIT INDEX Exhibit No. Description - ---------- ----------- Exhibit 2.1 Agreement and Plan of Merger, dated as of October 5, 1999. Exhibit 10.1 Stockholder Support Agreement, dated as of October 5, 1999, by Andrew H. Tompkins to and for the benefit of Isle of Capri Casinos, Inc. Exhibit 10.2 Consulting, Advisory and Noncompetition Agreement, dated as of October 5, 1999 by and between Isle of Capri Casinos, Inc. and Andrew H. Tompkins. Exhibit 10.3 Letter of Intent, dated October 5, 1999, between Isle of Capri Casinos, Inc. and Bettendorf Riverfront Development Company, L.C. Exhibit 10.4 Form of Credit Agreement between Gamblers Supply Management Company as the Borrower, and Isle of Capri Casinos, Inc. as the Lender. Exhibit 99.1 Press Release dated October 6, 1999. EX-2.1 2 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER dated as of October 5, 1999 among ISLE OF CAPRI CASINOS, INC., ISLE MERGER CORP. and LADY LUCK GAMING CORPORATION TABLE OF CONTENTS Page ARTICLE I THE MERGER Section 1.1. The Merger.................................................1 Section 1.2. Effective Time of the Merger...............................2 Section 1.3. Closing....................................................2 Section 1.4. Effect of the Merger.......................................2 Section 1.5. Certificate of Incorporation and Bylaws of the Surviving Corporation.....................................2 Section 1.6. Directors and Officers of the Surviving Corporation........2 Section 1.7. Subsidiaries of the Surviving Corporation..................2 ARTICLE II EFFECT OF THE MERGER ON SECURITIES OF THE CONSTITUENT CORPORATIONS Section 2.1. Conversion of Securities...................................3 Section 2.2. Exchange of Certificates...................................4 Section 2.3. Acceleration and Payment for Lady Luck Options.............5 Section 2.4. Dissenting Shares..........................................6 Section 2.5. Lady Luck Preferred Stock..................................6 Section 2.6. Lady Luck Debt Securities..................................7 ARTICLE III REPRESENTATIONS AND WARRANTIES OF LADY LUCK Section 3.1. Organization of Lady Luck and its Subsidiaries.............7 Section 3.2. Capitalization.............................................8 Section 3.3. Authority; No Conflict; Required Filings and Consents......9 Section 3.4. Public Filings; Financial Statements......................11 Section 3.5. No Undisclosed Liabilities................................11 Section 3.6. Absence of Certain Changes or Events......................12 Section 3.7. Taxes.....................................................12 Section 3.8. Real Property, Title and Related Matters..................14 Section 3.9. Title to Personal Property; Liens.........................15 Section 3.10. Intellectual Property.....................................16 Section 3.11. Agreements, Contracts and Commitments.....................16 Section 3.12. Litigation................................................17 Section 3.13. Environmental Matters.....................................17 Section 3.14. Employee Benefit Plans....................................18 Section 3.15. Compliance................................................20 Section 3.16. Labor Matters.............................................21 Section 3.17. Insurance.................................................22 i Page Section 3.18. Information in Proxy Statement............................22 Section 3.19. State Takeover Statute....................................22 Section 3.20. Voting Requirements.......................................22 Section 3.21. Year 2000.................................................22 Section 3.22. Opinion of Financial Advisor..............................23 Section 3.23. Brokers...................................................23 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB Section 4.1. Organization of Buyer and Merger Sub......................24 Section 4.2. Capitalization of Merger Sub..............................24 Section 4.3. Authority; No Conflict; Required Filings and Consents.....24 Section 4.4. Brokers...................................................25 Section 4.5. Ownership of Securities...................................26 Section 4.6. Proxy Statement...........................................26 Section 4.7. Litigation................................................26 Section 4.8. Financing.................................................26 ARTICLE V COVENANTS Section 5.1. Conduct of Business of Lady Luck..........................27 Section 5.2. Cooperation; Notice; Cure.................................31 Section 5.3. No Solicitation...........................................31 Section 5.4. Proxy Statement...........................................32 Section 5.5. Special Meeting...........................................32 Section 5.6. Access to Information.....................................32 Section 5.7. Governmental Approvals....................................33 Section 5.8. Publicity.................................................34 Section 5.9. Indemnification...........................................34 Section 5.10. Stockholder Litigation....................................35 Section 5.11. Employee Benefits.........................................35 Section 5.12. Other Agreements..........................................35 Section 5.13. Miss Marquette Loans......................................35 Section 5.14. Further Assurances and Actions............................36 Section 5.15. Pending Acquisitions......................................36 Section 5.16. Allocation of Funds.......................................36 ARTICLE VI CONDITIONS TO MERGER Section 6.1. Conditions to Each Party's Obligation to Effect the Merger...................................................36 Section 6.2. Additional Conditions to Obligations of Lady Luck.........37 Section 6.3. Additional Conditions to Obligations of Buyer.............38 ii Page ARTICLE VII TERMINATION AND AMENDMENT Section 7.1. Termination...............................................39 Section 7.2. Effect of Termination.....................................42 Section 7.3. Fees and Expenses.........................................42 Section 7.4. Amendment.................................................43 Section 7.5. Extension; Waiver.........................................43 ARTICLE VIII MISCELLANEOUS Section 8.1. Nonsurvival of Representations, Warranties, Covenants and Agreements...........................................43 Section 8.2. Notices...................................................44 Section 8.3. Interpretation............................................45 Section 8.4. Counterparts..............................................45 Section 8.5. Entire Agreement; No Third Party Beneficiaries............45 Section 8.6. Governing Law.............................................45 Section 8.7. Assignment................................................45 Section 8.8. Severability; Enforcement.................................46 Section 8.9. Specific Performance......................................46 iii Index of Defined Terms The following terms have the respective meanings specified in the indicated Sections of the Agreement: Term Agreement Section - ---- ----------------- Acquisition Proposal 5.3(a) Agreement Recitals best knowledge Article III Buyer Recitals Buyer Disclosure Schedule Article IV Buyer Material Adverse Effect 4.1 Certificate of Merger 1.2 CIBC 4.4 Closing 1.3 Closing Date 1.3 Code 2.2(f) Confidentiality Agreement 5.6 DGCL 1.1 Dissenting Shares 2.4 Due Diligence Period 6.3 Effective Time 1.2 Encumbrances 3.8(b) Environmental Law 3.13(b) ERISA 3.14(a) ERISA Affiliate 3.14(a) Exchange Act 3.3(c) Exchange Agent 2.2(a) Exchange Fund 2.2(a) foreign person 3.7(i) GAAP 3.4(b) Gemini 5.1(n) Gemini Trademark Assets 5.1(n) Governmental Approvals 5.7(a) Governmental Entity 3.3(c) GSMC 3.7(e) Hazardous Substance 3.13(c) HSR Act 3.3(c) IMPS 5.1(n) include, includes or including 8.3 Indebtedness 3.11(a) Indemnified Parties 5.9(a) IRS 3.7(c) iv Term Agreement Section ---- ----------------- knowledge Article III Lady Luck Recitals Lady Luck Balance Sheet 3.4(b) Lady Luck Common Stock 2.1(a) Lady Luck Disclosure Schedule Article III Lady Luck Employee Plans 3.14(a) Lady Luck Gaming Laws 3.15(b) Lady Luck Interim Financial Statements 3.4(b) Lady Luck Las Vegas Agreement 5.1(n) Lady Luck Material Contracts 3.11(a) Lady Luck Material Adverse Effect 3.1 Lady Luck Notes 5.1(p) Lady Luck Option 2.3 Lady Luck Option Plan 2.3 Lady Luck Permits 3.15(a) Lady Luck Preferred Stock 3.2(a) Lady Luck Series A Preferred Stock 2.1(c) Lady Luck Series A Preferred Stock Redemption Amount 2.5 Lady Luck SEC Reports 3.4(a) Lady Luck Special Meeting 5.5 Lady Luck Stockholder Approval 3.20 Lady Luck Welfare Plan 3.14(g) Las Vegas Hotel 5.1(n) Leased Real Property 3.8(b) Liens 3.1 made available 8.3 Merger Recitals Merger Consideration 2.1(a) Merger Sub Recitals Merger Sub Common Stock 4.2 Miss Marquette Agreement 5.1(d) Miss Marquette Credit Agreement 5.13 Multiemployer Plan 3.14(e) Nevada Approval 6.1(c) Notifying Party 5.7(a) Onyx Partners 3.23 Outside Date 7.1(b) Owned Real Property 3.8(b) PBGC 3.14(f) Permitted Encumbrances 3.8(b) Physical Inspection and Review 6.3(d) v Term Agreement Section - ---- ----------------- prohibited transactions 3.14(c) Proxy Statement 5.4(a) Redemption Agent 2.5 SEC 3.3(c) Securities Act 3.4(a) Services 3.21 single employer 3.14(a) Sodak 3.7(e) strategic alliances 3.11(a) Stockholder Support Agreement Recitals Subsidiary 3.1 Superior Proposal 5.3(a) Surviving Corporation 1.1 Tax or Taxes 3.7(a) Terminating Buyer Breach 7.1(h) Terminating Lady Luck Breach 7.1(g) the date of this Agreement, the date hereof 8.3 Third Party 5.3(a) Tompkins 5.1(m) Voting Debt 3.2(b) Wasserstein Perella 3.22 without limitation 8.3 Year 2000 Ready 3.21 vi AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of October 5, 1999, by and among ISLE OF CAPRI CASINOS, INC., a Delaware corporation ("Buyer"), ISLE MERGER CORP., a Delaware corporation and a wholly owned subsidiary of Buyer ("Merger Sub"), and LADY LUCK GAMING CORPORATION, a Delaware corporation ("Lady Luck"). WHEREAS, the Board of Directors of Lady Luck has determined that the merger of Merger Sub with and into Lady Luck, upon the terms and subject to the conditions set forth in this Agreement (the "Merger"), is fair to, and in the best interests of, Lady Luck and its stockholders; WHEREAS, the Boards of Directors of Buyer and Merger Sub have determined that the Merger is in the best interests of Buyer and Merger Sub and their respective stockholders; WHEREAS, the Boards of Directors of Buyer, Merger Sub and Lady Luck have each approved and adopted this Agreement and approved the Merger and the other transactions contemplated hereby; and WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to each of Buyer's and Merger Sub's willingness to enter into this Agreement, the principal stockholder of Lady Luck will enter into a Stockholder Support Agreement with Buyer, dated as of the date of this Agreement in the form attached hereto as Exhibit A (the "Stockholder Support Agreement"), pursuant to which such stockholder will agree, among other things, to vote all voting securities of Lady Luck owned by him beneficially or of record in favor of approval of the transactions contemplated by this Agreement; NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, the parties agree as follows: ARTICLE I THE MERGER Section 1.1. The Merger. Upon the terms and subject to the provisions of this Agreement and in accordance with Section 251 of the Delaware General Corporation Law (the "DGCL"), at the Effective Time (as defined in Section 1.2), Merger Sub shall be merged with and into Lady Luck. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and Lady Luck shall continue as the surviving corporation (the "Surviving Corporation"). 1 Section 1.2. Effective Time of the Merger. Subject to the provisions of this Agreement (including Section 7.1 hereof), a certificate of merger with respect to the Merger in appropriate form (the "Certificate of Merger") shall be duly prepared, executed and acknowledged and thereafter delivered to the Secretary of State of the State of Delaware for filing, as provided in the DGCL, as early as practicable on the Closing Date (as defined in Section 1.3). The Merger shall become effective at the later of the date of filing of the Certificate of Merger or at such time within 90 days of the date of filing as is specified in the Certificate of Merger (the "Effective Time"). Section 1.3. Closing. The closing of the Merger (the "Closing") will take place at such time and place to be agreed upon by the parties hereto, on a date to be specified by Buyer and Lady Luck, which shall be no later than the third business day after satisfaction or, if permissible, waiver of the conditions set forth in Article VI (the "Closing Date") and no earlier than January 4, 2000, unless another date is agreed to by Buyer and Lady Luck. Section 1.4. Effect of the Merger. Upon becoming effective, the Merger shall have the effects set forth in the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all properties, rights, privileges, powers and franchises of Merger Sub and Lady Luck shall vest in the Surviving Corporation, and all debts, liabilities and duties of Merger Sub and Lady Luck shall become the debts, liabilities and duties of the Surviving Corporation. Section 1.5. Certificate of Incorporation and Bylaws of the Surviving Corporation. At the Effective Time, the Certificate of Incorporation and Bylaws of the Surviving Corporation shall be amended to be substantially identical to the Certificate of Incorporation and Bylaws, respectively, of Merger Sub as in effect immediately prior to the Effective Time, in each case until duly amended in accordance with applicable law; provided the name of the Surviving Corporation as set forth in its Certificate of Incorporation shall be changed to a new name to be determined by Merger Sub prior to the Effective Time. Section 1.6. Directors and Officers of the Surviving Corporation. The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation. The directors of Lady Luck immediately prior to the Effective Time shall each have resigned as of the Effective Time. The officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation. Section 1.7. Subsidiaries of the Surviving Corporation. The Surviving Corporation may distribute shares of stock of the Subsidiaries of the Surviving Corporation to the Buyer, or undertake similar transactions having the effect of reorganizing the corporate structure of Buyer and its Subsidiaries, from time to time after the Effective Time. 2 ARTICLE II EFFECT OF THE MERGER ON SECURITIES OF THE CONSTITUENT CORPORATIONS Section 2.1. Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of any of the parties hereto or the holders of any of the following: (a) Lady Luck Common Stock. Each share of common stock, par value $0.006 per share, of Lady Luck ("Lady Luck Common Stock") issued and outstanding immediately prior to the Effective Time (other than shares to be canceled and retired in accordance with Section 2.1(b) and any Dissenting Shares (as defined in Section 2.4), together with all rights in respect thereto, shall be converted, subject to Section 2.1(e), into the right to receive from the Surviving Corporation a net amount of $12.00 in cash (the "Merger Consideration"). As of the Effective Time, all shares of Lady Luck Common Stock upon which the Merger Consideration is payable pursuant to this Section 2.1(a) 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 shall cease to have any ownership or other rights with respect thereto, except the right to receive the Merger Consideration in exchange for such shares upon the surrender of such certificate in accordance with Section 2.2. (b) Cancellation of Treasury Stock and Buyer-Owned Stock. All shares of Lady Luck Common Stock that are owned by Lady Luck as treasury stock and any shares of Lady Luck Common Stock owned by Buyer or any wholly-owned Subsidiary (as defined in Section 3.1) of Buyer shall be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. (c) Capital Stock of Merger Sub. Each issued and outstanding share of the common stock, par value $.01 per share, of Merger Sub shall be converted into and become one fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. (d) Adjustments to Merger Consideration. The Merger Consideration shall be adjusted to reflect fully the effect of any stock split, reverse split, stock dividend (including any dividend or distribution of securities convertible into Lady Luck Common Stock, as applicable), reorganization, recapitalization or any other like change with respect to Lady Luck Common Stock occurring after the date hereof and prior to the Effective Time. 3 Section 2.2. Exchange of Certificates. (a) Exchange Agent. At or prior to the Effective Time, Buyer shall deposit with a bank or trust company designated by Buyer and reasonably acceptable to Lady Luck (the "Exchange Agent"), for the benefit of the holders of shares of Lady Luck Common Stock outstanding immediately prior to the Effective Time, for exchange in accordance with this Section 2.2, through the Exchange Agent, cash in an aggregate amount sufficient to pay the Merger Consideration (the cash so deposited being hereinafter referred to as the "Exchange Fund"). Any interest, dividends or other income earned on the investment of cash or other property held in the Exchange Fund shall be for the account of and payable to Buyer. (b) Exchange Procedures. Promptly after the Effective Time, Buyer will instruct the Exchange Agent to mail to each holder of record of Lady Luck Common Stock (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to a Certificate shall pass, only upon proper delivery of the Certificate to the Exchange Agent and shall be in such form and have such other provisions as Buyer may reasonably specify), and (ii) instructions to effect the surrender of the Certificate in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Exchange Agent together with such letter of transmittal, duly executed, and such other customary documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor cash in an amount equal to the Merger Consideration multiplied by the number of shares represented by such Certificate, and the Certificate so registered shall forthwith be canceled. In the event of a transfer of ownership of shares of Lady Luck Common Stock which is not registered in the transfer records of Lady Luck as of the Effective Time, the Merger Consideration may be issued and paid in accordance with this Article II to a transferee if the Certificate evidencing such shares of Lady Luck Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer pursuant to this Section 2.2(b) and by evidence that any applicable stock transfer taxes have been paid. Until so surrendered, each outstanding Certificate that prior to the Effective Time represented shares of Lady Luck Common Stock (other than Certificates representing Dissenting Shares) will be deemed from and after the Effective Time for all corporate purposes (other than the payment of dividends and subject to Section 2.1(e)), to evidence the right to receive the Merger Consideration without interest. No interest will be paid or will accrue on the cash payable upon the surrender of any Certificate. (c) Transfers of Ownership. At the Effective Time, the stock transfer books of Lady Luck shall be closed, and there shall be no further registration of transfers of Lady Luck Common Stock thereafter on the records of Lady Luck. (d) Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to the former stockholders of Lady Luck as of the date which is 4 twelve months after the Effective Time shall be delivered to Buyer, upon demand, and thereafter such former stockholders of Lady Luck who have not theretofore complied with this Section 2.2 shall be entitled to look only to Buyer for payment of the Merger Consideration to which they are entitled pursuant hereto. (e) No Liability. None of Buyer, Merger Sub, Lady Luck or the Exchange Agent shall be liable to any holder of Lady Luck Common Stock for any Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificates shall not have been surrendered immediately prior to the date on which the Merger Consideration or any dividends or distributions with respect to Lady Luck Common Stock in respect of such Certificate would otherwise escheat to or become the property of any Governmental Entity, any such Merger Consideration, dividends or distributions in respect of such Certificate shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto on such date prior to the time such escheat laws become applicable. (f) Withholding Rights. Buyer or the Exchange Agent shall be entitled to deduct and withhold from the Merger Consideration otherwise payable pursuant to this Agreement to any holder of Certificates which prior to the Effective Time represented shares of Lady Luck Common Stock such amounts as Buyer or the Exchange Agent is 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 provision of state, local or foreign tax law. To the extent that amounts are so withheld by Buyer or the Exchange Agent and remitted to the proper authority, such withheld amounts thereafter shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Lady Luck Common Stock in respect of which such deduction and withholding was made by Buyer or the Exchange Agent. (g) Lost, Stolen or Destroyed Certificates. In the event any Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall pay in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof such Merger Consideration as may be required pursuant to Section 2.2; provided, however, that Buyer may, in its discretion, and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificates to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Buyer, the Surviving Corporation or the Exchange Agent with respect to the Certificates alleged to have been lost, stolen or destroyed. Section 2.3. Acceleration and Payment for Lady Luck Options. Following the execution of this Agreement, the Board of Directors of Lady Luck (or, if appropriate, any committee administering the Lady Luck Stock Option Plan (as defined below)) shall adopt such resolutions or use its best efforts to take such other actions as are required to provide that each then outstanding stock option to purchase shares of Lady Luck Common Stock (a "Lady Luck 5 Option") heretofore granted under any stock option or other stock-based incentive plan, program or arrangement of Lady Luck, including the 1993 Stock Option Plan and the 1996 Director Stock Option Plan (collectively, the "Lady Luck Option Plan") shall be accelerated and canceled immediately prior to the Effective Time in exchange for payment of an amount of cash equal to the product of (x) the number of shares of Lady Luck Common Stock subject to such Lady Luck Option immediately prior to the consummation of the Merger and (y) the excess, if any, of the Merger Consideration over the per share exercise price of such Lady Luck Option; provided, however, that such excess shall not be less than zero. Notwithstanding anything in this Section 2.3 to the contrary, with respect to any Lady Luck Option granted under the Lady Luck Stock Option Plan having a per share exercise price that is greater than the Merger Consideration, whether or not vested and exercisable, the Board of Directors of Lady Luck (or, if appropriate, any committee administering the Lady Luck Stock Option Plan), shall adopt such resolutions or use its best efforts to take such other actions as are required to provide that each such Lady Luck Option shall be accelerated and, if not exercised before the Effective Time, shall be canceled as of the Effective Time and shall have no further force or effect as of the Effective Time, without regard to the fact that the holder of such Lady Luck Option shall have received no payment for the Lady Luck Option. Section 2.4. Dissenting Shares. Notwithstanding Section 2.1, all shares of Lady Luck Common Stock issued and outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such shares of Lady Luck Common Stock in accordance with the DGCL (collectively, the "Dissenting Shares") shall not be converted into a right to receive the Merger Consideration, unless such holder fails to perfect or withdraws or otherwise loses such holder's right to appraisal. If after the Effective Time such holder fails to perfect or withdraws or loses such holder's right to appraisal, such shares of Lady Luck Common Stock shall be treated as if they had been converted as of the Effective Time into a right to receive the Merger Consideration without interest thereon. Lady Luck shall give Buyer prompt notice of any demands received by Lady Luck for appraisal of shares of Lady Luck Common Stock, and Buyer shall have the right to participate in all negotiations and proceedings with respect to such demands. Lady Luck shall not, except with the prior written consent of Buyer, make any payment with respect to, or settle or offer to settle, any such demands. Section 2.5. Lady Luck Preferred Stock. Each share of Series A Mandatory Cumulative Redeemable Preferred Stock, par value $25.00 per share, of Lady Luck ("Lady Luck Series A Preferred Stock") issued and outstanding immediately prior to the Effective Time, shall be redeemed in connection with the transactions contemplated hereby immediately prior to the Effective Time pursuant to its terms at its liquidation preference. Immediately prior to the Effective Time, Buyer shall deposit with a bank or trust company designated by Lady Luck and reasonably acceptable to Buyer (the "Redemption Agent") for the benefit of the holders of shares of Lady Luck Series A Preferred Stock outstanding immediately prior to the Effective Time, for redemption by Lady Luck through the Redemption Agent, cash in an aggregate amount sufficient to redeem all outstanding shares of Lady Luck Series A Preferred Stock at the liquidation preference as of such date (the "Lady Luck Series A Preferred Stock Redemption 6 Amount"). Lady Luck shall call the Lady Luck Series A Preferred Stock for redemption pursuant to its terms at the Lady Luck Series A Preferred Stock Redemption Price at the direction of Buyer and conditioned upon closing of the Merger. Any interest, dividends or other income earned on the investment of cash or other property held in the Exchange Fund shall be for the account of and payable to Buyer. Section 2.6. Lady Luck Debt Securities. Except as otherwise repaid, redeemed or purchased in connection with the transactions contemplated hereby, all notes and other debt instruments of Lady Luck that are outstanding at the Effective Time shall continue to be outstanding subsequent to the Effective Time as debt instruments of the Surviving Corporation, subject to their respective terms and provisions. ARTICLE III REPRESENTATIONS AND WARRANTIES OF LADY LUCK Lady Luck represents and warrants to Buyer and Merger Sub that the statements contained in this Article III are true and correct except as set forth herein and in the disclosure schedule delivered by Lady Luck to Buyer and Merger Sub on or before the date of this Agreement (the "Lady Luck Disclosure Schedule"). Any reference in the Merger Agreement to Lady Luck's "knowledge" or "best knowledge," or to "the best of Lady Luck's knowledge," or words of similar import, shall be deemed a reference to the actual knowledge of any of the (i) corporate officers of Lady Luck or any of its Subsidiaries and (ii) general managers of any gaming property of Lady Luck or any of its Subsidiaries for all purposes. The Lady Luck Disclosure Schedule has been prepared based upon the foregoing definition. Section 3.1. Organization of Lady Luck and its Subsidiaries. Each of Lady Luck and its Subsidiaries (as defined below) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite corporate, partnership or limited liability company power and authority to carry on its business as now being conducted. Each of Lady Luck and its Subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so qualified, licensed or in good standing would not have a material adverse effect on the business, properties, condition (financial or otherwise), prospects or results of operations of Lady Luck and its Subsidiaries, taken as a whole other than any effect arising out of, or resulting from, general economic conditions in the United States or conditions generally affecting the gaming industry in the United States (a "Lady Luck Material Adverse Effect"). Lady Luck has delivered to Buyer a true and correct copy of the Certificate of Incorporation and Bylaws of Lady Luck, in each case as amended to the date of this Agreement. Assuming regulatory compliance by Buyer, the respective organizational documents of Lady Luck's Subsidiaries do not contain any provision that would limit or otherwise restrict the ability of Buyer, following the Effective Time, from owning or operating such Subsidiaries on the same basis as Lady Luck. Except as set forth on the Lady Luck Disclosure Schedule, all the 7 outstanding shares of capital stock of, or other equity interests in, each such Subsidiary have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by Lady Luck, free and clear of all pledges, claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever (collectively, "Liens") and free of any other restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests). As used in this Agreement, the word "Subsidiary" means, with respect to any party, any corporation or other organization, whether incorporated or unincorporated, of which (i) such party or any other Subsidiary of such party is a general partner or (ii) at least fifty percent (50%) of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries. Section 3.2. Capitalization. (a) The authorized capital stock of Lady Luck consists of 75,000,000 shares of Lady Luck Common Stock, $0.006 par value per share, and 4,000,000 shares of preferred stock, $25.00 par value per share ("Lady Luck Preferred Stock"). As of the date hereof, (i) 4,881,003 shares of Lady Luck Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable, (ii) no shares of Lady Luck Common Stock were held in the treasury of Lady Luck or by Subsidiaries of Lady Luck, and (iii) 433,638 shares of Lady Luck Series A Preferred Stock were the only Lady Luck Preferred Stock issued and outstanding. Section 3.2(a)(i) of the Lady Luck Disclosure Schedule sets forth the number of shares of Lady Luck Common Stock reserved for future issuance upon exercise of Lady Luck Options granted and outstanding as of the date hereof and under the Lady Luck Stock Option Plans. Section 3.2(a)(i) of the Lady Luck Disclosure Schedule also sets forth as of the date hereof, for each Lady Luck Stock Option Plan, the dates on which Options which are still outstanding under such plan were granted, the number of outstanding Options granted on each such date and the exercise price thereof. Except as disclosed in Section 3.2(a)(i) of the Lady Luck Disclosure Schedule, since December 31, 1998 through the date of this Agreement, Lady Luck has not made any grants under any of the Lady Luck Stock Option Plans. Except as disclosed in Section 3.2(a)(i) of the Lady Luck Disclosure Schedule, as of the date of this Agreement, Lady Luck has not granted any contractual rights the value of which is derived from the financial performance of Lady Luck or from the value of shares of Lady Luck Common Stock. Except as disclosed in Section 3.2(a)(ii) of the Lady Luck Disclosure Schedule, there are no obligations, contingent or otherwise, of Lady Luck or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of Lady Luck Common Stock or the capital stock or ownership interests of any Subsidiary or to provide funds to or make any investment in an amount greater than $250,000 in the aggregate (in the form of a loan, capital contribution or otherwise) in any such Subsidiary or any other entity other than 8 guarantees of bank obligations or indebtedness for borrowed money of Subsidiaries entered into in the ordinary course of business. All of the outstanding shares of capital stock (including shares which may be issued upon exercise of outstanding options) or other ownership interests of each of Lady Luck's Subsidiaries are duly authorized, validly issued, fully paid and nonassessable and, except as disclosed in Section 3.2(a)(iii) of the Lady Luck Disclosure Schedule and except as required by gaming industry regulations, all such shares and ownership interests are owned by Lady Luck or another Subsidiary of Lady Luck, free and clear of all security interests, liens, claims, pledges, agreements, limitations on Lady Luck's voting rights, charges or other encumbrances or restrictions on transfer of any nature. (b) There are no bonds, debentures, notes or other indebtedness having voting rights (or convertible into securities having such rights) in connection with the Merger or the transactions contemplated by this Agreement ("Voting Debt") of Lady Luck or any of its Subsidiaries issued and outstanding, other than the debt securities disclosed in Section 3.2(b) of the Lady Luck Disclosure Schedule. Except as set forth in Section 3.2(a) or in this Section 3.2(b) or as reserved for future grants of options under the Lady Luck Stock Option Plans as of the date hereof, (i) there are no shares of capital stock of any class of Lady Luck, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding; (ii) except as set forth in Section 3.2(b) of the Lady Luck Disclosure Schedule, there are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which Lady Luck or any of its Subsidiaries is a party or by which it is bound obligating Lady Luck or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other ownership interests (including Voting Debt) of Lady Luck or any of its Subsidiaries or obligating Lady Luck or any of its Subsidiaries to grant, extend, accelerate the vesting of or enter into any such option, warrant, equity security, call, right, commitment or agreement; and (iii) except for the Stockholder Support Agreement being entered into on the date hereof, there are no voting trusts, proxies or other voting agreements or understandings with respect to the shares of capital stock of Lady Luck. All shares of Lady Luck Common Stock subject to issuance as specified in this Section 3.2(b) are duly authorized and, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be validly issued, fully paid and nonassessable. Section 3.3. Authority; No Conflict; Required Filings and Consents. (a) Lady Luck has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Lady Luck have been duly authorized by all necessary corporate action on the part of Lady Luck, subject only to the approval and adoption of this Agreement and the Merger by Lady Luck's common stockholders holding at least 75% of the outstanding shares of Lady Luck Common Stock. This Agreement has been duly 9 executed and delivered by Lady Luck and constitutes the valid and binding obligation of Lady Luck, enforceable against Lady Luck in accordance with its terms. (b) Other than as disclosed in Section 3.3(b) of the Lady Luck Disclosure Schedule, the execution and delivery of this Agreement by Lady Luck does not, and the consummation of the transactions contemplated hereby will not, (i) conflict with, or result in any violation or breach of, any provision of the Certificate of Incorporation or Bylaws of Lady Luck or the comparable charter or organizational documents of any of its Subsidiaries, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, contract or other agreement, instrument or obligation to which Lady Luck or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, or (iii) subject to the governmental filings and other matters referred to in Section 3.3(c), conflict with or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Lady Luck or any of its Subsidiaries or any of its or their properties or assets, except in the case of clauses (ii) and (iii) for any such conflicts, violations, defaults, terminations, cancellations or accelerations which (x) are not, individually or in the aggregate, reasonably likely to have a Lady Luck Material Adverse Effect or (y) would not prevent or materially delay the consummation of the Merger. (c) Except as disclosed in Section 3.3(c) of the Lady Luck Disclosure Schedule, no consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency, commission, gaming authority or other governmental authority or instrumentality ("Governmental Entity") is required by or with respect to Lady Luck or any of its Subsidiaries in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (i) the filing of the pre-merger notification report under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), (ii) the filing of the Certificate of Merger with respect to the Merger with the Secretary of State of the State of Delaware, (iii) the filing of any Proxy Statement (as such term is defined in Section 5.4(a) below) with the Securities and Exchange Commission (the "SEC") in accordance with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iv) any approvals and filing of notices required under any applicable gaming industry regulation, (v) such consents, approvals, orders, authorizations, permits, filings or registrations related to, or arising out of, compliance with statutes, rules or regulations regulating the consumption, sale or serving of alcoholic beverages, and (vi) such immaterial filings and consents as may be required under any environmental, health or safety law or regulation pertaining to any notification, disclosure or required approval triggered by the Merger. 10 Section 3.4. Public Filings; Financial Statements. (a) None of Lady Luck's Subsidiaries is required to file forms, reports and documents with the SEC. Lady Luck has filed with the SEC all reports, schedules, forms, statements and other documents required to be filed by the Securities Act of 1933, as amended (the "Securities Act") and the Exchange Act since December 31, 1998. Except as set forth in Section 3.4(a) of the Lady Luck Disclosure Schedule and except for matters otherwise corrected by the subsequent filing with the SEC of an appropriate amendment prior to the date of this Agreement, the reports, forms, documents filed by Lady Luck with the SEC prior to the date of this Agreement (the "Lady Luck SEC Reports") (including any financial statements filed as a part thereof or incorporated by reference therein) (i) at the time filed, complied in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and (ii) did not, at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Lady Luck SEC Reports or necessary in order to make the statements in such Lady Luck SEC Reports, in the light of the circumstances under which they were made, not misleading. (b) Except as set forth in Section 3.4(a), each of the consolidated financial statements (including, in each case, any related notes) of Lady Luck contained in the Lady Luck SEC Reports complied as to form in all material respects with the applicable rules and regulations of the SEC with respect thereto; was prepared in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q under the Exchange Act), and fairly presented the consolidated financial position of Lady Luck and its Subsidiaries as of the dates, and the consolidated results of its operations and cash flows for the periods, indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which, with respect to interim periods since December 31, 1998, were not or are not expected to be material in amount. The audited balance sheet of Lady Luck as of December 31, 1998 is referred to herein as the "Lady Luck Balance Sheet." The unaudited consolidated balance sheet and consolidated income statement of Lady Luck as of and for the period ended June 30, 1999 are referred to herein as the "Lady Luck Interim Financial Statements." Section 3.5. No Undisclosed Liabilities. Except as disclosed in the Lady Luck SEC Reports or in Section 3.5 of the Lady Luck Disclosure Schedule, and except for liabilities and obligations incurred since the date of the Lady Luck Balance Sheet in the ordinary course of business consistent with past practices, Lady Luck and its consolidated Subsidiaries do not have any liabilities accrued, contingent or otherwise, of the type required to be reflected in financial statements, including the notes thereto, in accordance with GAAP, and whether due or to become due. 11 Section 3.6. Absence of Certain Changes or Events. Except as disclosed in the Lady Luck SEC Reports or in Section 3.6 of the Lady Luck Disclosure Schedule, since the date of the Lady Luck Balance Sheet, Lady Luck and its Subsidiaries have conducted their respective businesses only in the ordinary course consistent with past practice, and there has not been (a) any event, series of events, condition or series of conditions that has had a Lady Luck Material Adverse Effect; (b) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any of Lady Luck's capital stock; (c) any split, combination or reclassification of any of its capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock; (d) (i) any granting by Lady Luck or any of its Subsidiaries to any director or officer of Lady Luck or its Subsidiaries of any increase in compensation, except in the ordinary course of business consistent with prior practice, or as was required under employment agreements in effect as of the date of the most recent financial statements included in the Lady Luck SEC Reports, (ii) any granting by Lady Luck or any of its Subsidiaries to any director or officer of any stock options, (iii) any granting by Lady Luck or any of its Subsidiaries to any officer of any increase in severance or termination pay, or (iv) any entry by Lady Luck or any of its Subsidiaries into any employment, severance or termination agreement with any director, officer or other employee, consultant or independent contractor; (e) any material change in accounting methods, principles or practices of Lady Luck, except insofar as may have been required by a change in GAAP; (f) any tax election that individually or in the aggregate would be reasonably likely to have a Lady Luck Material Adverse Effect; or (g) any settlement of pending or threatened litigation involving Lady Luck or any of its Subsidiaries (whether brought by a private party or a Governmental Entity) in amounts of $10,000 or more. Section 3.7. Taxes. (a) For the purposes of this Agreement, a "Tax" or, collectively, "Taxes," means any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, gains, franchise, withholding, payroll, recapture, employment, excise, unemployment insurance, social security, business license, occupation, business organization, stamp, environmental and property taxes, together with all interest, penalties and additions imposed with respect to such amounts. (b) Lady Luck and each of its Subsidiaries have: (i) filed all federal, state, local and foreign Tax returns and reports required to be filed by them prior to the date of this Agreement (taking into account all applicable extensions), and such Tax returns and reports (taking into account all amendments thereto) are true, correct and complete in all material respects; (ii) paid or accrued all Taxes due and payable; and (iii) paid or accrued all Taxes for which a notice of assessment or collection has been received (other than amounts being contested in good faith by appropriate proceedings with the relevant 12 taxing authority and for which adequate reserves in accordance with GAAP are being maintained). (c) Except as set forth in Section 3.7(c) of the Lady Luck Disclosure Schedule, no Tax return of Lady Luck or any of its Subsidiaries is under examination by the Internal Revenue Service (the "IRS") nor any other taxing authority and neither the IRS nor any other taxing authority has asserted any claim for Taxes, or to the actual knowledge of the executive officers of Lady Luck, is threatening to assert any claims for Taxes. No material issues relating to Taxes were raised by the relevant taxing authority in any completed audit or examination that can reasonably be expected to recur in a later taxable period. (d) Lady Luck and its Subsidiaries have withheld or collected and paid over to the appropriate governmental authorities (or are properly holding for such payment) all Taxes required by law to be withheld or collected. There are no liens for Taxes upon the assets of Lady Luck or any of its Subsidiaries (other than liens for Taxes that are not yet due or delinquent or that are being contested in good faith by appropriate proceedings, with the relevant taxing authority and for which adequate reserves in accordance with GAAP are being maintained). (e) Except as disclosed in Section 3.7(c) of the Lady Luck Disclosure Schedule and Gamblers Supply Management Company ("GSMC"), which currently is a subsidiary of Sodak Gaming, Inc. ("Sodak"), and which is expected to be acquired by Lady Luck after the date hereof but prior to Closing pursuant to the Miss Marquette Agreement (as herein defined), neither Lady Luck nor any of its Subsidiaries is or has been a member of an affiliated group of corporations filing a consolidated federal income tax return (or a group of corporations filing a consolidated, combined or unitary income tax return under comparable provisions of state, local or foreign tax law) other than a group the common parent of which is or was Lady Luck or any Subsidiary of Lady Luck. (f) Neither Lady Luck nor any of its Subsidiaries has any obligation under any agreement or arrangement with any other person with respect to Taxes of such other person (including pursuant to Treas. Reg. Section 1.1502-6 or comparable provisions of state, local or foreign tax law) and including any liability for Taxes of any predecessor entity. (g) Except as disclosed in Section 3.7(g) of the Lady Luck Disclosure Schedule, neither Lady Luck nor any of its Subsidiaries shall be required to include in a taxable period ending after the Effective Time taxable income attributable to income that accrued in a Tax period prior to the Effective Time but that was not recognized in any such prior Tax period as a result of the installment method of accounting, the completed contract or percentage contract methods of accounting (including the look-back method under Section 460(b)(2) of the Code), the cash method of accounting or Section 481 of the Code or any comparable provision of state, local, or foreign Tax law, or for any other 13 reason. Neither Lady Luck nor any of its Subsidiaries has made an election under Section 341(f) of the Code. (h) Except as disclosed in Section 3.7(h) of the Lady Luck Disclosure Schedule, (i) there are no outstanding agreements or waivers extending, or having the effect of extending, the statutory period of limitation applicable to any Tax returns required to be filed with respect to Lady Luck or any of its Subsidiaries, (ii) neither Lady Luck nor any of its Subsidiaries, nor any affiliated group, within the meaning of Section 1504 of the Code, of which Lady Luck or any of its Subsidiaries is or has ever been a member, has requested any extension of time within which to file any Tax return, which return has not yet been filed, and (iii) no power of attorney with respect to any Taxes has been executed or filed with any taxing authority by or on behalf of Lady Luck or any of its Subsidiaries which is still in effect. (i) Except as set forth in Section 3.7(i) of the Lady Luck Disclosure Schedule, no person who holds five percent or more of the stock of Lady Luck is a "foreign person" as defined in Section 1445 of the Code. Section 3.8. Real Property, Title and Related Matters. (a) Real Property. Section 3.8(a) of the Lady Luck Disclosure Schedule sets forth a true and complete list as of the date of this Agreement of (i) all contracts or agreements (including leases, ground leases, licenses, options and other agreements) relating to Leased Real Property, and (ii) a brief description of each piece of Owned Real Property. Lady Luck or a Subsidiary of Lady Luck, as the case may be, has (A) good and marketable title to all Owned Real Property and to all fixtures thereon, free and clear of any Encumbrances, except for Permitted Encumbrances, and (B) except as set forth in Section 3.8(a) of the Lady Luck Disclosure Schedule, the right to quiet enjoyment of the Leased Real Property for the full term of the leases. Each lease or other contract referred to in Section 3.8(a) of the Lady Luck Disclosure Schedule relating to Leased Real Property is a valid contract or agreement enforceable against Lady Luck or its Subsidiary, as the case may be, in accordance with its terms and, to the knowledge of Lady Luck, against the other parties thereto. To the knowledge of Lady Luck, there are no rights or options of any third party to acquire such Leased Real Property or any ownership therein. Neither Lady Luck nor any of its Subsidiaries are in default, nor have received any written notice alleging that it or they are in default, under the leases, ground leases, subleases, licenses, options or other agreements set forth in Section 3.8(a) of the Lady Luck Disclosure Schedule relating to Leased Real Property. To the knowledge of Lady Luck, no other party to any such leases, ground leases, licenses, options or other agreements is in default thereunder. (b) Definitions. As used in this Section 3.8, the following terms shall have the following meanings: 14 "Encumbrances" means all leases, mortgages, liens, pledges, charges, options, encumbrances or defects of any kind or character. "Leased Real Property" means all of the real property leased or subleased by Lady Luck or a Subsidiary of Lady Luck as tenant, together with, to the extent leased by Lady Luck, all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, equipment and personal property of Lady Luck attached or appurtenant thereto, and all easements, licenses, rights and appurtenances related to the foregoing. "Owned Real Property" means all of the real property owned by Lady Luck or any of its Subsidiaries, together with all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, equipment and personal property attached or appurtenant thereto, and all easements, licenses, rights and appurtenances relating to the foregoing. "Permitted Encumbrances" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (i) Encumbrances that are disclosed in Section 3.8(a) of the Lady Luck Disclosure Schedule, except for (A) any Encumbrance which would prevent or impair in any way the use of the subject property for its current use or (B) any Encumbrance which secures any indebtedness (other than indebtedness that is otherwise permitted by this Agreement), (ii) liens for taxes, assessments, fees and other governmental charges or levies which are not yet due, payable or delinquent, (iii) such survey exceptions or reciprocal easement agreements that do not prevent Lady Luck or its Subsidiaries, and would not prevent the Surviving Corporation, from conducting Lady Luck's business as applicable as currently conducted and which would not have a Lady Luck Material Adverse Effect, (iv) the provisions of any federal, state or local law, ordinance or regulation, provided the same are not violated by the current use of the property, (v) Encumbrances imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's liens and other similar liens arising in the ordinary course of business, securing obligations that are not in excess of $50,000 in the aggregate at any time, and (vi) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations. Section 3.9. Title to Personal Property; Liens. Lady Luck and each of its Subsidiaries has sufficiently good and valid title to, or an adequate leasehold interest in, its material tangible personal properties and assets (including all river boats operated by Lady Luck and its Subsidiaries) in order to allow it to conduct, and continue to conduct, its business as and where currently conducted. Section 3.9 of the Lady Luck Disclosure Schedule is a full and complete list of all leases, licenses and similar agreements relating to all tangible personal property used by Lady Luck and its Subsidiaries in the conduct of their business that is not owned by them. Except as disclosed in Section 3.9 of the Lady Luck Disclosure Schedule, all such material tangible personal assets and properties are sufficiently free of liens to allow each 15 of Lady Luck and its Subsidiaries to conduct, and continue to conduct, its business as currently conducted, and the consummation of the transactions contemplated by this Agreement will not alter or impair such ability in any respect which, individually or in the aggregate, would have a Lady Luck Material Adverse Effect. Section 3.10. Intellectual Property. Section 3.10 of the Lady Luck Disclosure Schedule lists all (i) trademark and service mark registrations and applications owned by Lady Luck or any of its Subsidiaries, and (ii) trademark, service mark and trade name license agreements to which Lady Luck or any of its Subsidiaries is a party. Except as disclosed in Section 3.10 of the Lady Luck Disclosure Schedule, all material trademarks, trademark applications, trade names, service marks, trade secrets (including customer lists and customer databases), copyrights, patents, licenses, know-how and other proprietary intellectual property rights used in connection with the businesses of Lady Luck and its Subsidiaries as currently conducted are without material restrictions or material conditions on use, and there is no conflict with the intellectual property rights of Lady Luck and its Subsidiaries therein or any conflict by them with the intellectual property rights of others therein which, individually or in the aggregate, would be reasonably likely to have a Lady Luck Material Adverse Effect. Section 3.11. Agreements, Contracts and Commitments. (a) Except as listed as an exhibit to the Lady Luck SEC Reports or as disclosed in Section 3.11(a) of the Lady Luck Disclosure Schedule, as of the date of this Agreement, neither Lady Luck nor any of its Subsidiaries is a party to any oral or written (i) agreement, contract, indenture or other instrument relating to Indebtedness (as defined below) in an amount exceeding $100,000, (ii) partnership, joint venture or limited liability or management agreement with any person, (iii) agreement, contract or other instrument relating to any merger, consolidation, business combination, share exchange or business acquisition, or for the purchase, acquisition, sale or disposition of any material assets, of Lady Luck or any of its Subsidiaries outside the ordinary course of business, (iv) agreement, contract or other instrument relating to any "strategic alliances" (i.e., cross-marketing, affinity relationship, etc.), (v) contract, agreement or commitment which materially restricts (geographically or otherwise) the conduct of any line of business by Lady Luck or any of its Subsidiaries, (vi) any contract, agreement or other instrument having as a party a partnership, joint venture or limited liability company in which Lady Luck or any of its Subsidiaries is a partner, joint venture party or member which would otherwise satisfy the criteria in clauses (i), (iii), (iv) or (v) if Lady Luck or any of its Subsidiaries were a party to such contract, agreement or other instrument, (vii) any other contract, agreement or commitment that requires annual or remaining payments in excess of $50,000 after the date hereof or (viii) any other contract, agreement or commitment that is not cancelable by Lady Luck or its Subsidiaries without penalty on 30 days' notice or less (collectively, the "Lady Luck Material Contracts"). "Indebtedness" means any liability in respect of (A) borrowed money, (B) capitalized lease obligations, (C) the deferred purchase price of property or services (other than trade payables in the ordinary course of business), and (D) guarantees of any of the foregoing incurred by any other person other than Lady Luck or any of its Subsidiaries. Except as 16 set forth in Section 3.11(a) of the Lady Luck Disclosure Schedule and except for the Lady Luck Las Vegas Agreement and the Consulting, Advisory and Non-Competition Agreement described in Section 5.12, from and after the Effective Time there will be no contract, agreement, other instrument or commitment, written or oral, between the Surviving Corporation or any of its Subsidiaries, on the one hand, and any former or present officer, director, shareholder or employee of Lady Luck or any of its Subsidiaries. (b) Except as disclosed in Section 3.11(b) of the Lady Luck Disclosure Schedule, as of the date of this Agreement, (i) each of the Lady Luck Material Contracts is valid and binding upon Lady Luck or any of its Subsidiaries (and, to Lady Luck's best knowledge, on all other parties thereto) in accordance with its terms and is in full force and effect, (ii) there is no breach or violation of or default by Lady Luck or any of its Subsidiaries under any of the Lady Luck Material Contracts, whether or not such breach, violation or default has been waived, and (iii) no event has occurred with respect to Lady Luck or any of its Subsidiaries which, with notice or lapse of time or both, would constitute a breach, violation or default, or give rise to a right of termination, modification, cancellation, foreclosure, imposition of a lien, prepayment or acceleration under any of the Lady Luck Material Contracts. Section 3.12. Litigation. Except as specifically disclosed in the Lady Luck SEC Reports or in Section 3.12 of the Lady Luck Disclosure Schedule, (a) there is no action, suit or proceeding, claim, arbitration or investigation against or affecting Lady Luck or any of its Subsidiaries pending, or as to which Lady Luck or any of its Subsidiaries has received any written notice of assertion against or affecting, Lady Luck or any of its Subsidiaries, or any property or asset of Lady Luck or any of its Subsidiaries, before any court, arbitrator, or administrative, governmental or regulatory authority or body, domestic or foreign that is not fully covered by insurance subject to deductible amounts under the applicable insurance policies; and (b) there is no judgment, order, injunction or decree of any Governmental Entity outstanding against Lady Luck or any of its Subsidiaries. Section 3.13. Environmental Matters. (a) Except as disclosed in Section 3.13(a) of the Lady Luck Disclosure Schedule: (i) Lady Luck and its Subsidiaries have complied with all applicable Environmental Laws (as defined in Section 3.13(b)); (ii) the properties currently owned, leased or operated by Lady Luck and its Subsidiaries (including soils, groundwater, surface water, buildings or other structures) are not contaminated with any Hazardous Substances (as defined in Section 3.13(c)); (iii) neither Lady Luck nor its Subsidiaries are subject to liability for any Hazardous Substance disposal or contamination on any third party property; (iv) neither Lady Luck nor any of its Subsidiaries has been associated with any release or threat of release of any Hazardous Substance; (v) neither Lady Luck nor any of its Subsidiaries has received any notice, demand, letter, claim or request for information alleging that Lady Luck or any of its Subsidiaries may be in violation of or liable under any Environmental Law; (vi) neither Lady Luck nor any 17 of its Subsidiaries is subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or is subject to any indemnity or other agreement with any third party relating to liability under any Environmental Law or relating to Hazardous Substances; and (vii) there are no circumstances or conditions involving Lady Luck or any of its Subsidiaries that could reasonably be expected to result in any claims, liability, investigations, costs or restrictions on the ownership, use or transfer of any property of Lady Luck or any of its Subsidiaries pursuant to any Environmental Law. (b) For purposes of this Agreement, the term "Environmental Law" means any federal, state, local or foreign law, regulation, order, decree, permit, authorization, opinion, common law or agency requirement relating to: (A) the protection, investigation or restoration of the environment, health and safety, or natural resources, (B) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance, or (C) noise, odor, wetlands, pollution, contamination or any injury or threat of injury to persons or property. (c) For purposes of this Agreement, the term "Hazardous Substance" means any substance that is: (A) listed, classified or regulated pursuant to any Environmental Law; (B) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials or radon; or (C) any other substance which is the subject of regulatory action by any Governmental Entity pursuant to any Environmental Law. Section 3.14. Employee Benefit Plans. (a) Section 3.14(a) of the Lady Luck Disclosure Schedule contains a true and complete list of all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), all employment, retention, change of control and severance agreements, and all bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance and other similar employee benefit plans, programs, policies and agreements, written or otherwise, in each case that is sponsored, maintained, contributed to or required to be contributed to by Lady Luck or any of its Subsidiaries or any trade or business (whether or not incorporated) which, together with Lady Luck or any of its Subsidiaries, would be deemed a "single employer" under Section 4001(b) of ERISA (an "ERISA Affiliate"), or to which Lady Luck, any of its Subsidiaries or any ERISA Affiliate is a party for the benefit of any current or former employee, consultant, director or independent contractor of Lady Luck or any of its Subsidiaries (together, the "Lady Luck Employee Plans"). (b) Lady Luck has delivered or made available to Buyer all documents related to the Lady Luck Employee Plans, including, without limitation: (i) true and complete copies of all Lady Luck Employee Plan documents and any summary plan descriptions, summary annual reports and insurance contracts relating thereto, (ii) detailed summaries of all unwritten Lady Luck Employee Plans, (iii) true and complete copies of the most 18 recent financial statements, actuarial reports and annual reports with respect to all Lady Luck Employee Plans for which financial statements, actuarial reports or annual reports are required or have been prepared, (iv) the most recent determination letter from the IRS (if applicable) for any such Lady Luck Employee Plan, and (v) true and complete copies of any correspondence during the twenty-four month period which ends on the date of this Agreement between any Governmental Entity and Lady Luck or any of its Subsidiaries relating to any of the documents described above. (c) All Lady Luck Employee Plans conform in all material respects to, and are being administered and operated in all material respects in compliance with, the requirements of ERISA, the Code and all other applicable laws, including applicable laws of foreign jurisdictions. Except as set forth in Section 3.14(c) of the Lady Luck Disclosure Schedule, there have not been any "prohibited transactions," as such term is defined in Section 4975 of the Code or Section 406 of ERISA, involving any of the Lady Luck Employee Plans that could subject Lady Luck or any of its Subsidiaries to any penalties or taxes imposed under the Code or ERISA. Section 3.14(c) of the Lady Luck Disclosure Schedule sets forth a true and complete list of all outstanding loans from Lady Luck or any of its Subsidiaries to any current or former director, officer, employee or consultant which exceeds $3,500 per employee. Loans to employees in the aggregate do not exceed $25,000. (d) Except as set forth in Section 3.14(d) of the Lady Luck Disclosure Schedule, any Lady Luck Employee Plan that is intended to be qualified under Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code has been determined by the IRS to be so qualified, has received a favorable determination letter from the IRS covering any provision for which the remedial amendment period (within the meaning of Section 401(b) of the Code) has not expired, and such determination remains in effect and has not been revoked. Nothing has occurred since the date of any such determination that is reasonably likely to affect adversely such qualification or exemption in any material respect or result in the imposition of material excise taxes or income taxes on unrelated business income under the Code or ERISA with respect to any Lady Luck Employee Plan. Except as set forth in Section 3.14(d) of the Lady Luck Disclosure Schedule, all contributions or other amounts payable by Lady Luck or any of its Subsidiaries with respect to each Lady Luck Employee Plan have been paid or accrued in accordance with GAAP, ERISA, the Code and the terms of each such plan. (e) Except as set forth in Section 3.14(e) of the Lady Luck Disclosure Schedule, none of Lady Luck, any of its Subsidiaries nor any ERISA Affiliate (i) at any time in the past has had a current or contingent obligation to contribute to any multiemployer plan (as defined in Section 3(37) of ERISA) ("Multiemployer Plan"), or (ii) at any time in the past has had any liability, contingent or otherwise, under Title IV of ERISA or Section 412 of the Code. As of the date of this Agreement, no Lady Luck Employee Plan is subject to Title IV of ERISA and no Lady Luck Employee Plan is a Multiemployer Plan. 19 (f) There are no pending, or to Lady Luck's knowledge, any threatened or anticipated claims by or on behalf of any Lady Luck Employee Plan, or by or on behalf of any individual participants or beneficiaries of any Lady Luck Employee Plan, alleging any breach of fiduciary duty on the part of Lady Luck or any of its Subsidiaries or any of the officers, directors or employees of Lady Luck or any of its Subsidiaries under ERISA or any other applicable Regulations, or claiming benefit payments other than those made in the ordinary operation of such plans, or alleging any violation of any other applicable laws. The Lady Luck Employee Plans are not the subject of any investigation, audit or action by the Internal Revenue Service, the Department of Labor or the Pension Benefit Guaranty Corporation ("PBGC"). (g) With respect to any Lady Luck Employee Plan that is an employee welfare benefit plan (within the meaning of Section 3(l) of ERISA) (a "Lady Luck Welfare Plan"), (i) each Lady Luck Welfare Plan for which contributions are claimed as deductions under any provision of the Code is in compliance in all material respects with all applicable requirements pertaining to such deductions, and (ii) any Lady Luck Employee Plan that is a group health plan (within the meaning of Section 4980B(g)(2) of the Code) complies, and in each and every case has complied, in all material respects with all of the requirements of ERISA and Section 4980B of the Code. No welfare benefit fund (within the meaning of Section 419(e)(1) of the Code) or voluntary employees' beneficiary association (within the meaning of Section 501(c)(9) of the Code) has been established or maintained in connection with a Lady Luck Welfare Plan. Section 3.15. Compliance. (a) Except as disclosed in Section 3.15(a) of the Lady Luck Disclosure Schedule, each of Lady Luck and its Subsidiaries, and each of their respective directors, officers, persons performing management functions similar to officers and, to Lady Luck's best knowledge, partners, hold all permits, registrations, findings of suitability, licenses, variances, exemptions, certificates of occupancy, orders and approvals of all Governmental Entities (including all authorizations under Environmental Laws, the Merchant Marine Act of 1920 and the Shipping Act of 1916, Certificates of Inspection issued by the US Coast Guard and permits and approvals issued by the United States Army Corps of Engineers and pursuant to the Lady Luck Gaming Laws (as defined below)), necessary to conduct the business and operations of Lady Luck and each of its Subsidiaries as currently conducted, each of which is in full force and effect in all material respects, and no notice of revocation has been received in respect thereof, (the "Lady Luck Permits") except where the failure to hold such permits, registrations certificates of occupancy, findings of suitability, licenses, variances not issued or required pursuant to any Lady Luck Gaming Law would not, individually or in the aggregate, be reasonably likely to have a Lady Luck Material Adverse Effect. Except as disclosed in the Lady Luck SEC Reports or as disclosed in Section 3.15(a) of the Lady Luck Disclosure Schedule or as would not reasonably be likely to have a Lady Luck 20 Material Adverse Effect, the businesses of Lady Luck and its Subsidiaries are not being conducted in violation of any law, ordinance or regulation of any Governmental Entity. Except as disclosed in Section 3.15(a) of the Lady Luck Disclosure Schedule, no investigation or review by any Governmental Entity with respect to Lady Luck or any of its Subsidiaries is pending or, to Lady Luck's best knowledge, threatened, nor has any Governmental Entity indicated any intention to conduct the same. (b) The term "Lady Luck Gaming Laws" means any federal, state, local or foreign statute, ordinance, rule, regulation, permit, consent, registration, finding of suitability, approval, license, judgment, order, decree, injunction or other authorization, including any condition or limitation placed thereon, governing or relating to the current or contemplated casino and gaming activities and operations of Lady Luck or any of its Subsidiaries, including any applicable state gaming law and any federal or state laws relating to currency transactions. (c) Except as disclosed in Section 3.15(c) of the Lady Luck Disclosure Schedule, (i) neither Lady Luck nor any of its Subsidiaries, nor any director, officer, key employee or, to Lady Luck's best knowledge, partners of Lady Luck or any of its Subsidiaries, has received any written claim, demand notice, complaint, court order or administrative order from any Governmental Entity in the past three years under, or relating to any violation or possible violation of, any Lady Luck Gaming Laws which did or would be reasonably likely to result in fines or penalties of $10,000 or more; (ii) to the best knowledge of Lady Luck, there are no facts, which, if known to the regulators under the Lady Luck Gaming Laws, could reasonably be expected to result in the revocation, limitation or suspension of a license, finding of suitability, registration, permit or approval of it or them, or any officer, director or other person performing management functions similar to an officer or partner, under any Lady Luck Gaming Laws; and (iii) neither Lady Luck nor any of its Subsidiaries has suffered a suspension or revocation of any material license, finding of suitability, registration, permit or approval held under the Lady Luck Gaming Laws. Section 3.16. Labor Matters. Except as disclosed in Section 3.16 of the Lady Luck Disclosure Schedule, (i) there are no proceedings pending between Lady Luck or any of its Subsidiaries and any of their respective employees before the Equal Employment Opportunity Commission, Department of Labor or any other Governmental Entity; (ii) to the best knowledge of Lady Luck, there are no activities or proceedings of any labor union to organize any non-unionized employees; (iii) neither Lady Luck nor any of its Subsidiaries has received notice of any alleged unfair labor practice charges and/or complaints pending against Lady Luck or any of its Subsidiaries or any of their respective representatives or employees before the National Labor Relations Board or any current union representation questions involving employees of Lady Luck or any of its Subsidiaries; (iv) Lady Luck's employment policies and practices comply in all material respects with applicable law; and (v) there is no strike, slowdown, work stoppage, labor dispute or lockout or, to the best knowledge of Lady Luck, threat thereof, by or with respect to any employees of Lady Luck or any of 21 its Subsidiaries. Lady Luck and its Subsidiaries are not parties to any collective bargaining agreements or other labor union contracts applicable to individuals employed or previously employed by Lady Luck or any of its Subsidiaries and, except as disclosed in Section 3.16 of the Lady Luck Disclosure, no collective bargaining agreement or labor union contract is being negotiated by Lady Luck or any such Subsidiary. Section 3.17. Insurance. All material fire and casualty, general liability, business interruption, product liability, and sprinkler and water damage insurance policies maintained by Lady Luck or any of its Subsidiaries are listed on Section 3.17 of the Lady Luck Disclosure Schedule. At the Effective Time, all such insurance policies, or replacements thereof, will be outstanding and duly in force. To Lady Luck's knowledge, no notice of termination or non-renewal of any such insurance policy has been received by Lady Luck. Section 3.18. Information in Proxy Statement. The Proxy Statement, as such term is defined in Section 5.4(a) below (or any amendment thereof or supplement thereto), at the date mailed to Lady Luck's stockholders and at the time of the Lady Luck Special Meeting, will not 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; provided, however, that no representation is made by Lady Luck with respect to statements made therein based on information supplied in writing by Buyer or Merger Sub for inclusion in the Proxy Statement. The Proxy Statement will comply with the provisions of the Exchange Act and the rules and regulations thereunder. Section 3.19. State Takeover Statute. The Board of Directors of Lady Luck has approved the Merger, this Agreement and the Stockholder Support Agreement and, assuming the accuracy of the representations contained in Section 4.5 hereof (without giving effect to the knowledge qualification therein), such approval is sufficient to render inapplicable to the Merger, this Agreement, the Stockholder Support Agreement and the transactions contemplated hereby and thereby the provisions of Section 203 of the DGCL to the extent, if any, that such Sections are applicable to the Merger, this Agreement, the Stockholder Support Agreement and the transactions contemplated hereby and thereby. Except for Section 203 of the DGCL, no "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation enacted under any federal or state law applicable to Lady Luck is applicable to the Merger or the other transactions contemplated hereby. Section 3.20. Voting Requirements. The affirmative vote of the holders of at least 75% of the outstanding shares of Lady Luck Common Stock entitled to vote thereon at the Lady Luck Special Meeting with respect to the approval of the Merger (the "Lady Luck Stockholder Approval") is the only vote of the holders of any class or series of Lady Luck's capital stock necessary to approve and adopt this Agreement and the transactions contemplated by this Agreement. Section 3.21. Year 2000. Lady Luck has conducted an initial review of whether its systems, processes, products, equipment and services are "Year 2000 Ready." Interim results of such review are disclosed in 22 Section 3.21 of the Lady Luck Disclosure Schedule. Lady Luck has provided to Buyer all reports prepared by it or its outside consultants regarding its Year 2000 Readiness. "Year 2000 Ready" means that the systems, processes, products, equipment and services of Lady Luck and each of its Subsidiaries (including any software embedded in any products) ("Services"), will correctly identify, recognize and process four-digit year dates, and the Services will: (a) continue to function properly with regard to dates before, during and after the transition to year 2000 including, but not limited to, the ability to roll dates from December 31, 1999 to January 1, 2000 and beyond with no errors or system interruptions; (b) accurately perform calculations and comparisons on dates that span centuries; (c) accept and properly process dates that could span more than 100 years (e.g., calculating a person's age from their birth date and the current date); (d) properly sort and sequence dates that span centuries; (e) understand that the year 2000 starts on a Saturday; (f) recognize that February 29, 2000 is a valid date and that the year 2000 has 366 days; (g) prohibit use of date fields for any purpose other than to store valid dates; (h) preclude the use of 12/31/99 or any other valid date to indicate something other than a date (e.g., 12/31/99 in a date field means "do not ever cancel"); and (i) comply with and conform to the specifications of American National Standard ANSI X3.30-1985, Representation for Calendar Date and Ordinal Date for Information Interchange. Each of Lady Luck and its Subsidiaries has made no express or implied warranties regarding the Year 2000 Readiness of themselves, or any of their Services, except as disclosed in Section 3.21 of the Lady Luck Disclosure Schedule. Section 3.22. Opinion of Financial Advisor. Lady Luck has received the written opinion of Wasserstein Perella & Co., Inc. ("Wasserstein Perella") as of the date of this Agreement to the effect that the Merger Consideration is fair to the holders of Lady Luck Common Stock from a financial point of view. Section 3.23. Brokers. None of Lady Luck, any of its Subsidiaries nor any of their respective officers, directors or employees have employed any broker, financial advisor or finder, or incurred any liability for any brokerage fees, commissions, finder's or other fees or expenses in connection with any pending capital markets or strategic transaction or the transactions contemplated by this Agreement, except, as disclosed in Section 3.23 of the Lady Luck Disclosure Schedule and except that Lady Luck has retained Wasserstein Perella and Onyx Partners, Inc. ("Onyx Partners") as its financial advisors and has delivered to Buyer copies of all written agreements, and written descriptions of any oral agreements, with Wasserstein Perella and Onyx Partners. 23 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB Buyer and Merger Sub represent and warrant to Lady Luck that the statements contained in this Article IV are true and correct, except as set forth herein and in the disclosure schedule delivered by Buyer and Merger Sub to Lady Luck on or before the date of this Agreement (the "Buyer Disclosure Schedule"). Any reference in the Merger Agreement to Buyer's "knowledge" or "best knowledge," or to "the best of Buyer's knowledge," or words of similar import, shall be deemed a reference to the actual knowledge of any of the corporate officers of Buyer or any of its Subsidiaries for all purposes. The Buyer Disclosure Schedule has been prepared based upon the foregoing definition. Section 4.1. Organization of Buyer and Merger Sub. Each of Buyer and Merger Sub is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite corporate, partnership or limited liability company power and authority to carry on its business as now being conducted and as proposed to be conducted. Each of Buyer and Merger Sub is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so qualified, licensed or in good standing would not have a material adverse effect on the business, properties, condition (financial or otherwise), prospects or results of operations of Buyer and its Subsidiaries, taken as a whole (a "Buyer Material Adverse Effect"). Buyer has delivered to Lady Luck a true and correct copy of the Certificate of Incorporation and Bylaws of Buyer, in each case as amended to the date of this Agreement. Section 4.2. Capitalization of Merger Sub. The authorized capital stock of Merger Sub consists of 2,500 shares of common stock, par value $.01 per share ("Merger Sub Common Stock"), of which 1,000 shares are issued and outstanding. Buyer owns directly all the outstanding shares of Merger Sub Common Stock. The outstanding shares of Merger Sub Common Stock are duly authorized, validly issued, fully paid and assessable and free of any preemptive rights. Section 4.3. Authority; No Conflict; Required Filings and Consents. (a) Buyer and Merger Sub have all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Buyer and Merger Sub have been duly authorized by all necessary corporate action on the part of Buyer and Merger Sub. This Agreement has been duly executed and delivered by Buyer and Merger Sub and constitutes the valid and binding obligation of Buyer and Merger Sub, enforceable against each of them in accordance with its terms. 24 (b) Other than as disclosed in Section 4.3(b) of the Buyer Disclosure Schedule, the execution and delivery of this Agreement by Buyer and Merger Sub do not, and the consummation of the transactions contemplated hereby will not, (i) conflict with, or result in any violation or breach of, any provision of the Certificate of Incorporation or Bylaws of Buyer or the comparable charter or organizational documents of any of its Subsidiaries, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both), a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, contract or other agreement, instrument or obligation to which Buyer or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, or (iii) subject to the governmental filings and other matters referred to in Section 4.3(c), conflict with or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Buyer or any of its Subsidiaries or any of its or their properties or assets, except in the case of clauses (ii) and (iii) for any such conflicts, violations, defaults, terminations, cancellations or accelerations which (x) are not, individually or in the aggregate, reasonably likely to have a Buyer Material Adverse Effect, or (y) would not impair or materially delay the consummation of the Merger. (c) Except as disclosed in Section 4.3(c) of the Buyer Disclosure Schedule, no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Buyer or any of its Subsidiaries in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, other than (i) the filing of the pre-merger notification report under the HSR Act, (ii) the filing of the Certificate of Merger with respect to the Merger with the Secretary of State of the State of Delaware, (iii) any approvals and filing of notices required under any applicable gaming industry regulation, (iv) such consents, approvals, orders, authorizations, permits, filings or registrations related to, or arising out of, compliance with statutes, rules or regulations regulating the consumption, sale or serving of alcoholic beverages, (v) such immaterial filings and consents as may be required under any environmental, health or safety law or regulation pertaining to any notification, disclosure or required approval triggered by the Merger or the transactions contemplated by this Agreement, and (vi) such other filings, consents, approvals, orders, registrations and declarations as may be required under the laws of any jurisdiction in which Buyer or any of its Subsidiaries conducts any business or owns any assets the failure of which to obtain would not have a Buyer Material Adverse Effect. Section 4.4. Brokers. None of Buyer, any of its Subsidiaries, nor any of their respective officers, directors or employees have employed any broker, financial advisor or finder or incurred any liability for any brokerage 25 fees, commissions, finder's or other fees, in connection with the transactions contemplated by this Agreement, except that Buyer has retained CIBC World Markets Corp. ("CIBC") as its financial advisor. Section 4.5. Ownership of Securities. As of the date hereof, neither Buyer nor, to Buyer's knowledge, any of its affiliates or associates (as such terms are defined under the Exchange Act), (i) beneficially owns, directly or indirectly, or (ii) is party to an agreement, arrangement or understanding (other than this Agreement and the Stockholder Support Agreement) for the purpose of acquiring, holding or disposing of, in each case, shares of Lady Luck Common Stock representing at least 15% of the total number of outstanding shares of Lady Luck Common Stock. Section 4.6. Proxy Statement. The information supplied by Buyer for inclusion in the Proxy Statement (as defined in Section 5.4(a) below) shall not, on the date the Proxy Statement is first mailed to stockholders of Lady Luck, at the time of the Lady Luck Special Meeting (as defined in Section 5.5) and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, omit to state any material fact necessary in order to make the statements made in the Proxy Statement not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Lady Luck Special Meeting which has become false or misleading. Section 4.7. Litigation. Except as specifically disclosed by Buyer in the reports, forms or documents filed by the Buyer with the SEC prior to the date of this Agreement or as set forth in Section 4.7 of the Buyer Disclosure Schedule, there is no (i) claim, action, suit or proceeding pending or, to the best of the Buyer's knowledge, threatened against the Buyer or any of its Subsidiaries or their respective properties, assets or operations before any court or governmental or regulatory authority or body or arbitration tribunal or (ii) outstanding judgment, order, writ, injunction or decree of any court, governmental agency or arbitration tribunal in a proceeding to which the Buyer, any of its Subsidiaries or any of their respective assets was or is a party, which would prevent, impair or materially alter, delay or impair the Buyer's ability to consummate the Merger or the other transactions contemplated hereby. Section 4.8. Financing. Attached under Section 4.8 of the Buyer Disclosure Schedule are copies of all commitment letters from external financing sources with respect to financing of the Merger and the transactions contemplated thereby. Assuming that the external financing sources loan the amounts designated for the transactions contemplated by this Agreement to the Buyer as described in the commitment letter, the Buyer will have sufficient funds to complete the transactions contemplated by this Agreement including the repayment of the Lady Luck Notes and redemption of the Lady Luck Series A Preferred Stock. 26 ARTICLE V COVENANTS Section 5.1. Conduct of Business of Lady Luck. Except as set forth in Section 5.1 of the Lady Luck Disclosure Schedule, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, Lady Luck agrees as to itself and its respective Subsidiaries (except to the extent that Buyer shall otherwise consent in writing) to carry on its business in the usual, regular and ordinary course in substantially the same manner as previously conducted, to pay its debts and taxes when due subject to good faith disputes over such debts or taxes, to pay or perform its other obligations when due, and, to the extent consistent with such business, use all commercially reasonable efforts consistent with past practices and policies to preserve intact its present business organization, keep available the services of its present officers and key employees and preserve its relationships with customers, suppliers, distributors and others having business dealings with it. Without limiting the generality of the foregoing, during the period from the date of this Agreement until the Effective Time, Lady Luck agrees (except as otherwise contemplated by this Agreement or to the extent that Buyer shall otherwise consent in writing) as follows: (a) Dividends; Changes in Stock. Lady Luck shall not, and shall cause its Subsidiaries not to, other than dividends and distributions by a direct or indirect wholly owned Subsidiary of Lady Luck to its parent, (x) declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of its capital stock, (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock (other than the issuance of shares of Lady Luck Common Stock upon the exercise of Lady Luck Options outstanding on the date of this Agreement and in accordance with their present terms), or (z) purchase, redeem or otherwise acquire any shares of capital stock of Lady Luck or any of its Subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities. (b) Issuance of Securities. Lady Luck shall not, and shall cause its Subsidiaries not to, issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities (other than the issuance of shares of Lady Luck Common Stock upon the exercise of Lady Luck Options outstanding on the date of this Agreement and in accordance with their present terms). (c) Governing Documents. Lady Luck shall not, and shall cause its Subsidiaries not to, amend its Certificate of Incorporation, Bylaws or other comparable charter or organizational documents. 27 (d) No Acquisitions. Lady Luck shall not, and shall cause its Subsidiaries not to, (i) enter into any agreement to acquire, or (ii) subject to the provisions of Section 5.15, except for the transactions contemplated by (x) the Stock Purchase Agreement by and among Lady Luck, Sodak and GSMC (the "Miss Marquette Agreement") and (y) the Lady Luck Las Vegas Agreement (which if consummated in accordance with the terms of the Lady Luck Las Vegas Agreement shall be consummated immediately prior to the Effective Time), acquire (including, without limitation, by merger, consolidation or acquisition of stock or assets), any business or any interest therein, including through the acquisition of any interest in any corporation, partnership, joint venture, association or other business organization or division thereof. (e) No Dispositions. Lady Luck shall not, and shall cause its Subsidiaries not to, sell, lease, license, mortgage or otherwise encumber or otherwise dispose of any of its properties or assets. (f) Indebtedness. Lady Luck shall not, and shall cause its Subsidiaries not to, (y) incur any indebtedness for borrowed money or guarantee any such indebtedness of another person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of Lady Luck or any of its Subsidiaries, or guarantee any debt securities of another person, other than short-term bank financing in the ordinary course of business consistent with past practice and loans to employees in the amount of no more than $3,500 per employee which are subject to a documented repayment obligation and which for all employees of Lady Luck do not exceed an aggregate of $25,000 outstanding at any time, or (z) make any loans, advances or capital contributions to, or investments in, any other person. (g) Employee Benefits. Lady Luck shall not, and shall cause its Subsidiaries not to, (A) adopt, enter into, terminate or amend any employment, severance, retention or similar agreement or contract; (B) negotiate or enter into any collective bargaining agreement or labor union contract; (C) increase, in any manner, the compensation or fringe benefits of, or pay any bonus to, any director, officer or employee (except for normal increases of cash compensation or cash bonuses in the ordinary course of business, consistent with past practice); (D) adopt or establish any new benefit plan; or amend any existing benefit plan, including, without limitation, the Lady Luck Employee Plans and the Lady Luck Welfare Plan, except as required by law; or pay any benefit not provided for under any Lady Luck Employee Plan or Lady Luck Welfare Plan; (E) adopt, establish or amend any severance pay plan; or increase in any manner the severance or termination pay of any officer or employee; (F) modify the provisions of any Lady Luck Stock Option Plan, adjust or modify the terms of any outstanding Lady Luck Options; or take any action to accelerate the vesting of, or cash out rights associated with, any Lady Luck Option; or remove existing restrictions in any Lady Luck Stock Option Plan or other plan or arrangement; (G) grant any new awards under any Lady Luck Stock Option Plan or other bonus, incentive, performance or compensation plan or arrangement, including the grant of Lady Luck Options, stock appreciation rights, stock-based or 28 stock-related awards, performance units or restricted stock; (H) take any action to fund or, in any other way secure, the payment of compensation or benefits under any Lady Luck Employee Plan, Lady Luck Welfare Plan or other employee plan, agreement, contract or arrangement; (I) hire any individual as an employee who will be paid an annual base salary that equals or exceeds $75,000 or who will be other than an "at will" employee; or (J) hire any independent contractor or consultant, in each case without the prior written consent of the Buyer. (h) Leases or Material Contracts. Lady Luck shall not, and shall cause its Subsidiaries not to, (i) enter into any lease or agreement of any nature that would obligate Lady Luck or its Subsidiary to pay $50,000 or more, (ii) enter into any lease or agreement of any nature that is not terminable by Lady Luck or its Subsidiary upon 90 days' notice without penalty, or (iii) modify, amend or terminate any existing agreement of such type or waive, release or assign any material rights or claims contained therein, except in the ordinary course of business consistent with past practice. (i) Accounting Matters. Lady Luck shall not, and shall cause its Subsidiaries not to, make any material change in accounting methods, principles or practices, except as required by GAAP or the applicable regulations under the Securities Act and the Exchange Act. (j) Tax Matters. Lady Luck shall not, and shall cause its Subsidiaries not to, make any material tax election, enter into any settlement or compromise with respect to any material income tax liability or waive or extend the statute of limitations in respect of any Taxes. (k) Settlement. Lady Luck shall not, and shall cause its Subsidiaries not to, settle any pending or threatened litigation involving Lady Luck or any of its Subsidiaries (whether brought by or against a private party or a Government Entity), except for settlements that, in the aggregate, involve payments not covered by insurance, by Lady Luck or any Subsidiaries, of less than $50,000 and which settle entire claims or causes of action arising out of the same or similar facts and circumstances or do not impose any restrictions on the business or operations of Lady Luck or any of its Subsidiaries. (l) Capital Expenditures. Except as set forth in Section 5.1(l) of the Lady Luck Disclosure Schedule, Lady Luck, together with its Subsidiaries, shall not make capital expenditures in excess of $50,000 individually or $100,000 in the aggregate. (m) Related Party Transactions. Except pursuant to Section 5.1(n), Lady Luck shall not, and shall cause its Subsidiaries not to, enter into or amend the terms of any transaction of any nature whatsoever with its or its Subsidiaries' directors, officers, employees, stockholders or their respective affiliates. 29 (n) Lady Luck Hotel & Casino. Lady Luck agrees, pursuant to the Amended and Restated Purchase Agreement dated as of August 31, 1999, by and among Lady Luck and Gemini, Inc. (d/b/a Lady Luck Casino Hotel) ("Gemini"), International Marco Polo's Services, Inc. ("IMPS"), and Andrew H. Tompkins ("Tompkins"), that such agreement will be amended concurrently with the execution of this Agreement and with the approval of Buyer (as so amended, the "Lady Luck Las Vegas Agreement") to provide that (i) the sale of all of the outstanding capital stock of IMPS and the sale of those certain trademarks, mailing lists and other intellectual property owned by Gemini (the "Gemini Trademark Assets") that are related to the operation of the Lady Luck Casino & Hotel located in Las Vegas, Nevada (the "Las Vegas Hotel") can be consummated immediately prior to the Effective Time without consummating the acquisition of the Las Vegas Hotel and related real property and leases and Gemini stock, which provision shall become effective only upon consummation of the Merger; (ii) the Lady Luck Las Vegas Agreement will not be amended without the prior approval of Buyer; (iii) pursuant to the Lady Luck Las Vegas Agreement, Lady Luck will provide an exclusive perpetual royalty free license agreement to Gemini to use the Gemini Trademark Assets in connection with the Las Vegas Hotel and will enter into a marketing agreement with Gemini until such time as it is acquired by Lady Luck pursuant to the Lady Luck Las Vegas Agreement, which provision shall become effective only with consummation of the Merger; (iv) Lady Luck will not consummate the transactions contemplated by the Lady Luck Las Vegas Agreement prior to the Effective Time; and (v) for a period of thirty (30) days following the date of this Agreement, Buyer shall have the opportunity to conduct due diligence on Gemini and the Las Vegas Hotel; at the end of that period, and effective if the Merger is consummated, Buyer may determine that Lady Luck shall not acquire Gemini, IMPS, the Las Vegas Hotel or the Gemini Trademark Assets. In the event this Agreement is terminated, the provisions of the Lady Luck Las Vegas Agreement included as a result of the amendment described above will be of no effect except as expressly stated therein and the original Lady Luck Las Vegas Agreement shall continue in effect. Tompkins shall, however, have the right to require Buyer to consummate the acquisition of the Gemini Trademark Assets at the price and on the terms provided in the Lady Luck Las Vegas Agreement and the Lady Luck license agreement with IMPS shall be amended to give effect to Lady Luck's ownership of the Gemini Trademark Assets. (o) Maintenance of Las Vegas Hotel. Pursuant to the amendment of the Lady Luck Las Vegas Agreement referred to in Section 5.1(n), Lady Luck shall be afforded the right to require, and pursuant to the Lady Luck Las Vegas Agreement as so amended, Lady Luck shall use its best efforts to cause, the owners and operators of the Las Vegas Hotel to maintain, at no expense to Lady Luck or any of its Subsidiaries, the condition of the Las Vegas Hotel and its related facilities such that upon the purchase and sale of the Las Vegas Hotel, the condition of the Las Vegas Hotel and related facilities is at least as good as on the date hereof. (p) Indebtedness and Preferred Stock. As directed by Buyer, Lady Luck will, from time to time, take all actions (including the transmittal of notices) as may be 30 required from time to time in order to enable Buyer to repay Lady Luck's outstanding 11- 7/8% First Mortgage Notes due 2001 (the "Lady Luck Notes") (and to obtain releases of the collateral securing the Lady Luck Notes) and redeem Lady Luck's outstanding Lady Luck Preferred Stock, in each case as of the Effective Time. (q) General. Lady Luck shall not, and shall cause its Subsidiaries not to, authorize any of, or commit or agree to take any of, the foregoing actions. Section 5.2. Cooperation; Notice; Cure. Subject to compliance with applicable law, from the date hereof until the Effective Time, each of Buyer and Lady Luck shall confer on a regular and frequent basis with one or more representatives of the other party to report on the general status of ongoing operations. Each of Lady Luck and Buyer shall promptly notify the other in writing of, and will use all commercially reasonable efforts to cure before the Closing Date, any event, transaction or circumstance, as soon as practical after it becomes known to such party, that causes or will cause any covenant or agreement of Lady Luck or Buyer under this Agreement to be breached in any material respect or that renders or will render untrue in any material respect any representation or warranty of Lady Luck or Buyer contained in this Agreement. Section 5.3. No Solicitation. (a) From and after the date hereof, Lady Luck shall not, directly or indirectly, through any officer, director, employee, financial advisor, representative or agent of such party (i) solicit, initiate, or encourage (including by way of furnishing information) or take any other action to facilitate any inquiries or proposals that constitute, or could reasonably be expected to lead to, a proposal or offer for a merger, consolidation, business combination, sale of substantial assets, sale of shares of capital stock (including, without limitation, by way of a tender or exchange offer) or similar transaction involving Lady Luck or any of its Subsidiaries, other than the transactions contemplated by this Agreement (any of the foregoing inquiries or proposals being referred to in this Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or discussions with any person (or group of persons) other than Buyer or its respective affiliates (a "Third Party") concerning, or provide any non-public information to any person or entity relating to, any Acquisition Proposal, or (iii) agree to or recommend any Acquisition Proposal; provided, however, that until approval of the Merger at the Lady Luck Special Meeting (as defined below), nothing contained in this Agreement shall prevent Lady Luck or its Board of Directors from furnishing non-public information to, or entering into discussions or negotiations with, any person or entity in connection with an unsolicited bona fide written Acquisition Proposal by such person or entity or recommending an unsolicited bona fide written Acquisition Proposal to the stockholders of Lady Luck, if (and only if) the Board of Directors of Lady Luck reasonably believes in good faith that (i) such Acquisition Proposal, after consultation with and receipt of advice from Wasserstein Perella, is reasonably capable of being completed on substantially the terms proposed and if consummated, would result in a transaction that would be superior from a 31 financial point of view to the holders of Lady Luck Common Stock including consideration of the financial terms of the Miss Marquette Credit Agreement provided to Lady Luck by Buyer (a "Superior Proposal"), and (ii) after receipt of advice to such effect from outside legal counsel (who may be Lady Luck's regularly engaged outside legal counsel), the Board of Directors of Lady Luck, in the exercise of its fiduciary duties, determines in good faith that the failure to take such action would be contrary to the best interests of holders of Lady Luck Common Stock. Nothing in this Agreement shall prevent Lady Luck from complying with the provisions of Rule 14e-2 promulgated under the Exchange Act with respect to an Acquisition Proposal. (b) Lady Luck shall notify Buyer promptly (and no later than 48 hours) after receipt by Lady Luck, or any officer, director, employee, financial advisor, representative or agent of Lady Luck, of any Acquisition Proposal or any request for non-public information in connection with an Acquisition Proposal or for access to the properties, books or records of Lady Luck or its Subsidiaries by any Third Party that informs Lady Luck that it is considering making, or has made, an Acquisition Proposal. Such notice shall be made orally and shall indicate the identity of the Third Party and the terms and conditions of such proposal, inquiry or contract. Section 5.4. Proxy Statement. (a) As promptly as practicable after the execution of this Agreement, Lady Luck shall prepare and file with the SEC, in preliminary form, a proxy statement to be sent to Lady Luck's common stockholders in connection with, and for their consideration of, this Agreement and the Merger (the "Proxy Statement"). (b) Lady Luck shall make all other necessary filings with respect to the Merger under the Exchange Act, applicable state blue sky laws and the rules and regulations thereunder. Section 5.5. Special Meeting. Lady Luck shall duly call, give notice of, convene and hold a special meeting of its common stockholders for the purpose of voting upon this Agreement and the Merger (the "Lady Luck Special Meeting") as promptly as reasonably practicable after the date hereof. Except as expressly otherwise provided in Section 5.3 hereof or as otherwise required to comply with the fiduciary duties of the Board of Directors of Lady Luck, Lady Luck shall, through its Board of Directors, recommend to its stockholders adoption and approval of this Agreement and the Merger and shall use all reasonable efforts to solicit from its stockholders proxies in favor of such matters. Section 5.6. Access to Information. Upon reasonable notice, Lady Luck (and each of its Subsidiaries) shall afford to Buyer, and its officers, employees, accountants, counsel and other representatives, reasonable access, during normal business hours during the period prior to the Effective Time, to all its personnel, properties, books, contracts, commitments and records, and during such period, Lady Luck shall, and shall cause each of its Subsidiaries to, furnish 32 promptly to Buyer (a) copies of monthly financial reports and development reports, (b) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal or state securities laws, and (c) all other information concerning its business, properties and personnel as Buyer may reasonably request. Buyer will hold any such information furnished to it by Lady Luck in confidence in accordance with the confidentiality agreement between the parties (the "Confidentiality Agreement"). No information or knowledge obtained in any investigation pursuant to this Section 5.6 shall affect or be deemed to modify any representation or warranty contained in this Agreement or the conditions to the obligations of the parties to consummate the Merger. Section 5.7. Governmental Approvals. (a) The parties hereto shall cooperate with each other and use all commercially reasonable efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable without conditions, restrictions or limitations that are more restrictive than those conditions, restrictions and limitations applicable to Lady Luck on the date hereof, all permits, registrations, licenses, findings of suitability, consents, variances, exemptions, orders, approvals and authorizations of all third parties and Governmental Entities which are necessary or advisable to consummate the transactions contemplated by this Agreement ("Governmental Approvals"). Each of the parties hereto and their respective officers, directors and affiliates shall file within 60 days after the date hereof (without the applicability of any grace periods set forth elsewhere in this Agreement and with Buyer's efforts to complete and file regulatory applications under Lady Luck Gaming Laws focused on expeditiously complying with the requirements to obtain the Nevada approval), all required initial applications and documents in connection with obtaining approvals under the Lady Luck Gaming Laws and shall file initial applications and documents related to all other Governmental Approvals within such time as necessary for such Governmental Approvals to be granted on or before the effective date of the respective approvals required under the Lady Luck Gaming Laws and shall act reasonably and promptly thereafter in responding to additional requests in connection therewith. Each of Lady Luck and Buyer (the "Notifying Party") will notify the other reasonably promptly of the receipt of material comments or requests from Governmental Entities relating to Governmental Approvals, and will supply the other party with copies of all material correspondence documents or descriptions of communications between the Notifying Party or any of its representatives and Governmental Entities with respect to Governmental Approvals; provided, however, that it shall not be required to supply the other party with copies of correspondence, documents or descriptions of communications relating to the personal applications of individual applicants except for evidence of filing. (b) Lady Luck and Buyer shall promptly advise each other upon receiving any communication from any Governmental Entity whose consent or approval is required for consummation of the transactions contemplated by this Agreement which causes such 33 party to believe that there is a reasonable likelihood that any approval needed from a Governmental Entity will not be obtained or that the receipt of any such approval will be materially delayed. Lady Luck and Buyer shall take any and all actions reasonably necessary to vigorously defend, lift, mitigate and rescind the effect of any litigation or administrative proceeding adversely affecting this Agreement or the transactions contemplated hereby or thereby, including, without limitation, promptly appealing any adverse court or administrative order or injunction to the extent reasonably necessary for the foregoing purposes. (c) Notwithstanding any other provision of this Agreement (but without limiting the obligations set forth in Sections 5.7(a) and (b)), Buyer shall have no obligation or affirmative duty under this Section 5.7 to cease or refrain from the ownership of any assets or properties (including any of the assets and properties to be acquired from Lady Luck) or the association with any person or entity which association is material to the operations of Buyer, whether on the date hereof or at any time in the future. Section 5.8. Publicity. Lady Luck and Buyer shall agree on the form and content of the initial press release regarding the transactions contemplated hereby and thereafter shall consult with each other before issuing, and use all reasonable efforts to agree upon, any press release or other public statement with respect to any of the transactions contemplated hereby and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law or in connection with presentations or discussions with or before gaming regulators. Section 5.9. Indemnification. (a) From and after the Effective Time, Buyer agrees that it will, and will cause the Surviving Corporation to, indemnify and hold harmless each present and former director and officer of Lady Luck (the "Indemnified Parties"), against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in settlement incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that Lady Luck would have been permitted under the DGCL and its Certificate of Incorporation or Bylaws in effect on the date hereof to indemnify and to provide advancement of expenses to such Indemnified Party. (b) The provisions of this Section 5.9 are intended to be in addition to the rights otherwise available to the current officers and directors of Lady Luck by law, charter, statute, bylaw or agreement, and shall operate for the benefit of, and shall be enforceable by, each of the Indemnified Parties, their heirs and their representatives. 34 (c) For a period of six years after the Effective Time, Buyer shall maintain or shall cause the Surviving Corporation to maintain in effect a directors' and officers' liability insurance policy covering those persons who are currently covered by Lady Luck's directors' and officers' liability insurance policy (copies of which have been heretofore delivered by Lady Luck to Buyer) with coverage in amount and scope at least as favorable as Lady Luck's existing coverage; provided that in no event shall Buyer or the Surviving Corporation be required to expend in the aggregate in excess of 200% of the annual premium currently paid by Lady Luck for such coverage; and if such premium would at any time exceed 200% of the such amount, then Buyer or the Surviving Corporation shall maintain insurance policies which provide the maximum and best coverage available at an annual premium equal to 200% of such amount. Section 5.10. Stockholder Litigation. Lady Luck shall give Buyer the reasonable opportunity to participate in the defense or settlement of any stockholder litigation against Lady Luck and its directors relating to the transactions contemplated hereby; provided, however, that no such settlement shall be agreed to without Buyer's consent. Section 5.11. Employee Benefits. (a) Buyer shall cause the Surviving Corporation to honor all written employment, severance and termination agreements (including change in control provisions) of the employees of Lady Luck and its Subsidiaries provided to Buyer on or prior to the date of this Agreement and which are identified in Section 3.14(a) of the Lady Luck Disclosure Schedule or which may be otherwise agreed to by Buyer after the date hereof. Buyer agrees to confer with Lady Luck and evaluate the appropriateness of severance and stay bonuses for key employees of Lady Luck and its Subsidiaries. (b) For purposes of determining eligibility for participation and vesting under any employee benefit plan or arrangement of Buyer or the Surviving Corporation, employees of Lady Luck and its Subsidiaries as of the Effective Time shall receive service credit for service with Lady Luck and any of its Subsidiaries as if such service had been rendered to the Buyer or Surviving Corporation, but not for purposes of determining benefit accruals. This Section 5.11 shall not obligate the Buyer or Surviving Corporation to provide duplicate benefits to employees of Lady Luck and its Subsidiaries. (c) Nothing in this Agreement is intended to create any right of employment for any person or to create any obligation for Buyer or the Surviving Corporation to continue any Plan of Lady Luck following the Effective Time. Section 5.12. Other Agreements. Buyer and Tompkins shall enter into a Consulting, Advisory and Non-Competition Agreement in the form attached hereto as Exhibit B, which shall become effective at the Effective Time. 35 Section 5.13. Miss Marquette Loans. Immediately prior to the consummation of the transactions contemplated by the Miss Marquette Agreement, the parties shall enter into a credit agreement in the form attached as Exhibit C (the "Miss Marquette Credit Agreement"), relating to the making of a secured bridge loan by Buyer in the principal amount of $16.3 million, for the purpose of enabling Lady Luck to consummate the transactions contemplated by the Miss Marquette Agreement. Section 5.14. Further Assurances and Actions. (a) Subject to the terms and conditions herein, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, (i) using their respective reasonable best efforts to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Entities and parties to contracts with each party hereto as are necessary for consummation of the transactions contemplated by this Agreement, and (ii) to fulfill all conditions precedent applicable to such party pursuant to this Agreement. (b) In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full title to all properties, assets, rights, approvals, immunities and franchises of any of the parties to the Merger, the proper officers and/or directors of Buyer, Lady Luck and the Surviving Corporation shall take all such necessary action. Section 5.15. Pending Acquisitions. To the extent not prohibited by applicable law, Lady Luck shall consult with Buyer as to any pre-closing and post-closing determinations and actions related to the Miss Marquette Agreement and the Lady Luck Las Vegas Agreement, and agrees to exercise any rights it has, and take or omit to take all actions to be taken or not taken by it, under such agreements in accordance with the Buyer's reasonable directions and requests. Section 5.16. Allocation of Funds. Subject to the financing contingency set forth in Section 6.3(c) and Buyer's and Lady Luck's obligations under the terms of the Las Vegas Agreement, immediately prior to the Effective Time, Buyer agrees to allocate sufficient funds (i) to close both the transactions contemplated thereunder or, (ii) if all approvals necessary to acquire the Las Vegas Hotel and the capital stock of Gemini have not been granted at or before the Effective Time, then to consummate at the Effective Time the acquisition of the Gemini Trademark Assets and, at such times as permitted, the Las Vegas Hotel and the capital stock of Gemini. 36 ARTICLE VI CONDITIONS TO MERGER Section 6.1. Conditions to Each Party's Obligation to Effect the Merger. The respective obligations of each party to this Agreement to effect the Merger shall be subject to the satisfaction or waiver by each party prior to the Effective Time of the following conditions: (a) Stockholder Approval. This Agreement and the Merger shall have been approved by the stockholders of Lady Luck in the manner required under the DGCL and the Certificate of Incorporation of Lady Luck. (b) No Injunctions. No Governmental Entity shall have enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or injunction or statute, rule, regulation which is in effect and which has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger. (c) Governmental Approvals. All Governmental Approvals required to consummate the transactions contemplated by this Agreement shall have been obtained, all such approvals shall remain in full force and effect, all statutory waiting periods in respect thereof (including, without limitation, under the HSR Act) shall have expired and no such approval shall contain any conditions, limitations or restrictions which Buyer reasonably determines in good faith will have or would reasonably be expected to have a Lady Luck Material Adverse Effect or a Buyer Material Adverse Effect. Notwithstanding the foregoing, Lady Luck agrees that if the Nevada Gaming Commission has not issued all approvals necessary to be obtained in connection with the purchase and sale of the Las Vegas Hotel pursuant to the terms of the Lady Luck Las Vegas Agreement (the "Nevada Approval") on or before the fulfillment or waiver of all other conditions precedent to the parties' obligations to effect the Merger, it will, at Buyer's request, for purposes of Section 6.1(c), consummate the purchase of the Gemini Trademark Assets pursuant to the terms of the Lady Luck Las Vegas Agreement for which the Nevada Approval is not required as described in Section 5.1(n) and proceed with its obligations to effect the Merger. Section 6.2. Additional Conditions to Obligations of Lady Luck. The obligations of Lady Luck to effect the Merger is subject to the satisfaction of each of the following conditions prior to the Effective Time, any of which may be waived in writing exclusively by Lady Luck: (a) Representations and Warranties. The representations and warranties of Buyer and Merger Sub set forth in this Agreement shall be true and correct in all material respects (except for those qualified as to materiality or a Buyer Material Adverse Effect, which shall be true and correct) as of the date of this Agreement and, except to the extent such representations explicitly speak as of an earlier date, as of the Closing Date as though made on and as of the Closing Date. Lady Luck shall have received a certificate 37 signed on behalf of Buyer by the Chief Executive Officer and the Chief Financial Officer of Buyer to such effect. (b) Performance of Obligations of Buyer. Buyer shall have performed in all material respects all material obligations required to be performed by it under this Agreement at or prior to the Closing Date including, without limitation, that Buyer shall not be in default under the Miss Marquette Credit Agreement, and Lady Luck shall have received a certificate signed on behalf of Buyer by the Chief Executive Officer the Chief Financial Officer of Buyer to such effect. Immediately prior to the Effective Time (i) Buyer shall have, and shall have made available to Lady Luck, funds sufficient under the Lady Luck Las Vegas Agreement (x) to close both the transactions contemplated thereunder or, (y) if all approvals necessary to acquire the Las Vegas Hotel and the capital stock of Gemini have not been granted on or before the Effective Time, then to acquire the Gemini Trademark Assets and, at such times as permitted, the Las Vegas Hotel and the capital stock of Gemini and (ii) Buyer shall have caused Lady Luck to have consummated at the Effective Time the acquisition of the Gemini Trademark Assets and, if all necessary approvals have been obtained, the Las Vegas Hotel and the capital stock of Gemini. Section 6.3. Additional Conditions to Obligations of Buyer. The obligations of Buyer and Merger Sub to effect the Merger are subject to the satisfaction of each of the following conditions prior to the Effective Time, any of which may be waived in writing exclusively by Buyer: (a) Representations and Warranties. The representations and warranties of Lady Luck set forth in this Agreement shall be true and correct in all material respects (except for those qualified as to materiality or a Lady Luck Material Adverse Effect, which shall be true and correct) as of the date of this Agreement and, except to the extent such representations and warranties explicitly speak as of an earlier date, as of the Closing Date as though made on and as of the Closing Date. Buyer shall have received a certificate signed on behalf of Lady Luck by the Chief Executive Officer and a senior financial officer of Lady Luck to such effect. (b) Performance of Obligations of Lady Luck. Lady Luck shall have performed in all material respects all material obligations required to be performed by it under this Agreement at or prior to the Closing Date. Buyer shall have received a certificate signed on behalf of Lady Luck by the Chief Executive Officer and a senior financial officer of Lady Luck to each such effect. (c) Financing. Buyer shall have obtained financing on terms satisfactory to it and sufficient to allow Buyer to complete the transactions contemplated by this Agreement, including the consummation of the transactions contemplated in the Las Vegas Agreement the repayment of the Lady Luck Notes and the redemption of the Lady Luck Series A Preferred Stock. 38 (d) Due Diligence Review. (i) Buyer shall have been reasonably satisfied with the results of the Physical Investigation and Review (as defined below) of the properties of Lady Luck and its Subsidiaries described below. Buyer and its consultants shall have the right for a period of forty five (45) days after the date hereof (the "Due Diligence Period") to enter all properties of Lady Luck and its Subsidiaries during reasonable hours for the purpose of inspection of the physical condition of the properties including hull inspections, engine inspections, engineering surveys (including inspection of the structural integrity of all improvements to such properties) and environmental reports and such other environmental and structural integrity tests and inspections as the Buyer may reasonably desire, including a Phase II environmental inspection, that includes sampling and report (collectively, the "Physical Investigation and Review"). Any such inspections and tests shall be performed at the sole cost of the Buyer. The Buyer will not create or cause to be created any claim against or Lien for third party contractors upon the properties, nor otherwise impair Lady Luck's estate or unreasonably interfere in any manner with the regular conduct or business upon the properties. The Buyer shall repair and restore to its original condition any portion of the properties physically damaged, altered or disturbed as a result of such inspections and shall indemnify and hold Lady Luck harmless from any and all liability damage, claims or injury lawsuits resulting from the acts or omissions of the Buyer, its employees, agents or contractors related to such inspection of the properties. The Buyer's obligations under this Section 6.3(d) shall survive the termination of this Agreement; (ii) Lady Luck shall, as promptly as practicable after the execution of this Agreement, to the extent not previously provided and to the extent in Lady Luck's possession or control, provide or cause to be provided to the Buyer copies of all documents reasonably related to the Physical Investigation and Review. (e) No Material Adverse Change. No material adverse change shall have occurred in the business, properties, condition (financial or otherwise), prospects or results of operations of Lady Luck and its Subsidiaries, taken as a whole, since the date of the Lady Luck Interim Financial Statements other than any change arising out of, or resulting from, general economic conditions in the United States or conditions generally affecting the gaming industry in the United States. 39 ARTICLE VII TERMINATION AND AMENDMENT Section 7.1. Termination. This Agreement may be terminated at any time prior to the Effective Time (with respect to Sections 7.1(b) through 7.1(l), by written notice by the terminating party to the other party), whether before or after approval of the matters presented in connection with the Merger by the stockholders of Lady Luck: (a) by mutual written consent of Lady Luck and Buyer; or (b) by either Buyer or Lady Luck if the Merger shall not have been consummated by December 31, 2000 (the "Outside Date"); provided that either Buyer or Lady Luck may extend the Outside Date to June 30, 2001 by providing written notice thereof to the other party between three (3) and five (5) business days prior to and including December 31, 2000 if (i) the Merger shall not have been consummated by such date because the requisite Governmental Approvals required under Section 6.1(c) (not including the Nevada Approval) have not been obtained and are still being pursued, (ii) the party requesting such extension has not violated any of its obligations under this Agreement in a manner that was the cause of or resulted in the failure of the Merger to occur on or before December 31, 2000, and (iii) it is reasonably probable, based on, among other things, the status of completed regulatory filings, scheduled regulatory meetings and the advice of regulatory counsel to such party, that the requisite Governmental Approvals will be obtained within such extension period; provided, further, that the right to terminate this Agreement under this Section 7.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause or resulted in the failure of the Merger to occur on or before such date; or (c) by either Buyer or Lady Luck if a court of competent jurisdiction or other Governmental Entity shall have issued an order, decree or ruling or taken any other final action not subject to appeal, in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger; or (d) by Buyer or Lady Luck, if, at the Lady Luck Special Meeting (including any adjournment or postponement), the requisite vote of the stockholders of Lady Luck in favor of the approval and adoption of this Agreement and the Merger shall not have been obtained; or (e) by Buyer, if the Board of Directors of Lady Luck shall have (i) withdrawn or modified its recommendation of this Agreement or the Merger, (ii) recommended an Acquisition Proposal to the stockholders of Lady Luck, or (iii) failed to reaffirm its recommendation of this Agreement and the Merger upon the request of Buyer at any time, in the case of (i), (ii) and (iii) in accordance with the proviso in Section 5.3; or 40 (f) by Lady Luck, as a result of the exercise of fiduciary duties by its Board of Directors in accordance with Section 5.3; provided that no termination under this Section 7.1(f) shall be effective until (i) the termination fee required by Section 7.3(b) shall be paid, and (ii) at least three Business Days shall have elapsed after delivery to Buyer of a written notice from Lady Luck providing a complete and accurate description of material terms of the Superior Proposal, including the identity of all parties thereto; or (g) by Buyer, upon breach of any representation, warranty, covenant or agreement on the part of Lady Luck set forth in this Agreement, or if any representation or warranty of Lady Luck shall have become untrue, in either case such that the conditions set forth in Section 6.3(a) or Section 6.3(b) would not be satisfied ("Terminating Lady Luck Breach"); provided, however, that, if such Terminating Lady Luck Breach is curable by Lady Luck through reasonable best efforts within 30 days and for so long as Lady Luck continues to exercise such reasonable best efforts during such 30 day period, Buyer may not terminate this Agreement under this Section 7.1(g); or (h) by Lady Luck, upon breach of any representation, warranty, covenant or agreement on the part of Buyer set forth in this Agreement, or if any representation or warranty of Buyer shall have become untrue, in either case such that the conditions set forth in Section 6.2 would not be satisfied ("Terminating Buyer Breach"); provided, however, that, if such Terminating Buyer Breach is curable by Buyer through reasonable best efforts within 30 days and for so long as Buyer continues to exercise such reasonable best efforts during such 30 day period, Lady Luck may not terminate this Agreement under this Section 7.1(h); or (i) by Buyer, if (A) any state gaming authority revokes any of Lady Luck's licenses or permits to operate any of its casino river boats, or (B) one or more gaming regulatory authorities imposes fines or penalties against, or requires other payments by, Lady Luck and/or any of its current or former directors, officers, employees, agents or representatives (to the extent that Lady Luck is responsible for any such fines, penalties or other payments and such fines, penalties or other payments are not covered by insurance policies of Lady Luck) relating to the actions of Lady Luck and/or its current or former directors, officers, agents or representatives in an aggregate amount or which impose restrictions upon operations in the case of (A) or (B), as applicable, that would reasonably be expected to have a material adverse effect on the business of any Lady Luck casino (with materiality determined with respect to the enterprise value of such business); or (j) by Buyer, if a material adverse change as described in Section 6.3(e) has occurred; or (k) by Lady Luck, if Buyer has not filed its initial applications with the Mississippi, Iowa and Nevada gaming authorities in connection with obtaining required approvals within 60 days after the date of this Agreement; provided, however, that Lady 41 Luck shall not be permitted to terminate the Agreement pursuant to this Section 7.1(k) until it has given Buyer 30 days' notice of its intent to terminate this Agreement pursuant to this Section 7.1(k), setting forth the initial applications that it believes have not been filed, or if Buyer has filed all such initial applications and documents; or (l) by Buyer, if Lady Luck has not filed any required applications with the Mississippi, Iowa and Nevada gaming authorities in connection with obtaining any approvals required for Lady Luck within 60 days after the date of this Agreement; provided, however, that Buyer shall not be permitted to terminate this Agreement pursuant to this Section 7.1(l) until it has given Lady Luck 30 days' notice of its intent to terminate this Agreement pursuant to this Section 7.1(l), setting forth the initial applications that it believes have not been filed, or if Lady Luck has filed all such initial applications and documents; or (m) by Buyer, if it is not satisfied with the Physical Investigation and Review as described in Section 6.3(d). Section 7.2. Effect of Termination. In the event of termination of this Agreement as provided in Section 7.1, this Agreement shall immediately become void and there shall be no liability or obligation on the part of Buyer, Merger Sub or Lady Luck, or their respective officers, directors, stockholders or affiliates, except as set forth in Section 7.3, and except that such termination shall not limit liability for a willful breach of this Agreement; provided that the provisions of this Section 7.2 and Section 7.3 of this Agreement and the Confidentiality Agreement shall remain in full force and effect and survive any termination of this Agreement. Section 7.3. Fees and Expenses. (a) Except as set forth in this Section 7.3, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, whether or not the Merger is consummated. Fees and expenses payable under this Section 7.3 to any party hereunder shall include all costs of collection and interest from the date such payment is due at a rate per annum of London Interbank Offered Rate plus 2%. (b) Where an Acquisition Proposal exists or where an intention (whether or not conditional) to make an Acquisition Proposal has been communicated to Lady Luck or shall have been communicated directly to a director, Lady Luck's counsel or financial advisors, Lady Luck shall pay Buyer a termination fee of $2,500,000 via wire transfer of same-day funds on the date of the earliest to occur one of the following events: (i) the termination of this Agreement by Buyer or Lady Luck pursuant to Section 7.1(d) provided the Acquisition Proposal has been communicated to stockholders of Lady Luck generally; 42 (ii) the termination of this Agreement by Buyer pursuant to Section 7.1(e); or (iii) the termination of this Agreement by Lady Luck pursuant to Section 7.1(f). Lady Luck's payment of a termination fee pursuant to this subsection shall be the sole and exclusive remedy of Buyer against Lady Luck and any of its Subsidiaries and their respective directors, officers, employees, agents, advisors or other representatives with respect to the occurrences giving rise to such payment; provided that this limitation shall not apply in the event of a willful breach of this Agreement by Lady Luck. (c) In addition to the provisions of Section 7.3(b), if (i) Buyer or Lady Luck terminates this Agreement pursuant to Section 7.1(d), (ii) Buyer terminates this Agreement pursuant to Section 7.1(g) or Section 7.1(l), (iii) Lady Luck or Buyer terminates this Agreement pursuant to Section 7.1(b) and the condition specified in Section 6.1(c) shall not have been satisfied because of facts or circumstances relating to Lady Luck, its employees or operations, or (iv) Buyer terminates this Agreement pursuant to Section 7.1(j), Lady Luck shall immediately thereafter reimburse Buyer and Merger Sub all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby plus, in the case of (ii) or (iii) above, a termination fee of $1,500,000. (d) If (i) Lady Luck terminates this Agreement pursuant to Section 7.1(h) or Section 7.1(k) or (ii) Lady Luck or Buyer terminates this Agreement pursuant to Section 7.1(b) and the condition specified in Section 6.1(c) shall not have been satisfied because of facts or circumstances relating to Buyer, its employees or operations, Buyer shall immediately thereafter reimburse Lady Luck all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby plus a termination fee of $1,500,000. Section 7.4. Amendment. This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of Lady Luck; but, after any such approval, no amendment shall be made which by law requires further approval by such stockholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Section 7.5. Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements or conditions contained here. Any agreement on the part of a party hereto 43 to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. ARTICLE VIII MISCELLANEOUS Section 8.1. Nonsurvival of Representations, Warranties, Covenants and Agreements. None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except for the agreements contained in Sections 1.4, 1.5, 1.6, 1.7, 2.1, 2.2, 2.3, 2.4, 5.9, 5.11, 5.14 and the last sentence Section 6.3(d)(i) and Article VIII. The Confidentiality Agreement shall survive the execution and delivery of this Agreement. Section 8.2. Notices. Any and all notices, demands or other communications required or desired to be given hereunder by any party shall be in writing and shall be validly given or made to another party if served personally, or by facsimile or air courier, or deposited in the United States mail, certified or registered, postage prepaid, return receipt requested. If such notice, demand or other communications be served personally, or by facsimile or air courier, service shall be conclusively deemed made at the time of such service. If such notice, demand or other communications be given by mail, it shall be conclusively deemed given three (3) days after the deposit thereof in the United States mail, addressed to the party to whom such notice, demand or other communication is to be given as hereinafter set forth: (a) if to Lady Luck, to: Lady Luck Gaming Corporation 206 North Third Street Las Vegas, Nevada 89101 Attention: Chief Executive Officer with a copy to: Swidler Berlin Shereff Friedman, LLP 919 Third Avenue New York, New York 10022 Attention: Martin Nussbaum (b) if to Buyer or Merger Sub, to: Isle of Capri Casinos, Inc. 711 Dr. Martin Luther King, Jr. Boulevard Biloxi, Mississippi 39530 Attention: Chief Executive Officer 44 with copies to: Isle of Capri Casinos, Inc. 2200 Corporate Boulevard, N.W. Suite 310 Boca Raton, Florida 33431 Attention: Allan B. Solomon Mayer, Brown & Platt 190 South LaSalle Street, Suite 3100 Chicago, Illinois 60603 Attention: Paul W. Theiss Section 8.3. Interpretation. When a reference is made in this Agreement to Sections, such reference shall be to a Section of 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 phrase "made available" in this Agreement shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available. The phrases "the date of this Agreement," "the date hereof," and terms of similar import, unless the context otherwise requires, shall be deemed to refer to October 5, 1999. Section 8.4. Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Section 8.5. Entire Agreement; No Third Party Beneficiaries. This Agreement and all documents and instruments referred to herein (a) constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) except as provided in Section 5.9, are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder; provided that the Confidentiality Agreements shall survive the execution and delivery of this Agreement. Each party hereto agrees that, except for the representations and warranties contained in this Agreement, none of Buyer, Merger Sub or Lady Luck makes any other representations or warranties, and each hereby disclaims any other representations and warranties made by itself or any of its officers, directors, employees, agents, financial and legal advisors or other representatives, with respect to the execution and delivery of this Agreement or the transactions contemplated hereby, notwithstanding the delivery or disclosure to any of them or their respective representatives of any documentation or other information with respect to any one or more of the foregoing. 45 Section 8.6. Governing Law. This Agreement shall be governed by and construed, and the obligations, rights and remedies of the parties hereunder shall be determined, in accordance with the laws of the State of Delaware without reference to the conflicts of law or choice of law doctrine of such state. Section 8.7. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other party, except that Merger Sub may assign its rights and obligations hereunder to any direct or indirect wholly-owned subsidiary of Buyer; provided that no such assignment shall relieve Buyer of its obligations hereunder. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Section 8.8. Severability; Enforcement. Except to the extent that the application of this Section 8.8 would have a Buyer Material Adverse Effect with respect to Buyer or a Lady Luck Material Adverse Effect with respect to Lady Luck, the invalidity of any portion hereof shall not affect the validity, force or effect of the remaining portions hereof. If it is ever held that any covenant hereunder is too broad to permit enforcement of such covenant to its fullest extent, each party agrees that a court of competent jurisdiction may enforce such covenant to the maximum extent permitted by law, and each party hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such covenant. Section 8.9. Specific Performance. Except as provided in Section 7.3(b), the parties hereto agree that the remedy at law for any breach of this Agreement will be inadequate and that any party by whom this Agreement is enforceable shall be entitled to specific performance in addition to any other appropriate relief or remedy. Such party may, in its sole discretion, apply to a court of competent jurisdiction for specific performance or injunctive or such other relief as such court may deem just and proper in order to enforce this Agreement or prevent any violation hereof and, to the extent permitted by applicable laws, each party hereto waives any objection to the imposition of such relief. 46 IN WITNESS WHEREOF, Isle of Capri Casinos, Inc., Isle Merger Corp. and Lady Luck Gaming Corporation have caused this Agreement to be signed by their respective duly authorized officers as of the date first written above. ISLE OF CAPRI CASINOS, INC. By: /s/ Allan B. Solomon ---------------------------------- Its: Executive Vice President, General Counsel and Secretary ISLE MERGER CORP. By: /s/ Allan B. Solomon --------------------------------- Its: Executive Vice President, General Counsel and Secretary LADY LUCK GAMING CORPORATION By: /s/ Rory J. Reid --------------------------------- Its: Senior Vice President 47 EX-10.1 3 STOCKHOLDER SUPPORT AGMT STOCKHOLDER SUPPORT AGREEMENT STOCKHOLDER SUPPORT AGREEMENT, dated as of October 5, 1999 (this "Agreement"), by Andrew H. Tompkins ("Stockholder") to and for the benefit of Isle of Capri Casinos, Inc., a Delaware corporation ("Buyer"). WHEREAS, as of the date hereof, Stockholder owns of record and beneficially 2,226,409 shares (such shares, together with any other voting or equity securities of Lady Luck Gaming Corporation, a Delaware corporation ("Lady Luck"), hereafter acquired by Stockholder prior to the termination of this Agreement, being referred to herein collectively as the "Shares") of common stock, par value $0.006 per share ("Lady Luck Common Stock"); WHEREAS, concurrently with the execution of this Agreement, Buyer, Isle Merger Corp., a Delaware corporation and a wholly owned subsidiary of Buyer ("Merger Sub"), and Lady Luck are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"; capitalized terms used and not otherwise defined herein shall have the respective meanings assigned to them in the Merger Agreement), pursuant to which, upon the terms and subject to the conditions thereof, Merger Sub will be merged with and into Lady Luck such that Lady Luck will become a wholly owned subsidiary of Buyer (the "Merger"); and WHEREAS, as a condition to the willingness of Buyer and Merger Sub to enter into the Merger Agreement, Buyer has requested that the Stockholder agree, and in order to induce Buyer and Merger Sub to enter into the Merger Agreement the Stockholder is willing to agree, to vote in favor of adopting the Merger Agreement and approving the Merger, upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereby agree, severally and not jointly, as follows: Section 1. Voting of Shares. Until the termination of this Agreement in accordance with the terms hereof, Stockholder hereby agrees that, at the Lady Luck Stockholders' Meeting or any other meeting of the stockholders of Lady Luck, however called, and in any action by written consent of the stockholders of Lady Luck, Stockholder will vote all of his Shares (a) in favor of adoption of the Merger Agreement and approval of the Merger and the other transactions contemplated by the Merger Agreement, (b) against any proposal for any recapitalization, merger (other than the Merger), sale of assets or other business combination between Lady Luck and any person or entity (other than Buyer or any subsidiary of Buyer) or any other action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of Lady Luck under the Merger Agreement or which could result in any of the conditions to the Merger Agreement not being fulfilled and (c) in favor of any other matter necessary to the consummation of the transactions contemplated by the Merger Agreement and considered and voted upon by the stockholders of Lady Luck (or any class thereof). In addition, 1 Stockholder agrees that he will, upon request by Buyer, furnish written confirmation, in form and substance reasonably acceptable to Buyer, of such Stockholder's vote in favor of the Merger Agreement and the Merger. Stockholder acknowledges receipt and review of a copy of the Merger Agreement. Section 2. Proxy. Subject to any required approval under the Lady Luck Gaming Laws, the Stockholder, by this Agreement, and for so long as this Agreement shall remain in effect, does hereby constitute and appoint Buyer, or any nominee of Buyer, with full power of substitution, as such Stockholder's irrevocable proxy and attorney-in-fact to vote the Shares as indicated in Section 1, in the event such Stockholder fails to comply with his obligations under such section. Stockholder intends this proxy to be irrevocable and coupled with an interest and will take such further action and execute such other instruments as may be necessary to effectuate the intent of this proxy and hereby revokes any proxy previously granted by him with respect to its Shares. Section 3. Transfer of Shares. Stockholder covenants and agrees that he will not, without the consent of Buyer, prior to the termination of this Agreement in accordance with the terms hereof, directly or indirectly, (a) sell, assign, transfer (including by merger, testamentary disposition, interspousal disposition pursuant to a domestic relations proceeding or otherwise by operation of law), pledge, encumber or otherwise dispose of any of the Shares, (b) deposit any of the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares or grant any proxy or power of attorney with respect thereto which is inconsistent with this Agreement or (c) other than the Option (as defined below), enter into any contract, option or other arrangement or undertaking with respect to the direct or indirect sale, assignment, transfer (including by merger, testamentary disposition, interspousal disposition pursuant to a domestic relations proceeding or otherwise by operation of law) or other disposition of any Shares. The consent of the Buyer shall not be unreasonably withheld with respect to (i) transfers in connection with Stockholder's estate planning or (ii) testamentary transfers by the Stockholder, in which in both cases, each transferee agrees to be bound by the terms of this Agreement prior to the acceptance of any transfer. Buyer shall be deemed to have consented to the transfer of 11,739 shares of Lady Luck Common Stock to Alain Uboldi pursuant to his agreement with the Stockholder (the "Uboldi Agreement"). Section 4. Representations and Warranties of Stockholder. Stockholder hereby represents and warrants to Buyer with respect to himself and his ownership of the Shares as follows: a. Ownership of Shares. On the date hereof, the Shares are owned of record and beneficially by Stockholder, are not subject to a pledge and do not otherwise serve as collateral for any indebtedness. Upon the exercise of the Option, except with respect to 11,739 shares of Lady Luck Common Stock which are subject to the Uboldi Agreement, Buyer will receive good and marketable title to the Shares, free and clear of all liens, claims, encumbrances and security interests of any kind. 2 Stockholder has sole power and authority to vote and to sell the Shares, without restrictions, with respect to all of the Shares. b. Power, Binding Agreement. Stockholder has the legal capacity, power and authority to enter into and perform all of his obligations under this Agreement. The execution, delivery and performance of this Agreement by Stockholder will not violate any other agreement to which Stockholder is a party, including, without limitation, any voting agreement, stockholders' agreement, partnership agreement or voting trust. This Agreement has been duly and validly executed and delivered by Stockholder and constitutes a valid and binding obligation of Stockholder, enforceable against Stockholder in accordance with its terms. c. No Conflicts. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby will not, conflict with or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, any provision of any loan or credit agreement, note, bond, mortgage, indenture, lease, or other agreement, instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Stockholder or any of his properties or assets, other than such conflicts, violations or defaults or terminations, cancellations or accelerations which individually or in the aggregate do not materially impair the ability of Stockholder to perform his obligations hereunder. No consent, approval, order or authorization of, or registration, declaration, or filing with, any governmental entity is required by or with respect to the execution and delivery of this Agreement by Stockholder and the consummation by Stockholder of the transactions contemplated hereby. Section 5. Option to Purchase Shares. Stockholder hereby grants to Buyer (i) an option to purchase that portion of the Shares equal to 34.99% of the issued and outstanding shares of the Lady Luck Common Stock and (ii) effective upon a breach by Stockholder of the provisions of Section 1, an option to purchase the remainder of the Shares, except for Shares subject to the Uboldi Agreement (each, an "Option" and collectively, the "Options"), at a price of $12.00 per Share (or such higher price as Buyer may determine), until the termination of this Agreement in accordance with Section 7 hereof. Buyer agrees that if either of the Options are exercised (which exercise shall be evidenced by payment for the Shares) and Buyer disposes of the Shares within six months after the date of the exercise of such Option, Buyer will pay to Stockholder one-half of the net profit (after reduction for Buyer's expenses incurred for brokerage commissions (net of any reimbursements) in connection with the exercise of such Option and disposition of such Shares) to Buyer from such disposition (the "Profit Amount"), provided that the Profit Amount is not subject to disgorgement under Section 16 of the Securities Exchange Act of 1934, as amended. Solely for income tax purposes, Buyer and Stockholder shall treat any portion of the Profit Amount paid to Stockholder as additional consideration paid by Buyer to Stockholder for purchase of the Shares. Subject to any required approval under the Lady Luck Gaming Laws, either Option may be exercised by 3 Buyer at any time upon two (2) business days' prior written notice to Stockholder, against payment of the purchase price for the Shares that are subject to such Option. Stockholder agrees to cooperate with Buyer at Buyer's expense and use all commercially reasonable efforts to assist Buyer in obtaining any approvals required under the Lady Luck Gaming Laws. Section 6. No Solicitation. Stockholder agrees that (i) in his individual capacity, as opposed to his capacity as a director of Lady Luck, he will not, nor will he authorize or permit any of his employees, agents and representatives to, directly or indirectly, (a) initiate, solicit or encourage (including by way of furnishing information) or take any other action to facilitate any inquiries or proposals that constitute, or could reasonably be expected to lead to, an Acquisition Proposal, (b) agree to or recommend any Acquisition Proposal, or (c) engage in negotiations or discussions with a Third Party concerning, or provide any non-public information to any person or entity relating to, any Acquisition Proposal and (ii) he will notify Buyer as soon as possible (and in any event within 48 hours) if any such inquiries or proposals are received by, any information or document is requested from, or any negotiations or discussions are sought to be initiated or continued with him, any of his affiliates or his legal or financial advisors Section 7. Termination. This Agreement shall terminate upon the earliest to occur of (i) the Effective Time, (ii) the termination of the Merger Agreement pursuant to Section 7.1(a), Section 7.1(c), Section 7.1(e), Section 7.1(g), Section 7.1(h), Section 7.1(i), Section 7.1(j), Section 7.1(k) or Section 7.1(l) of the Merger Agreement, and (iii) December 31, 2000; provided that the provisions of Section 9 of this Agreement shall survive any termination of this Agreement; and provided further that no such termination shall relieve any party of liability for a breach hereof prior to termination. Section 8. Escrow of Shares. On the date hereof, Stockholder has deposited with Swidler Berlin Shereff Friedman, LLP (the "Escrow Agent") certificates representing all of the Shares. Buyer and Stockholder agree that the Escrow Agent shall hold the Shares as escrowee in accordance with the terms and conditions of the Escrow Agreement, dated the date hereof, among Buyer, Stockholder and the Escrow Agent. Section 9. Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. Section 10. Miscellaneous. a This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the parties with respect thereto. This Agreement may not be amended, modified or rescinded except by an instrument in writing signed by each of the parties hereto. 4 b. 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 a mutually acceptable manner in order that the terms of this Agreement remain as originally contemplated to the fullest extent possible. c. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the principles of conflicts of law thereof. d. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. 5 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed as of the date first written above. ANDREW H. TOMPKINS /s/ Andrew H. Tompkins --------------------------------------- Agreed and Acknowledged: ISLE OF CAPRI CASINOS, INC. By: /s/ Allan B. Solomon ------------------------------- Its: Executive Vice President, General Counsel and Secretary 6 EX-10.2 4 CONSULTING, ADVISORY AND NONCOMPETITION AGMT CONSULTING, ADVISORY AND NONCOMPETITION AGREEMENT This Consulting, Advisory and Noncompetition Agreement (this "Agreement") is made as of October 5, 1999, by and between Isle of Capri Casinos, Inc., a Delaware corporation ("Buyer"), and Andrew H. Tompkins, a Nevada resident ("Tompkins"). RECITALS WHEREAS, concurrently with the execution and delivery of this Agreement, Buyer is entering into an agreement and plan of merger with Lady Luck Gaming Corporation, a Delaware corporation (the "Merger Agreement"); WHEREAS, Tompkins founded Lady Luck and is its Chairman; WHEREAS, Tompkins owns all the shares of Gemini, Inc. ("Gemini") and International Marco Polo's Services, Inc. ("IMPS") and owns the Lady Luck Las Vegas Hotel & Casino (the "Hotel"). Buyer will have the right to acquire Gemini, IMPS and the Hotel from Tompkins after the consummation of the Merger; WHEREAS, Buyer desires to retain Tompkins' services as a consultant and advisor to Buyer, and Tompkins desires to perform such services for Buyer; NOW, THEREFORE, in consideration of the foregoing and the representations, covenants and agreements set forth below, the parties, intending to be legally bound, agree as follows: Section 1. Effectiveness and Interpretation. This Agreement shall become effective upon the Effective Time of the Merger (as defined in the Merger Agreement). Upon the earlier termination of the Merger Agreement, this Agreement shall terminate automatically and be of no further force and effect. Until such date as the Buyer has acquired the Hotel from Tompkins, this Agreement shall be interpreted as not restricting Tompkins' operation of the Hotel or ownership and use of Confidential Information (as defined below) as it relates to the Hotel and the terms of this Agreement as it relates to the Hotel shall be effective only upon Buyer's closing of the acquisition of the Hotel. Section 2. Acknowledgments by Tompkins. Tompkins acknowledges that (a) Tompkins has occupied a position of trust and confidence with Lady Luck Gaming Corporation, its subsidiaries and its affiliates including, without limitation, Gemini and IMPS (collectively, "Lady Luck") prior to the date hereof and has become familiar with the following, any and all of which constitute confidential information of Lady Luck and the Hotel (collectively the "Confidential Information," which in all instances does not include information to the extent such information is reflected in publicly available filings with the Securities and Exchange Commission and 1 which is otherwise generally known by management in the gaming industry in the jurisdictions in which Lady Luck and the Gemini have casino properties): (i) any and all trade secrets concerning the business and affairs of Lady Luck, data, know-how, processes, photographs, inventions and ideas, customer lists, business and technical information, current and anticipated customer requirements, price lists, market studies and plans, business plans, systems, methods and information of Lady Luck and the Hotel and any other information, however documented, of Lady Luck and the Hotel that is a trade secret under Nevada, Iowa or Mississippi law; (ii) any and all information concerning the business and affairs of Lady Luck and the Hotel (which includes historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and backgrounds of key personnel, personnel training and techniques and materials, however documented); and (iii) any and all notes, analysis, compilations, studies, summaries, and other material prepared by or for Lady Luck and the Hotel containing or based, in whole or in part, on any information included in the foregoing, (b) although the businesses of Buyer, Lady Luck and the Hotel have regional customer bases, the expansion and development opportunities are national and international in scope, (c) Buyer has required that Tompkins make the covenants set forth in Sections 3 and 4 of this Agreement in consideration of the Buyer entering into the Merger Agreement with Lady Luck; (d) the provisions of Sections 3 and 4 of this Agreement are reasonable and necessary to protect and preserve Lady Luck's and the Hotel's business, and (e) Buyer and Lady Luck and the Hotel would be irreparably damaged if Tompkins were to breach the covenants set forth in Sections 3 and 4 of this Agreement. Section 3. Confidential Information. Tompkins acknowledges and agrees that all Confidential Information known or obtained by Tompkins, whether before or after the date hereof, is the property of Lady Luck or the Hotel, as applicable. Therefore, Tompkins agrees that Tompkins will not, at any time, disclose to any unauthorized persons or use for his own account (except as contemplated in Section 1 with respect to the Hotel) or for the benefit of any third party any Confidential Information, whether Tompkins has such information in Tompkins' memory or embodied in writing or other physical form, without Buyer's written consent, unless and to the extent that the Confidential Information is or becomes generally known to and available for use by the public other than as a result of Tompkins' fault or the fault of any other person bound by a duty of confidentiality to Buyer or Lady Luck. Except with respect to the Hotel in the event that Buyer does not acquire the Hotel at the Effective Time, Tompkins agrees to deliver to Buyer at the Effective Time, and at any other time Buyer may request, all documents, memoranda, notes, plans, records, reports, and other documentation, models, components, devices, or computer software, whether embodied in a disk or in other form (and all copies of all of the foregoing), relating to the businesses, operations, or affairs of Lady Luck and the Hotel and any other Confidential Information that Tompkins may then possess or have under Tompkins' control. Section 4. Noncompetition. In connection with Buyer entering into the Merger Agreement and for the consideration to be paid under this Agreement, Tompkins agrees that: 2 (a) For a period of four years after the Effective Time of the Merger: (i) Tompkins agrees not to compete, directly or indirectly (including as an officer, director, partner, employee, consultant, independent contractor, or equity holder of any entity) with Buyer or any of its subsidiaries in any way concerning (including by permitting his name to be used in connection with) the ownership, development or management of any gaming operation or facility within a 75-mile radius of any gaming operation or facility with respect to which Buyer or any of its subsidiaries has an ownership interest or renders or is actively negotiating to render management services; provided, however, that Tompkins may purchase or otherwise acquire up to (but not more than) 5% of any class of securities of any gaming enterprise which owns a facility within such radius (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934. Notwithstanding the preceding sentence, with regard to any gaming operation or facility owned or managed by Buyer: (i) located in Las Vegas, Nevada, such radius shall be a 25-mile radius; or (ii) with respect to which Buyer has not filed regulatory applications or publicly indicated an intention to conduct business in such location prior to Tompkins entering into a written agreement for gaming activities within a 75-mile radius of such location, Tompkins shall not be deemed to be in breach of the provisions hereof. Tompkins agrees that this covenant is reasonable with respect to its duration, geographical area, and scope. (ii) Tompkins will not, directly or indirectly, either for himself or any other person or entity, (A) induce or attempt to induce any employee of Lady Luck or Buyer or any of their subsidiaries or the Hotel to leave the employ of Lady Luck or Buyer or any of their subsidiaries or the Hotel, (B) in any way interfere with the relationship between Lady Luck or Buyer and any employee of Lady Luck or Buyer or their subsidiaries or the Hotel, (C) employ, or otherwise engage as an employee, independent contractor, or otherwise, any then current employee of Lady Luck, Buyer or any of their subsidiaries or the Hotel, or (D) induce or attempt to induce any customer, supplier, licensee, or business relation to cease doing business with, or in any way interfere with the relationship between any customer, supplier, licensee, or business relation of Lady Luck or Buyer or their subsidiaries or the Hotel. (iii) Tompkins will not, directly or indirectly, either for himself or any other person or entity, solicit the business of any person known to Tompkins to be a customer of Lady Luck or Buyer or any of their subsidiaries or the Hotel, whether or not Tompkins had 3 personal contact with such person, with respect to activities which compete in whole or in part with the Buyer; (b) In the event of a breach by Tompkins of any covenant set forth in subsection 4(a) of this Agreement, the term of such covenant will be extended by the period of the duration of such breach; and (c) Tompkins and Buyer hereby agree not to make any statements, in writing or otherwise, that may disparage the reputation or character of the other (and Gemini if Tompkins shall retain ownership) or any of Buyer's or Gemini's subsidiaries, affiliates, officers, directors, employees, agents, stockholders, partners, members, successors and assigns both individually and in their official capacities with such party at any time for any reason whatsoever, except as required by law or as required in connection with any litigation or administrative proceeding by or between Buyer and Tompkins in which the party making such statement has been subpoenaed and is required by law to give testimony and in any litigation or administrative proceeding by and between Buyer and Tompkins. Section 5. Consulting Duties. Tompkins will have such consulting and advisory duties as are assigned or delegated to him by the Chairman of Buyer and as agreed to by Tompkins in his sole and absolute discretion. Tompkins will devote such time, attention, skill, and energy to the business of Buyer as is appropriate, and will cooperate fully with the Chairman of Buyer as reasonably requested in the advancement of the best interests of Buyer. Nothing in this Section 5, however, will (i) require Tompkins to travel outside of the Las Vegas area at Buyer's request, or (ii) prevent Tompkins from engaging in additional activities in connection with employment, consulting, personal investments and community affairs that are not inconsistent with Tompkins' duties under this Agreement. Section 6. Compensation. As consideration for the covenants in Section 3 and Section 4 of this Agreement and the duties to be performed by Tompkins pursuant to Section 5 of this Agreement, Buyer will pay Tompkins the sum of Two Million Dollars ($2,000,000) (the "Total Consideration") payable as follows: (a) The sum of One Hundred Twenty-Five Thousand Dollars ($125,000) upon the Effective Time of the Merger; and (b) The sum of One Hundred Twenty-Five Thousand Dollars ($125,000) on the last day of each calendar quarter beginning with the full calendar quarter immediately following the quarter in which the Effective Time occurs, until the Total Consideration has been paid in full. 4 In addition, Buyer will permit Tompkins and his immediate family to enroll in any welfare benefit plans available to management of Buyer and its subsidiaries at Tompkins' expense and subject to the enrollment and eligibility requirements of such plans. Section 7. Remedies. If Tompkins breaches the covenants set forth in Sections 3 or 4 of this Agreement, Buyer will be entitled to the following remedies: (a) Damages from Tompkins; (b) To offset against any and all amounts owing to Tompkins under Subsection 6(b) of this Agreement any and all amounts which Buyer claim under Subsection 7(a) of this Agreement; (c) In addition to its right to damages and any other rights it may have, to obtain injunctive or other equitable relief to restrain any breach or threatened breach or otherwise to specifically enforce the provisions of Sections 3 and 4 of this Agreement; it being agreed that money damages alone would be inadequate to compensate the Buyer and would be an inadequate remedy for such breach; and (d) The rights and remedies of the parties to this Agreement are cumulative and not alternative. Section 8. Successors and Assigns. This Agreement will be binding upon Buyer and Tompkins and will inure to the benefit of Buyer and its affiliates, successors and assigns and Tompkins and Tompkins' assigns, heirs and legal representatives. Section 9. Waiver. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement. Section 10. Governing Law and Jurisdiction. This Agreement will be governed by the laws of the State of Mississippi without regard to conflicts of laws principles. 5 Section 11. Severability. Whenever possible each provision and term of this Agreement will be interpreted in a manner to be effective and valid but if any provision or term of this Agreement is held to be prohibited by law or invalid, then such provision or term will be ineffective only to the extent of such prohibition or invalidity, without invalidating or affecting in any manner whatsoever the remainder of such provision or term or the remaining provisions or terms of this Agreement. If any of the covenants set forth in Section 4 of this Agreement are held to be unreasonable, arbitrary, or against public policy, such covenants will be considered divisible with respect to scope, time, and geographic area, and in such lesser scope, time and geographic area, will be effective, binding and enforceable against Tompkins. Section 12. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. Section 13. Section Headings; Construction. The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. Section 14. Notices. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties): ` Tompkins: Andrew H. Tompkins 220 Stewart Avenue Las Vegas, NV 89101 Facsimile No.: (702) 258-8175 with a copy to: Swidler Berlin Shereff Friedman, LLP 919 Third Avenue New York, NY 10022 Attention: Martin Nussbaum Facsimile No.: (212) 891-9442 6 Buyer: Isle of Capri Casinos, Inc. 711 Dr. Martin Luther King, Jr. Boulevard Biloxi, Mississippi 39530 Attention: Chief Executive Officer Facsimile No.: (228) 435-5998 with a copy to: Mayer Brown & Platt 190 South LaSalle Street Chicago, IL 60603 Attention: Paul W. Theiss Facsimile No.: (312) 701-7711 Section 15. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior written and oral agreements and understandings between Buyer and Tompkins with respect to the subject matter of this Agreement. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. Section 16. Indemnification. Buyer agrees to indemnify Tompkins to the fullest extent provided to any member of management of Buyer consistent with the provisions of its Certificate of Incorporation and Bylaws against any liability arising out of his performance of any obligations under Section 5 hereof. 7 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. ISLE OF CAPRI CASINOS, INC. ANDREW H. TOMPKINS By: /s/ Allan B. Solomon /s/ Andrew H. Tompkins --------------------------------- ------------------------------ Its: Executive Vice President, General Counsel and Secretary 8 EX-10.3 5 LETTER OF INTENT ISLE OF CAPRI CASINOS, INC. 711 DR. MARTIN LUTHER KING, JR. BLVD. BILOXI, MISSISSIPPI 39530 October 5, 1999 BRDC, Inc. Bettendorf Riverfront Development Company, L.C. 2117 State Street Bettendorf, Iowa 52722 Ladies and Gentlemen: The term sheet attached to this letter of intent sets forth the principal terms and conditions upon which Isle of Capri Casinos, Inc. (the "Purchaser"), itself or through a wholly owned subsidiary, is prepared to acquire all of the capital stock of BRDC, Inc., which we understand owns 100% of the equity interests in Bettendorf Riverfront Development Company, L.C., which we understand owns 50% of the equity interests in Lady Luck Bettendorf, L.C. As you know, the Purchaser has, or is about to, enter into an Agreement and Plan of Merger with respect to the proposed acquisition of Lady Luck Gaming Corporation, the owner of the other 50% interest in Lady Luck Bettendorf, L.C. By our execution of this letter, we are confirming to you that our Board of Directors, acting upon the recommendation of a Special Committee thereof, has approved the principal terms and conditions set forth on the attached term sheet, and we are committing to you to negotiate in good faith toward the execution of definitive documentation reflecting those terms and conditions. By your execution of this letter, you confirm to us the approval of such terms and conditions by your management committee or board of directors, as the case may be, as well as each of your equity holders, and your (and their) commitment to so negotiate. If for any reason a definitive Purchase Agreement or other binding agreement has not been signed on or before November 15, 1999 (or such later date as the parties may agree), then at the option of either party communicated to the other in writing, this letter and all obligations set forth herein shall terminate. Prior to the termination of this letter, each of BRDC, Inc. Bettendorf Riverfront Development Company, L.C. October 5, 1999 Page 2 you agrees that you will not directly or indirectly solicit or encourage offers with respect to the sale of the subject business, or engage in any discussions relating thereto. This letter is not intended to be, and is not, a binding agreement between the parties but is merely an expression of their intent with regard to the transactions described herein, and no binding agreement shall be deemed to exist between the parties unless and until a definitive agreement is executed. If the foregoing correctly sets forth our understanding, please execute and return to the undersigned the enclosed copy of this letter. Very truly yours, Isle of Capri Casinos, Inc. By: /s/ Allan B. Solomon ------------------------------------- Allan B. Solomon ACCEPTED: BRDC, Inc. Bettendorf Riverfront Development Company, L.C. By: /s/ Bernard Goldstein -------------------------------- Authorized Signatory PROJECT CYCLONE TERM SHEET Transaction: G Company and Dixie will enter into a tax-free reorganization (the form and structure of which will be acceptable to both parties) in which Dixie will acquire all of the capital stock of G Company (the "G Company Interests"). G Company owns, directly or indirectly, (i) 50% of the outstanding ownership interests in Cyclone and (ii) an interest in the land currently used by Cyclone, other than the leased temporary parking (the "Land"). Consideration: In exchange for acquiring all of the G Company Interests, the G Company shareholders will receive 6,300,000 shares (adjusted for any stock splits or stock dividends) of Dixie Common Stock (the "Consideration"), adjusted as provided below. Adjusted Consideration: The Consideration will be adjusted at closing valuing each Dixie share at $9.486 (the average of the per share closing price for Dixie's shares for the 45 trading days ended September 22, 1999), as follows: (i) If Actual Cyclone EBITDA for the twelve months ended September 30, 1999 is greater or less than $18.744 million the Consideration will be increased or decreased by one-half of the product of the increase or decrease multiplied by 6.35; (ii) If Cyclone's "Net Debt" at September 30, 1999 is greater than $17,000,000 the Consideration will be decreased by one-half of the difference and if Cyclone's Net Debt at September 30, 1999 is less than $17,000,000 the Consideration will be increased by one-half of the difference. "Net Debt" means indebtedness for borrowed money (including guarantees), the deferred purchase price of property or assets and capitalized lease obligations less "Excess Cash." "Excess Cash" mans total cash and cash equivalents minus "cage cash" of $2.5 million. 1 (iii) If G Company indebtedness at closing, including all indebtedness secured by the Land is greater than $10,200,000 the Consideration will be decreased by the difference and if such indebtedness at closing is less than $10,200,000 the Consideration will be increased by the difference. (iv) The Consideration will be increased by one-half of the net income of Cyclone for the period from October 1, 1999 through the closing (the "Allocated Net Income"). (v) The Consideration will be decreased by the amount of all cash distributed to the G Company shareholders after September 30, 1999. Related Party Loan: Dixie agrees that it will cause G Company to prepay, immediately following the closing, the loan owed to Valley Corporation (in the approximate amount of $3,200,000). Cash Withdrawals Prior Prior to the closing, it is understood that, to Closing: Cyclone will distribute to G Company and G Company will distribute to its shareholders the following amounts in cash: (i) 45% of one-half of Cyclone's September, 1999 net income (the "October Tax Distribution"), (ii) 45% of Allocated Net Income on a monthly basis (the "Additional Tax Distributions"), and (iii) such additional amount as requested by the G Company shareholders on the closing date (the "Discretionary Distribution"); provided that the Discretionary Distribution and the Additional Tax Distributions (i) shall not exceed $10,000,000 plus the Allocated Net Income, (ii) results in less than $2,500,000 in Cyclone cash at closing, and (iii) shall not be less than any amount necessary such that the number of shares of Dixie Common Stock to be received by the G Company shareholders is equal to or less than 6,300,000 shares. Expenses: Each of the parties shall pay all costs and expenses incurred or to be incurred by it in connection with the transaction including, without limitation, any legal, investment banking and accounting fees. 2 Representations, Customary representations and warranties which Warranties, Covenants shall survive only until closing, except for the Agreements: representations and warranties relating to the Land (including environmental), which shall survive for an agreed period, and customary covenants, agreements and conditions, including conduct of business prior to closing. Due diligence to be performed prior to execution of definitive agreement. The parties shall use all reasonable efforts prior to closing to (i) obtain the release of the G Company shareholders and all of their affiliates ("G Affiliates") from all guarantees of Cyclone indebtedness and G Company indebtedness, (ii) obtain the release of all collateral pledged by G Affiliates to secure such indebtedness and (iii) eliminate or document (to the satisfaction of the parties) all agreements and arrangements between Cyclone and any G Affiliates. Reasonable efforts shall include, if necessary, the guarantee by Dixie of all the guaranteed indebtedness but shall not require the payment of any significant amount or the release of any significant rights. Indemnification: Dixie agrees to indemnify G Company and its affiliates and their respective directors, officers, employees, agents and controlling persons from and against any losses, claims, damages and liabilities, to which G Company or such persons may become subject in connection with their entering into and consummating the transaction contemplated herein. G Company agrees to indemnify Dixie and its affiliates and their respective directors, officers, employees, agents and controlling persons from and against any losses, claims, damages and liabilities, to which Dixie or such persons may become subject as a result of inaccuracies in the representations and warranties regarding the Land. Conditions Precedent: Receipt of fairness opinion from CIBC World Markets with respect to the transaction described herein (subject to the approval of CIBC World Markets' M&A Committee), Dixie's due diligence review and the closing of the proposed transaction with Gypsy, which at the time shall include its 50% interest in Cyclone. CIBC World Markets has indicated that subject to the results of due diligence and preparation of the definitive agreement, it is prepared to provide its fairness opinion. Assumption: "Clean" company as to absence of material contingent liabilities as determined prior to execution of definitive agreement. Closing: Simultaneous with closing of Gypsy merger. 3 EX-10.4 6 FORM OF CREDIT AGREEMENT 10/5/99 $16,300,000 CREDIT AGREEMENT dated as of October __, 1999 between GAMBLERS SUPPLY MANAGEMENT COMPANY as the Borrower, and ISLE OF CAPRI CASINOS, INC. as the Lender. Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS......................................2 1.1. Defined Terms.................................................2 1.2. Use of Defined Terms.........................................12 1.3. Cross-References.............................................12 1.4. Accounting and Financial Determinations......................12 ARTICLE II COMMITMENT, BORROWING PROCEDURES AND NOTE.............................12 2.1. Commitment...................................................12 2.1.1. Commitment To Make Loan......................................12 2.1.2. Lender Not Permitted or Required To Make Loan................12 2.2. Borrowing Procedure..........................................12 2.3. Note.........................................................13 ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES............................13 3.1. Repayments and Prepayments...................................13 3.2. Interest Provisions..........................................14 3.2.1. Rates........................................................14 3.2.2. Post-Maturity Rate...........................................14 3.2.3. Payment Dates................................................14 3.3. Fees.........................................................14 3.3.1 Upfront Fee..................................................15 3.3.2 Prepayment/Repayment Fee.....................................15 ARTICLE IV TAXES, PAYMENTS, CALCULATIONS, ETC...................................15 4.1. Taxes.......................................................15 4.2. Payments, Computations, etc.................................16 4.3. Use of Proceeds.............................................16 ARTICLE V CONDITIONS TO LOAN....................................................16 5.1. Conditions to Loan..........................................16 5.1.1. Resolutions, etc............................................16 5.1.2. Delivery of Note............................................16 5.1.3. Acquisition Consummated.....................................16 5.1.4. Payment of Outstanding Indebtedness, etc....................17 5.1.5. Equity Infusion.............................................17 5.1.6. Security Agreement..........................................17 5.1.7. Mortgage....................................................18 5.1.8. Ship Mortgage...............................................18 5.1.9. Opinions of Counsel.........................................19 5.1.10. Closing Fees, Expenses, etc.................................19 5.1.11. Compliance with Warranties, No Default, etc.................19 5.1.12. Borrowing Request...........................................20 5.1.13. Financial Condition.........................................20 5.1.14 Satisfactory Legal Form; Other Documents....................20 5.1.15. Payoff Letters..............................................20 5.1.16. Amendment to CIBC Credit Agreement..........................20 ARTICLE VI REPRESENTATIONS AND WARRANTIES........................................20 6.1. Organization, etc...........................................20 6.2. Due Authorization, Non-Contravention, etc...................21 6.3. Government Approval, Regulation, etc........................21 6.4. Validity, etc...............................................21 6.5. Financial Information.......................................21 6.6. No Material Adverse Change..................................22 6.7. Litigation, Labor Controversies, etc........................22 6.8. Subsidiaries................................................22 6.9. Ownership of Properties.....................................22 6.10. Taxes.......................................................22 6.11. Pension and Welfare Plans...................................22 6.12. Environmental Warranties....................................23 6.13. Regulations U and X........................................24 6.14. Accuracy of Information.....................................24 ARTICLE VII COVENANTS.............................................................24 7.1. Affirmative Covenants..............................24 7.1.1. Financial Information, Reports, Notices, etc.......24 7.1.2. Compliance with Laws, etc..........................26 7.1.3. Maintenance of Properties..........................26 7.1.4. Insurance..........................................26 7.1.5. Books and Records..................................26 7.1.6. Environmental Covenant.............................27 7.1.7. Year 2000 Compliance...............................27 7.2. Negative Covenants.................................28 7.2.1. Business Activities................................28 7.2.2. Indebtedness.......................................28 7.2.3. Liens..............................................28 7.2.4. Financial Condition................................29 7.2.5. Investments........................................29 7.2.6. Restricted Payments, etc...........................30 7.2.7. Capital Expenditures, etc..........................30 7.2.8. Rental Obligations.................................30 7.2.9. Take or Pay Contracts..............................31 7.2.10. Consolidation, Merger, etc.........................31 7.2.11. Asset Dispositions, etc............................31 7.2.12. Modification of Certain Agreements.................31 7.2.13. Transactions with Affiliates.......................31 7.2.14. Negative Pledges, etc..............................31 ARTICLE VIII EVENTS OF DEFAULT.....................................................32 8.1. Listing of Events of Default................................32 8.1.1. Non-Payment of Obligations..................................32 8.1.2. Breach of Warranty..........................................32 8.1.3. Non-Performance of Certain Covenants and Obligations........32 8.1.4. Non-Performance of Other Covenants and Obligations..........32 8.1.5. Default on Other Indebtedness...............................32 8.1.6. Judgments...................................................32 8.1.7. Pension Plans...............................................33 8.1.8. Control of the Borrower.....................................33 8.1.9. Bankruptcy, Insolvency, etc.................................33 8.1.10. Impairment of Security, etc.................................34 8.2. Action if Nonpayment, etc...................................34 8.3. Action if Bankruptcy........................................34 8.4. Action if Other Event of Default............................34 ARTICLE IX MISCELLANEOUS PROVISIONS.........................................35 9.1. Waivers, Amendments, etc...........................35 9.2. Notices............................................35 9.3. Payment of Costs and Expenses......................35 9.4. Indemnification....................................36 9.5. Survival...........................................37 9.6. Severability.......................................37 9.7. Headings...........................................37 9.8. Execution in Counterparts, Effectiveness, etc......37 9.9. Governing Law; Entire Agreement....................37 9.10. Successors and Assigns.............................37 9.11. Confidentiality....................................37 9.12. Other Transactions.................................38 9.13. Forum Selection and Consent to Jurisdiction........38 9.14. Waiver of Jury Trial...............................39 9.15. Limitation of Liability............................40 9.16. Interest Rates.....................................41 9.17. Iowa Gaming Licenses...............................42 SCHEDULE I - Disclosure Schedule EXHIBIT A - Form of Note EXHIBIT B - Form of Borrowing Request EXHIBIT C - Form of Certificate of Authorized Officer CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of October __, 1999 between GAMBLERS SUPPLY MANAGEMENT COMPANY, a South Dakota corporation (the "Borrower"), and ISLE OF CAPRI CASINOS, INC., a Delaware corporation (the "Lender"), W I T N E S S E T H: WHEREAS, Lady Luck Gaming Corporation, a Delaware corporation ("Parent"), is engaged directly and through its various Subsidiaries in the business of operating gaming casinos; and WHEREAS, pursuant to a Stock Purchase Agreement, dated July 30, 1999 (as so originally executed and delivered, the "Sodak Stock Purchase Agreement"), among Parent, the Borrower and Sodak Gaming Inc., a South Dakota corporation ("Sodak"), Parent intends to acquire all of the issued and outstanding stock of the Borrower from Sodak for $47,100,000 (including the assumption of approximately $4,250,000 of indebtedness in connection with an existing equipment lease and approximately $640,000 of indebtedness related to a hotel on the premises of the Borrower's gaming facilities, and up to $485,000 of prepayment premiums) (the "Acquisition"); and WHEREAS, in connection with, and to fund, the Acquisition, the Borrower desires to obtain a Commitment from the Lender pursuant to which a Loan, in a maximum aggregate principal amount not to exceed $16,300,000, will be made to the Borrower prior to the Commitment Termination Date; WHEREAS, Lender, Parent and Isle Merger Corp., a Delaware corporation ("Merger Sub"), have entered into an Agreement and Plan of Merger, dated as of October __, 1999 (as so originally executed and delivered, the "Isle Merger Agreement"), pursuant to which Merger Sub will merge with and into Parent (the "Isle Merger"); and WHEREAS, the Lender is willing, on the terms and subject to the conditions hereinafter set forth (including Article V), to extend such Commitment and make such Loan to the Borrower; and WHEREAS, the proceeds of such Loan will be used to make partial payment of the Parent's obligations under the Sodak Stock Purchase Agreement; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "Acquisition" is defined in the recitals. "Affiliate" of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors, managers or managing general partners; or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Agreement" means, on any date, this Credit Agreement as originally in effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date. "Authorized Officer" means, relative to the Borrower, those of its officers whose signatures and incumbency shall have been certified to the Lender pursuant to Section 5.1.1. "Base Rate" means, on any date, a fluctuating rate of interest per annum equal to the rate of interest most recently established by CIBC as its Base Rate. The Base Rate is not necessarily intended to be the lowest rate of interest determined by CIBC in connection with extensions of credit. Changes in the rate of interest will take effect simultaneously with each change in the Base Rate. The Lender will give notice promptly to the Borrower of changes in the Base Rate. "Borrower" is defined in the preamble. "Borrower Excess Cash Flow" means, for any period, EBITDA for such period less the sum of (i) cash interest expense, (ii) cash income taxes, (iii) the sum of (x) $150,000 monthly scheduled principal payments and (y) any voluntary prepayments of the Borrower on the Loan, (iv) maintenance Capital Expenditures not to exceed $100,000 per quarter, (v) Capital Expenditures in connection with the replacement of the mooring barge not to exceed $1,000,000 in the aggregate, and (vi) such other Capital Expenditures as shall be agreed to by the Lender. "Borrowing Request" means the loan request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit B hereto. "Business Day" means any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York or Mississippi. "Capital Expenditures" means, for any period, the sum of (a) the aggregate amount of all expenditures of the Borrower for fixed or capital assets made during such period which, in accordance with GAAP, would be classified as capital expenditures; and (b) the aggregate amount of all Capitalized Lease Liabilities incurred during such period. "Capitalized Lease Liabilities" means all monetary obligations of the Borrower under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Cash Equivalent Investment" means, at any time: (a) any evidence of Indebtedness, maturing not more than one year after such time, issued or guaranteed by the United States Government; (b) commercial paper, maturing not more than nine months from the date of issue, which is issued by (i) a corporation (other than an Affiliate of the Borrower) organized under the laws of any state of the United States or of the District of Columbia and rated A-l or higher by Standard & Poor's Corporation or P-l or higher by Moody's Investors Service, Inc., or (ii) CIBC; (c) any certificate of deposit or bankers acceptance, maturing not more than one year after such time, which is issued by either (i) a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000, or (ii) CIBC; or (d) any repurchase agreement entered into with CIBC (or other commercial banking institution of the stature referred to in clause (c)(i)) which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c), and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of CIBC (or other commercial banking institution) thereunder. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List. "Change in Control" means the failure of Parent to own, free and clear of all Liens or other encumbrances, 100% of the outstanding shares of voting stock of the Borrower on a fully diluted basis (other than prior to the closing under the Sodak Stock Purchase Agreement, and except for a pledge of all capital stock of the Borrower pursuant to the Indenture). "CIBC" means Canadian Imperial Bank of Commerce. "CIBC Credit Agreement" means the Credit Agreement dated as of April 23, 1999 by and among the Lender, various lenders and agents and CIBC, as administrative agent. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Commitment" means the Lender's obligation to make the Loan pursuant to Section 2.1.1. "Commitment Amount" means $16,300,000. "Commitment Termination Date" means the earliest of (a) October 31, 1999, or such other date as Parent, Borrower and Sodak agree to extend the closing date under the Sodak Stock Purchase Agreement; (b) the date on which the Commitment Amount is terminated in full or reduced to zero pursuant to this Agreement; (c) the date on which any Commitment Termination Event occurs; and (d) the Maturity Date. Upon the occurrence of any event described in clause (b), (c) or (d), the Commitment shall terminate automatically and without any further action. "Commitment Termination Event" means (a) the occurrence of any Default described in clauses (a) through (d) of Section 8.1.9 with respect to the Borrower; or (b) the occurrence and continuance of any other Event of Default and either (i) the declaration of the Loan to be due and payable pursuant to Section 8.2, or (ii) in the absence of such declaration, the giving of notice by the Lender to the Borrower that the Commitment has been terminated. "Contingent Liability" means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, obligation or any other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum principal amount, if larger) of the debt, obligation or other liability guaranteed thereby. "Controlled Group" means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "Default" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "Disclosure Schedule" means the Disclosure Schedule attached hereto as Schedule I, as it may be amended, supplemented or otherwise modified from time to time by the Borrower with the written consent of the Lender. "Dollar" and the sign "$" means lawful money of the United States. "EBITDA" means the sum for any period of (i) net income for the Borrower (excluding extraordinary gains or losses), on a pro forma basis for periods prior to the date of the Acquisition, such net income being the net income of the Miss Marquette Gaming Facility, (ii) provisions for taxes deducted in determining such net income, (iii) interest expense deducted in determining such net income, (iv) depreciation expense deducted in determining such net income, and (v) amortization expense deducted in determining such net income. "Effective Date" means the date this Agreement becomes effective pursuant to Section 9.8. "Environmental Laws" means all applicable federal, state or local statutes, laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) relating to public health and safety and protection of the environment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections. "Event of Default" is defined in Section 8.1. "Fiscal Quarter" means any quarter of a Fiscal Year. "Fiscal Year" means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the "1999 Fiscal Year") refer to the Fiscal Year ending on December 31 occurring during such calendar year. "F.R.S. Board" means the Board of Governors of the Federal Reserve System or any successor thereto. "GAAP" is defined in Section 1.4. "Gaming Vessel" means the vessel Miss Marquette having Official No. 950558 of approximately 99.96 gross and 67 net tons and with dimensions of approximately 228.4 feet by 55 feet, built in 1989 at Freeport, Florida, by Freeport Ship Builders and Marine Repair, Inc., which is duly documented in the name of the Borrower under the laws of the United States at the National Vessel Documentation Center at Falling Waters, West Virginia. "Hazardous Material" means (a) any "hazardous substance", as defined by CERCLA; (b) any "hazardous waste", as defined by the Resource Conservation and Recovery Act, as amended; (c) any petroleum product; or (d) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other applicable federal, state or local law, regulation, ordinance or requirement (including consent decrees and administrative orders) relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material, all as amended or hereafter amended. "Hedging Obligations" means, with respect to any Person, all liabilities of such Person under interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and all other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency (or currency unit) exchange rates. "Heller" means Heller Financial, Inc. in its capacity as lessor under the Heller Lease. "Heller Lease" means the Master Lease Agreement dated June 30, 1997 between the Borrower, as lessee, and Heller (as successor to PDS Financial Corporation). "herein", "hereof", "hereto", "hereunder" and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document. "Impermissible Qualification" means, relative to the opinion or certification of any independent public accountant as to any financial statement of the Borrower, any qualification or exception to such opinion or certification (a) which is of a "going concern" or similar nature; (b) which relates to the limited scope of examination of matters relevant to such financial statement; or (c) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause the Borrower to be in default of its obligation under Section 7.2.4. "including" means including without limiting the generality of any description preceding such term, and, for purposes of this Agreement and each other Loan Document, the parties hereto agree that the rule of ejusdem generis shall not be applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned. "Indebtedness" of any Person means, without duplication: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person; (c) all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities; (d) all other items which, in accordance with GAAP, would be included as liabilities on the liability side of the balance sheet of such Person as of the date at which Indebtedness is to be determined; (e) net liabilities of such Person under all Hedging Obligations; (f) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; and (g) all Contingent Liabilities of such Person in respect of any of the foregoing. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer. "Indemnified Liabilities" is defined in Section 9.4. "Indemnified Parties" is defined in Section 9.4. "Indenture" means the Indenture, dated as of February 17, 1994, by and among Lady Luck Gaming Finance Corporation, the Parent, certain subsidiary guarantors named therein and First Trust National Association, as amended and supplemented, relating to the 11 7/8% First Mortgage Notes. "Investment" means, relative to any Person, (a) any loan or advance made by such Person to any other Person (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business); (b) any Contingent Liability of such Person; and (c) any ownership or similar interest held by such Person in any other Person. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property. "Isle Merger" is defined in the recitals. "Isle Merger Agreement" is defined in the recitals. "Lender" is defined in the preamble. "Lien" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever. "Loan" is defined in Section 2.1.1. "Loan Document" means this Agreement, the Note, the Mortgage, the Ship Mortgage and the Security Agreement. "Material Adverse Effect" means, with respect to the Borrower, a material adverse effect upon the ability of the Borrower to pay the Obligations or upon the business, financial condition, results of operation, prospects or properties of the Borrower. "Maturity Date" means the earliest to occur of the following: (i) the Isle Merger Agreement shall, in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of Parent and (a) such termination or cessation shall continue for two Business Days if resulting from the Parent's acceptance of a Superior Proposal (as defined in the Isle Merger Agreement) to be acquired by another Person other than the Lender or (b) such termination or cessation shall continue for 180 days if resulting for any other reason under the Isle Merger Agreement; (ii) the Parent or any Affiliate of the Parent shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability or (iii) consummation of the Isle Merger. "Merger Sub" is defined in the recitals. "Miss Marquette Gaming Facility" means the Miss Marquette gaming property in Marquette, Iowa, including the Gaming Vessel, gaming equipment, and dockside buildings, including a motel, an enclosed walkway, a parking lot, a restaurant, an administrative office and other entertainment facilities. "Monthly Payment Date" means the last day of each calendar month, beginning with November 30, 1999, or, if any such day is not a Business Day, the next succeeding Business Day. "Mortgage" means the Mortgage on the Miss Marquette Gaming Facility (excluding the Gaming Vessel). "Note" means a promissory note of the Borrower payable to the Lender, in the form of Exhibit A hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate indebtedness of the Borrower to the Lender resulting from the outstanding Loan, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Obligations" means all obligations (monetary or otherwise) of the Borrower arising under or in connection with this Agreement, the Note and each other Loan Document. "Organic Document" means, relative to the Borrower, its certificate of incorporation, its by-laws and all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized shares of capital stock. "Parent Excess Cash Flow" means Excess Cash Flow (as such term is defined in the Indenture) less, without duplication, the sum of (i) the sum of (x) scheduled principal payments and (y) any voluntary prepayments by the Parent or the Borrower on the Loan and (ii) amounts paid by the Parent to repurchase 11 7/8% First Mortgage Notes from the holders thereof pursuant to the terms of the Indenture. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "Pension Plan" means a "pension plan," as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, may have liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. "Person" means any natural person, corporation, limited liability company, firm, association, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity. "Plan" means any Pension Plan or Welfare Plan. "Quarterly Payment Date" means the 45th day after the end of each calendar quarter, beginning with February 14, 2000, or, if any such day is not a Business Day, the next succeeding Business Day. "Release" means a "release," as such term is defined in CERCLA. "Resource Conservation and Recovery Act" means the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect from time to time. "Security Agreement" means the Security Agreement executed and delivered pursuant to Section 5.1.6, substantially in a form acceptable to the Lender, as amended, supplemented, restated or otherwise modified from time to time. "Ship Mortgage" means the First Preferred Mortgage executed and delivered by the Borrower to the Lender pursuant to Section 5.1.8, in form and substance acceptable to the Lender, as amended, supplemented, restated or otherwise modified from time to time. "Sodak" is defined in the recitals. "Sodak Stock Purchase Agreement" is defined in the recitals. "Subsidiary" means, with respect to any Person, any other Person of which more than 50% of the outstanding capital stock or other equity interest having ordinary voting power to elect a majority of the board of directors or similar management group of such other Person (irrespective of whether at the time equity of any other class or classes of such other Person shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. "Taxes" is defined in Section 4.1. "United States" or "U.S." means the United States of America, its fifty States and the District of Columbia. "Welfare Plan" means a "welfare plan," as such term is defined in Section 3(1) of ERISA. "Year 2000 Compliant" is defined in Section 7.1.7. SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in the Disclosure Schedule and the Note and in each Borrowing Request, Loan Document, notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document. SECTION 1.3. Cross-References. Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. SECTION 1.4. Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under Section 7.2.4) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared in accordance with, those generally accepted accounting principles ("GAAP") applied in the preparation of the financial statements referred to in Section 6.5. ARTICLE II COMMITMENT, BORROWING PROCEDURES AND NOTE SECTION 2.1. Commitment. On the terms and subject to the conditions of this Agreement (including Article V), the Lender agrees to make a Loan pursuant to the Commitment described in this Section 2.1. SECTION 2.1.1. Commitment To Make Loan. On a Business Day occurring prior to the Commitment Termination Date, the Lender will make a loan (the "Loan") to the Borrower equal to the aggregate amount of the amount requested by the Borrower to be made on such day. The commitment of the Lender described in this Section 2.1.1 is herein referred to as its "Commitment". No amounts paid or prepaid with respect to the Loan may be reborrowed. SECTION 2.1.2. Lender Not Permitted or Required To Make Loan. The Lender shall not be permitted or required to make the Loan if it would exceed the Commitment Amount. SECTION 2.2. Borrowing Procedure. By delivering a Borrowing Request to the Lender on or before 10:00 a.m. (Central time) on a Business Day, the Borrower may irrevocably request, on not less than one nor more than three Business Days' notice, that the Loan be made in an amount up to the Commitment Amount. On the terms and subject to the conditions of this Agreement, the Loan shall be made on the Business Day specified in such Borrowing Request. On or before 11:00 a.m. (Central time) on such Business Day, the Lender shall make funds in an amount equal to the requested Loan available to the Borrower by wire transfer to the accounts the Borrower shall have specified in the Borrowing Request. SECTION 2.3. Note. The Lender's Loan under its Commitment shall be evidenced by the Note payable to the order of the Lender in a maximum principal amount equal to the original Commitment Amount. The Borrower hereby irrevocably authorizes the Lender to make (or cause to be made) appropriate notations on the grid attached to the Lender's Note (or on any continuation of such grid), which notations, if made, shall evidence, inter alia, the date of and the outstanding principal amount of the Loan evidenced thereby. Such notations shall be conclusive and binding on the Borrower absent manifest error; provided, however, that the failure of the Lender to make any such notations shall not limit or otherwise affect any Obligations of the Borrower. ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1. Repayments and Prepayments. The Borrower shall cause the Parent to make three equal monthly principal payments each in the amount of $500,000 on the Monthly Payment Date in each of March 2000, April 2000 and May 2000. In addition, the Borrower shall make equal monthly principal payments each in the amount of $150,000 on each Monthly Payment Date after the making of the Loan, with any remaining principal and interest payable on the Maturity Date. Prior thereto, the Borrower (a) may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of the Loan; provided, however, that (i) all such voluntary prepayments shall require at least one but no more than three Business Days' prior written notice to the Lender; and (ii) all such voluntary partial prepayments shall be in an aggregate minimum amount of $100,000 and an integral multiple of $25,000; (b) shall, immediately upon any acceleration of the Maturity Date of the Loan pursuant to Section 8.2 or Section 8.3, repay the Loan, unless, pursuant to Section 8.2, only a portion of the Loan is so accelerated. Each prepayment of the Loan made pursuant to this Section shall be without premium or penalty (except for the fees provided in Section 3.3); (c) shall, on each Quarterly Payment Date, pay an amount equal to the Borrower Excess Cash Flow for the immediate prior calendar quarter; and (d) shall, on August 1, 2000, cause to be paid an amount equal to the Parent Excess Cash Flow. All prepayments of the Loan shall be applied to the installments of the Loan in the inverse order of maturity. SECTION 3.2. Interest Provisions. Interest on the outstanding principal amount of the Loan shall accrue and be payable in accordance with this Section 3.2. SECTION 3.2.1. Rates. Prior to maturity (whether on the Maturity Date, upon acceleration or otherwise) the Loan and the Note shall bear interest at a rate per annum equal to the Base Rate plus a margin of 3.625%. SECTION 3.2.2. Post-Maturity Rate. After the date any principal amount of the Loan is due and payable (whether on the Maturity Date, upon acceleration or otherwise), after any other monetary Obligation of the Borrower shall have become due and payable, or pursuant to Section 8.4, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on such amounts at a rate per annum equal to the Base Rate plus a margin of 10.00%. SECTION 3.2.3. Payment Dates. Interest accrued on the Loan shall be payable, without duplication: (a) on the Maturity Date therefor; (b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on the Loan; (c) on each Monthly Payment Date occurring after the making of the Loan hereunder; (d) on that portion of the Loan the Maturity Date of which is accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such acceleration. Interest accrued on the Loan or other monetary Obligations arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on the Maturity Date, upon acceleration or otherwise) shall be payable upon demand. SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in this Section 3.3. All such fees shall be non-refundable. SECTION 3.3.1 Upfront Fee. The Borrower agrees to pay to the Lender an upfront fee in an amount equal to 2.5% of the Commitment Amount (without regard to any reduction thereto), payable on the date of the Loan hereunder. SECTION 3.3.2 Prepayment/Repayment Fee. The Borrower agrees to pay to the Lender a repayment/prepayment fee in an amount equal to 2% of any principal amount of the Loan repaid or prepaid hereunder. Such fee shall be payable upon the date of each such repayment or prepayment on the amount so repaid or prepaid. ARTICLE IV TAXES, PAYMENTS, CALCULATIONS, ETC. SECTION 4.1. Taxes. All payments by the Borrower of principal of, and interest on, the Loan and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, other than franchise taxes and taxes imposed on or measured by the Lender's net income or receipts (such non-excluded items being called "Taxes"). In the event that any withholding or deduction from any payment to be made by the Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Borrower will (a) pay directly to the relevant authority the full amount required to be so withheld or deducted; (b) promptly forward to the Lender an official receipt or other documentation satisfactory to the Lender evidencing such payment to such authority; and (c) pay to the Lender such additional amount or amounts as are necessary to ensure that the net amount actually received by the Lender will equal the full amount the Lender would have received had no such withholding or deduction been required. Moreover, if any Taxes are directly asserted against the Lender with respect to any payment received by the Lender hereunder, the Lender may pay such Taxes and the Borrower will promptly pay such additional amounts (including any penalties, interest or expenses) as are necessary so that the net amount received by such person after the payment of such Taxes (including any Taxes on such additional amounts) shall equal the amount such Person would have received had not such Taxes been asserted. If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Lender the required receipts or other required documentary evidence, the Borrower shall indemnify the Lender for any incremental Taxes, interest or penalties that may become payable by the Lender as a result of any such failure. SECTION 4.2. Payments, Computations, etc. All payments by the Borrower pursuant to this Agreement, the Note or any other Loan Document shall be made by the Borrower to the Lender, without setoff, deduction or counterclaim, not later than 11:00 a.m. (Central time) on the date due, in same day or immediately available funds, to such account as the Lender shall specify from time to time by notice to the Borrower. Funds received after that time shall be deemed to have been received by the Lender on the next succeeding Business Day. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 365 days. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment. SECTION 4.3. Use of Proceeds. The Borrower shall apply the proceeds of the Loan to make the payment due under the Sodak Stock Purchase Agreement. ARTICLE V CONDITIONS TO LOAN SECTION 5.1. Conditions to Loan. The obligation of the Lender to fund the Loan shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 5.1. SECTION 5.1.1. Resolutions, etc. The Lender shall have received from the Borrower a certificate, dated on or prior to the date on which the Loan is made, of its Secretary or Assistant Secretary as to (a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement, the Note and each other Loan Document to be executed by it; and (b) the incumbency and signatures of those of its officers authorized to act with respect to this Agreement, the Note and each other Loan Document executed by it, upon which certificate the Lender may conclusively rely until it shall have received a further certificate of the Secretary of the Borrower canceling or amending such prior certificate. SECTION 5.1.2. Delivery of Note. The Lender shall have received its Note duly executed and delivered by the Borrower. SECTION 5.1.3. Acquisition Consummated. The conditions set forth in Section 6.1 and Section 6.2 of the Sodak Stock Purchase Agreement regarding the obligations of the Parent, Sodak and Borrower to consummate the Acquisition shall have been satisfied in all material respects, and the Acquisition shall have been consummated in accordance therewith to the satisfaction of the Lender. SECTION 5.1.4. Payment of Outstanding Indebtedness, etc. All Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the Disclosure Schedule, together with all interest, all prepayment premiums and other amounts due and payable with respect thereto, shall have been paid in full (including, to the extent necessary, from proceeds of the Loan). (b) The Borrower shall use all reasonable efforts from and after the date hereof until the date on which the Loan is made to cause the Heller Lease to remain in full force and effect and not to become part of the Indebtedness to be Paid. If such efforts of the Borrower fail, then the Lender agrees to take all reasonable efforts to cause Heller to keep the Heller Lease in full force and effect and not to become part of the Indebtedness to be Paid. If such efforts of the Lender fail, then the Lender shall either guaranty the obligations of the Borrower under the Heller Lease or take an assignment from Heller of the Heller Lease. SECTION 5.1.5. Equity Infusion. The Borrower shall have received a cash equity infusion from Parent in the amount of $25,367,000. SECTION 5.1.6. Security Agreement. The Lender shall have received executed counterparts of the Security Agreement, dated on or before the date on which the Loan is made, duly executed by the Borrower, together with (a) acknowledgment copies of properly filed Uniform Commercial Code financing statements (Form UCC-1), dated a date reasonably near to the date of the Loan, or such other evidence of filing as may be acceptable to the Lender, naming the Borrower as the debtor and the Lender as the secured party, or other similar instruments or documents, filed under the Uniform Commercial Code of all jurisdictions as may be necessary or, in the opinion of the Lender, desirable to perfect the security interest of the Lender pursuant to the Security Agreement; (b) executed copies of proper Uniform Commercial Code Form UCC-3 termination statements, if any, necessary to release all Liens and other rights of any Person (i) in any collateral described in the Security Agreement previously granted by any Person, and (ii) securing any of the Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the Disclosure Schedule, together with such other Uniform Commercial Code Form UCC-3 termination statements as the Lender may reasonably request from such obligors; and (c) certified copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Lender, dated a date reasonably near to the date of the Loan, listing all effective financing statements which name the Borrower (under its present name and any previous names including Sodak) as the debtor and which are filed in the jurisdictions in which filings were made pursuant to clause (a) above, together with copies of such financing statements (none of which (other than those described in clause (a), if such Form UCC-11 or search report, as the case may be, is current enough to list such financing statements described in clause (a)) shall cover any collateral described in the Security Agreement). SECTION 5.1.7. Mortgage. The Lender shall have received counterparts of the Mortgage, dated on or before the date on which the Loan is made, duly executed by the Borrower, together with (a) evidence of the completion (or satisfactory arrangements for the completion) of all recordings and filings of the Mortgage as may be necessary or, in the reasonable opinion of the Lender, desirable effectively to create a valid, perfected Lien against the properties purported to be covered thereby, subject only to the Lien in favor of Chester and Geneva Busse described in Item 7.2.3 ("Liens") of the Disclosure Schedule; (b) mortgagee's title insurance policies (and survey required by the Lender in connection therewith) in favor of the Lender in amounts and in form and substance and issued by insurers, reasonably satisfactory to the Lender, with respect to the property purported to be covered by the Mortgage, insuring that title to such property is marketable and that the interests created by the Mortgage constitute valid first Liens thereon free and clear of all defects and encumbrances other than as approved by the Lender, and such policies shall also include such endorsements as the Lender shall request and shall be accompanied by evidence of the payment in full of all premiums thereon; and (c) such other approvals, opinions, or documents relating to the Mortgage as the Lender may reasonably request. SECTION 5.1.8. Ship Mortgage. (a) The Lender shall have received from the Borrower a duly executed Ship Mortgage, dated on or before the date on which the Loan is made, on the Gaming Vessel; the Ship Mortgage shall have been duly filed and recorded in the manner prescribed by the laws of the United States of America; and the Borrower shall have complied with and shall have provided to the Lender evidence reasonably satisfactory to the Lender that the Borrower has satisfied all requisite formalities and provisions of such laws so that the Ship Mortgage constitutes a valid and enforceable first "preferred mortgage" on the Gaming Vessel as provided in such laws (including Chapter 313 of Title 46, United States Code), having the effect and with the priority as therein provided. (b) The Lender shall have received the report of the Borrower's marine insurance broker required pursuant to Section 2.15.6(a) of the Ship Mortgage, together with such evidence of insurance as is required by Section 2.15.6(b) of the Ship Mortgage and such other evidence of the maintenance of the insurance required by Section 2.15 of the Ship Mortgage as the Lender shall reasonably request. (c) The Lender shall have received such other approvals, opinions, and documents relating to the Ship Mortgage as the Lender may reasonably request. SECTION 5.1.9. Opinions of Counsel. The Lender shall have received opinions, dated the date of the Loan and addressed to the Lender, from Swidler Berlin Shereff Friedman, LLP, special counsel to the Borrower and Parent, and from Lane & Waterman, counsel to the Borrower and Parent, each in form and substance satisfactory to the Lender. SECTION 5.1.10. Closing Fees, Expenses, etc. The Lender shall have received all fees, costs and expenses due and payable pursuant to Section 3.3 and 9.3, if then invoiced. Compliance with Warranties, No Default, etc. Both before and after giving effect to the Loan (but, if any Default of the nature referred to in Section 8.1.5 shall have occurred with respect to any other Indebtedness, without giving effect to the application, directly or indirectly, of the proceeds thereof) the following statements shall be true and correct (a) the representations and warranties set forth in Article VI shall be true and correct in all material respects (except as to representations and warranties which are qualified as to materiality, which representations and warranties shall be true in all respects), unless stated to relate solely to an early date, in which case such representations and warranties shall be true and correct as of such earlier date; (b) except as disclosed by the Borrower to the Lender pursuant to Section 6.7 (i) no labor controversy, litigation, arbitration or governmental investigation or proceeding shall be pending or, to the knowledge of the Borrower, threatened against the Borrower which could reasonably be expected to have a Material Adverse Effect or which purports to affect the legality, validity or enforceability of this Agreement, the Note or any other Loan Document; and (ii) no development shall have occurred in any labor controversy, litigation, arbitration or governmental investigation or proceeding disclosed pursuant to Section 6.7 which could reasonably be expected to materially adversely affect the consolidated businesses, operations, assets, revenues, properties or prospects of the Borrower; and (c) no Default shall have then occurred and be continuing, and the Borrower shall not be in material violation of any law or governmental regulation or court order or decree. SECTION 5.1.12. Borrowing Request. The Lender shall have received a Borrowing Request for the Loan. Each of the delivery of such Borrowing Request and the acceptance by the Borrower of the proceeds of the Loan shall constitute a representation and warranty by the Borrower that on the date of the Loan (both immediately before and after giving effect to such Loan and the application of the proceeds thereof) the statements made in Section 5.1.11 are true and correct in all material respects. SECTION 5.1.13. Financial Condition. The Lender shall have received an unaudited pro forma balance sheet of the Borrower as of September 30, 1999 after giving effect to the Loan (if the Borrower is able to produce such balance sheet after using all reasonable efforts). SECTION 5.1.14. Satisfactory Legal Form; Other Documents. All documents executed or submitted pursuant hereto by or on behalf of the Borrower shall be satisfactory in form and substance to the Lender and its counsel; the Lender and its counsel shall have received all information, approvals, opinions, documents or instruments as the Lender or its counsel may reasonably request. SECTION 5.1.15. Payoff Letters. The Lender shall have received payoff letters with regard to Indebtedness to be paid, including without limitation any such Indebtedness relating to the Miss Marquette Gaming Facility. SECTION 5.1.16. Amendment to CIBC Credit Agreement. An amendment to the CIBC Credit Agreement shall have been executed by the Requisite Lenders (as defined in the CIBC Credit Agreement) which, among other things, contains the consent of such Requisite Lenders to the making of the Loan by the Lender under this Agreement, provided that the Lender shall use all reasonable efforts to cause such amendment to be executed. ARTICLE VI REPRESENTATIONS AND WARRANTIES In order to induce the Lender to enter into this Agreement and to make the Loan hereunder, the Borrower represents and warrants unto the Lender as set forth in this Article VI. SECTION 6.1. Organization, etc. The Borrower is a corporation validly existing and in good standing under the laws of the State of its incorporation, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, except where the failure to so qualify and be in good standing could not reasonably be expected to have a Material Adverse Effect, and has full corporate power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under this Agreement, the Note and each other Loan Document to which it is a party and to own and hold under lease its property and to conduct its business substantially as currently conducted by it. SECTION 6.2 Due Authorization, Non-Contravention, etc. The execution, delivery and performance by the Borrower of this Agreement, the Note and each other Loan Document executed or to be executed by it, and the Borrower's participation in the consummation of the Acquisition are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not (a) contravene the Borrower's Organic Documents; (b) contravene any material contractual restriction, law or governmental regulation or court decree or order binding on or affecting the Borrower, except where such contravention could not reasonably be expected to have a Material Adverse Effect; or (c) result in, or require the creation or imposition of, any Lien on any of the Borrower's or the Parent's properties. SECTION 6.3. Government Approval, Regulation, etc. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by the Borrower of this Agreement, the Note or any other Loan Document or for the Borrower's and Parent's participation in the consummation of the Acquisition, except as described in Item 6.3 ("Government Approvals") of the Disclosure Schedule, all of which have been duly obtained or made and are in full force and effect or will be prior to the making of the Loan. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 6.4. Validity, etc. This Agreement constitutes, and the Note and each other Loan Document executed by the Borrower will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally. SECTION 6.5. Financial Information. The pro-forma balance sheet of the Borrower as at June 30, 1999, and the related statements of earnings and cash flow of the Borrower (or the Miss Marquette Gaming Facility), copies of which have been furnished to the Lender, have been prepared in accordance with GAAP consistently applied, except as indicated on Item 6.5 ("Financial Information") of the Disclosure Schedule, and present fairly in all material respects the consolidated financial condition of the Borrower as at the dates thereof and the results of the Borrower's operations for the periods then ended, subject to the absence of complete footnotes and subject to normal year-end adjustments. SECTION 6.6. No Material Adverse Change. Since the date of the financial statements described in Section 6.5, there has been no material adverse change in the financial condition, operations, assets, business, properties or prospects of the Borrower or the Miss Marquette Gaming Facility, other than general economic conditions in the United States and conditions affecting the gaming business generally. SECTION 6.7. Litigation, Labor Controversies, etc. There is no pending or, to the knowledge of the Borrower, threatened litigation, action, proceeding or labor controversy affecting the Borrower, or any of its properties, assets or revenues, which could reasonably be expected to have a Material Adverse Effect or which purports to affect the legality, validity or enforceability of this Agreement, the Note or any other Loan Document, except as disclosed in Item 6.7 ("Litigation") of the Disclosure Schedule. SECTION 6.8. Subsidiaries. The Borrower has no Subsidiaries. SECTION 6.9. Ownership of Properties. The Borrower owns good and marketable title to all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 7.2.3 and as set forth in Item 7.2.3 ("Liens") of the Disclosure Schedule. SECTION 6.10. Taxes. The Borrower has filed, or caused to be filed, all tax returns and reports required by law to have been filed by it or on its behalf and has paid, or has made adequate provision for the payment of, all taxes and governmental charges shown to be owing on such tax returns and reports, except as shown on Item 6.10 ("Taxes") of the Disclosure Schedule and except for any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. SECTION 6.11. Pension and Welfare Plans. During the twelve-consecutive-month period prior to the date of the execution and delivery of this Agreement and prior to the date of the Loan, no steps have been taken to terminate any Pension Plan, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which might result in the incurrence by the Borrower of any material liability, fine or penalty. Except as disclosed in Item 6.11 ("Employee Benefit Plans") of the Disclosure Schedule, the Borrower has no contingent liability with respect to any post-retirement benefit under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Title I of ERISA. SECTION 6.12. Environmental Warranties. Except as set forth in Item 6.12 ("Environmental Matters") of the Disclosure Schedule: (a) all facilities and property (including underlying groundwater) owned or leased by the Borrower have been, and continue to be, owned or leased by the Borrower in material compliance with all Environmental Laws; (b) there have been no past, and there are no pending or, to the Borrower's knowledge, threatened (i) claims, complaints, notices or requests for information received by the Borrower with respect to any alleged violation of any Environmental Law, or (ii) complaints, notices or inquiries to the Borrower regarding potential liability under any Environmental Law; (c) there have been no Releases of Hazardous Materials at, on or under any property now or, to the Borrower's knowledge, previously owned or leased by the Borrower that, singly or in the aggregate, have, or could reasonably be expected to have, a Material Adverse Effect; (d) the Borrower has been issued and is in material compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary or desirable for its business; (e) no property now or, to the Borrower's knowledge, previously owned or leased by the Borrower is listed or proposed for listing (with respect to owned property only) on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list of sites requiring investigation or clean-up; (f) there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or, to the Borrower's knowledge, previously owned or leased by the Borrower that, singly or in the aggregate, have, or could reasonably be expected to have, a Material Adverse Effect; (g) Borrower has not directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list or which is the subject of federal, state or local enforcement actions or other investigations which may lead to material claims against the Borrower thereof for any remedial work, damage to natural resources or personal injury, including claims under CERCLA; (h) there are no polychlorinated biphenyls or friable asbestos present at any property now or, to the knowledge of the Borrower, previously owned or leased by the Borrower that, singly or in the aggregate, have, or could reasonably be expected to have, a Material Adverse Effect; and (i) no conditions exist at, on or under any property now or, to the knowledge of the Borrower, previously owned or leased by the Borrower which, with the passage of time, or the giving of notice or both, would give rise to material liability under any Environmental Law, except where such conditions could not reasonably be expected to have a Material Adverse Effect. SECTION 6.13. Regulations U and X. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loan will be used for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation U or X. Terms for which meanings are provided in F.R.S. Board Regulation U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings. SECTION 6.14. Accuracy of Information. No representation or warranty of the Borrower contained in this Agreement, any Loan Document, the Sodak Stock Purchase Agreement or any other document, certificate or written statement furnished to the Lender or its representatives by or on behalf of the Borrower for use in connection with this Agreement or any Loan Document contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements contained therein not misleading. ARTICLE VII COVENANTS SECTION 7.1. Affirmative Covenants. The Borrower agrees with the Lender that, until the Commitment has terminated and all Obligations have been paid and performed in full, the Borrower will perform the obligations set forth in this Section 7.1. SECTION 7 Financial Information, Reports, Notices, etc. The Borrower will furnish, or will cause to be furnished, to the Lender copies of the following financial statements, reports, notices and information: (a) as soon as available and in any event within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, a balance sheet of the Borrower as of the end of such Fiscal Quarter and statements of earnings and cash flow of the Borrower for such Fiscal Quarter and for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, certified by the chief financial officer of the Borrower; (b) as soon as available and in any event within 90 days after the end of each Fiscal Year of the Borrower, a copy of the annual audit report for such Fiscal Year for the Borrower including therein a balance sheet of the Borrower as of the end of such Fiscal Year and a statement of earnings and cash flow of the Borrower for such Fiscal Year, in each case certified (without any Impermissible Qualification) in a manner acceptable to the Lender by Arthur Andersen, LLP or other independent public accountants acceptable to the Lender, together with a certificate from such accountants containing a computation of, and showing compliance with, the financial ratio and restriction contained in Section 7.2.4 and to the effect that, in making the examination necessary for the signing of such annual report by such accountants, they have not become aware of any Default or Event of Default that has occurred and is continuing, or, if they have become aware of such Default or Event of Default, describing such Default or Event of Default and the steps, if any, being taken to cure it; (c) as soon as available and in any event within 45 days after the end of each Fiscal Quarter, a certificate, executed by the chief financial officer of the Borrower, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Lender) compliance with the financial covenant set forth in Section 7.2.4; (d) as soon as possible and in any event within three days after the occurrence of each Default, a statement of the chief financial officer of the Borrower setting forth details of such Default and the action which the Borrower has taken and proposes to take with respect thereto; (e) as soon as possible and in any event within three days after (x) the occurrence of any adverse development with respect to any litigation, action, proceeding or labor controversy described in Section 6.7 or (y) the commencement of any labor controversy, litigation, action or proceeding of the type described in Section 6.7, notice thereof and copies of all documentation relating thereto; (f) promptly after the sending or filing thereof, copies of all reports which the Borrower sends to any of its securityholders, and all reports and registration statements which the Borrower files with the Securities and Exchange Commission or any national securities exchange; (g) immediately upon becoming aware of the institution of any steps by the Borrower or any other Person to terminate any Pension Plan, or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which could result in the requirement that the Borrower furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in the incurrence by the Borrower of any material liability, fine or penalty, or any material increase in the contingent liability of the Borrower with respect to any post-retirement Welfare Plan benefit, notice thereof and copies of all documentation relating thereto; and (h) such other information respecting the financial condition or operations of the Borrower as the Lender may from time to time reasonably request. SECTION 7.1.2. Compliance with Laws, etc. The Borrower will comply in all material respects with all applicable laws, rules, regulations and orders, such compliance to include (without limitation): (a) the maintenance and preservation of its corporate existence and qualification as a foreign corporation; and (b) the payment, before the same become delinquent, of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. SECTION 7.1.3. Maintenance of Properties. The Borrower will, consistent with past practice, maintain, preserve, protect and keep its properties in good repair, working order and condition, and make necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times unless the Borrower determines in good faith that the continued maintenance of any of its properties is no longer economically desirable. SECTION 7.1.4. Insurance. The Borrower will use commercially reasonable efforts to maintain or cause to be maintained with responsible insurance companies insurance with respect to its properties and business (including business interruption insurance) against such casualties and contingencies and of such types and in such amounts as is customary in the case of similar businesses and will, upon request of the Lender, furnish to the Lender at reasonable intervals a certificate of an Authorized Officer of the Borrower setting forth the nature and extent of all insurance maintained by the Borrower in accordance with this Section. SECTION 7.1.5. Books and Records. The Borrower will keep books and records which accurately reflect all of its business affairs and transactions and permit the Lender or any of its representatives, upon reasonable advance written notice and at reasonable times and intervals, to visit all of its offices, to discuss its financial matters with its officers and independent public accountant (and the Borrower hereby authorizes such independent public accountant to discuss the Borrower's financial matters with the Lender or its representatives whether or not any representative of the Borrower is present) and to examine (and, at the expense of the Borrower, photocopy extracts from) any of its books or other corporate records. The Borrower shall pay any reasonable fees of such independent public accountant incurred in connection with the Lender's exercise of its rights pursuant to this Section. SECTION 7.1.6. Environmental Covenant. The Borrower will, (a) use and operate all of its facilities and properties in material compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws; (b) immediately notify the Lender and provide copies upon receipt of all written claims, complaints, notices or inquiries relating to the condition of its facilities and properties or compliance with Environmental Laws; and (c) provide such information and certifications which the Lender may reasonably request from time to time to evidence compliance with this Section 7.1.6. SECTION 7.1.7. Year 2000 Compliance. (a) The Borrower agrees to (i) prior to or promptly following the date on which the Loan is made, initiate a review and assessment of all areas within its business and operations that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications used by the Borrower may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999), (ii) develop a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (iii) implement that plan in accordance with that timetable. (b) The Borrower agrees to use commercially reasonable efforts to cause all computer applications that are material to its business and operations to, on a timely basis, be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 Compliant"), except to the extent that a failure to do so could not reasonably be expected to have a Material Adverse Effect. (c) The Borrower will promptly notify Lender in the event the Borrower discovers or determines that any computer application (including those of its suppliers and vendors) that is material to its business and operations will not be Year 2000 Compliant on a timely basis, except to the extent that such failure to be Year 2000 Compliant could not reasonably be expected to have a Material Adverse Effect. SECTION 7.2. Negative Covenants. The Borrower agrees with the Lender that, until the Commitment has terminated and all Obligations have been paid and performed in full, the Borrower will perform the obligations set forth in this Section 7.2. SECTION 7.2.1. Business Activities. The Borrower will not engage in any business activity, except the operation of the Miss Marquette Gaming Facility in Marquette, Iowa and such activities as may be incidental or related thereto. SECTION 7.2.2. Indebtedness. The Borrower will not create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following: (a) Indebtedness in respect of the Loan and other Obligations; (b) until the date of the Loan, Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the Disclosure Schedule; (c) Indebtedness existing as of the Effective Date which is identified in Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure Schedule; (d) unsecured Indebtedness incurred in the ordinary course of business (including open accounts extended by suppliers on normal trade terms in connection with purchases of goods and services, but excluding Indebtedness incurred through the borrowing of money or Contingent Liabilities); (e) Indebtedness in respect of Capital Expenditures in an aggregate amount not to exceed $5,400,000 (without regard to the period in which such Capital Expenditures are incurred); and (f) any guaranty by the Borrower of the notes issued under or pursuant to the Indenture, as supplemented, and the Borrower's execution of a supplemental indenture to jointly and severally guaranty, on a senior basis, the obligations under the Indenture. provided, however, that no Indebtedness otherwise permitted by clauses (d) or (e) shall be permitted if, after giving effect to the incurrence thereof, any Default shall have occurred and be continuing. SECTION 7.2.3. Liens. The Borrower will not create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except: (a) Liens securing payment of the Obligations, granted pursuant to any Loan Document; (b) Liens securing payment of Indebtedness of the type permitted and described in clauses (b) and (e) of Section 7.2.2; (c) Liens granted prior to the Effective Date to secure payment of Indebtedness of the type permitted and described in clause (c) of Section 7.2.2; (d) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (e) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (f) Liens incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (g) judgment Liens in existence less than 30 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies; (h) Liens described on Item 7.2.3 ("Liens") of the Disclosure Schedule; and (i) easements, rights of way, restrictions, minor defects or irregularities in title and other similar Liens not interfering in any material respect with the ordinary conduct of the business of the Borrower. SECTION 7.2.4. Financial Condition. The Borrower will not permit EBITDA as of any Fiscal Quarter end to be less than $8,000,000 for the prior trailing four Fiscal Quarters ending on such date. SECTION 7.2.5. Investments. The Borrower will not make, incur, assume or suffer to exist any Investment in any other Person, except: (a) Investments existing on the Effective Date and identified in Item 7.2.5(a) ("Ongoing Investments") of the Disclosure Schedule; (b) Cash Equivalent Investments; (c) Investments permitted as Indebtedness pursuant to Section 7.2.2; provided, however, that (d) any Investment which when made complies with the requirements of the definition of the term "Cash Equivalent Investment" may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; and (e) no Investment otherwise permitted by clause (d) shall be permitted to be made if, immediately before or after giving effect thereto, any Default shall have occurred and be continuing. SECTION 7.2.6. Restricted Payments, etc. On and at all times after the Effective Date: (a) the Borrower will not declare, pay or make any dividend or distribution (in cash, property or obligations) on any shares of any class of capital stock (now or hereafter outstanding) of the Borrower or on any warrants, options or other rights with respect to any shares of any class of capital stock (now or hereafter outstanding) of the Borrower (other than dividends or distributions payable in its common stock or warrants to purchase its common stock or splitups or reclassifications of its stock into additional or other shares of its common stock) or apply any of its funds, property or assets to the purchase, redemption, sinking fund or other retirement of any shares of any class of capital stock (now or hereafter outstanding) of the Borrower, or warrants, options or other rights with respect to any shares of any class of capital stock (now or hereafter outstanding) of the Borrower; (b) the Borrower will not make any deposit for any of the foregoing purposes. SECTION 7.2.7. Capital Expenditures, etc. The Borrower will not make or commit to make Capital Expenditures in any period, except (i) Capital Expenditures related to the purchase of a new mooring barge in an aggregate amount not to exceed $1,700,000 and (ii) other Capital Expenditures which do not aggregate in excess of the amount set forth below opposite such period: Period Amount ------ ------ 4th Fiscal Quarter 1999 $975,000 Fiscal Year 2000 $2,100,000 SECTION 7.2.8. Rental Obligations. The Borrower will not enter into at any time any arrangement which does not create a Capitalized Lease Liability and which involves the leasing by the Borrower from any lessor of any real or personal property (or any interest therein), except as disclosed on Item 7.2.8 ("Rental Obligations") of the Disclosure Schedule and arrangements which, together with all other such arrangements which shall then be in effect, will not require the payment of an aggregate amount of rentals by the Borrower in excess of (excluding escalations resulting from a rise in the consumer price or similar index) $720,000 for any Fiscal Year or $2,160,000 during the full remaining term of such arrangements; provided, however, that any calculation made for purposes of this Section shall exclude any amounts required to be expended for maintenance and repairs, insurance, taxes, assessments, and other similar charges. SECTION 7.2.9. Take or Pay Contracts. The Borrower will not enter into or be a party to any arrangement for the purchase of materials, supplies, other property or services if such arrangement by its express terms requires that payment be made by the Borrower regardless of whether such materials, supplies, other property or services are delivered or furnished to it. SECTION 7.2.10. Consolidation, Merger, etc. Except as necessitated by the Acquisition or the Isle Merger, the Borrower shall not liquidate or dissolve, consolidate with, or merge into or with, any other corporation, or purchase or otherwise acquire all or substantially all of the assets of any Person (or of any division thereof). SECTION 7.2.11. Asset Dispositions, etc. The Borrower will not sell, transfer, lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to, all or any substantial part of its assets to any Person other than in the ordinary course of business and other than the disposal of damaged or obsolete property if such property is no longer necessary for the operation of the Borrower's business. SECTION 7.2.12. Modification of Certain Agreements. The Borrower will not consent to any amendment, supplement or other modification of any of the terms or provisions contained in, or applicable to, the Sodak Stock Purchase Agreement. SECTION 7.2.13. Transactions with Affiliates. The Borrower will not enter into, or cause, suffer or permit to exist any arrangement or contract with any of its other Affiliates unless such arrangement or contract is fair and equitable to the Borrower and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of the Borrower with a Person which is not one of its Affiliates. SECTION 7.2.14. Negative Pledges, etc. The Borrower will not enter into any agreement (excluding this Agreement, any other Loan Document and any agreement governing any Indebtedness permitted either by clause (b) of Section 7.2.2 as in effect on the Effective Date or by clause (d) of Section 7.2.2 as to the assets financed with the proceeds of such Indebtedness) prohibiting the creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired, or the ability of the Borrower to amend or otherwise modify this Agreement or any other Loan Document. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1. Listing of Events of Default. Each of the following events or occurrences described in this Section 8.1 shall constitute an "Event of Default". SECTION 8.1.1. Non-Payment of Obligations. The Borrower shall default in the payment or prepayment when due of any principal of or interest on the Loan, or the Borrower shall default (and such default shall continue unremedied for a period of three Business Days) in the payment when due of any fee or of any other Obligation. SECTION 8.1.2. Breach of Warranty. Any representation or warranty of the Borrower made or deemed to be made hereunder or in any other Loan Document or any other writing or certificate furnished by or on behalf of the Borrower to the Lender for the purposes of or in connection with this Agreement or any such other Loan Document (including any certificates delivered pursuant to Article V) is or shall be incorrect when made in any material respect. SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations. The Borrower shall default in any material respect in the due performance and observance of any of its obligations under Section 7.2 (except Section 7.2.4), and such default shall continue unremedied for a period of 5 Business Days after written notice thereof shall have been given to the Borrower by the Lender. SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. The Borrower shall default in any material respect in the due performance and observance of any other agreement contained herein or in any other Loan Document, and such default shall continue unremedied for a period of 15 Business Days after written notice thereof shall have been given to the Borrower by the Lender. SECTION 8.1.5. Default on Other Indebtedness. A default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness (other than Indebtedness described in Section 8.1.1) of the Borrower having a principal amount, individually or in the aggregate, in excess of $1,000,000, or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity in accordance with the terms of such Indebtedness. SECTION 8.1.6. Judgments. Any judgment or order for the payment of money in excess of $1,000,000 shall be rendered against the Borrower and either (a) enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or (b) there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect. SECTION 8.1.7. Pension Plans. Any of the following events shall occur with respect to any Pension Plan: (a) the institution of any steps by the Borrower, any member of its Controlled Group or any other Person to terminate a Pension Plan if, as a result of such termination, the Borrower could be required to make a contribution to such Pension Plan, or could reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $1,000,000; or (b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA. SECTION 8.1.8. Control of the Borrower. Any Change in Control shall occur with respect to the Borrower. SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower shall (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to pay, debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Borrower or any property of the Borrower, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for the Borrower or for a substantial part of the property of the Borrower, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days, provided that the Borrower hereby expressly authorizes the Lender to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend its rights under the Loan Documents; (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Borrower and, if any such case or proceeding is not commenced by the Borrower, such case or proceeding shall be consented to or acquiesced in by the Borrower or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that the Borrower hereby expressly authorizes the Lender to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend its rights under the Loan Documents; or (e) take any corporate action authorizing, or in furtherance of, any of the foregoing. SECTION 8.1.10. Impairment of Security, etc. (a) Any Loan Document, or any Lien granted thereunder, shall (except in accordance with its terms), in whole or in part in any material respect, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of the Borrower; (b) the Borrower, or any other party shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability; (c) or any Lien securing any Obligation shall, in any material respect, cease to be a perfected first priority Lien, subject only to those exceptions expressly permitted by such Loan Document. SECTION 8.1.11. Loss of a Material License. The Borrower shall lose any license (and shall exhaust all appeal procedures to regain such license) that could reasonably be expected to have a Material Adverse Effect. SECTION 8.2. Action if Nonpayment, etc. If any Event of Default described in Sections 8.1.1, 8.1.3, 8.1.5, 8.1.6, 8.1.8, 8.1.10 or 8.1.11 shall occur for any reason, whether voluntary or involuntary, and be continuing, the Lender may by notice to the Borrower declare all or any portion of the outstanding principal amount of the Loan and other monetary Obligations to be due and payable and/or the Commitment (if not theretofore terminated) to be terminated, whereupon the outstanding principal amount of such Loan and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the Commitment (if not theretofore terminated) shall terminate. SECTION 8.3. Action if Bankruptcy. If any Event of Default described in clauses (a) through (d) of Section 8.1.9 shall occur, the Commitment (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of the Loan and all other monetary Obligations shall automatically be and become immediately due and payable, without notice or demand. SECTION 8.4. Action if Other Event of Default. If any Event of Default (other than any Event of Default listed in Sections 8.2 and 8.3 above) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Obligations shall bear interest at the post-maturity rate as described in Section 3.2.2 until such Event of Default has been cured or waived by the Lender or is no longer continuing. ARTICLE IX MISCELLANEOUS PROVISIONS SECTION 9.1. Waivers, Amendments, etc. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Lender. No failure or delay on the part of the Lender or the holder of the Note in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Lender or the holder of the Note under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. SECTION 9.2. Notices. All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address, or facsimile number set forth below its signature hereto or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted. SECTION 9.3. Payment of Costs and Expenses. The Borrower agrees to pay on demand all reasonable expenses of the Lender (including the fees and out-of-pocket expenses of counsel to the Lender and of local counsel, if any, who may be retained by counsel to the Lender) up to $___________ in connection with (a) the negotiation, preparation, execution and delivery of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated, and (b) the filing, recording, refiling or rerecording of the Mortgage and the Security Agreement and/or any Uniform Commercial Code financing statements relating thereto and all amendments, supplements and modifications to any thereof and any and all other documents or instruments of further assurance required to be filed or recorded or refiled or rerecorded by the terms hereof or of the Mortgage or the Security Agreement, and (c) the preparation and review of the form of any document or instrument relevant to this Agreement or any other Loan Document. The Borrower further agrees to pay, and to save the Lender harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of this Agreement, the borrowings hereunder, or the issuance of the Note or any other Loan Documents. The Borrower also agrees to reimburse the Lender upon demand for all reasonable out-of-pocket expenses (including attorneys' fees and legal expenses) incurred by the Lender in connection with (x) the negotiation of any restructuring or "work-out", whether or not consummated, of any Obligations and (y) the enforcement of any Obligations. SECTION 9.4. Indemnification. In consideration of the execution and delivery of this Agreement by the Lender and the extension of the Commitment, the Borrower hereby indemnifies, exonerates and holds the Lender and each of its officers, directors, employees and agents (collectively, the "Indemnified Parties") free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (collectively, the "Indemnified Liabilities"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan; (b) the entering into and performance of this Agreement and any other Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of the Borrower as the result of any determination by the Lender pursuant to Article V not to fund the Loan); (c) any investigation, litigation or proceeding related to the Acquisition; (d) any investigation, litigation or proceeding related to any environmental cleanup, audit, compliance or other matter relating to the protection of the environment or the Release by the Borrower of any Hazardous Material; or (e) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by the Borrower thereof of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, the Borrower, except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's gross negligence or wilful misconduct, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. SECTION 9.5. Survival. The obligations of the Borrower under Sections 4.1, 9.3 and 9.4 shall in each case survive any termination of this Agreement, the payment in full of all Obligations and the termination of all Commitments. The representations and warranties made by the Borrower in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document. SECTION 9.6. Severability. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 9.7. Headings. The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof. SECTION 9.8. Execution in Counterparts, Effectiveness, etc. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of the Borrower and the Lender (or notice thereof satisfactory to the Lender) shall have been received by the Lender and notice thereof shall have been given by the Lender to the Borrower. SECTION 9.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTE AND EACH OTHER LOAN DOCUMENT (OTHER THAN THE MORTGAGE) SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement, the Note and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 9.10. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that neither the Borrower nor the Lender may assign or transfer its rights or obligations hereunder without the prior written consent of the other party (other than the collateral assignment of the Note by the Lender to CIBC as required by an existing credit agreement between the Lender and CIBC). SECTION 9.11.Confidentiality. The Lender shall hold all non-public information (which has been identified as such by the Borrower) obtained pursuant to the requirements of this Agreement in accordance with its customary procedures for handling confidential information of this nature and in any event may make disclosure to any of its regulators, Affiliates, outside auditors, counsel and other professional advisors in connection with this Agreement or as reasonably required by any bona fide transferee, participant or assignee or as required or requested by any governmental agency or representative thereof or pursuant to legal process; provided, however, that (a) unless specifically prohibited by applicable law or court order, the Lender shall notify the Borrower of any request by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of the Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; (b) prior to any such disclosure pursuant to this Section 9.11, the Lender shall require any such bona fide transferee, participant and assignee receiving a disclosure of non-public information to agree in writing (i) to be bound by this Section 9.11; and (ii) to require such Person to require any other Person to whom such Person discloses such non-public information to be similarly bound by this Section 9.11; and (c) except as may be required by an order of a court of competent jurisdiction and to the extent set forth therein, the Lender shall not be obligated or required to return any materials furnished by the Borrower. SECTION 9.12. Other Transactions. Nothing contained herein shall preclude the Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby from engaging with any other Person. SECTION 9.13 Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE LENDER OR THE BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE LENDER'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT OF THE STATE OF NEW YORK. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. SECTION 9.14. Waiver of Jury Trial. THE LENDER AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE LENDER OR THE BORROWER. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT. SECTION 9.15. Limitation of Liability. (a) Notwithstanding any provision in the Loan Documents to the contrary, except as set forth in subsections (b) and (c), the Borrower shall not be personally liable for payment of the Loan or performance of the Obligations and the Loan is intended to be secured by Liens in favor of the Lender which are purchase money security interests. (b) The limitation of liability in Section 9.15(a) will not affect or impair (i) the lien of the Mortgage, the Ship Mortgage or the Security Agreement or the Lender's other rights and remedies under the Loan Documents, including the Lender's right to commence an action to foreclose (by judicial foreclosure, power of sale or otherwise) any Lien or security interest the Lender has under the Loan Documents; (ii) the validity of the Loan Documents or the Obligations or (iii) the Lender's right to present and collect on any letter of credit or other credit enhancement document held by the Lender in connection with the Obligations. (c) The following are excluded and excepted from the limitation of liability of the Borrower in Section 9.15(a) and the Lender may recover personally against the Borrower for the following: (i) all losses suffered and liabilities and expenses incurred by the Lender relating to any fraud or intentional misrepresentation or omission by the Borrower or any of the officers or directors of the Borrower in connection with (A) the performance of any of the conditions to the Lender making the Loan; (B) any inducements to the Lender to make the Loan; (C) the execution and delivery of the Loan Documents; (D) any certificates, representations or warranties given in connection with the Loan; or (E) the Borrower's performance of the Obligations; (ii) the cost of remediation of any environmental activity affecting the property subject to the Mortgage, any diminution in the value of the property subject to the Mortgage arising from any environmental activity affecting the property subject to the Mortgage and any other losses suffered and liabilities and expenses incurred by the Lender relating to a default under Section 6.12 or Section 7.1.6; (iii) the replacement cost of any fixtures or personal property removed by the Borrower or its Affiliates from the property subject to the Mortgage after an Event of Default occurs and is continuing; (iv) all losses suffered and liabilities and expenses incurred by the Lender relating to any acts or omissions by the Borrower that result in waste (including economic and non-physical waste) on the property subject to the Mortgage; (v) all proceeds that are not applied in accordance with the Mortgage or not paid to the Lender as required under the Mortgage; and (vi) all losses suffered and liabilities and expenses incurred by the Lender relating to any default by the Borrower under any of the provisions of any Loan Document relating to ERISA. (d) Nothing under Section 9.15(a) will be deemed to be a waiver of any right which the Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code or under any other applicable law relating to bankruptcy or insolvency to file a claim for the full amount of the Obligations or to require that all collateral will continue to secure all of the Obligations in accordance with the Loan Documents. SECTION 9.16. Interest Rates. (a) It is the intention of the parties hereto that the Loan made hereunder shall conform strictly to applicable usury laws. Accordingly, none of the terms and provisions contained in this Agreement or any of the other Loan Documents shall ever be construed to create a contract to pay interest to the Lender for the use, forbearance or detention of money at a rate in excess of the highest lawful rate applicable (the "Maximum Lawful Rate"); for purposes of this Section 9.16, "interest" shall include the aggregate of all charges or other consideration which constitute interest under applicable laws (whether or not denominated as interest) and are contracted for, taken, reserved, charged or received under this Agreement or the other Loan Documents or otherwise in connection with the transactions contemplated by this Agreement and the other Loan Documents. If as a result of prepayment, acceleration of maturity or otherwise, the effective rate of interest which would otherwise be payable to the Lender under this Agreement or any other Loan Document would exceed the Maximum Lawful Rate for the period during which the principal amount of the Loan was outstanding, or if the Lender shall receive moneys or other consideration that are deemed to constitute interest that would increase the effective rate of interest payable by the Borrower to the Lender under this Agreement or any other Loan Document to a rate in excess of the Maximum Lawful Rate for the period during which the principal amount of the Loan was outstanding, then (i) the amount of interest that would otherwise be payable by the Borrower to the Lender under this Agreement and the other Loan Documents shall be reduced to the Maximum Lawful Rate, and (ii) any interest paid by the Borrower to the Lender in excess of the Maximum Lawful Rate shall be credited by the Lender as an optional prepayment of the Loan and, thereafter, shall be returned to the Borrower. All calculations of the rate or amount of interest contracted for, taken, reserved, charged or received by the Lender under this Agreement and the other Loan Documents that are made for the purpose of determining whether such rate or amount exceeds the Maximum Lawful Rate shall be made, to the extent permitted by applicable law, by amortizing, prorating, allocating and spreading during the full stated term of the Loan owed to the Lender. (b) If at any time and from time to time (i) the amount of interest payable to the Lender on any date would otherwise exceed the Maximum Lawful Rate, the amount of interest payable to the Lender shall be limited to the Maximum Lawful Rate pursuant to paragraph (a) above and (ii) in respect of any subsequent interest computation period, the amount of interest otherwise payable to the Lender would be less than the amount of interest payable to the Lender computed at the Maximum Lawful Rate, then the amount of interest payable in respect of such subsequent computation period shall be computed at the Maximum Lawful Rate until the earlier to occur of (x) the date upon which the total amount of interest payable to the Lender shall equal the total amount of interest that would have been payable to the Lender if the total amount of interest had been computed without giving effect to paragraph (a) above, or (y) payment in full of the Loan held by the Lender. SECTION 9.17. Iowa Gaming Licenses. No interest of the Lender created or arising under this Agreement or any other Loan Document shall attach to any gaming license issued by the State of Iowa. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. GAMBLERS SUPPLY MANAGEMENT COMPANY By:--------------------------------------------- Title: Address: ------------------------------------ ------------------------------------ Facsimile No.:---------------------------------- Attention: ------------------------------------- with copies to: Swidler Berlin Shereff Friedman, LLP 919 Third Avenue New York, New York Attention: Robert M. Friedman Facsimile No.: (212) 758-9526 ISLE OF CAPRI CASINOS, INC. By:---------------------------------------------- Title: Address: 711 Dr. Martin Luther King, Jr. Boulevard Biloxi, Mississippi 39530 Attention: Chief Executive Officer Facsimile No.: (228) 436-5998 with copies to: Isle of Capri Casinos, Inc. 2200 Corporate Boulevard, N.W. Suite 310 Boca Raton, Florida 33431 Attention: Allan B. Solomon Facsimile No.: (561) 995-6665 Mayer, Brown & Platt 190 South LaSalle Street, Suite 3100 Chicago, Illinois 60603 Attention: Paul W. Theiss Facsimile No.: (312) 701-7711 SCHEDULE I Disclosure Schedule for U.S. $16,300,000 CREDIT AGREEMENT dated as of October __, 1999 between GAMBLERS SUPPLY MANAGEMENT COMPANY as the Borrower, and ISLE OF CAPRI CASINOS, INC. as the Lender The following schedules refer to the Credit Agreement, dated as of October __, 1999 (the "Credit Agreement"), Gamblers Supply Management Company, as the Borrower, and Isle of Capri Casinos, Inc., as the Lender. This Disclosure Schedule is qualified in its entirety by references to specific provisions of the Credit Agreement and is not intended to constitute, and shall not be construed as constituting any representations or warranties of the Borrower, except as and to the extent provided in the Credit Agreement. To the extent more than one representation and warranty contained in the Credit Agreement require the same disclosure, the appearance of such disclosure on any single item herein shall serve as disclosure for all other representations and warranties to which such disclosure applies. Except to the extent explicitly provided in the respective schedule, inclusion of any item in the schedules: (1) does not represent a determination by the Borrower that such item is material nor shall it be deemed to establish a standard of materiality (it being the intent that Borrower shall not be penalized for having disclosed more than may be required by the terms of the Credit Agreement), (2) does not represent a determination by the Borrower that such item did not arise in the ordinary course of business, and (3) shall not constitute, or be deemed to be, an admission concerning such item by the Borrower. The items in the schedules are descriptions of instruments or brief summaries of certain aspects of the Borrower's business. Such descriptions and summaries are qualified in their entirety by reference to the more detailed information in documents previously delivered or made available to the Lender and its representatives. Capitalized terms used but not defined herein shall have the same meanings ascribed to them in the Credit Agreement. The headings in the following schedules are for reference only and shall not affect the disclosures contained therein. Item 6.3 Government Approvals The Borrower and Sodak Gaming, Inc. ("Sodak") must notify the U.S. Coast Guard prior to a change in ownership of the Miss Marquette Riverboat. The Borrower and Sodak must file with the Federal Trade Commission and the Antitrust Division of the Department of Justice a premerger notification and report form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Iowa Racing and Gaming Commission must determine that Parent is a suitable buyer and approve the Parent's purchase of the shares of the Borrower's stock from Sodak. Item 6.5 Financial Information The Borrower has settled a dispute relating to an Iowa sales/use tax audit for the 1995 and 1996 tax years and has paid $150,000 in final settlement thereof. Item 6.7 Litigation The Iowa Department of Natural Resources (the "DNR") has notified Sodak and the Borrower that a treatment agreement is required to be entered into between the City of Marquette and the owner of the Miss Marquette Riverboat, whereby the latter shall quantify and describe its discharge to the City and the City agrees to treat such discharge based on the disclosed volume and quantities. It is anticipated that pursuant to the treatment agreement and a side agreement relating to rate structure, increased treatment rates and surcharges will be charged to the Riverboat Complex. The treatment agreement and side agreement have not yet been concluded. No draft of the side agreement has been prepared or exchanged between the parties as yet. The following actions are pending: Case: Plaintiffs Byron Clements and Mark Clements v. Defendants Gamblers Supply Management Company and Sodak Gaming Iowa, Inc. a/k/a Sodak Gaming, Inc. Byron Clements discharge: October 2, 1996 Mark Clements discharge: July 28, 1996 Date Filed: October 1, 1997 8 Court and File Number: Clayton County Iowa District Court, Case No. LACV005269 Claim and Demand: Plaintiffs allege wrongful discharge. No specific monetary amount of damages reported. Insurance Company: Miss Marquette's insurance carrier has declined coverage. Sodak Counsel: E. David Wright Dubuque, Iowa (315) 556-6433 Status/outcome: Summary Judgment was entered in favor of Defendants, Plaintiffs filed a Notice of Appeal as of October 9, 1998. Briefs have been filed with Iowa Supreme Court, the oral arguments are scheduled for March 2000. Case: Plaintiff Pauline Smith v. Defendant Miss Marquette Riverboat Casino --------------------------------------------------------------------- Date of Occurrence: July 13, 1995 Date Filed: July 11, 1997 Court and File Number: Clayton County Iowa District Court, Case No. LACV005204 Claim and Demand: Plaintiff claims she suffered serious and permanent personal injuries. Plaintiff's initial settlement demand is in the amount of $85,000. Insurance Company: Reliance Insurance Company Juanna Kuby 233 South Wacker Avenue Chicago, IL 60606 Sodak Counsel: E. David Wright Dubuque, Iowa (319) 556-6433 Status/outcome: Pending Case: Plaintiff Beulah Hanson v. Sodak Gaming Iowa, Inc., Gamblers Supply Management Company and Upper Mississippi Gaming Corporation - ---------------------------------------------------------------------------- Date of Occurrence: September 18, 1996 Date Filed: March 5, 1998 Court and File Number: U.S. District Court Northern District of Iowa Eastern Division, Case No. C98-1009-MIM. Claim and Demand: Personal Injury Claim. No specific monetary amount of damages reported. Insurance Company: Zurich American Insurance Company Ottis J. Parry 1450 American Lane Schaumburg, IL 60173 (847) 605-7691 Sodak Counsel: E. David Wright Dubuque, Iowa (319) 556-6433 Anthony Todd Schneider Chicago, IL (312) 360-9500 Status/outcome: Pending Case: Plaintiff Margot Palbicki v. Defendant Miss Marquette ------------------------------------------------------ Date Filed: September 21, 1998 Court and File Number: United States District Court for the Northern District of Iowa, Case No. C98-1033-MIM. Claim and Demand: Jones Act Claim. No specific monetary amount reported. of damages Insurance Company: Zurich American Insurance Company Carol Woo 1400 American Lane Schaumburg, IL 60196-1056 (815) 439-6978 Sodak Counsel: E. David Wright Dubuque, Iowa (319) 556-6433 Status/outcome: Pending Case: Plaintiff Kristin L. Valentine v. Defendant Miss Marquette ---------------------------------------------------------- Date Filed: November 23, 1998 Court and File Number: United States District Court for the Western District of Wisconsin, Case No. 98C-0806-S. Claim and Demand: Jones Act Claim. No specific monetary amount reported of damages Insurance Company: Zurich American Insurance Company Bill Watering Sodak Counsel: Insurance Company will be appointing Counsel Status/outcome: Pending Case: Plaintiff Jill Wilt v. Defendant Miss Marquette ----------------------------------------------- Date Filed: August 31, 1998 Court and File Number: United States District Court for the Northern District of Iowa. Claim and Demand: Jones Act Claim. No specific monetary amount reported. of damages Insurance Company: Zurich American Insurance Company Carol Woo Sodak Counsel: Insurance Company will be appointing Counsel Status/outcome: Pending In addition, the following claims have been made by customers against the Borrower and have been referred to its insurer: Allen Dorzaner April 10, 1999 Said broke tooth while eating fish in buffet. Charlene Swanson July 5, 1999 Said burned by a cup of coffee. Rick Rosacker July 12, 1999 Said automatic doors hit him. No formal action has been taken with respect to any of these claims and no additional information is known; however, the Borrower does not expect any of these claims to have a Material Adverse Effect. Item 6.10 Taxes The Borrower has settled a dispute relating to an Iowa sales/use tax audit for the 1995 and 1996 tax years and has paid $150,000 in final settlement thereof. The Borrower files a consolidated federal income tax return with Sodak. Sodak allocates the consolidated provision for income tax to its subsidiaries as if the subsidiaries filed separate federal income tax returns. The current and deferred income tax expense allocated to the Borrower for the year ended December 31, 1998 represents the income tax expense realized by the consolidated group as a result of the Borrower's 1998 earnings. See the Borrower's financial statements and notes thereto for more information. Item 6.11 Employee Benefit Plans The employees of the Borrower participate in the Sodak Gaming Inc. Healthcare Plan which is a self-insured plan. Item 6.12 Environmental Matters The Iowa Department of Natural Resources (the "DNR") has notified Sodak and the Borrower that a treatment agreement is required to be entered into between the City of Marquette and the owner of the Miss Marquette Riverboat, whereby the latter shall quantify and describe its discharge to the City and the City agrees to treat such discharge based on the disclosed volume and quantities. It is anticipated that pursuant to the treatment agreement and a side agreement relating to rate structure, increased treatment rates and surcharges will be charged to the Riverboat Complex. The treatment agreement and side agreement have not yet been concluded. No draft of the side agreement has been prepared or exchanged between the parties as yet. Item 7.2.2(b) Indebtedness to be Paid None. Item 7.2.2(c) Ongoing Indebtedness 1. Chester and Geneva Busse indebtedness in the amount of approximately $642,125. 2. Heller Capital Lease indebtedness in the amount of approximately $4,250,000. 3. The Sodak Gaming Inc. Amended and Restated Credit Agreement among Seller, Comerica Bank Midwest, as agent bank, and certain syndicate banks dated February 21, 1996 is secured by a first preferred ship mortgage on the Miss Marquette Riverboat. Sodak has obtained the consent of Comerica Bank Midwest to the contribution of the Miss Marquette Riverboat to the Borrower and the subsequent sale of the Borrower. In connection with the contribution of the Miss Marquette Riverboat to the Borrower, Comerica Bank Midwest will release its first preferred ship mortgage on the Miss Marquette Riverboat. Item 7.2.3 Liens 1. Approximately $642,125 payable pursuant to a contract with Chester and Geneva Busse, which is secured by the Port of Marquette hotel real estate. 2. The Sodak Gaming Inc. Amended and Restated Credit Agreement among Seller, Comerica Bank Midwest, as agent bank, and certain syndicate banks dated February 21, 1996 is secured by a first preferred ship mortgage on the Miss Marquette Riverboat. Sodak has obtained the consent of Comerica Bank Midwest to the contribution of the Miss Marquette Riverboat to the Borrower and the subsequent sale of the Borrower. In connection with the contribution of the Miss Marquette Riverboat to the Borrower, Comerica Bank Midwest will release its first preferred ship mortgage on the Miss Marquette Riverboat. 3. The Master Lease Agreement with PDS Financial Corporation dated June 30, 1997 (subsequently assigned to Heller Financial Corporation) is secured by the gaming equipment and office equipment on the Miss Marquette Riverboat. 4. A lien search has revealed the existence of the following two liens. Although the management of the Borrower was not aware of such liens, it believes that they originated in connection with debts that have now been paid off. Management will seek to have the filings made that are necessary to remove these liens.
Debtor Secured Party Filing Number Filing Date Document Type - -------------------------------------------------------------------------------------- ---------------------------- Miss Marquette Mikohn Gaming 00K659915 06/23/1995 Financing Statement Corporation - -------------------------------------------------------------------------------------- ---------------------------- Gambler Supply Associates Capital 00K587025 10/21/1994 Financing Statement Management Co. Services Corp. - -------------------------------------------------------------------------------------- ----------------------------
Item 7.2.5 Investments None. Item 7.2.8 Rental Obligations The Borrower is party to a lease with the City of Marquette that obligates the Borrower to make the following payments: (i) $180,000 per annum; (ii) $0.50 per customer who enters the Miss Marquette Riverboat; and (iii) a percentage of the net gaming receipts (as defined in the lease) from the Miss Marquette Riverboat equal to (A) 2.5% of net gaming receipts greater than $20,000,000 up to $40,000,000, (B) 5.0% of net gaming receipts greater than $40,000,000 up to $60,000,000, and (C) 7.5% of net gaming receipts greater than $60,000,000. The Borrower paid $759,000 in 1998 pursuant to this lease. EXHIBIT A NOTE $16,300,000 October , 1999 FOR VALUE RECEIVED, the undersigned, GAMBLERS SUPPLY MANAGEMENT COMPANY, a South Dakota corporation (the "Borrower"), promises to pay to the order of ISLE OF CAPRI CASINOS, INC. (the "Lender") the principal sum of SIXTEEN MILLION THREE HUNDRED THOUSAND DOLLARS ($16,300,000) or, if less, the aggregate unpaid principal amount of the Loan shown on the schedule attached hereto (and any continuation thereof) made by the Lender pursuant to that certain Credit Agreement, dated as of October ___, 1999 (together with all amendments and other modifications, if any, from time to time thereafter made thereto, the "Credit Agreement"), between the Borrower and the Lender, payable as set forth in the Credit Agreement, with a final installment (in the amount necessary to pay in full this Note) due and payable on or before the Maturity Date. The Borrower also promises to pay interest on the unpaid principal amount hereof from time to time outstanding from the date hereof until maturity (whether by acceleration or otherwise) and, after maturity, until paid, at the rates per annum and on the dates specified in the Credit Agreement. Payments of both principal and interest are to be made in lawful money of the United States of America in same-day or immediately-available funds to the account designated by the Lender pursuant to the Credit Agreement. This Note is the Note referred to in, and evidences Indebtedness incurred under, the Credit Agreement, to which reference is made for a description of the security for this Note and for a statement of the terms and conditions on which the Borrower is permitted and required to make prepayments and repayments of principal of the Indebtedness evidenced by this Note and on which such Indebtedness may be declared to be immediately due and payable. Unless otherwise defined, terms used herein have the meanings provided in the Credit Agreement. All parties hereto, whether as makers, endorsers, or otherwise, severally waive presentment for payment, demand, protest and notice of dishonor. A-1 THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. GAMBLERS SUPPLY MANAGEMENT COMPANY By: ------------------------------------------------ Title:----------------------------------------------- A-2 LOAN AND PRINCIPAL PAYMENTS Amount of Unpaid Notation Amount of Principal Principal Made Date Loan Made Repaid Balance By - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ A-3 EXHIBIT B BORROWING REQUEST Isle of Capri Casinos, Inc. 711 Dr. Martin Luther King, Jr. Boulevard Biloxi, Mississippi 39530 Attention: Chief Executive Officer GAMBLERS SUPPLY MANAGEMENT COMPANY Gentlemen and Ladies: This Borrowing Request is delivered to you pursuant to Section 2.2 of the Credit Agreement, dated as of October __, 1999 (together with all amendments, if any, from time to time made thereto, the "Credit Agreement"), between Gamblers Supply Management Company, a South Dakota corporation (the "Borrower"), and you. Unless otherwise defined herein or the context otherwise requires, terms used herein have the meanings provided in the Credit Agreement. The Borrower hereby requests that the Loan be made in the aggregate principal amount of $ ________________ on _____________, 1999. The Borrower hereby acknowledges that, pursuant to Section 5.1.12 of the Credit Agreement, each of the delivery of this Borrowing Request and the acceptance by the Borrower of the proceeds of the Loan requested hereby constitute a representation and warranty by the Borrower that, on the date of the Loan, and before and after giving effect thereto and to the application of the proceeds therefrom, all statements set forth in Section 5.1.11 are true and correct in all material respects. The Borrower agrees that if prior to the time of the Loan requested hereby any matter certified to herein by it will not be true and correct at such time as if then made, it will immediately so notify you. Except to the extent, if any, that prior to the time of the Loan requested hereby you shall receive written notice to the contrary from the Borrower, each matter certified to herein shall be deemed once again to be certified as true and correct at the date of such Loan as if then made. B-1 Please wire transfer the proceeds of the Loan to the accounts of the following persons at the financial institutions indicated respectively: Amount to be Person to be Paid Name, Address, etc. Transferred Name Account No. of Transferee Lender - ----------- ---- ---------- --------------------- $______ _____ _______ _____________________ _____________________ Attention: __________ _____ _____ _______ _______________________ _______________________ Attention: ____________ Balance of _______________________ such proceeds The Borrower ______ _______________________ Attention: The Borrower has caused this Borrowing Request to be executed and delivered, and the certification and warranties contained herein to be made, by its duly Authorized Officer this day of , 1999. GAMBLERS SUPPLY MANAGEMENT COMPANY By:----------------------------- Title: B-2 EXHIBIT C Certificate of Authorized Officer I, the undersigned, [Assistant] Secretary of Gamblers Supply Management Company, a corporation (the "Borrower"), DO HEREBY CERTIFY that: 1. This Certificate is furnished pursuant to Section 5.1.1 of that certain Credit Agreement, dated as of October__ , 1999 (the "Credit Agreement"), between the Borrower and Isle of Capri Casinos, Inc. (the "Lender"). Unless otherwise defined herein, capitalized terms used in this Certificate have the meanings assigned to such terms in the Credit Agreement. 2. There have been no amendments to the Articles of Incorporation of the Borrower since ______________ , 19 ___. 3. Attached hereto as Exhibit I is a true, correct and complete copy of the by-laws of the Borrower as in effect on the date hereof. 4. Attached hereto as Exhibit II is a true, correct and complete copy of resolutions duly adopted at a meeting of the Board of Directors of the Borrower, convened and held on the __ day of __________, 1999, which resolutions have not been revoked, modified, amended or rescinded and are still in full force and effect, and the Credit Agreement, the Note and the other Loan Documents to which the Borrower is a party are in substantially the forms of those documents submitted to and approved by the Board of Directors of the Borrower at such meeting. 5. The persons named in Exhibit III attached hereto have been duly elected, have been duly qualified as and at all times since _____________ , 1999 (to and including the date hereof), have been officers of the Borrower holding the respective offices set forth therein opposite their names, and the signatures set forth therein opposite their names are their genuine signatures. 6. I know of no proceeding for the dissolution or liquidation of the Borrower or threatening its existence. WITNESS my hand and seal of the Borrower this __ day of ______, 1999. __________________________________ [Assistant] Secretary [Affix Corporate Seal] C-1 I, the undersigned, [Vice] President of the Borrower, DO HEREBY CERTIFY that: 1. is [a] the duly elected and qualified [Assistant] Secretary of the Borrower and the signature above is his genuine signature. 2. The representations and warranties on the part of the Borrower contained in the Credit Agreement are as true and correct at and as of the date hereof as though made on and as of the date hereof. 3. No Default has occurred and is continuing, or would result from the consummation of the Loan on this date. WITNESS my hand on this ____ day of ________________ , 1999. [Vice] President C-2 EXHIBIT I Copy of the by-laws of Gamblers Supply Management Company EXHIBIT II Resolutions of the Board of Directors of Gamblers Supply Management Company WHEREAS, there has been presented to this meeting a form of Credit Agreement (draft of _____________ , 19 ___ ) (the "Credit Agreement"), between this Corporation and Isle of Capri Casinos, Inc. (the "Lender"), providing for the making by the Lender of a Loan (as defined in the Credit Agreement) to this Corporation; and WHEREAS, it is proposed that payment of this Corporation's obligations under and in connection with the Credit Agreement and the promissory note to be executed by this Corporation pursuant thereto be secured by the following collateral security documents: (1) A certain Mortgage, substantially in the form of the draft Mortgage, dated ________, 1999 (the "Mortgage"), presented to this meeting, (2) A certain Ship Mortgage, substantially in the form of the draft Ship Mortgage, dated ___________ , 1999 (the "Ship Mortgage"), presented to this meeting, and (3) A certain Security Agreement, substantially in the form of the draft Security Agreement, dated ___________, 1999 (the "Security Agreement"), presented to this meeting. NOW, THEREFORE, BE IT RESOLVED, that the President or any Vice President of this Corporation, and each of them, be and hereby is authorized to execute, in the name and on behalf of this Corporation, and deliver a credit agreement between this Corporation and the Lender, substantially in the form of the Credit Agreement presented to this meeting, except for such changes, additions and deletions as to any or all of the terms and provisions thereof as the officer executing the Credit Agreement on behalf of this Corporation shall deem proper, such execution by such officer of the Credit Agreement to be conclusive evidence that such officer deems all of the terms and provisions thereof to be proper; FURTHER RESOLVED, that the President or any Vice President of this Corporation, and each of them, be and hereby is authorized to borrow from time to time on behalf of this Corporation the amounts permitted or provided to be borrowed by this Corporation under the Credit Agreement executed by this Corporation pursuant to these resolutions, and to execute and deliver on behalf of this Corporation the promissory note payable to the order of the Lender, substantially in the form provided for as an exhibit to the Credit Agreement, evidencing such borrowings; and FURTHER RESOLVED, that the President or any Vice President and the Secretary or any Assistant Secretary of this Corporation, and each of them, be and hereby is authorized to execute, in the name and on behalf of this Corporation and under its corporate seal, and deliver to the Lender [and trustees for the Lender], on behalf of and in the name of this Corporation and under its corporate seal, a mortgage, substantially in the form of the Mortgage presented to this meeting, except for such changes, additions and deletions as to any or all of the terms and provisions thereof as the officers executing such instrument on behalf of this Corporation shall deem proper, such execution by such officers of such instrument to be conclusive evidence that such officers deem all of the terms and provisions thereof to be proper; FURTHER RESOLVED, that the President or any Vice President of this Corporation, and each of them, be and hereby is authorized to execute, in the name and on behalf of this Corporation, and deliver a security agreement, substantially in the form of the Security Agreement presented to this meeting, except for such changes, additions and deletions as to any or all of the terms and provisions thereof as the officer executing the Security Agreement on behalf of this Corporation shall deem proper, such execution by such officer of the Security Agreement to be conclusive evidence that such officer deems all of the terms and provisions thereof to be proper; and FURTHER RESOLVED, that the President or any Vice President of this Corporation, and each of them, be and hereby is authorized to execute, in the name and on behalf of this Corporation, and deliver a ship mortgage, substantially in the form of the Ship Mortgage presented to this meeting, except for such changes, additions and deletions as to any or all of the terms and provisions thereof as the officer executing the Ship Mortgage on behalf of this Corporation shall deem proper, such execution by such officer of the Ship Mortgage to be conclusive evidence that such officer deems all of the terms and provisions thereof to be proper; and FURTHER RESOLVED, that each and every officer of this Corporation be and hereby is authorized in the name and on behalf of this Corporation from time to time to take such actions and to execute and deliver such certificates, instruments, notices and documents as may be required or as such officer may deem necessary, advisable or proper in order to carry out and perform the obligations of this Corporation under the Credit Agreement, the Mortgage, the Ship Mortgage and the Security Agreement executed by this Corporation pursuant to these resolu tions, or under any other instrument or document executed pursuant to or in connection with the Credit Agreement, the Mortgage, the Ship Mortgage and the Security Agreement; all such actions to be performed in such manner, and all such certificates, instruments, notices and documents to be executed and delivered in such form, as the officer performing or executing the same shall approve, the performance or execution thereof by such officer to be conclusive evi dence of the approval thereof by such officer and by this Board of Directors. EXHIBIT III Name of Officer Office Signature - --------------- ------ --------- - -------------------- ------------------- -------------------- - -------------------- ------------------- -------------------- - -------------------- ------------------- -------------------- EX-99.1 7 PRESS RELEASE IMMEDIATE RELEASE - ----------------- ISLE OF CAPRI CASINOS, INC. SIGNS DEFINITIVE AGREEMENT TO ACQUIRE LADY LUCK GAMING CORPORATION Biloxi, Mississippi, October 6, 1999. Isle of Capri Casinos, Inc. (NASDAQ: ISLE) and Lady Luck Gaming Corporation (NASDAQ: LUCK) announced today that they have entered into a definitive agreement under which Isle of Capri would acquire Lady Luck in a merger transaction. Under terms of the agreement, Lady Luck's common shareholders will receive cash in the amount of $12.00 per share for an aggregate share consideration of approximately $59 million and Isle of Capri will assume all of Lady Luck's outstanding debt in the amount of approximately $177 million. The agreement also provides for the redemption of Lady Luck's outstanding preferred stock in the amount of approximately $22 million. Closing is expected in the first half of 2000 pending the approval of Lady Luck's shareholders and gaming regulators and other contingencies. Andrew Tompkins, the owner of approximately 46% of Lady Luck's common stock, has agreed to vote for the transaction. Lady Luck operates dockside riverboat casinos and hotels in Coahoma and Natchez, Mississippi, and owns a 50% interest in the Lady Luck Casino and Hotel in Bettendorf, Iowa. Lady Luck also has agreements to acquire the Miss Marquette Casino in Marquette, Iowa for $41.7 million and the Lady Luck Casino & Hotel in downtown Las Vegas and certain intellectual property for $45.5 million. Isle of Capri has also agreed to make a secured loan of $16.3 million to Lady Luck in order to assist Lady Luck in consummating the Miss Marquette acquisition in October. Isle of Capri also announced that it has entered into a letter of intent to acquire the other 50% interest in Lady Luck's Bettendorf, Iowa facility and related real estate in exchange for approximately 6.3 million shares of Isle of Capri common stock, subject to adjustment in certain circumstances. This interest is owned by members of the family of Bernard Goldstein, Isle of Capri's Chairman and Chief Executive Officer. This transaction is contingent on the completion of Isle of Capri's acquisition of Lady Luck, the approval of Isle of Capri's shareholders and other contingencies. The sellers have the option to receive up to $10 million of their consideration in cash rather than Isle of Capri stock. CIBC World Markets has fully underwritten the financing for the transactions and is also acting as financial advisor to Isle of Capri. Wasserstein Perella & Co. and Onyx Partners, Inc. are acting as financial advisors to Lady Luck. Bernard Goldstein, Chairman of the Board and Chief Executive Officer of Isle of Capri, said "We are pleased to have reached an agreement with Lady Luck and to have the opportunity to offer our shareholders the benefits of this natural combination. This acquisition takes Isle of Capri to the next level and makes the Company, on a pro forma basis, one of the ten largest public gaming companies in the United States." "We believe that the transaction with Isle of Capri will benefit both our company and its stockholders," said Mr. Tompkins, Chairman and Chief Executive Officer of Lady Luck. "The $12.00 per share purchase price represents a significant premium to our stockholders, the bridge financing being provided to Lady Luck by Isle of Capri will enable us to conclude the Miss Marquette acquisition without being subject to the uncertainties of the high-yield debt market, and in a consolidating industry, our employees and customers will have an opportunity to be part of a strong company with a significant position in the gaming industry." "This transaction allows the Isle of Capri brand to expand to new venues throughout the country in order to give a more diverse product mix to our present and future data base customers," said Isle of Capri's President and Chief Operating Officer, John M. Gallaway. "Lady Luck has a talented management team and seasoned employees whom we welcome to our ever-growing Isle family." Isle of Capri owns and operates seven riverboat, dockside and land-based casinos at six locations, including the Isle of Capri Casino, Crowne Plaza Resort in Biloxi, Mississippi; the Isle of Capri Casino & Hotel in Vicksburg, Mississippi; the Isle of Capri Casino & Hotel in Bossier City, Louisiana; two riverboats operating as the Isle of Capri Casino & Hotel in Lake Charles, Louisiana, the Isle of Capri Casino in Black Hawk, Colorado (through a 57% owned subsidiary), and the Isle of Capri Casino in Tunica, Mississippi. The Company also operates Pompano Park Harness Racing Track in Pompano Beach, Florida and through a joint venture, the Enchanted Capri cruise ship, that features an Isle of Capri Casino, sailing from New Orleans, Louisiana. This press release may be deemed to contain forward-looking statements which are subject to change. These forward looking statements may be significantly impacted, either positively or negatively by various factors, including without limitation, licensing and other regulatory approvals, financing sources, development and construction activities, costs and delays, permits, competition and business conditions in the gaming industry. Additional information concerning potential factors that could affect the Isle of Capri's financial condition, results of operations and expansion projects, is included in its filings with the Securities and Exchange Commission, including but not limited to, Isle of Capri's Annual Report on Form 10-K for the fiscal year ended April 25, 1999. CONTACTS: Allan B. Solomon, Isle of Capri Casinos, Inc., Executive Vice President, 561.995.6660. Rex Yeisley, Isle of Capri Casinos, Inc., Chief Financial Officer, 228.436.7052. Rory Reid, Lady Luck Gaming Corporation, Senior Vice President and General Counsel, 800.634.6580 NOTE: Other Isle of Capri Casinos, Inc. press releases and a corporate profile are available by fax at no charge. For a menu of available Isle of Capri Casinos press releases, call 800.758.5804, ext. 145913 or log on to http://www.prnewswire.com. Isle of Capri Casinos, Inc.'s home page is http://www.theislecorp.com. - -------------------------- -----END PRIVACY-ENHANCED MESSAGE-----